Beware: good odds that FAA Airport Revenue Use Policy Police coming

The US Department of Transportation’s Office of Inspector General (OIG) is a Watchdog organization established by Congress to audit the Department and its modes for compliance with legislated mandates. One such mandate was labeled as AIRPORT REVENUE DIVERSION. As the cover image suggests, the owners of these expensive infrastructures see them as CASH REGISTERS like other municipal “utilities.” The standard mayoral argument is that “we invest our funds in them; so, it’s reasonable that we get some return.” 

This position ignores that federal tax dollars in the form of Airport Improvement Program grants actually are greater sources of capital for runways, taxiways, terminals, etc. Some wise Member of Congress, many years ago enacted a statutory prohibition on exporting dollars generated on airport for non-aviation purposes (Rose Bowl floats, on airport day care facilities for children of all city workers, city administrative staff paid disproportionately for “airport” assignments, etc.). Ever more clever, “taxes” were then imposed in order to circumvent the “revenue diversion rule.

.Congress and the FAA responded, and the “Policy and Procedures Concerning the Use of Airport Revenue (Revenue Use Policy)” was issued to define airport revenue and identify permitted and prohibited uses of that revenue. “FAA amended this policy in 2014 to address revenue use for aviation fuel taxes. Given the importance of promoting effective stewardship of taxpayer dollars used to support the Nation’s airports, we initiated this audit. Our objective was to assess whether FAA’s oversight policies and procedures are sufficient to prevent or detect airport revenue diversion. For this audit, we focused on FAA’s efforts to ensure compliance with FAA’s rules for collecting and using aviation fuel taxes.

The OIG has issued a report, which remarkably almost was positive, concluding: 

“FAA provides billions of taxpayer dollars in Federal grants to ensure that U.S. airports remain self-sufficient and can invest in their own infrastructure. A key component for airports to stay self-sufficient is the revenue they collect, such as fuel taxes. Thus, airport revenue diversion diminishes the effectiveness and achievement of objectives of these Federal grants. While FAA has been working with jurisdictions to align State and local laws with the Amendment on aviation fuel tax revenue as directed by Congress, the Agency LACKS A PLAN TO TEST AVIATION FUEL TAX PLANS from compliant jurisdictions and enforce compliance in qualified jurisdictions. As a result, FAA is not well positioned to promote effective stewardship of the taxpayer dollars that were meant to support the Nation’s airports.” 

CALIFORNIA, KENTUCKY, NEVADA, TENNESSEE, AND GUAM were cited as NOT IN COMPLIANCE with the Policy. FanDuel, the online betting site, is taking odds on the likelihood that FAA airport investigators will be camping out in the 3 states, i Commonwealth and an organized, unincorporated territory UNTIL they find evidence of malfeasance (the FanDuel over/under’s of violations are 10, 3,2, 4 and 1 plus a prop bet on the number of other states that will experience the same investigations; odds for more than 5 states are quite attractive—BE PREPARED even if you’re not in the OIG 5).  

With those odds, the airport directors located in these target jurisdictions would be well advised to hire airport consultants to proactively review their books. An objective, third party subject matter expert is an invaluable asset. First, because past examinations of other airports have identified sophisticated diversion techniques. Second, if the FAA auditors arrive before the flaws are identified, the next discretionary AIP request will be placed at the bottom of your Airport District Office priority list. Preparing for the investigation and being able to disclose “historic” inadvertent flaws may not delay your expansion plan may not be delayed.  Finally, the mayor (see above hypothetical quote) thinks that the airport tax revenues, which have funded the extra shift of police officers, the city’s pools longer hours and the like, are part of next year’s budget. Being able to point to an outside subject matter’s opinion increases the likelihood that next year’s Airport Director will look like last year’s (self-preservation) and that the Mayor will be able to cut the ribbon of next year’s scheduled airport expansion.   

DOT Watchdog Calls for Better Airport Revenue Oversight 

FAA Needs To Verify Use of Aviation Tax Revenues, OIG Maintains 

By KERRY LYNCH • Editor, AIN monthly magazine 

December 15, 2023 

A Department of Transportation watchdog is recommending that the FAA improve its oversight of AIRPORT REVENUE USE and ensure that SEVERAL STATES that have NOT COMPLIED WITH AVIATION FUEL TAX REVENUE limitations take steps to meet the requirements. The DOT Office of Inspector General (OIG) said the agency has agreed to follow through on the recommendations. 

In 2014, the FAA strengthened its policies of what is permitted and prohibited uses of revenues stemming from aviation fuel taxes. The OIG conducted an audit to ensure “effective stewardship of taxpayer dollars used to support the nation’s airports” and assessed whether the FAA’s oversight was sufficient to prevent or detect revenue diversion. 

Since the FAA updated its revenue policy, the FAA has made progress in confirming whether states and local governments are complying with the requirements, the OIG found. BUT, it added, the FAA has NOT VALIDATED if jurisdictions are using processing from aviation fuel taxes IN ACCORDANCE WITH THEIR APPROVED PLANS. “Without testing the jurisdictions’ approved action plan for using aviation fuel taxes, FAA cannot ensure that revenue is used for aviation‑related purposes as required by federal regulations,” the OIG maintained. 

Further, the FAA HAS YET TO TAKE ENFORCEMENT ACTIONS AGAINST FIVE JURISDICTIONS THAT ARE NOT IN COMPLIANCE WITH REVENUE LIMITATIONS, the OIG said, naming CALIFORNIA, KENTUCKY, NEVADA, TENNESSEE, AND GUAM. The OIG noted that the FAA officials indicated that “the lack of testing, validation, and enforcement action is DUE TO CONGRESSIONAL GUIDANCE that encouraged the agency to postpone enforcement.” 

The OIG further stated: “By potentially diverting aviation fuel tax revenue from airports for non‑aviation-related purposes, these jurisdictions INCREASE THE RISK OF hindering the airports’ ability to REMAIN SELF‑SUFFICIENT AND IMPROVE THEIR INFRASTRUCTURE.” 

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