VI. AIRPORTS AND FIXED BASE OPERATORS

B. Privatization

1. Lack Of Definitive Regulations

   1. Privatization of airport facilities has been extremely limited in the United States, and federal policies regarding such arrangements are not well developed. Presently, DOT and FAA are dealing with such situations on a case-by-case basis. As a result, there is little useful DOT or FAA guidance or precedent dealing with privatization. The same is true with respect to innovative airport rates and charges issues, such as peak/off-peak pricing, for which there has been little agency decision making or private litigation.

   2. On the other hand, the DOT and FAA have issued general policy statements regarding airport rates and charges, revenue diversion, and related issues that will be helpful, though not definitive. The most recent of these is the joint DOT/FAA Airport Rates and Charges Policy issued in June, 1996.

2. Revenue Diversion

   1. Under the Airport Improvement Program ("AIP"), an AIP grant recipient certifies that all revenues generated by the airport will be expended only for the capital and operating costs of the airport or for local facilities directly related to actual air transportation. Privatization issues implicate diversion issues in many ways, such as for management or private operational fees.

   2. DOT/FAA Concerns

      1. Revenue diversion has become a sensitive issue with the DOT, FAA and Congress due to (1) audits in recent years by the DOT Inspector General which disclosed that numerous federally-assisted airports were breaching the prohibition, diverting monies for off-airport uses, and (2) the use by Los Angeles to fund non-airport city police and fire services

      2. Increased scrutiny. As a result congress has enacted legislation requiring increased scrutiny by the FAA of airport revenue usage that will involve privatization in yet unknown ways.

      3. In the near future there should be added guidance and or litigation on the issue of what are proper "off airport purposes" and how they may enhance or restrict privatization.

3. FAA 1996 Authorization Bill Provisions Affecting Airports

   1. On October 9, 1996 President Clinton signed into law the FAA Reauthorization bill, extending for two years funding authority for FAA capital programs and making statutory changes affecting airports, airlines and other industry segments. The FAA bill combines the major legislative initiatives of the 104th Congress, including FAA reform, pilot record transfers, airport revenue diversion, airport privatization and child pilot safety.

   2. Airport specific provisions include:

      1. Revises the formulas for distributing airport entitlement and discretionary funds;

      2. Expands statutory prohibitions against airport revenue diversion.

      3. Creates a pilot program allowing the long-term lease of five airports, subject to DOT approval and other various conditions.

      4. Authorizes FAA to certificate airports served by commuter aircraft with between 10 and 30 seats.

      5. Requires FAA to hire a noise ombudsman to serve as a liaison with the public on issues regarding aircraft noise and to be consulted when FAA changes aircraft routes.