Complying with FAA Grant Assurances
The San Diego Airport Authority, an appointed board which manages Lindbergh Field, decided to spend airport funds on a collection composed of 46 artworks for the airport. The decisions on how to decorate a public facility ordinarily are the exclusive domain of such an authority, but there are limitations on such discretion.
One of the explicit terms of the grant of Airport Improvement Program (AIP) dollars may not be expended on Art Work at the airport. AIP Sponsor Guide ¶ 140 Project Eligibility.
Further, the Assurances place obligations on the airport sponsor. For example, FAA Airport Compliance Manual – Order 5190.6B, states:
15.9. Permitted Uses of Airport Revenue.
a. General. Sponsors may use their airport revenue for the capital or operating costs of the airport, the local airport system, or other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property.
Airport Revenue is different from the AIP dollars; revenue includes all of the earnings collected by the airport, i.e. airport landing fees, other rates and charges, vendor rentals, parking collections and other funds earned on airport, as stated in Policy and Procedures Concerning the Use of Airport Revenue:
1. All fees, charges, rents, or other payments received by or accruing to the sponsor for any one of the following reasons are considered to be airport revenue:
a. Revenue from air carriers, tenants, lessees, purchasers of airport properties, airport permittees making use of airport property and services, and other parties. Airport revenue includes all revenue received by the sponsor for the activities of others or the transfer of rights to others relating to the airport, including revenue received:
i. For the right to conduct an activity on the airport or to use or occupy airport property;
ii. For the sale, transfer, or disposition of airport real property (as specified in the applicability section of this policy statement) not acquired with Federal assistance or personal airport property not acquired with Federal assistance, or any interest in that property, including transfer through a condemnation proceeding;
iii. For the sale of (or sale or lease of rights in) sponsor-owned mineral, natural, or agricultural products or water to be taken from the airport; or
iv. For the right to conduct an activity on, or for the use or disposition of, real or personal property or any interest therein owned or controlled by the sponsor and used for an airport-related purpose but not located on the airport (e.g., a downtown duty-free shop).
b. Revenue from sponsor activities on the airport. Airport revenue generally includes all revenue received by the sponsor for activities conducted by the sponsor itself as airport owner and operator, including revenue received:
i. From any activity conducted by the sponsor on airport property acquired with Federal assistance
ii. From any aeronautical activity conducted by the sponsor which is directly connected to a sponsor’s ownership of an airport subject to 49 U.S.C. §§ 47107(b) or 47133
iii. From any nonaeronautical activity conducted by the sponsor on airport property not acquired with Federal assistance, but only to the extent of the fair rental value of the airport property. The fair rental value will be based on the fair market value
2. State or local taxes on aviation fuel (except taxes in effect on December 30, 1987) are considered to be airport revenue subject to the revenue-use requirement. However, revenues from state taxes on aviation fuel may be used to support state aviation programs or for noise mitigation purposes, on or off the airport.
3. While not considered to be airport revenue, the proceeds from the sale of land donated by the United States or acquired with Federal grants must be used in accordance with the agreement between the FAA and the sponsor. Where such an agreement gives the FAA discretion, FAA may consider this policy as a relevant factor in specifying the permissible use or uses of the proceeds.
Unlawful Revenue Diversion
Unlawful revenue diversion is the use of airport revenue for purposes other than the capital or operating costs of the airport, the local airport system, or other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property, when the use is not ‘‘grandfathered’’ under 49 U.S.C. § 47107(b)(2). When a use would be diversion of revenue but is grandfathered, the use is considered lawful revenue diversion. See Section VI, Prohibited Uses of Airport Revenue.
These are guidelines subject to interpretation. It can easily be argued that an Art Collection is not a “capital or operating cost” and the FAA usually narrowly construes its revenue diversion policy. As noted before, failure to comply with the Assurances may imperil past AIP funding and may make the Authority ineligible for future such awards.
Airlines may consider this use of airport revenues as an undue burden on the airport’s overhead costs. The costs of the art must be recovered from landing fees, vendor lease charges and other on-airport sources. Those charges become higher air fares, added costs for food/magazines, and other consumer goods/services at SAN.
A sponsor might assert that the collections contribute to its passengers’ experience and may contribute to future travel. It would be helpful if the dollars used by Authority for these acquisitions were “donated” outside of any airport revenue. The more attenuated the source of the money used to buy the sculptures, display and other works from the economic activities of SAN, the better.