Proposed Policy Regarding Airport Rates and Charges; Notice DEPARTMENT OF TRANSPORTATION

SUMMARY: This document announces modifications to a recent Notice of

Proposed Policy Regarding Airport Rates and Charges. The modifications

are intended to reflect statutory provisions governing airport rates

and charges included in the Federal Aviation Administration

Authorization Act of 1994, Public Law 103-305 (August 23, 1994). The

DOT/FAA previously extended the comment period on the notice until

October 15, 1994. The comment period is being extended until 14 days

after publication of this supplemental notice in the Federal Register.

DATES: Comments must be received by October 26, 1994.

ADDRESSES: Comments should be mailed, in quadruplicate, to: Federal

Aviation Administration, Office of Chief Counsel, Attention: Rules

Docket (AGC-10), Docket No. 27782, 800 Independence Avenue, SW.,

Washington, DC 20591. All comments must be marked: ``Docket No.

27782.'' Commenters wishing the FAA to acknowledge receipt of their

comments must include a preaddressed, stamped postcard on which the

following statement is made; ``Comments to Docket No. 27782.'' The

postcard will be date stamped and mailed to the commenter.

Comments on this Notice may be examined in room 915G on weekdays,

except on Federal holidays, between 8:30 a.m. and 5 p.m.

FOR FURTHER INFORMATION CONTACT: John Rodgers, Director, Office of

Aviation Policy, Plans and Management Analysis, Federal Aviation

Administration, 800 Independence Ave. SW., Washington, DC 20591,

telephone (202) 267-3274; Mr. Barry Molar, Manager, Airports Law

Branch, Office of the Chief Counsel, Federal Aviation Administration,

800 Independence Avenue, SW., Washington, DC 20591, telephone (202)

267-3473.

SUPPLEMENTARY INFORMATION: On June 9, 1994, the Office of the Secretary

of Transportation (OST) and the FAA issued two related notices on the

subject of Federal policy on airport rates and charges. A notice of

proposed policy entitled ``Proposed Policy Regarding Airport Rates and

Charges,'' listed and explained the principles that the OST and the FAA

believes define Federal policy on the rates and fees that an airport

proprietor can charge to aeronautical users of the airport. Docket No.

27782 (59 FR 29874, June 9, 1994). Notice 94-18, a notice of proposed

rulemaking entitled ``Rules of Practice for Federally Assisted

Airports,'' proposed detailed procedures for the filing, investigation,

and adjudication of complaints against airports for alleged violation

of Federal requirements involving rates and charges and other airport-

related requirements (59 FR 29880, June 9, 1994).

The FAA Authorization Act of 1994, Public Law 103-305 (1994

Authorization Act) was signed into law on August 23, 1994. The 1994

Authorization Act includes provisions that specifically address airport

rates and charges. This supplemental notice is intended to assure that

the proposed policy statement reflects relevant provisions of the 1994

Authorization Act.

Summary of Proposed Policy Statement

The proposed policy statement includes five principles with

supporting guidance for each. In brief, the first principle would

establish the continued reliance on direct local negotiation between

airports and aeronautical users. DOT/FAA would be available to resolve

the issues raised in a dispute when the airport and aeronautical users

are unable to resolve disputes directly.

The second principle would restate the legal requirement that

rates, fees and charges to aeronautical users must be fair and

reasonable, with more detailed guidance on the practices and

restrictions that define ``fair and reasonable.'' Among other things,

the DOT/FAA proposed to provide airport proprietors with some

flexibility to deviate from the proposed policy guidance based on

agreement with aeronautical users. In addition, the proposed policy

statement would recognize the legitimacy of either the compensatory or

residual pricing approach and of combinations of both. DOT/FAA did not

propose to establish standards for rates and charges for

nonaeronautical users (nonaeronautical rates and charges) nor to limit

the amount of revenues generated by nonaeronautical rates and charges.

The third principle would restate the legal prohibition on unjustly

discriminatory rates and charges.

The fourth principle would restate the legal obligation of the

airport sponsor to maintain a fee and rental structure that makes the

airport as self-sustaining as possible. Supplemental guidance

encouraged the sponsor of an airport that is not currently self-

sustaining to establish long-term goal and targets to make the airport

financially self-sustaining.

The fifth principle would restate legal requirements for the

application and use of airport revenues. Supplemental guidance would

advise that airport revenue generated by nonaeronautical sources is

subject to the same statutory requirements governing use as

aeronautical revenue. In addition, supplemental guidance would provide

that progressive accumulation of substantial amounts of airport

revenues may warrant an FAA inquiry into the airport proprietor's

application of revenues to the local airport system.

Summary of Applicable 1994 Authorization Act Provisions

Section 110 of the 1994 Authorization Act amends the statement of

policy for airport improvement, 49 U.S.C. 47101, by adding statements

``that airport fees, rates, and charges must be reasonable'' and that

``in establishing new fees, rates, and charges, and generating revenues

from all sources, airport owners and operators should not seek to

create revenue surpluses that exceed the amounts to be used for airport

system purposes and for other purposes for which airport revenues may

be spent under section 47107(b)(1) of this title, including reasonable

reserves and other funds to facilitate financing and cover

contingencies.''

