[Federal Register Volume 59, Number 196 (Wednesday, October 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25310]


[[Page Unknown]]

[Federal Register: October 12, 1994]


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Part VIII





Department of Transportation





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Federal Aviation Administration



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

Federal Aviation Administration
[Docket No. 27782]

 
Proposed Policy Regarding Airport Rates and Charges

AGENCY: Department of Transportation (DOT), Federal Aviation 
Administration (FAA).

ACTION: Supplemental notice of proposed policy, extension of comment 
period.

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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