National Academies Press: OpenBook

Theory and Law of Airport Revenue Diversion (2008)


Page 26
Suggested Citation:"VII. CONCLUSION." National Academies of Sciences, Engineering, and Medicine. 2008. Theory and Law of Airport Revenue Diversion. Washington, DC: The National Academies Press. doi: 10.17226/23092.
Page 26

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28 operator could not recoup its capital and operating costs long after it had made such investments. The U.S. DOT General Counsel put the question to the Justice De- partment, which took the opposite position, concluding that the use of airport revenue to reimburse prior capi- tal or operating expenditures may fairly be character- ized as a legitimate capital or operating expense within the meaning of the AAIA, irrespective of when such expenses were incurred.250 Following issuance of this opinion, Congress in 1994 enacted the 6-year statute of limitations on use of airport revenue to reimburse spon- sor for previous contributions to the airport. When Hurricane Katrina hit New Orleans and the surrounding region, several airports sought to reim- burse emergency costs incurred by sister airports in the region. Airports Council International sought an opin- ion as to whether such expenditures were consistent with the airport revenue-use requirements of 49 U.S.C. §§ 47107(b) and 47133. In an informal opinion letter, the FAA concluded that such relief was analogous to mutual aid agreements entered into by public airports with local governmental safety providers, and the ex- penditures were therefore lawful. However, the FAA took the position that this conclusion applied only to airport revenue and not to federal grants or PFC re- ceipts.251 Many of the FAA revenue determinations are highly factually based and depend upon specific language in the grant agreements and action taken by FAA person- nel in authorizing various transactions, including the disposal of airport land, for example. In many such cases, the FAA found no unlawful revenue diversion.252 VII. CONCLUSION It is understandable that financially strapped local governments look to airports as “cash cows.” Indirect taxes can be levied upon airlines and passengers who may have no vote in the local jurisdiction; hence there will be no political price for the local politician to pay for imposing unjust fees upon them for services they do not receive. Indeed, the local politician can be viewed as a hero among his constituents, who enjoy enhanced governmental services with no corresponding local fi- nancial burden. 250 DOJ Memorandum from Ass’t Att’y Gen. Michael Luttig to Acting DOT General Counsel C. Dean McGrath, Jr., (Feb. 12, 1991). 251 Letter from FAA Chief Counsel Andrew Steinberg to ACI General Counsel Patricia Hahn (Sept. 23, 2005). 252 See, e.g., Rudy J. Clarke v. City of Alamogordo, NM, 2006 FAA Lexis 629 (Sept. 20, 2006); Boca Airport, Inc., d/b/a Boca Aviation v. Boca Raton Airport Auth., 2003 FAA Lexis 143 (Mar. 20, 2003); Wilson Air Center v. Memphis and Shelby County Airport Auth., FAA Docket No. 16-99-10, Final Agency Decision (Aug. 30, 2001), and Director’s Determination (Aug. 2, 2000); Steere v. County of San Diego, FAA Docket No. 16-99- 15, Final Agency Decision (Dec. 7, 2004) and Director's Deter- mination (July 21, 2004). Congress, however, has found this form of indirect taxation to constitute an impermissible burden on in- terstate commerce. Federal statutory prohibitions against revenue diversion are long-standing; they go back to 1982, with the promulgation of the AAIA that year, and have been reaffirmed and strengthened by Congress in successive legislation passed in 1987, 1994, and 1996. The FAA also has promulgated regulations and policy statements furthering the Congressional policies embraced in that legislation and has inserted language in federal grant agreements imposing contrac- tual duties upon airport operators not to divert revenue. Like most rules addressing complex issues, the reve- nue-diversion rules themselves are complex. There are areas of clarity and areas of ambiguity in the law and policy of airport revenue diversion. The basic principles are clear. Though there are exceptions, there can be no doubt of the general rule—local governments may not siphon off airport revenue for nonairport purposes. Air- port revenue is to be spent on the capital and operating expenses of the airport. The devil, of course, lies in the details. What an airport spends influences what it collects. Congress has decreed that funds derived from the fed- eral government, as well as revenue derived from air- lines and other users, are to be spent on the airport and related activities and are not to be diverted elsewhere. A review of FAA and U.S. DOT orders and opinion let- ters reveals that many determinations of whether indi- vidual expenditures fall on the lawful or unlawful side of revenue diversion are intensely factually based.

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TRB’s Airport Cooperative Research Program (ACRP) Legal Research Digest 2: Theory and Law of Airport Revenue Diversion explores the issue of airport revenue diversion, what prompted Congress to address it, how it has manifested itself, and how the prohibition against revenue diversion has been enforced.


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