[Congressional Record Volume 142, Number 70 (Friday, May 17, 1996)]
[Senate]
[Pages S5268-S5269]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 1774. A bill to enhance the enforceability of airport revenue 
diversion provisions under chapter 471 of title 49, United States Code, 
and for other purposes; to the Committee on Commerce, Science, and 
Transportation.


               the airport revenue protection act of 1996

  Mr. McCAIN. Mr. President, I rise today to introduce legislation that 
I believe will end, once and for all, the illegal diversion of airport 
revenues. The Airport Revenue Protection Act of 1996 is intended to 
make it absolutely clear to everyone, which includes airports, local 
governments, airport sponsors, the Department of Transportation, the 
Federal Aviation Administration, air carriers, and the traveling 
public, that Federal laws prohibiting revenue diversion from our 
Nation's airports will be strengthened and enforced. Airport sponsors, 
however, will continue to have access to judicial review of Department 
of Transportation decisions on revenue diversion.
  For many years, our Nation's airports have prospered and grown 
substantially under an innovative funding mechanism by which airport 
users, including airlines, their customers, and others who do business 
on airports, finance nearly all airport needs. This funding comes 
primarily from landing fees, rental charges, concession revenues, and 
passenger facility charges. Virtually no public funds are used to 
operate this country's airports. Moreover, local tax revenues do not 
support our national system of airports.
  To the extent that Federal money is used for airports, it comes from 
grants paid out of the user-funded aviation trust fund. Because it is 
tremendously important the Federal grant money to airports is used only 
for airport purposes, Congress has had a longstanding policy that 
diversion of airport revenues for any nonairport purposes is illegal. 
In fact, several times, Congress has acted to strengthen Federal laws 
prohibiting revenue diversion.
  Recently, however, Congress was informed that there is a disturbing 
trend of unlawful airport revenue diversion by local governments. The 
last round of audits, conducted by the inspector general's office of 
the Department of Transportation, found that more than $170 million was 
diverted by at least 23 of our Nation's airports from 1992 through 
1995. These audits show that far too many local governments are 
attempting to solve their fiscal problems by taking money away from 
their airports, and using it for nonairport purposes. It also appears 
that when cities or counties control airports, politics, on all levels, 
is more likely to play a major role in encouraging revenue diversion.
  The blatant disregard by airport sponsors of the intent of Federal 
laws prohibiting revenue diversion, particularly by cities such as Los 
Angeles, is reprehensible and must be addressed. Congress can no longer 
stand by and watch as air travelers' hard-earned money is used 
wrongfully to pay a city's nonairport bills.
  This legislation specifically acts on many of the recommendations of 
the Department of Transportation's inspector general to address the 
problem of revenue diversion. First, the bill would expand the 
prohibition on the use of airport revenues to cover revenues from 
airports that are the subject of any form of Federal assistance or that 
operate under a federally issued airport operating certificate. In 
addition, annual airport audits must certify to DOT and FAA that any 
airport funds transferred to airport sponsors are carried out in 
accordance with Federal laws and regulations on revenue diversion. The 
DOT inspector general would then certify that the audit complies with 
Federal law.
  If, as a result of such an audit, it is determined that illegal 
revenue diversion has occurred, DOT, acting through FAA, must access a 
penalty against the offending airport sponsor for the amount of the 
illegal diversion plus interest, or withhold the illegally diverted 
amount from Federal funds that the sponsor expected to receive from the 
Federal Government. If an airport sponsor does not pay the assessed 
penalty, and withholding does not cover the amount owed, DOT, acting 
through the FAA, must file a civil suit to recover the illegally 
diverted funds and any accumulated interest. Private citizens also are 
given the ability to file such suits.

