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Airport Customer Facility Charges: Analysis of Laws, Regulations, and Case Law (2023)

Chapter: AIRPORT CUSTOMER FACILITY CHARGES: ANALYSIS OF LAWS, REGULATIONS, AND CASE LAW

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Suggested Citation:"AIRPORT CUSTOMER FACILITY CHARGES: ANALYSIS OF LAWS, REGULATIONS, AND CASE LAW." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Customer Facility Charges: Analysis of Laws, Regulations, and Case Law. Washington, DC: The National Academies Press. doi: 10.17226/27049.
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Suggested Citation:"AIRPORT CUSTOMER FACILITY CHARGES: ANALYSIS OF LAWS, REGULATIONS, AND CASE LAW." National Academies of Sciences, Engineering, and Medicine. 2023. Airport Customer Facility Charges: Analysis of Laws, Regulations, and Case Law. Washington, DC: The National Academies Press. doi: 10.17226/27049.
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ACRP LRD 45 3 AIRPORT CUSTOMER FACILITY CHARGES: ANALYSIS OF LAWS, REGULATIONS, AND CASE LAW Sarah E. Wilbanks and Steven L. Osit, Kaplan Kirsch and Rockwell LLP, Denver, CO I. INTRODUCTION For many U.S. airports, customer facility charges or CFCs are an integral component of maintaining an overall system of rates and charges that is sufficient for the airport to satisfy ongoing operations and maintenance expenses, as well as to support robust capital programs for the improvement of land- side facilities (i.e., non-airfield areas of the airport, including passenger terminals, access systems, and parking facilities and lots). Typically, an airport proprietor imposes a CFC on the end- user of a nonaeronautical service available at the airport, and the nonaeronautical service provider collects the CFCs on the airport proprietor’s behalf. Most commonly, CFCs are imposed on rental car customers and collected by rental car companies (referred to herein as RACs)1 authorized to do business at or near the airport, and then periodically remitted to the airport proprietor for its use in connection with the operating and capi- tal expenses of rental car facilities (e.g., ConRACs) and support- ing infrastructure. As discussed in this report, CFCs may also be used in support of other types of projects, and vary, from airport to airport, in their amount, programming flexibility, and other key characteristics. This digest analyzes state and federal law, regulations, report- ed cases, and other similar legal authorities concerning the im- position, collection, use, and treatment of CFCs. Unlike many other aspects of airport finance, there is very little regulation of CFCs at the federal level and, thus, less uniformity in the ap- proaches taken by airports with respect to CFCs than with other aspects of airport management. More often than not, legal con- siderations with respect to the imposition, collection, and use of CFCs are a function of state and municipal law, the many varia- tions and unique aspects of which are too numerous to fully detail in this digest. While we endeavor to identify the types of legal issues that may arise under federal, state, and local law with respect to CFCs, this digest is intended only as a starting point for practitioners seeking to learn more about CFCs; the authors strongly advise reviewing applicable state and municipal law in any specific instances. This digest is organized into four primary sections. Section II, What are CFCs?, elaborates on the defining characteristics of CFCs and distinguishes their treatment under applicable law from other types of charges that may be imposed by an airport 1 This digest also discusses instances where airport proprietors have imposed CFCs, or similar charges, on the end users of entities other than traditional RACs (e.g., non-traditional rental car businesses like Turo). However, the vast majority of CFCs are imposed on traditional RAC customers, and we use this term throughout to describe the enti- ties subject to CFCs. See also, infra, at Section V.A.3 (discussing treat- ment of non-traditional and off-airport rental car operations). proprietor or RAC. This section also summarizes the types of projects that CFCs may be programmed toward. Section III, State-Level Regulation of CFCs, summarizes the laws enacted by those ten U.S. states that have adopted CFC-specific provisions at the state level. At the time of this writing, most states do not have state-level legislation addressing CFCs; however, it is critical that practitioners in those jurisdictions that have adopted CFC- specific requirements be familiar with applicable limitations and procedures. Section IV, Local Imposition of CFCs, describes the various mechanisms—resolutions and ordinances, bond inden- tures, and lease and concession agreements—and the essential features thereof, which typically operate to impose CFCs at air- ports. Finally, Section V, Treatment of CFCs Under State and Federal Law, analyzes the treatment of CFCs in several different legal contexts, including various challenges to the imposition of CFCs and other types of airport fees, bankruptcy, public financ- ing, and consumer protection. Because there is relatively little case law directly addressing CFCs, this section discusses several ancillary, but instructive, matters regarding airports’ imposition of other types of charges and ground access fees. II. WHAT ARE CFCS? CFCs may be generally defined as charges imposed by an airport proprietor on the end-user of a nonaeronautical service available at the airport (most commonly, a rental car customer), collected by the nonaeronautical service provider (most com- monly, a rental car company operating at or near the airport), in trust and as an agent for the airport proprietor. Although there may be substantial variations among airports with respect to the particular mechanisms used to impose CFCs and the way they may be used, CFCs generally share certain key characteristics, which are further detailed below: (1) they are charges imposed directly on customers of RACs, not the RACs themselves; (2) RACs are obligated to collect CFCs from their customers on the airport’s behalf; and (3) the revenue from the CFCs is gen- erally programmed for specific ground access-related projects, which are often prescribed by state and/or local law. A. CFCs Are Imposed and Controlled by the Airport Proprietor It is important to distinguish CFCs from other charges im- posed by the airport proprietor on RACs or by RACs on their customers. RACs conducting transactions on or around an air- port are typically required under the terms of their concession agreements with an airport to pay some form of compensation for their use of the airport or the privilege of conducting their business on the airport, whether a fixed rental fee, a percentage

CONTENTS I. Introduction, 3 II. What Are CFCs?, 3 A. CFCs Are Imposed and Controlled by the Airport Proprietor, 3 B. CFCs Are Collected from End-Users by RACs and Held in Trust for the Airport Proprietor, 4 C. CFCs Are Generally Used to Support Specific Ground Access Projects, 4 D. CFCs Are Distinct from Passenger Facility Charges, 4 III. State-Level Regulation of CFCs, 5 A. Alaska, 5 B. California, 6 C. Colorado, 6 D. Hawaii, 6 E. Illinois, 7 F. Nevada, 7 G. New York, 8 H. Pennsylvania, 8 I. Rhode Island, 8 J. Washington, 8 IV. Local Imposition of CFCs, 9 V. Treatment of CFCs Under State and Federal Law, 11 A. Challenges to the Imposition and Applicability of CFCs and Similar Fees, 12 B. Treatment of CFCs as Trust Property, 17 C. Applicability of FAA Grant Assurances, 18 D. Public Financing and Taxation, 19 E. Consumer Protection, 20 VI. Conclusion, 20 Appendix A. State Statutes Related to CFCs, 21 Appendix B. Examples of CFCs Imposed Locally by Law and/or Contract, 22 2 ACRP LRD 45

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Customer facility charges (CFCs) are imposed by airport proprietors on customers of rental car companies at airports to pay for capital and operating costs of rental car facilities. CFCs have relatively little federal regulatory oversight, and most are implemented through local municipal acts and/or contractual arrangements. Recently, challenges to the imposition and use of CFCs and other airport fees and charges have been mounted in several states.

ACRP Legal Research Digest 45: Airport Customer Facility Charges: Analysis of Laws, Regulations, and Case Law, from TRB's Airport Cooperative Research Program, examines legal issues arising under state and federal law from the imposition and use of CFCs. The digest includes an inventory of state-level authorizing legislation in jurisdictions that regulate CFCs. Judicial decisions regarding the collection and use of CFCs and related issues are also analyzed.

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