Your local airport is becoming a drain on the local economy. Sure, it provides a few jobs, adds a certain cachet to the area and provides a hobby for the few people who can afford to purchase and maintain aircraft. But the annual expense of keeping the airport running – and running safely – is becoming more and more like a lead weight on your budget. “Let’s just close the thing,” you say. But wait, remember all that money you accepted from the FAA as part of the AIP grant program to lengthen the runway, pay for new taxiways, and purchase property? The FAA remembers. And before you can close the airport, there are many hurdles to clear set by the FAA to discourage the closure of airports.
1. Take A Look At The Grant Assurances
First, take a look at the documents in your possession – the grant agreements you received from the FAA and signed as a condition of receiving the grants. As you are no doubt aware, under various Federal grant programs, you have agreed to assume certain statutorily defined obligations pertaining to the operation, use and maintenance of the Airport [49 U.S.C. § 47107(a)], that are described and implemented in FAA Order 5190.6B and memorialized in the application for Federal assistance as Grant Assurances, which become a part of the grant offer and bind the grant recipient contractually upon acceptance. 49 U.S.C. § 47107(a); FAA Order 5190.6B, “Guide To Sponsor Obligations” pp. 2-13 to 2-18.
The Grant Assurances primarily relevant to a proposed Airport closing or “deactivation” and reuse for non-aviation purposes are as follows. First, you, the airport sponsor, may not “sell, lease, encumber, or otherwise transfer or dispose of any part of its title or other interests in the property … for the duration of the terms, conditions, and assurances in the grant agreement without approval by the Secretary [of Transportation].” See, e.g., Grant Assurance C.5.b. FAA regulations expand on this requirement. All of the land shown on Exhibit A to each grant constitutes the airport property obligated for compliance under the terms and covenants of the grant agreements. FAA Order 5190.6B. The airport sponsor is obligated to obtain FAA consent to delete any land so described and shown. Id. FAA consent shall be granted only if it is determined that the property is not needed for present or foreseeable public airport purposes. Id. Accordingly, if the airport sponsor’s Airport deactivation planning includes the sale, lease, encumbrance, or other transfer or disposition of its interests in the Federally obligated property, it: (1) must first obtain approval from the Secretary; by (2) establishing that the land to be alienated is no longer “needed” for public airport purposes.
Second, the airport sponsor is obligated to “suitably operate and maintain the airport and facilities. . . Any proposal to temporarily close the airport for nonaeronautical purposes must first be approved by the Secretary . . . [the Sponsor] will not cause or permit any activity or action thereon which would interfere with its use for airport purposes.” See, e.g., Grant Assurance C.19.a. This obligation to maintain the Airport includes the responsibility to operate the aeronautical facilities and common use areas for the benefit of the public. FAA Order 5190.6B, p. 2-15. Therefore, the airport sponsor “is more than a passive landlord of specialized real estate,” and has a continuing obligation to operate and maintain the Airport facilities. Id. For this reason, the airport sponsor may not cease to operate the airport prior to obtaining a release of its Grant Assurances from the FAA.
Third, “[f]or land purchased under a grant for airport development purposes (other than noise compatibility), [the airport sponsor] will, when the land is no longer needed for airport purposes, dispose of such land at fair market value or make available to the Secretary [of Transportation] an amount equal to the United States’ proportionate share of the fair market value of the land.” See, e.g., Grant Assurance 31.b.1. The United States’ share will either be reinvested in the national airport system or be deposited in the Aviation Trust Fund. Accordingly, the airport sponsor must either dispose of the land obtained with Federal grant funds at fair market value, paying a proportionate share to the Secretary, or make that proportionate share available to the United States without disposing of the property. Therefore, whether the airport sponsor chooses to dispose of the property purchased with Federal funds, maintain it for a public purpose other than aviation, or use it for non-public purposes, the airport sponsor must repay a proportionate share of the current fair market value of the land to the Federal government. There is no longer any limit on the duration of the terms, conditions, and assurances regarding real property acquired with Federal funds. [See, Grant Assurance B.1; FAA Order 5190.6B, p. 2-14]
Federal regulations distinguish between the treatment of grants for the purchase of real property and those for airport development or improvement purposes. With respect to facilities developed or equipment obtained with Federal funds, the Assurances remain in effect for the useful life of the facilities developed or equipment acquired [See Grant Assurance B.1; FAA Order 5190.6B, p. 2-13], although this period may not exceed twenty (20) years from the date the grant offer was accepted. Id.
In summary, deactivation of the Airport would require approval by the Secretary of Transportation and payment of the FAA’s proportionate share of the FMV of all real property acquired with Federal funds, as well as coordination with the FAA with respect to the disposition of grants made for airport development or improvement.
