McDonough Properties, LLC, M&R Holding, LLC, Tri-D, LLC, and Col. Frank Barnett v. City of Wetumpka, Alabama – No. 16-12-11
FAA Docket No:
FAA Docket No. 16-12-11
Author:
Eduardo A. Angeles, Associate Administrator for Airports
Complainant(s):
McDonough Properties, LLC, M&R Holding, LLC, Tri-D, LLC, and Col. Frank BarnettRespondent(s):
City of Wetumpka, AlabamaAirport(s):
Wetumpka Municipal Airport (08A)
History:
See also Director's Determination dated 10/10/13.
Holding:
Affirming finding of no violation of federal law or grant obligations.Abstract:
Respondent contemplated expanding or relocating the airport and prepared a Feasibility Study to determine whether expansion or relocation was the best option. To this end, the airport developed a new standard lease with a one-year term. The purpose of the one-year lease was to put the airport users on notice that making improvements to hangars would not be economically advisable pending the outcome of the study. Complainants—tenants of the Wetumpka Municipal Airport—filed a formal Part 16 complaint, alleging various violations of federal law and related federal grant obligations. The Director determined that no violations had occurred by the Respondent.
The Director specifically concluded that: (1) contrary to the Complainants’ assertion that the airport was failing in its power to make the airport as self-sustaining as possible, the Respondent’s standard lease with short-term lease provisions for hangars at the airport did not constitute a violation of Grant Assurance 5, Preserving Rights and Powers, and the lease term did not deprive the Respondent of its rights and powers necessary to operate the airport; (2) the Respondent was not in violation of Grant Assurance 19, Operation and Maintenance, because the minimum standards did not require the Respondent to offer a long-term lease; (3) the Respondent was not in violation of Grant Assurance 8, Consultation with Users, because this grant assurance is only applicable to projects funded under Title 49 of the United States Code; (4) the Respondent was not in violation of Grant Assurance 22, Economic Nondiscrimination, because the standard lease terms provided for a one-year lease term to allow the airport to assess its future needs; (5) the Respondent’s refusal to grant long-term leases for hangars at the airport also was not a constructive granting of an exclusive right in violation of Grant Assurance 23, Exclusive Rights, as the record refuted the assertion that other tenants were being treated more favorably such that an exclusive right had been created; (6) the Respondent’s fee and rental structure was not in violation of Grant Assurance 24, Fee and Rental Structure, based on the short term of the lease as the record did not support the claim that the short-term lease was causing the airport to fail to be self-sustaining; and (7) the Respondent’s refusal to grant long-term leases was not a violation of Grant Assurance 38, Hangar Construction, as no agreement between the Respondent and the Complainants existed to construct any hangars as would be necessary to trigger Grant Assurance 38.
On appeal, the Complainants raised four issues, namely whether the Director erred: (1) when he identified the process the City was undertaking with its feasibility study as having a legitimate business purpose; (2) by finding that Respondent was not in violation of Grant Assurance 24, Fee and Rental Structure, as a result of the new standard lease with a one-year term; (3) when he found that the record failed to support the assertion that nonaeronautical users were treated more favorably; and (4) by finding that the Respondent did not grant an exclusive right to nonaeronautical tenants in violation of Grant Assurance 23, Exclusive Rights. The Associate Administrator for Airports affirmed the Director’s Determination in all aspects.
First, the Associate Administrator observed that, “[t]he fact that the Complainants were not satisfied with the process of the feasibility study does not mean that the airport sponsor was not within its proprietary rights to engage in the study … the fact that the City has concluded this study and determined that longer term (10) year leases are appropriate and efforts have been made to communicate this information to the Complainants essentially renders this argument in the Appeal with little practical value. The Complainants’ argument that the Director erred when he identified the process was undertaking with its feasibility study as having a legitimate purpose has no merit.” (Final Agency Decision and Order, p. 22.)
Second, the Associate Administrator observed that “Grant Assurance 24, Fee and Rental Structure, has more flexibility than other Assurances in that compliance is generally determined over the longer term. An airport sponsor could not reasonably be found in violation of this assurance by judging its financial performance over just one year.” (Final Agency Decision and Order, p. 24.) Accordingly, “Grant Assurance 24 does not necessarily prohibit agreements that in the short term may not maximize revenues … The City was well within its proprietary rights to examine whether the airport should remain in its current location or move to a new location. It was a prudent business decision to require short-term leases while the feasibility study was ongoing.” (Final Agency Decision and Order, p. 24.)
Third, “[a]eronautical tenants and nonaeronautical tenants are not similarly situated,” defeating the Complainants’ claim that they were there unjustly discriminated against by the terms of the lease in violation of Grant Assurance 22. (Final Agency Decision and Order, p. 27.)
Finally, the Associate Administrator noted that “to make a finding of a violation of Grant Assurance 23, Exclusive Rights, the FAA would have to determine that the City established such inequity in its aeronautical leases as to create a significant burden on one competitor that is not placed on another provider of a particular aeronautical service or activity at the airport.” (p. 29.) However, here, the Complainants only pointed to the lease of a nonaeronautical user that was not provided any right to provide a particular aeronautical service that was not provided by the Complainants. Moreover, this nonaeronautical user assumed its lease prior to the Respondent’s adoption of the new standard lease and, therefore, was not treated more favorably than the Complainants—“it had an existing lease when the Respondent initiated its new leasing policy.” (Final Agency Decision and Order, p. 29.)