Section 113 of the 1994 Authorization Act adds a new section 47129

titled ``Resolution of airport-air carrier disputes concerning airport

fees.'' Section 47129 authorizes the Secretary of Transportation

(Secretary) to issue a determination on the reasonableness of an

airport rate or fee imposed on an air carrier if the airport owner

requests a determination or if a complaint is filed by an affected air

carrier. Section 47129 further provides that a fee may be calculated

pursuant to either a compensatory or residual fee methodology or any

combination thereof, and section 47129 specifically prohibits the

Secretary from setting the level of the fee. Section 47129 further

directs the Secretary to issue within 90 days after enactment final

regulations or policy statements establishing (1) administrative

procedures for processing cases under section 47129 and (2) standards

or guidelines to be used in determining the reasonableness of a fee.

Section 112 of the Authorization Act strengthens existing

requirements for the use of airport revenues by grant-obligated airport

sponsors. Section 112 of the Authorization Act amends 49 U.S.C. 47107

by adding a new subsection ``(l).'' Among other things, subsection (l)

directs the Secretary to establish within 90 days after enactment

policies and procedures to assure prompt and effective enforcement of

subsections (a)(13) and (b) of section 47107.

Subsection 47107(a)(13) in turn requires an airport sponsor to give

written assurances that it will maintain a schedule of charges at the

airport that will make the airport as self-sustaining as possible under

the circumstances existing at the airport. Subsection 47107(b) requires

the airport sponsor to give written assurances that revenue generated

by the airport will be used for the capital and operating costs of the

obligated airport, the sponsor's local airport system or other

facilities owned or operated by the sponsor and directly and

substantially related to the air transportation of persons or property.

Certain other uses of airport revenue mandated by statutes or

assurances in debt obligations in effect before September 2, 1982 are

expressly excluded from this requirement. Uses of airport revenue not

in accordance with section 47107(b) are referred to as airport revenue

diversion.

New subsection 47107(l) further directs the Secretary to prohibit,

at a minimum, four specific practices as diversion of airport revenue.

Section 112 of the Authorization Act also amends 49 U.S.C. 47111 by

adding new sanctions for airport revenue diversion. As amended, section

47111 directs the Secretary to withhold approval of new grant

applications for funds and to withhold approval under 49 U.S.C. 40117

of any new passenger facility charge if the Secretary has found an

airport sponsor to be engaged in airport revenue diversion and the

sponsor has failed to take appropriate corrective action. In addition

section 47111 authorizes the Secretary to seek judicial enforcement of

all grant assurances made by a sponsor.

Modifications to Proposed Policy Statement

DOT/FAA are making four modifications to the proposed policy

statement in response to statutory direction. First, the proposed

supplemental guidance on the DOT/FAA role in resolving airport/

aeronautical user disputes is being modified to reflect the statutory

directive to determine the reasonableness of fees charged to air

carriers and foreign air carriers when requested by the airport or upon

complaint of a carrier, if a significant dispute exists.

Second, supplementary guidance on financial self-sufficiency is

being modified to reflect the statutory directive on this subject

contained in section 112 of the 1994 Authorization Act.

Third, the proposed supplemental guidance on the generation and use

of airport revenue is being modified to incorporate the new statutory

policy guidance added by section 110 of the 1994 Authorization Act. As

noted, section 110 provides that ``in establishing new fees, rates, and

charges, and generating revenues from all sources, airport owners and

operators should not seek to create revenue surpluses that exceed the

amounts to be used for airport system purposes. * * *.'' Section 110 is

being implemented in this way, rather than through the guidance on fair

and reasonable rates, because the DOT/FAA do not consider section 110

to require the regulation of the level of total airport revenue or to

establish a standard for reasonableness for nonaeronautical rates and

charges under the grant assurances. This conclusion is based on a

number of considerations.

First, the 1994 Authorization Act explicitly authorizes

compensatory as well as residual pricing arrangements. Under the

compensatory system, air carrier user charges are based on costs of

serving air carriers without regard to the profit or loss generated by

other users of the airport. To construe the reasonableness requirement

of the statute as creating a legally enforceable right to limit the

amount of nonaeronautical generated revenue would be inconsistent with

the express authorization of compensatory pricing.

Furthermore, Congress included the language in question as an

amendment to 49 U.S.C. 47101, which is a statement of the policy of the

United States. Congress chose not to include the provision as an

amendment to 49 U.S.C. 47107, which specifies practices that airport

proprietors must agree to as a condition for receipt of grants. In

addition, section 110 of the 1994 Authorization Act stands in marked

contrast to sections 112 and 113 of the 1994 Authorization Act, in

which Congress directed the Secretary to develop policies and

procedures to address the reasonableness of rates and charges imposed

on airlines and to define airport revenue diversion.