[[Page S5269]]

  The legislation also sets up a process to ensure that any recovered 
airport revenue is returned to the airport from which funds were 
illegally diverted. In addition, the legislation protects 
whistleblowers and establishes a means for them to receive payment when 
it is determined that an airport sponsor has illegally diverted airport 
revenue. Finally, to ensure that all airports are treated equally, this 
bill would eliminate 10 years from the date of enactment, the 
grandfather provisions that currently permit revenue diversion at some 
airports.
  Mr. President, this bill is intended to send the strong message that 
no one can get away with ignoring Federal laws prohibiting airport 
revenue diversion. It is not directed at activity relating to any 
specific airport, but instead attempts to create a clear and fair means 
of ensuring that airport money is spent on airport purposes only. I am 
confident that this legislation will reverse the alarming trend of 
illegal airport revenue diversion.
  Mr. President, I ask unanimous consent that additional material be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

     Airport Revenue Protection Act of 1996--Summary of Legislation


                                PURPOSES

       This legislation is intended to reverse the alarming trend 
     of illegal diversion of airport revenues, and ensure that 
     airport revenues are used only for airport capital and 
     operating costs. Congress has long believed that airport 
     users should not be burdened with any type of hidden taxation 
     for local services. This bill would leave no doubt that 
     airport sponsors, such as city and county governments, cannot 
     put their local budgetary burdens on airport users.
       In specific, the legislation bolsters efforts to stop 
     revenue diversion by expanding the prohibition on revenue 
     diversion to cover more instances of diversion. It also would 
     establish clear penalties and stronger mechanisms to enforce 
     federal laws prohibiting revenue diversion. In addition, the 
     bill imposes additional reporting requirements so that 
     illegal revenue diversion can be easily identified and 
     verified. Finally, it would provide important protections for 
     whistleblowers.


                          SPECIFIC PROVISIONS

            Restriction on use of airport revenues (Sec. 4)

       This bill would expand the prohibition on use of airport 
     revenues beyond project grant recipients to cover local taxes 
     on aviation fuel and revenues at airports that receive any 
     form of federal assistance or operate under a federal-issued 
     airport operating certificate. Certain airports would be 
     permitted to divert revenue, however, under ``grandfather'' 
     provisions in the bill similar to provisions in existing law. 
     The bill does not affect airports that have been 
     grandfathered in existing law. Under current law, recipients 
     of federal airport grants must provide assurances that 
     airport revenues will not be diverted for non-airport 
     purposes.

             Audits of airport funding activities (Sec. 5)

       In the bill, this review would provide assurances that any 
     funds transferred to airport sponsors (such as local 
     governments) were not illegally diverted. The DOT Inspector 
     General would certify that the review meets the requirements 
     of this section. Current law requires recipients of airport 
     project grants to conduct annual audits. This bill would 
     require DOT, acting through the FAA, to promulgate 
     regulations requiring grant recipients, as part of these 
     annual audits, to provide a review and opinion concerning 
     airport funding activities.

           Recovery of Illegally Diverted Funds (Secs. 5, 8)

       Administrative action: Within 180 days after an audit or 
     any other report identifying an illegal diversion of airport 
     revenues is issued, DOT/FAA, would: (1) make a final 
     determination whether the illegal diversion occurred; (2) 
     provide written notice to the airport and sponsor of that 
     termination and the sponsor's obligation to reimburse the 
     airport; (3) assess an administrative penalty against the 
     airport sponsor in an amount equal to the amount illegally 
     diverted plus interest, or withhold this same amount from 
     federal funds intended for that airport sponsor.
       Civil action: -If, within 180 days from the date when the 
     airport and sponsor are notified of DOT/FAA's determination 
     of illegal revenue diversion, the sponsor does not pay the 
     administrative penalty and interest, DOT/FAA must initiate a 
     civil action to recover the illegally diverted funds. A 
     private citizen also may bring a civil action (i.e., a qui 
     tam action) for such violations of revenue diversion laws.
       Statue of Limitations: The bill establishes a 6-year 
     statute of limitations for any action to recover illegally 
     diverted airport funds. In specific, this provision requires 
     an airport or any other person to bring an action to recover 
     illegally diverted funds within 6 years from the date that 
     the diversion took place. Thus, the bill precludes any effort 
     by an airport sponsor to recover illegally diverted airport 
     funds more than 6 years after it occurs.
       Reimbursement of Diverted Funds to Airport: The bill sets 
     up a process to ensure that any recovered airport funds are 
     returned to the airport from which the funds were illegally 
     diverted. The illegally diverted funds would first have to be 
     reimbursed to DOT/FAA by the sponsor. The funds would be 
     placed in the Airport and Airway Trust Fund. DOT/FAA must 
     then, as soon as practicable, reimburse the airport from 
     which the revenue was illegally diverted, in an amount equal 
     to that collected from the sponsor, including interest paid.

