City Council Report
City Council Meeting: March 25, 2014
Agenda Item: 8-A
To: Mayor and City Council
From: Marsha Moutrie, City Attorney
Martin Pastucha, Director of Public Works
Subject: The Future of Santa Monica Airport
Staff recommends that the City Council:
1. Consider and comment on the information provided in this report and by members of the public.
2. Continue to pursue City control of the use of its Airport land.
3. Direct staff to begin positioning the City for possible closure of all or part of the Santa Monica Airport ("Airport") after July 1, 2015, including, for instance, by preparing a preliminary conceptual plan for a smaller airport that excludes the Airport's western parcel and by preparing preliminary work plans for environmental assessment.
4. Direct staff to continue to identify and undertake efforts by which the City might reduce adverse impacts of Airport operations, such as zoning the Airport land to require uses compatible with surrounding uses.
5. Direct staff to increase efforts to ensure that the use of Airport leaseholds is compatible with surrounding uses by, for instance, notifying flight schools that flight school leases will be conditioned or will not be renewed after July 1, 2015 and evaluating whether and how fuel sales should be prohibited or limited to curtail adverse environmental impacts.
6. Revise leasing policies to maintain lease revenues so that the Airport does not again burden the General Fund by authorizing the City Manager to negotiate and execute five year non-aviation leases with five 1-year options to renew for up to a total of ten years and one year aviation leases with two 1-year options to renew for up to a total of three years with any renewals at the City's sole discretion.
7. Continue to receive and assess community input on preferences and possibilities for the potential future use of the land.
Identifying and assessing the possibilities for the Airport's short-term and long-term future, require a basic understanding of the legal constraints imposed upon the City by federal law and of the Airport's history. They are summarized in this section. Additionally, detailed information is provided about current Airport operations, developments occurring since the Council hearing of last April, recent community input, and the currently pending litigation.
Federal aviation law significantly limits the City's ability to control Airport operations and the City's present options. The City acquired the Airport land in 1926 and has owned it ever since. But the City's operation of the Airport and use of the Airport land are subject to significant legal constraints. To understand and evaluate the possibilities for modifying Airport operations and rededicating the use of the Airport land, it is important to recognize at least the general nature of those constraints.
They fall into two basic categories: legal and contractual. A body of federal statutes regulates aviation in the United States, creates the Federal Aviation Administration (FAA), and confers broad authority upon the agency. Its realm of authority includes the use and management of navigable airspace, aviation safety, air traffic control, air navigation facilities and airport development, among other things. The FAA exercises its authority in several ways, including by promulgating, interpreting, applying and enforcing a body of federal regulations. Thus, like most agencies, the FAA is part of the executive branch of the federal government, but it also exercises quasi-legislative and quasi-judicial powers. It is empowered to conduct hearings and decide many issues relating to the operation of airports. Its final administrative decisions are subject to judicial review in federal court, but the agency's decisions are generally afforded deference by the courts.
In addition to creating the FAA and according it broad authority, Congress has also recognized the proprietary rights of airport owners. But, Congress has not clearly delineated the extent of those rights.
The body of federal law governing airports also includes an array of court decisions. Among other things, these decisions interpret federal aviation laws, apply federal constitutional requirements to uphold or invalidate local airport regulations, affirm or reverse administrative decisions of the FAA, and explain (to some extent) the proprietary rights of Airport owners.
Because the body of federal law regulating airports is very complex, the City Attorney's Office has worked to develop specialized expertise. Additionally, the City has retained expert outside counsel on several occasions, including at present.
In addition to legal constraints, the City's operation of the Airport is also constrained by contracts and other legal instruments. At present, these include the 1984 Santa Monica Airport Agreement ("the 1984 Agreement"), the 1994 grant agreement between the City and the FAA to fund Airport improvements, and the 1948 Instrument of Transfer by which the federal government returned land to the City after the end of World War II.
The Airport's History
The staff report for the Council hearing of April 30, 2013 details the Airport's long history. It is also summarized in this report with emphasis on the particular past events that shape the current controversies.