In particular, nowhere in the 1994 Authorization Act is the

Secretary explicitly directed to establish standards of reasonableness

for nonaeronautical rates and charges or total airport revenue. At the

time of enactment, however, the DOT/FAA had already published its

proposed policy, and that policy would not have applied to

nonaeronautical rates and charges. In these circumstances, it is

reasonable to expect that Congress would have included clear and

explicit direction to the Secretary to establish standards of

reasonableness for nonaeronautical rates and charges just as it did for

carrier rates and charges in section 112 had Congress intended to

mandate such a result.

Finally, DOT/FAA have considered the legislative history of this

provision. The Conferees described section 110 of the Authorization Act

as ``[r]eaching a middle ground on this aspect of airport finances * *

*'' H.R. Rep. 103-677 at 68 (August 5, 1994). DOT/FAA consider our

approach to be more in keeping with this view of section 110 than would

an approach that treated section 110 as mandating a cap on total

airport revenue.

Section 110 and the modifications to the proposed policy encouraged

airport proprietors not to ``seek to create revenue surpluses'' in

excess of airport needs. The DOT/FAA recognize that in any given year,

surpluses may exceed projections if traffic exceeds forecast levels or

costs are held below forecast amounts. The existence of a surplus in

any given year is not necessarily evidence that an airport proprietor

is not following this policy guidance. However, as is provided in the

proposed policy statement, the progressive accumulation of substantial

amounts of airport revenues may warrant an FAA inquiry into the airport

proprietor's application of revenues to the local airport system.

The fourth modification, new supplemental guidance on generation

and use of airport revenue, is being proposed to reflect the statutory

mandate of section 112 of the Authorization Act to define certain

practices as impermissible revenue diversion.

While DOT/FAA consider these changes to the guidance on generation

and use of airport revenue to be consistent with section 112 of the

1994 Authorization Act, they are not intended to be the sole response

to section 112. Additional policy guidance or regulations implementing

section 112 will be published.

Finally, the mandate of 1994 Authorization Act to adopt procedural

regulations is being addressed in separate rulemaking proceedings.

Accordingly, DOT/FAA revise the proposal published at 59 FR 29874

as follows:

1. Proposed paragraphs 1.2.1 and 1.2.2 are deleted and the

following paragraphs are proposed instead.

``1.2.1 In the case of rates, charges and fees imposed on one or

more air carriers or foreign air carriers, DOT will issue a

determination on the reasonableness of the rate or charge upon the

filing of a written request for a determination by the airport

proprietor or the filing of a complaint by one or more air carriers, if

DOT determines that a significant dispute exists, in accordance with 49

U.S.C. 47129, and implementing regulations.

1.2.2 In the case of rates, charges or fees imposed on other

aeronautical users, DOD/FAA will first offer its good offices to

facilitate parties' reaching a successful outcome in a timely manner.

Prompt resolution of these disputes is always desirable since extensive

delay can lead to uncertainty for the public and a hardening of the

parties' positions.

1.2.3. In the case of rates, charges or fees imposed on other

aeronautical users, where negotiations between the parties are

unsuccessful and a complaint is filed alleging that airport rates and

charges violate an airport proprietor's federal grant obligations, DOT/

FAA will, where warranted, exercise the broad statutory authority to

investigate and review the legality of those rates and charges and to

issue such determinations and take such actions as are appropriate

based on that review. DOT/FAA will remain available to assist in the

negotiated resolution of a dispute even after the filing of a

complaint.''

2. A new paragraph 4.1.1 as set forth below is added to the

proposed policy statement:

``4.1.1 Airport proprietors are encouraged, when entering into new

or revised agreements or otherwise establishing rates, charges, and

fees, to undertake reasonable efforts to make their particular airports

as self-sustaining as possible in the circumstances existing at such

airports.''

3. A new paragraph 5.2 as set forth below is added to the proposed

policy statement. The current paragraph 5.2 is renumbered as paragraph

5.2.1, and paragraph 5.3 is renumbered as paragraph 5.2.2. Paragraphs

5.4 and 5.5 are renumbered as paragraphs 5.3 and 5.4, respectively.

``5.2 In establishing new fees, rates and charges, and generating

revenues from all sources, airport owners and operators should not seek

to create revenue surpluses that exceed the amounts to be used for

airport system purposes and for other purposes for which airport

revenues may be spent under 49 U.S.C. 47107(b)(1), including reasonable

reserves and other funds to facilitate financing and cover

contingencies.''

4. A new paragraph 5.6, as set forth below, is added to the

proposed policy statement:

``5.6 Subject to the provisions of 49 U.S.C. 47107(b)(2), the DOT/

FAA consider the following practices to be impermissible uses of

airport revenue:

(a) Direct payments or indirect payments, other than payments

reflecting the value of services and facilities provided to the

airport;

(b) Use of airport revenues for general economic development,

marketing, and promotional activities unrelated to airports or airport

systems;

(c) Payments in lieu of taxes or other assessments that exceed the

value of services provided; or

(d) Payments to compensate nonsponsoring governmental bodies for

lost tax revenues exceeding stated tax rates.''

Issued in Washington, DC, on October 4, 1994.

Federico Pena,

Secretary of Transportation.

David R. Hinson,

Administrator, Federal Aviation Administration.

[FR Doc. 94-25310 Filed 10-7-94; 11:31 am]

BILLING CODE 4910-13-M