Chandler Air Service, Inc. v. City of Chandler, Arizona – No. 16-13-05
FAA Docket No:
16-13-05
Author:
Byron K. Huffman, Acting Director
Author Title:
Acting Director
Complainant(s):
Chandler Air Service, Inc.Respondent(s):
City of Chandler, ArizonaAirport(s):
Chandler Municipal Airport (CHD)
Holding:
Finding Potential Violation of Grant Assurance 25, Airport Revenue; Requiring City to submit Action Plan or Proof of Grandfather Status of City’s Tax.Abstract:
The Complainant, the sole Fixed-Base Operator (“FBO”) and lessee of five acres at a public-use, towered airport owned and operated by the City of Chandler, Arizona, sought to have the City revise Chandler City Ordinance 8-10, which required voter bond approval to finance a runway extension and to allow the City to make an appropriate decision regarding the necessity of a runway extension without voter bond approval. The Complainant also requested that the City return the fuel taxes paid to the City’s General Fund to the Airport Enterprise Fund. Lastly, the Complainant requested that the City be prevented from using Federal, State, and local money to subsidize the City’s self-service fuel operation.
The FAA found that the Respondent was not in violation of its Federal obligations with respect to Grant Assurance 5, Preserving Rights and Powers, Grant Assurance 11, Pavement Preventive Maintenance, Grant Assurance 21, Compatible Land Use, Grant Assurance 22, Economic Nondiscrimination, and Grant Assurance 24, Fee and Rental Structure. However, the Director found that the Respondent may be in violation of Grant Assurance 25, Airport Revenues.
First, the Respondent argued that it intended to codify City policy regarding anticipated improvements to the airfield based on the latest Airport Master Plan and did not restrict aircraft operations at the airport. The Director agreed, finding that the City did not violate Grant Assurance 5, Preserving Rights and Powers, by enacting a City Ordinance requiring voter-approved bonds to fund a runway extension. “The decision to proceed with an airport project, such as a runway extension, and the related funding process is a business decision within the discretion of the City. Similarly, the method by which the City chooses to fund the project (e.g., through a bond process approved by the voters) is a local matter within the City’s discretion.” (p. 18.)
Second, according to the Director, the City did not violate Grant Assurance 11, Pavement Preventive Maintenance, because the pavement and management program met the requirements of the grant assurance. Indeed, the Respondent argued that Grant Assurance 11 does not require airport sponsors to assure that no pavement problems ever occur. While the Complainant argued that “a temporary fix after years of neglect” to an airport apron did not meet the requirements for an effective pavement maintenance program, the Director concluded that the “record supports that the Airport has a reasonable program of daily and periodic detail inspections, and the that the Airport’s program reasonably identified, analyzed, and ultimately cured pavement issues on the San Tan Apron.” (p. 19.)
Third, the City did not violate Grant Assurance 21, Compatible Land Use, by rezoning land for commercial development compatible with the airport that would limit a future runway extension. The Complainant alleged that the City had rezoned land planned for runway development with plans for the development of a retain center even though it had accepted Federal funds to purchase land for runway expansion. (p. 20.) The Respondent countered that the development did not interfere or limit current airport operations and that the airport continued to control all of the land it needed for current operations and almost all of the lands it needed for projected future expansion. (p. 21.)
The Director noted that “[t]he intent of Grant Assurance 21 is to protect against hazards resulting from obstructions to aerial navigation and noise impacts, such as those resulting from residential construction too close to the airport. The Complainant attempts to redefine Grant Assurance 21 to include possible future development of the Airport.” (p. 22.). Additionally, the Director concluded that “a sponsor is not required to develop its airport to the maximum extent possible, but rather it has discretion to make business decisions provided those decisions do not violate grant assurances.” In this context, the Director reasoned that “[t]he FAA does not second-guess a sponsor’s business decisions unless they directly violate a grant assurance. In this instance, the City rezoned non-airport land after weighing the competing interests of the community economic development and planned airport development. The City acknowledged the need to comply with grant assurances to protect the runway protection zone and properly amended its [Airport Master Plan] to reflect the maximum 5,700-foot runway that would continue to comply with Grant Assurance 21 [and] the record does not support the allegation that the Respondent accepted Federal funds to acquire property to build a planned 6,800-foot runway.” (p. 22.)
Fourth, the City did not violate Grant Assurance 22, Economic Discrimination, by passing an ordinance requiring voter bond approval for a runway extension, and the facts did not support the allegation that the City utilized Federal grant money and airport enterprise funds to subsidize its self-fueling operation. The Complainant had asserted that the City unjustly discriminated against jet aircraft through an ordinance that implicitly sought to limit runway length; that the City intentionally operated its self-fueling services at a break-even or a small loss, and the used AIP grant and airport enterprise funds to subsidize that operation; and that the City imposed fuel requirements on the Complainant that it did not impose on itself or that it used Federal or other grant money to subsidize its fuel operations. (p. 22.)
The Director rejected each of these allegations with respect to Grant Assurance 22 because: (1) “[a] decision by the airport sponsor not to extend a runway because it chooses not to expand the types of aircraft that may operate from the airport is not analogous to a restriction on aircraft operations;” and (2) the record did not support the allegation that the Respondent purposefully charged below-cost or other non-competitive fuel rates. (p. 24). And finally, the Director found that there was no evidence to support the assertion that the City imposed fuel requirements inconsistently or improperly. (p. 25.)
Fifth, according to the Director, the City did not violate Grant Assurance 24, Fee and Rental Structure, because it did not impose artificial barriers to the development of the airport thereby failing to make the airport as self-sustaining as possible. (p. 30-31.) The Complainant alleged that the “City erected numerous artificial barriers (indeed, self-inflicted wound) to the appropriate development of the airport ensuring the worst possible circumstances of low traffic and economies of scale and then it complains that it has to subsidize the airport.” (p. 26.) The Director disagreed, however, finding the Complainant’s allegations “misplaced” because Grant Assurance 24 “does not require an airport to develop to the maximum extent possible … allegations concerning business decisions related to the length of the Airport’s runway are not appropriately addressed under Grant Assurance 24.” (p. 26.)
Notwithstanding the above, the Director determined that the City may be in violation of Grant Assurance 25, Airport Revenue, based on the collection of levied fuel tax form the airport while waiving the same levied fuel tax for Chandler Air Service, Inc., and the City may also be in violation of Grant Assurance 25 by using the proceeds from aviation fuel taxes collected at the airport for the City’s general fund purposes instead of airport-related uses. (p. 31.)
The Director acknowledged that the City may charge sales and use taxes on the sale of fuel pursuant to State statute and local ordinance, but “in this case, the City appears to be using the tax revenues for non-airport related purposes under a claim of grandfathered status … To receive grandfathered status for an aviation fuel tax under the revenue use policy, a State or local authority must submit the enabling legislation and any other substantiation to the FAA for review and determination.” (p. 28.) As such, the Director ordered the Respondent to “submit either an action plan describing its intended process to comply with Federal law on aviation fuel tax revenues or submit justification for grandfathering status.” (p. 28.)
Finally, even though neither the Complainant nor the Respondent raised the possibility that the City had violated a grant assurance by back paying unpaid taxes on the sale of Avgas, the Director analyzed the issue, finding that “the City’s decision to waive delinquent tax and interest for the Complainant may be a violation of Grant Assurance 25. The proceeds of the sales and use taxes on aviation fuel must be used for airport-related purposes. [Thus, the] City should articulate the reasons for the waiver, explaining whether the Airport was made whole in relation to the taxes, and why the Airport did not receive the same waiver consideration as the Complainant.” (p. 30.)