FAA Docket No:
FAA Docket No. 16-19-15
Author:
Kevin C. Willis, Director, Office of Airport Compliance and Management Analysis
Complainant(s):
Jim Hankins and Mike Plyler
Respondent(s):
Grayson County, Texas
Airport(s):
North Texas Regional Airport (GYI)
Holding:
Complaint dismissed.
Abstract:
Complainants alleged that the county violated Grant Assurance 22, Economic Nondiscrimination, by its failure to offer and/or extend to them long-term leases comparable to the terms of other similarly situated leaseholders. (p. 1.) Complainants also alleged that the county’s refusal to accommodate their request for extended leases was a violation of Grant Assurance 38, Hangar Construction.
At the core of the complaint was a dispute regarding the length of the Complainants’ lease terms compared to other leaseholders who had also leased and/or constructed hangars on the airport property. (p. 6.) Complainants alleged that the county had unjustly discriminated against them in violation of Grant Assurance 22 by “offering and extending lease terms to similarly situated tenants” and “unjustifiably failing to offer such lease terms” to the Complainants. (p. 6.) They also argued that they “and other tenants [were] making the same or similar use of the facilities under the same circumstances,” and that “the same rates, fees, and rental structure should apply.” (p. 6.) In support of their claims, the Complainants provided a semi detailed review of eight airport leaseholds, including a comparison of parcel size, lease term in number of years, and rate per square foot. (p. 6.) On this basis, the Complainants’ argued that the “County’s refusal to offer a 30-year lease [to them] … while offering 30-year leases to various other tenants is blatant and unfair economic discrimination” and that the difference between a 20- and 30-year lease was “economically significant and will cost [them] substantial economic harm.” (p. 6.)
In response, the County disagreed with the way in which the Complainants characterized the facts and law and argued that lessees “have no right to a lease of a specific duration under Grant Assurance 22 or 38.” (p. 6.) Regarding the terms of the lease, the County noted that the Complainant’s ground leases: (1) had an initial lease term of 20 years and with four 5 year options (for a total of 40 years); (2) clearly stated that improvements would become property of the county upon construction; and (3) the county could set the new fair market value facility lease rates upon expiration of the initial term. (p. 6.) In this respect, the County noted that it changed its leasing policy and rates after it completed a comprehensive rate study which concluded that “throughout the country, airports are increasing the length of … leases from twenty years to an average of thirty years” and that “it is not surprising … that the lease agreements identified by the Complainants [by way of comparison], which were all entered into after this study was conducted, are for 30 years” and pay more per square foot than the Complainants pay for their 20 year leases. (p. 6-7.) The County further argued that the Complainants had not demonstrated that they were similarly situated to the tenants identified in their complaint as the parcel size and commencement dates differed significantly. (p. 7.)
With respect to one of the Complainants (Plyler), the Director found that the County’s actions were not unjustly discriminatory compared to similarly situated Air Runners over the same 30-year period. (p. 17.) The Director concluded that what the Complainant really seeks is “a 10 year extension at their prevailing lease rates” that “would permit them to continue to pay drastically lower rental rates than the other tenants they have identified,” as stated by the County. (p. 17.)
With respect to the other Complainant (Hankins), the Director found that he and Air Runners were not similarly situated. (p 17.) Therefore, the County did not engage in disparate treatment of Hankins by failing to renegotiate his lease as they did with Air Runners. (p. 17.) The Director found no violation, concluding that a complainant does not establish a violation of Grant Assurance 22 for unjust discrimination simply by showing differences between two leases. (p. 7.) The Director noted that the FAA has found differences in lease terms executed at different points in time were justified by market conditions present at the time of the lease execution. (p. 7.) “Grant Assurance 22 prohibits only unjust economic discrimination, not all economic discrimination.” (p. 7.) The Director was also persuaded that the Complainant was not similarly situated to other tenants: “the FAA has found that even when aeronautical tenants propose the same or similar use of the airport, if the level of investment and business aspects are dissimilar, the FAA may appropriately find the aeronautical users are not similarly situated.” (p. 7.) Moreover, the Director also noted that “The principle of unjust economic discrimination requires a party who has been allegedly discriminated against to be ‘similarly situated to’ to alleged preferred party in order to establish a violation (sic) economic discrimination under assurance 22.” (p. 7.)
Finally, the Director assessed whether the Complainants’ lease terms resulted in a violation of Grant Assurance 38, Hangar Construction. The issue arose from the Complainants’ arguments that “[b]ased on … significant economic investments, 20 year leases fail to provide an appropriate time for reasonable return” and that by “failing to extend Complainants’ leases to 30 years” the County violated Grant Assurance 38. To support their argument, the Complainants cited FAA Order 5190.6B Airport Compliance Manual as requiring the FAA “to consider whether the term exceeds a period of years that is reasonably necessary to amortize a tenant’s investment.” (p. 16.) The complaint also stated that “… one can logically conclude that a shorter ground lease … such as a 20 year term, may not be great enough to amortize” the investment. (p. 16.)
The Director disagreed, finding that the Complainants’ “mere statement that a lease term of 20 years may not be great enough to amortize their investment is insufficient evidence to support a finding of a violation of Grant Assurance 38.” (p. 16.) Therefore, the Director noted, there was no evidence showing that a lease with a term of 20 years with four 5 year options, subject to changing rental rates, fails to provide the Complainants sufficient time, certainty, and stability to get a reasonable return. (p. 16.) In addition, the County, according to the Director, satisfactorily addressed the future rent escalation issue by making the 5-year renewal options contingent on fair market valuations of comparable facilities at comparable airports. (p. 16-17.) As such, the County had granted the Complainants long-term leases for hangars as required by Grant Assurance 38.
In all, while the Director found that the County failed to uniformly apply its leasing policy to complainant Plyler, there was insufficient evidence to substantiate that the County’s management of its lease policies resulted in unjust economic discrimination against the complainant Plyler in violation of either Grant Assurance 22 or 38. (p. 2.)
Index Terms:
Disparate Treatment Grant Assurance 22 (Economic Nondiscrimination); Grant Assurance 38 (Hangar Construction); FAA Order 5190.6B; Leases; Rent Escalation; Similarly Situated; Tenant (Aeronautical)