The Early History
The City first acquired land for the Airport in 1926, when it purchased fee title to a portion of the present Airport from Howard Stanton. The purchase was funded with general obligation bonds, which were approved by the voters and issued for "park purposes". The following year, state law was amended to include airports within the definition of "park purposes". See Government Code Section 50471.
The City has held title to the Airport property ever since. In the years that followed the initial purchase the City acquired additional, smaller parcels to expand the Airport property. In 1941, President Roosevelt issued Presidential Proclamation 2487, declaring an "unlimited national emergency" requiring "military, naval, aviation and civilian … readiness to repel any and all acts or threats of aggression … ".
The War-Time Leases to the Federal Government and Airport Expansion
The City responded to the national emergency by leasing its Airport property to the United States in order to aid the war effort by protecting Douglas, which was the federal government's major military aviation contractor and which had been producing aircraft on the Airport since before the City's acquisition of the land. Douglas was also the City's major employer. Tens of thousands of Santa Monicans and others worked in the Douglas factory, producing aircraft, twenty four-seven. And, Sunset Park grew up to the north and west of the Airport to house them. So, during World War II, Airport and community interests were aligned.
The City leased the Airport to the federal government in two separate leases. One lease covered 86 acres that encompassed the runways, which were configured in an "X" and situated on what is now the northern portion of the Airport land. The other lease covered an 83-acre parcel immediately to the south, which was then developed with a golf course. As part of its war effort, the City charged the federal government only nominal rents. The charge for the northern parcel was only $1 for the entire lease term. The charge for the southern parcel was $150 per month. The leases did not impact the City's status as land owner; at all times the City retained fee title.
During the war years, the Airport property was expanded. In 1945, in order to build a longer runway, the United States condemned and purchased residential properties totaling about 20 acres to the west side of the Airport. These properties were acquired using City funds. Later, Douglas conveyed to the City an adjacent parcel, just to the east of the property acquired by condemnation. The condemned properties and the land conveyed by Douglas are collectively referred to as the "Western Parcel".
These acquisitions expanded the City's Airport land by about 35 acres. Construction work also occurred during the war. The x-configured runways were replaced with the current, longer, single runway; and, various structures were built.
The Post-War Transfers
In 1946, with the war over, the federal government decided to dispose of its leasehold interest pursuant to the Surplus Property Acts and did so utilizing the 1948 Instrument of Transfer. Staff believes that this form was routinely used by the War Assets Administration to transfer properties used during the war to local governments. The Instrument includes various conditions, such as public-use requirements. And, there is a reversion clause which provides that, if the conditions are violated, the "title" conveyed by the Instrument shall revert to the government. (A dispute exists as to whether the document did, or could have, conveyed title, since the federal government was only a lessee and never owned the land.)
Also, in 1949, the United States transferred to the City its interest in the 20-acre Western Parcel. This transfer was accomplished by a quit claim deed. As a result, the City became owner of the Land without limitation or condition.
Changes, Conflict, Legal Disputes and the 1984 Agreement
After the war, Douglas sharply reduced its workforce and later left the Airport; and the fleet mix changed with the proliferation of jet aircraft. These changes ignited conflicts between Airport interests and the Airport's immediately adjacent residential neighbors, many of whom resided in very close proximity to the runway ends.
In the years that followed, the City Council considered how best to protect the quality of life for Airport neighbors. Those who had been employed by Douglas no longer worked at the Airport. The early "pure" jet aircraft were very noisy -- about ten times noisier than today's fan jets. And, operations increased to an all-time high of over 350,000 annually. On January 10, 1962, the Council conducted a hearing on the Airport and discussed closure. At that hearing, and later in writing, the then City Attorney expressed the view that the Instrument of Transfer and federal contracts prevented the City from abandoning use of the property as an airport. The City Attorney's opinion does not attempt to explain how the Instrument of Transfer could have elevated the federal government's limited term interest as lessee into perpetual control of the land covered by the instrument or whatever the federal leasehold interest could, legally, be unilaterally converted into a greater interest.
Again in 1970 and 1971, the City Council considered making an alternative use of the Airport land. And, a study undertaken for the City Council by Economic Research Associates of Los Angeles reported that revenue to the City would increase tenfold if the land were rededicated to commercial use. The FAA responded with letters to the Mayor noting the federal government's investment in the Airport and urging that Santa Monica Airport was an important part of the national transportation system. One of these letters cites the City Attorney's opinion in support of the assertion that the Instrument of Transfer required the City to maintain the airport use of the Airport land.
