FAA acts on AOPA complaint, orders $20 million returned to LAX in precedent-setting airport revenue diversion decision

FAA acts on AOPA complaint, orders $20 million returned to LAX in precedent-setting airport revenue diversion decision

Following a formal complaint from AOPA and the Air Transport Association (ATA), the FAA has ordered the city of Los Angeles to return more than $20 million in revenue illegally diverted from Los Angeles International Airport (LAX).

"This 'preliminary decision' from the FAA could set an important precedent involving the 2,400 airports nationwide that have accepted federal funds," said Phil Boyer, AOPA president. "AOPA is adamant that airport sponsors follow federal law."

AOPA Vice President of Regional Affairs Bill Dunn added, "This ruling shows that the FAA is starting to get serious about enforcing the law that airport revenues must be used for the benefit of airports," said Dunn. "That will help protect general aviation airports nationwide."

In 1985 the state of California condemned some 1.5 million square feet (34 acres) of airport land to build the Century Freeway, which runs along the south edge of the airport and connects the airport with the I-405 freeway.

The state paid some $43 million for the land, which the city put in its airports account. But by 1994, Los Angeles had encountered financial problems and asked for permission to transfer the money to the city general fund, claiming the proceeds weren't subject to the usual restrictions that prevent diverting revenue from federally funded airports.

The FAA told the city it wouldn't oppose the transfer but that the agency would be forced to review the action if affected parties filed formal complaints. In 1995, Los Angeles transferred $58.5 million (the condemnation proceeds plus interest) from the airport account to the city's general fund.

Both AOPA and ATA filed complaints that year. AOPA took the additional action of urging its California members to contact the city and express their opposition to the transfer.

In its "preliminary determination" issued June 20, 2000, the FAA agreed with many of the points AOPA raised in its complaint.

"We have determined that the city of Los Angeles is in violation of its federal obligations regarding the use of proceeds from the sale of airport property," the agency said. The FAA ordered the city to return $20,131,459—plus interest—to the Los Angeles World Airports account.

(That amount hinges on a rather arcane interpretation of the rules as they then existed. The FAA ruled that the portion of the condemnation proceeds for temporary construction easements and severance damages—about 34 percent of the total amount the city received for the airport land—was illegally diverted airport revenue.)

(The FAA said that under present policy, the entire proceeds would have been considered airport revenue.)

Noting that Los Angeles World Airports, the city's airport authority, also owns the Van Nuys, Palmdale, and Ontario airports, Dunn said, "That's $20 million that Los Angeles could and should have spent on its general aviation airports. Other cities that want to divert airport revenue should pay heed to this ruling."

The 360,000-member Aircraft Owners and Pilots Association is the world's largest civil aviation organization.

More than one half of the nation's pilots are AOPA members, as are more than 45,000 California pilots.

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June 23, 2000