NBAA Appeals FAA SMO Ruling, Calls for More Actions

 - December 11, 2019, 11:34 AM

While the FAA in November agreed with industry contentions that the California city of Santa Monica violated grant assurance agreements, NBAA is appealing the FAA determination, saying it did not fully address issues raised.

NBAA, the Aircraft Owners and Pilots Association, and local tenants filed a Part 16 complaint against the city, alleging that the city was diverting revenues by charging principal and interest on loans to the airport without valid documentation. In addition, the interest on those loans exceeded allowable rates, it said.

On November 8, the FAA found that the city had not adequately documented interest-bearing loans made to the airport, its landing fees and rates do not reflect actual use of the airport, and that it needs to supplement a corrective plan surrounding the below-market rates assessed on Santa Monica College, which uses airport property.

NBAA believes the FAA needs to take further action, saying the city has engaged in unlawful revenue diversion for years with practices of inadequately documented loans with SMO and excessive landing fees from aviation users. “This is a complex Part 16,” said NBAA director of airports and ground infrastructure Alex Gertsen. “Although the FAA did find that a significant number of loans between the city and the airport are invalid and/or charged excessive interest, further rulings by FAA are required.”

The association asserted the city engaged in revenue diversion that extended beyond the FAA’s finding, citing mathematical and other errors, and said FAA should require reimbursement. Gertsen added the FAA should have ordered other immediate compliance measures, including a suspension of landing fees until a new fee is determined. Further, he said, excessive landing fees must be refunded.

“Corrective action on these issues must be taken by the FAA, not just to rectify the incorrect and possibly illegal actions at SMO, but also to maintain a consistent national policy that airport finances must be properly documented and landing fees thoroughly justified,” Gertsen said. “NBAA will continue to advocate for proper and legal use of funds collected from aviation users, as well as compliance with federal grant-based and other obligations, at Santa Monica and airports across the country.”