The controversy continued. In 1972, the California Supreme Court held that residents adversely impacted by the Airport could sue the City on nuisance and other theories. Nestle v. City of Santa Monica, 6 Cal. 3d 920 (1972). In 1975, in response to ongoing complaints and demands from residents, the Council adopted local regulations restricting operations to reduce noise and other impacts. That same year, a state legislator asked the Attorney General of California if the City could "at the present time, cease using the Santa Monica Municipal Airport for airport purposes." The Attorney General issued an opinion saying that the City could not. He based this conclusion on the totality of the contracts between the City and the federal government, including at least six grant agreements, eleven leases and the Instrument of Transfer, as well as on leases to private parties. Thus, the Attorney General did not opine on the issue of whether the Instrument of Transfer alone obligates the City to maintain the Airport in perpetuity. See Cal.A.G.Opinion No. CV 74-317.
The controversy escalated when the aviation community and the federal government filed suit challenging the night curfew, touch-and-go ban, stop-and go ban, low approach ban, prohibition against helicopter flight training and noise limits which the Council had adopted to protect Airport neighbors. All of the regulations were upheld, except for the jet ban, which was overturned on constitutional grounds because jets are not necessarily noisier than propeller aircraft. Santa Monica Airport Assoc. v. City, 481 F.Supp. 927 (C.D. Cal. 1979, affirmed 659 F.2d 100 (1981). After that, another noise limit was adopted, and it was invalidated as a "disguised jet ban" in litigation instituted by the National Business Aircraft Association ("NBAA") and joined by the federal government. The City Council then adopted a resolution declaring its intent to close the Airport when legally possible; and also adopted a new Airport Master Plan. These actions spawned a new round of legal complaints.
In 1980, the City conducted (another) economic analysis and determined that more revenue could be generated if the Airport were closed and converted to commercial use. When the City notified tenants that their tenancies would terminate in a year, an Airport business operator sued the City claiming that the City's regulations had unlawfully damaged his business. And, in 1981, the City Council adopted Resolution No. 6296 to close the Airport when legally possible.
Ultimately, the post-war controversies about the City's authority to regulate and close the Airport, the Airport's operation, and the Airport's future were (temporarily) resolved through adoption of the 1984 Settlement Agreement. It obligates the City to operate the Airport on specified terms until July 1, 2015. The Agreement does not obligate the City to operate the Airport after that date.
The Grant Agreements and Leases
In the half century after World War II, the City also made grant agreements with the federal government. Pursuant to these agreements the City received federal funding for Airport improvements in return for agreeing to operate the Airport according to federal conditions for the life of the improvements funded with the grants, but no more than twenty years. The last grant was accepted in 1994. In 2003, additional funds were added to that grant. The funds were used, at least in part, to pay for a blast wall at the eastern end of the runway, which would help shield Airport neighbors to the east from Aircraft emissions.
Additionally, the City entered into numerous leases of parcels on the Airport, some of which are on land designated for aviation use and some of which are not. The aviation leases provide for the services that are required pursuant to the 1984 Agreement. The non-aviation leases provide revenues that are used to help support the Airport.
On Dec 5, 2000, Council approved Leasing Guidelines for the Non-Aviation Property Leasing at the Airport. The guidelines outline policies and procedures for leasing property at the Airport which align with the City’s stated objectives for the leasing program. These guidelines include the following:
· Maintain the compatibility of non-aviation airport property use with Santa Monica Airport operations and the adjacent residential community;
· Assist Santa Monica Airport in meeting its fiscal obligations in a self-sufficient manner;
· Provide a safe harbor for the local arts community; and
· Assure access to and use of public properties by the general public for the preferred uses through a leasing program that promotes orderly and periodic changes in tenancy.
