In the Matter of Compliance with Federal Obligations by the City of Zephyrhills – No. 16-22-01
FAA Docket No:
16-22-01
Author:
Kevin C. Willis, Director, Office of Airport Compliance and Management Analysis
Complainant(s):
Federal Aviation AdministrationRespondent(s):
City of ZephyrhillsAirport(s):
Zephyrhills Municipal Airport (ZPH)
Holding:
Violation of Grant Assurances 5, 19, 24, and 25 and Surplus Property Act; Corrective Action Plan (CAP) RequiredAbstract:
The FAA initiated an investigation in January 2022, issuing a Notice of Investigation (NOI) to the City of Zephyrhills, FL, the sponsor of the Zephyrhills Municipal Airport, to determine whether the City was complying with its federal sponsor obligations, which included a review of its lease and operating agreement with Skydive City, Inc. (Director’s Determination, p. 1.)
The agreement was a 20-year lease set to expire in 2030, with an option for Skydive City to extend it for an additional 5 years. (Director’s Determination, p. 1.) The lease allowed nonaeronautical uses, including a recreational vehicle (RV) campground, on airport property designated for aeronautical purposes. (Director’s Determination, p. 1.) The FAA also reviewed the rates charged for nonaeronautical use of the property and evaluated whether the City maintained its rights and powers over airport operations. (Director’s Determination, p. 1.)
The NOI identified three primary issues (Director’s Determination, p. 7.):
- Whether the City violated Grant Assurance 5, Preserving Rights and Powers, by entering into a long-term lease with Skydive City that granted sublease rights for long-term RV parking and a 5-year lease extension, potentially impairing the City’s authority to operate the airport.
- Whether the City violated Grant Assurance 19, Operations and Maintenance, and Grant Assurance 21, Compatible Land Use, by allowing residential use of airport property, specifically the RV campground, in areas designated for aeronautical purposes.
- Whether the City violated Grant Assurance 24, Fee and Rental Structure; Grant Assurance 25, Airport Revenues; and 49 U.S.C. § 47133 by failing to make the airport “as self-sustaining as possible” and leasing property for nonaeronautical activities—such as the RV campground, skydive jumpsuit and equipment manufacturing, a skydive equipment vendor, and a restaurant/bar—at less than fair market value (FMV).
The FAA Director’s investigation concluded that while the issues raised in the NOI remained largely unchanged, some elements had evolved to reflect current circumstances, and the revised issues continued under review. (Director’s Determination, p. 7.)
Grant Assurance 19, Operations and Maintenance
The FAA examined whether the City of Zephyrhills violated Grant Assurance 19, Operations and Maintenance, and the Surplus Property Act of 1944 by allowing an RV campground with permanent residents on airport property in an area designated for aeronautical use at the airport. The Director’s analysis first considered whether the on-airport RV campground was incompatible with airport operations. (Director’s Determination, p. 8.)
First, a letter from the Airports District Office (ADO) to the City, in September 2020, confirmed that permanent residents were living at the RV campground, a claim the City did not dispute during informal resolution discussions. Photographs reviewed by the FAA showed that many RVs at the site were accompanied by sheds, porches, decks, patios, and fences, indicating long-term or seasonal occupancy. (Director’s Determination, p. 8.) Such residential use of airport property—whether permanent, seasonal, or part-time—is considered incompatible with airport operations under FAA Order 5190.6B, Change 2, Airport Compliance Manual, which explicitly prohibits residential development at federally obligated airports. (Director’s Determination, p. 8.)
Second, the campground’s location, adjacent to the airfield in an area designated for aeronautical purposes, conflicted with the primary mission of airport property, which is to support aeronautical activity. (Director’s Determination, p. 8.) Airport sponsors are required to retain control over property development to ensure efficient use for aviation needs. (Director’s Determination, p. 8.) The ADO noted that the RV campground served no necessary role in supporting skydiving or other aeronautical operations. Instead, the nonaeronautical activity encumbered land needed for aviation development and posed unnecessary safety and security risks. (Director’s Determination, p. 8.)