          Valid Payment by Airport to Airport Sponsor (Sec. 5)

       If DOT/FAA determines, during an audit or other review, 
     that an airport owes funds to an airport sponsor, interest 
     should be assessed on that amount from the date of DOT/FAA's 
     determination. Any request by an airport sponsor for 
     reimbursement of funds from an airport must be made within 6 
     years from the date the expense is incurred. An airport 
     sponsor (such as a local government), therefore, could not 
     seek to recover funds from an airport for an expense (such as 
     police and fire services) dating back more than 6 years.

 Revision of DOT/FAA Revenue Diversion Polices and Procedures (Sec. 5)

       Within 90 days after enactment, DOT/FAA must revise its 
     policies and procedures ensuring enforcement against illegal 
     diversion of airport revenue, to take into account changes 
     from this legislation.

           Elimination of ``Grandfather'' Provisions (Sec. 6)

       This bill would prohibit diversion from an airport covered 
     by the grandfather provision when either: (1) the debt 
     obligations are retired or refinanced, or (2) 10 years after 
     enactment of this legislation, whichever is earlier. To 
     ensure that all airports are covered by the same prohibitions 
     on revenue diversion, this legislation would eliminate 
     ``grandfather'' provisions in existing law that permit some 
     airport sponsors to divert revenue. Currently, an airport 
     sponsor can legally divert revenue if such diversion was 
     specifically permitted before September 2, 1982, in a law 
     controlling financing by the airport owner or operator, or a 
     covenant or assurance in a debt obligation issued by that 
     date.

         Elimination of Provisions Relating to Hawaii (Sec. 6)

       Specifically, this legislation would prohibit diversion 
     from an airport in Hawaii covered by current exemptions when 
     either: (1) the debt obligations are retired or financed, or 
     (2) 10 years after enactment of this measure, whichever is 
     earlier. Current law provides several exemptions permitting 
     legal use in Hawaii of airport revenues for certain non-
     airport purposes. Similar to the elimination of 
     ``grandfather'' provisions, this bill also would eliminate 
     provisions in current law that accord special treatment to 
     airport sponsors in Hawaii.

                   Whistleblower Protection (Sec. 7)

       Petition Process: Within 180 days after enactment of this 
     legislation, DOT/FAA must establish a process enabling 
     private citizens (or other parties, but not DOT/FAA 
     employees) to petition DOT/FAA for review of possible illegal 
     revenue diversion from an airport. DOT/FAA must evaluate any 
     petition asserting diversion of $10,000 or more, within 30 
     days after such petition is made. If a petition asserts 
     illegal diversion of less than $10,000, then DOT/FAA have 
     discretion whether to evaluate such a petition. DOT/FAA 
     reviews a petition, and finds that illegal diversion has 
     occurred, DOT/FAA must take action to recover the funds and 
     provide reimbursement to the airport.
       Confidentiality of Petitioner's Identity: The petitioner's 
     identity would remain confidential, unless the petitioner 
     provided consent to disclose it.
       Payment to Petitioner: When DOT/FAA recovers illegally 
     diverted funds, DOT/FAA must take action to make a payment to 
     the petitioner, in accordance with procedures established by 
     DOT/FAA. DOT/FAA may require the sponsor to make a payment 
     for petitioner and transfer that payment from the Airport and 
     Airway Trust Fund.

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