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

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

20 ACRP LRD 45 have made similar arguments, with some achieving settlements on such theories.147 However, most states and airports do not expressly prohibit this practice. The manner in which rental car companies refer to these fees on customer receipts has also been the subject of litigation. For example, in a dispute involving the legality of different aspects of the airport’s required concession fees, a RAC sought to enjoin the Columbus Municipal Airport Authority’s restrictions on what language could be used in its transaction receipts to refer to a concession fee surcharge that it passed onto its customers.148 The authority argued that characterizations such as “access fee” were potentially misleading to customers as to who was im- posing the charge, the airport or the RAC.149 When discussing the legality of these concession recovery fees or privilege fees, that court also noted the distinction between a charge imposed directly on the customer by the airport sponsor—e.g., CFCs— and a charge that is passed on to the customer by the rental car company in order to recoup overhead/its costs of doing business at the airport from the customer.150 As discussed above in Sec- tion V.A.2, for example, this distinction and whether it has been properly made by the airport proprietor will play an important role in how any imposition of CFCs will be analyzed under fed- eral or state law. VI. CONCLUSION CFCs may be an important component of an airport pro- prietor’s overall financing plan for development, operation, and maintenance of nonaeronautical facilities. Because CFCs are not specifically regulated under federal law, however, the precise mechanism for imposing and collecting CFCs may vary from jurisdiction to jurisdiction. It is important that prac- titioners understand whether and, if so, to what extent state- level legislation imposes substantive or procedural limitations (9th Cir. 2007) (finding that Cal. Civ. Code § 1939.19 prohibited rental car companies from charging concession recovery fees to any cus- tomers who rented vehicles in California but denying claims based on out of state transactions by California customers). 147 See, e.g., Shames v. Hertz Corp., et al., Case No. 07-CV-2174, 2012 U.S. Dist. LEXIS 158577 (S.D. Cal. Nov. 5, 2012) (settlement approved of class action alleging antitrust and other violations due to pass-through of concession recovery and “tourism assessment fee” by rental car companies); see also Lee v. Enterprise Leasing Co.-W., LLC, No. 3:10-CV-00326, 2015 U.S. Dist. LEXIS 64027 (D. Nev. May 15, 2015) (settlement approved of class action alleging violations of state law and unjust enrichment due to rental car companies’ practice of unbundling concession recovery fees). 148 Capital Leasing v. Columbus Mun. Airport Auth., 13 F. Supp. 2d 640 (S.D. Ohio 1998). 149 Id. The court ultimately found the term “access fee” could be misleading, but that the Authority had been overly restrictive in limit- ing the way RACs could characterize the fee. 150 See id. at 665 (discussing potential First Amendment issues with airport sponsor’s restrictions on how a rental car company may charac- terize concession fees on a customer’s receipt because the language implied that the fee was one imposed by a governmental authority and not a charge passed on to the customer by the rental car company that was recouping its costs). under the tax regulations of what is included in the definition of an “airport” for such purposes. In short, the facility must be either directly related and essential to servicing aircraft or enabling aircraft to take off and land, or transferring passen- gers or cargo to or from aircraft, or, if not, must be “function- ally related and subordinate to an airport.”143 Importantly, rental car facilities are not considered to meet this definition, even if located on the airport. Therefore, while CFCs may be pledged as security for financing for facilities that may qualify differently under federal tax law than rental car facilities (e.g., if an airport is authorized to use CFCs for associated roadways or terminal modifications), when they are pledged as security for rental car facilities themselves, the bonds will require a different tax law analysis. The overlap but separation of these considerations will be important in practice for airports seeking bond financing in connection with CFCs and rental car operations. Where CFC-backed bonds have been issued, rental car com- panies typically agree by contract to certain covenants related to the bonds. Of particular significance to investors may be the in- clusion of provisions in an airport’s agreements with its current RACs that in the event CFC revenue is inadequate to meet the airport’s debt obligations toward its CFC-backed bonds, and/ or CFCs are no longer imposed, other revenue will be flowed instead toward the repayment of the bonds and/or the RACs may owe additional payments. This might protect the airport, at least for a limited time, in a circumstance where a local govern- ment (or state) that had imposed CFCs repealed or revised the relevant authority or because of a successful legal challenge.144 E. Consumer Protection While largely tangential to airport proprietors’ authority to impose, collect, and use CFCs, practitioners should be aware of potential legal issues regarding the disclosure and classi- fication of CFCs and other types of airport charges vis-à-vis consumers.145 For example, often a concession recovery fee is not included by a rental car company in the quoted and advertised rate given to customers—potentially creating the impression that the rental car company has a lower rate than its competitors—but is nonetheless imposed on the customer’s actual bill, a practice sometimes referred to as “unbundling.” This has led to con sumer protection concerns, and a few states have even prohibited the practice of “unbundling” these charges on receipts, arguing that it is misleading and unfair to consumers.146 Recent class actions 143 26 C.F.R. § 1.103-8(e)(2). 144 For examples of this type of language, see, e.g., The Port of Portland (Or.), Official Bond Statement – Series 2019 CFC Bonds, App. D at 22-23 (April 3, 2019); Columbus Regional Airport Auth. (Ohio), Official Bond Statement – Customer Facility Charge Revenue Bonds, Series 2019, App. D at D-29-30 (April 17, 2019). 145 See, e.g., Haw. Rev. Stat. § 1939.19; see also Nev. Rev. Stat. § 482.3158 (describing disclosure requirements to consumers). 146 See, e.g., Cal. Civ. Code § 1939.19 (prohibiting rental car com- panies from imposing charges other than the rental rate, additional mandatory charges, or a mileage charge); see also Speyer v. Avis Rent a Car Sys., 415 F. Supp. 2d 1090 (S.D. Cal. 2005), aff’d, 242 F. App’x 474