Grant Assurance 19 requires airport sponsors to maintain and operate their airports safely and exclusively for aeronautical purposes, prohibiting any activity that interferes with these objectives. (Director’s Determination, p. 9.) Because nonaeronautical uses incompatible with aviation violate this assurance, the Director found the City in violation. (Director’s Determination, p. 9.) The City did not dispute this finding and attempted to renegotiate its lease with Skydive City, which controlled the property, but those negotiations failed. (Director’s Determination, p. 9.) While the Director acknowledged the City’s attempts to address the issue, the incompatibility persisted. (Director’s Determination, p. 9.)
The FAA also examined the 1947 deed of conveyance for ZPH, which required that all airport property be used for airport purposes. (Director’s Determination, p. 9.) The deed allowed the City to use certain original structures for other purposes, but the land under the RV campground was not included in these exceptions. (Director’s Determination, p. 9.) FAA policy explicitly rejects interim nonaeronautical uses that conflict with aeronautical activity, and although the airport’s approved Airport Layout Plan (ALP) identified the RV campground as a “non-aviation interim use not to exceed the current lease term,” the ADO clarified in the 2020 letter that this depiction did not constitute FAA approval. (Director’s Determination, p. 9.) The ALP also failed to show the campground’s permanent or seasonal residential nature, further undermining any claim of approval. (Director’s Determination, p. 9.)
The FAA emphasized that inadvertent errors in the ALP do not override policy or limit its authority to enforce compliance. (Director’s Determination, p. 10.) FAA guidance directs ADOs and regional divisions to reject residential developments when reviewing ALPs, as introducing such development inside a federally obligated airport violates federal obligations. (Director’s Determination, p. 10.) The City remains bound by the terms of the 1947 deed, which prohibits incompatible nonaeronautical land uses. (Director’s Determination, p. 10.)
Ultimately, the Director determined that the City violated Grant Assurance 19 by allowing incompatible land use on federally conveyed airport property and that its actions were inconsistent with the Surplus Property Act. (Director’s Determination, p. 10.) A Corrective Action Plan (CAP) was deemed necessary to remove the RV campground, with specific actions and a timeline to restore compliance. (Director’s Determination, p. 10.)
Grant Assurance 24, Fee and Rental Structure, and Grant Assurance 25, Airport Revenues
The FAA examined whether the City violated Grant Assurance 24, Fee and Rental Structure; Grant Assurance 25, Airport Revenues; and 49 U.S.C. § 47133, which is implemented through the FAA’s Policy and Procedures Concerning the Use of Airport Revenue, by failing to keep the airport as self-sustaining as possible and by leasing property and assets for nonaeronautical activities at less than FMV. (Director’s Determination, p. 10.)
Grant Assurance 24 requires airport sponsors to maintain a fee and rental structure that makes an airport as self-sustaining as possible, while Grant Assurance 25 requires that all revenues generated by the airport be used only for airport capital or operating expenses. (Director’s Determination, p. 10.)
To investigate, the FAA Director reviewed the City’s lease with Skydive City and engaged in discussions with the City during informal resolution efforts. (Director’s Determination, p. 10.) The lease permitted several nonaeronautical activities, including the RV campground, a skydive equipment vendor, and a restaurant/bar. (Director’s Determination, p. 11.) A plain reading of the agreement revealed that the City charged a single flat rate for the entire leasehold without distinguishing between aeronautical and nonaeronautical uses. (Director’s Determination, p. 11.)
FAA Revenue Use Policy, under Grant Assurances 24 and 25, explains that failing to collect FMV rates for nonaeronautical uses is considered a form of revenue diversion, and it prevents an airport from being as self-sustaining as possible. (Director’s Determination, p. 11.) FAA Order 5190.6B, Change 2, Airport Compliance Manual, states that leasing airport land for nonaeronautical purposes at less than FMV is considered a subsidy of local government and is a prohibited use of airport revenue. (Director’s Determination, p. 11.) The City admitted that it was not charging FMV for nonaeronautical uses and reported that it had attempted, unsuccessfully, to address this during lease amendment negotiations with Skydive City between August and December 2022. (Director’s Determination, p. 11.) The proposed revisions would have applied commercial FMV rates to the skydive vendor and the restaurant/bar, while excluding the RV campground because the City intended to remove it. (Director’s Determination, p. 11.)