2. Federal Regulations Allow the Release of the Airport Sponsor’s Obligations under the Grant Assurances.
Despite the seemingly unequivocal requirements of the Grant Assurances, the FAA has established procedures that allow the release, modification, reformation or amendment of airport agreements, including grant agreements, under certain prescribed circumstances. Specifically, “[w]ithin the specific authority conferred upon the Administrator by law, the FAA will, when requested, act to release, modify, reform, or amend any airport agreement to the extent that such action will protect, advance, or benefit the public interest in civil aviation.” FAA Order 5190.6B Section 22.31 (emphasis added). The FAA may grant relief from specific limitations or covenants of an agreement, or grant a complete and total release which authorizes the subsequent disposal of obligated airport property. Id. The FAA’s release may apply to specific facilities and parcels of land acquired with Federal assistance, which ultimately results in a partial airport closure, or disposal of an entire airport.
a. Deactivation, or Permanent Closure of the EntireAirport.
An airport sponsor may request the release of obligations for an entire airport. FAA Order 5190.6B, Section 22.20. ARP-1’s concurrence is required before granting any release that would enable the disposal of an entire airport for non-aviation purposes. Moreover, each request to release an entire airport is considered by ARP-1 on a “case-by-case” basis without limitation to the guidance in FAA Order 5190.6B. In other words, the terms under which deactivation is allowed are expressly left to the complete discretion of ARP-1.
1. Constraints on ARP-1′ s Discretion.
Clearly, however, ARP-1’s discretion is not unlimited. It will be guided, at least to some extent, not merely by the Grant Assurances, as set forth above, but also by applicable parallel Federal regulations and procedures. For example, where a release is sought to permit sale and disposal of land purchased with grant funds, apparently including deactivation, it must be demonstrated at minimum that (1) the land is no longer “needed” for airport purposes; and (2) the airport will repay that portion of the property’s FMV proportionate to the Federal Government’s share of the cost of the acquisition of such land, which sum is to be deposited in the Aviation Trust Fund. FAA Order 5190.6B, Section 22-19.
2. Procedural Requirements.
Generally, the request for release must: (1) be in writing and signed by a duly authorized official of the airport owner [FAA Order 5190.6B, Section 22.23]; and (2) be specific, including the facts and circumstances justifying the request [FAA Order 5190.6B, Section 22.24]. The FAA will take into consideration factors such as: (1) the past and present owner’s compliance record under all its airport agreements and its actions to make available a safe and usable airport for maximum aeronautical use by the public; (2) evidence that the owner has taken or agreed to take all actions possible to correct noncompliance situations at the airport, if applicable; (3) the reasonableness and practicality of the owner’s request in terms of aeronautical facilities which are needed and the priority of need; (4) the net benefit to be derived by civil aviation and the compatibility of the proposal with the needs of civil aviation; and (5) consistency with the guidelines for specific types of releases. FAA Order 5190.6B, Section 22.27.
3. Applicable Policy Determinations.
Moreover, the FAA must also make at least one of several policy determination, those potentially applicable here include that: (1) the public purpose which a term, condition, or covenant of an agreement, or the agreement itself, was intended to serve is no longer applicable; or (2) the release, modification, reformation, or amendment of an applicable agreement will not prevent accomplishment of the public purposes for which the airport or its facilities were obligated, and such action is necessary to protect or advance the interest of the United States in civil aviation; or (3) the release, modification, reformation or amendment will conform the rights and obligations of the owner to the statutes of the United States and the intent of Congress consistent with applicable law. FAA Order 5190.6B, Section 22.28.
b. Treatment of Airport Improvements Other than Land.
Finally, where a release is sought to abandon, demolish or convert grant-funded improvements, other than land, the FAA must find that: (1) the grant agreement involved has expired; or (2) the facility in question is no longer needed for the purpose for which it was developed; or (3) the useful life of the facility in question has expired
Despite the inherently discretionary nature of FAA regulations governing deactivation, it seems clear that, for real property they require, at a minimum: (1) repayment of a sum (some proportion of the current FMV of the real property purchased with FAA funds) which is substantially in excess of the original amount of the FAA Grants, but which can theoretically be obtained through resale or development of the Airport property; and (2) successful argument that the deactivation will benefit the National Air Transportation System, which can be based upon the substantial benefit to be derived from the airport sponsor’s deposit in the Aviation Trust Fund of the sum required to compensate the FAA for deactivation, which can then be used for the development and improvement of other airports in the system.
The deactivation of an airport is not impossible, but it is tricky and complex due to the fact that most airports have accepted federal funds to keep the airport operating safely. This post should not be used as an exhaustive “how-to” on closing an airport, and it would behoove airport sponsors contemplating closure to consult with an attorney who is cognizant of the complex and often confusing regulations surrounding airports and grant assurances.