The Director determined that the City’s failure to charge FMV rates violated its obligations under Grant Assurances 24 and 25. (Director’s Determination, p. 11.) The fact that the lease did not separate nonaeronautical rates from aeronautical ones raised concerns that the City lacked a full understanding of its responsibilities. (Director’s Determination, p. 11.) The FAA emphasized that leases for aeronautical and nonaeronautical activities should be separate agreements to avoid confusion over terms and rates, as noted in a September 2020 letter from the ADO. (Director’s Determination, p. 11.)
Although the revenue loss from the City’s failure to charge FMV rates may have been relatively minor, the FAA required the City to develop a CAP to demonstrate a fee and rental structure that charges appropriate rates for nonaeronautical use, outline a plan to separate nonaeronautical and aeronautical activities in the Skydive City lease, and provide a timeline for implementing these changes to ensure compliance with Grant Assurances 24 and 25. (Director’s Determination, p. 11.)
Grant Assurance 5, Preserving Rights and Powers
Last, the FAA investigated whether the City violated Grant Assurance 5, Preserving Rights and Powers, by entering into a lease with Skydive City that impaired the City’s ability to maintain the rights and powers necessary to fulfill its federal obligations. (Director’s Determination, p. 11.) Grant Assurance 5 requires airport sponsors to retain full control over airport property and prohibits any action that would deprive them of the authority to comply with the terms and conditions of federal grant agreements. (Director’s Determination, p. 12.)
The Director reviewed the lease between the City and Skydive City and found that its terms allowed incompatible land use in an area designated for aeronautical purposes, a violation already established under Grant Assurance 19 in a separate finding. (Director’s Determination, p. 12.) The lease, which ran for 20 years with an option for Skydive City to extend it for an additional 5 years on identical terms, effectively locked the City into provisions that conflicted with its federal obligations. (Director’s Determination, p. 12.) The inclusion of this extension option reinforced the noncompliant elements, as it perpetuated the use of airport property for purposes contrary to federal grant requirements. (Director’s Determination, p. 12.)
FAA Order 5190.6B, Change 2, Airport Compliance Manual, states that airport sponsors must take necessary steps to regain their rights and powers when contractual agreements undermine their ability to comply with federal obligations. (Director’s Determination, p. 12.) One such measure is the inclusion of a strong subordination clause in all leases, which ensures that federal grant assurances take precedence over conflicting lease provisions. (Director’s Determination, p. 12.) Although the Skydive City lease contained a subordination clause in Article XIII, the FAA determined that it failed to provide adequate protection for the City’s rights. (Director’s Determination, p. 13.) Rather than prioritizing the City’s federal obligations, the clause emphasized protecting Skydive City’s rights as lessee and even suggested compensation for disruptions resulting from the City’s compliance with federal requirements. (Director’s Determination, p. 13.)
While the FAA did not take a position on compensation agreements between lessor and lessee, the Director emphasized that the purpose of a subordination clause is to safeguard federal investments in airport development and preserve the sponsor’s ability to correct conflicts arising from lease arrangements on federally obligated property. (Director’s Determination, p. 13.) Because the lease terms violated the City’s federal obligations and the subordination clause was insufficient to restore its rights and powers, the Director found the City in violation of Grant Assurance 5. (Director’s Determination, p. 13.)
To remedy these issues, the FAA directed the City to create a CAP to address the noncompliant terms. (Director’s Determination, p. 13.) The Director also recommended the development of a formal airport leasing policy, including a properly drafted subordination clause and other provisions to protect the airport’s operational and financial interests. (Director’s Determination, p. 13.)