In recent years, the controversy temporarily quelled by the 1984 Agreement has re-ignited. The April 30, 2013 staff report and attachments provide details. Basically, Airport neighbors, aviation community members and the federal government have all (repeatedly) instituted legal proceedings against the City. Airport neighbors' suits have claimed that the Airport's adverse impacts deprive them of use of their property and damage their health. Members of the aviation community have challenged City restrictions and requirements as violating federal law and contractual rights. And, perhaps most notably, the FAA instituted a Part 16 administrative proceeding against the City in response to the Airport Commission's mere recommendation that the Council approve an Aircraft Conformance program. It would have conformed Airport usage to the Airport's runway facilities, particularly its relatively short runway which ends in exceptionally close proximity to homes and businesses. That eight year dispute is described in detail in last year's staff report.
During its course, the City explored all possibilities for reaching compromise and a voluntary resolution with the FAA. This effort included years of discussions, a formal settlement procedure, and Congressional intervention. Ultimately, after all efforts at compromise failed, the Council adopted an ordinance prohibiting Airport usage by larger and faster (Category C&D) aircraft. Council based the ordinance on extensive findings including findings relating to the proximity of homes to the runway ends, the absence of any runway safety areas, the runways relatively short length, and the Airport's Layout Plan designation of B-1 (which means it is suitable for use by generally smaller, slower A & B aircraft). The FAA sought and obtained a federal court injunction against implementation of the ordinance, and the case proceeded administratively and in court. Ultimately, the second federal appellate court to consider the dispute upheld an FAA decision striking down the ordinance. The court based its decision on the narrow ground that the FAA did not act arbitrarily or capriciously in concluding that the ordinance violated the grand condition prohibiting unjust economic discrimination. The court declined to address arguments relating to the Instrument of Transfer and the 1984 Agreement. City of Santa Monica v. Federal Aviation Administration 631 F.3d 550, 559 (D.C. Cir. 2011)
In a 2008 decision issued in the course of that dispute, the FAA claimed, for the first time, that the City is obligated by the federal Surplus Property Act and the 1948 Instrument of Transfer to operate the Airport in perpetuity (forever) or ownership of the Airport would revert to the FAA. This assertion was made, and has been reaffirmed, despite the facts that the FAA has never had an ownership interest in the Airport land and has previously expressly recognized that the City would control use of the Airport land after the expiration of the 1984 Agreement. For instance, in the FAA Director's determination issued in 1998, the Director said: "[The 1984 agreement] makes clear that the City is obligated to operate the Airport only for the duration of the Agreement … To the extent that Complainants... seek to prevent the future closure of the Airport or require the City to operate the Airport beyond July 1, 2015, that is a local land use matter. " (Emphasis added.)
In addition to the conflict with the FAA, in the last 15 years, proceedings against the City have also been instituted by the aviation industry and Airport neighbors. While the runway safety dispute was ongoing, an industry organization filed a Part 16 complaint to challenge the landing fee structure. The FAA issued an initial decision against the City, and the complaint was ultimately resolved through adoption of a different fee program. Also, neighbors living to the east of the Airport filed suits claiming that jet blast was interfering with their use of their property and damaging their health. A western neighbor also sued the City after an aircraft owned by a flight school and operated by a trainee crashed into her garage. That litigation is still pending. And, the City anticipates a lawsuit about last fall's fatal jet crash.
The FAA has not been a party to any neighbors' suits against the City. It is shielded by sovereign immunity and therefore cannot be held legally responsible for injury caused by Airport operations.
In addition to actual litigation, the City has received many threats and informal demands relating to adverse Airport impacts. Recently, most have focused potential adverse impacts on air quality. Studies undertaken by researchers at UCLA were presented to the City along with demands that the City take action to control aircraft emissions in order to protect neighbors' health.
The City Begins Planning the Airport's Future
After the litigation about runway safety and the C&D ban ended, the City shifted its focus to the Airport's future, undertaking a comprehensive community process to identify and assess any and all options for the Airport's future, including those between the extremes of maintaining the status quo, which residents and neighbors argued was untenable, and closing the Airport, which would entail a long and costly legal battle of uncertain outcome.
The three phases of that visioning process are described in detail in the April 30th staff report. It was one of the most expansive and inclusive public processes ever undertaken by the City. It provided a substantial body of information about the benefits and burdens of the Airport and the possibilities for enhancing its contribution to the community. However, the vast majority of participants strongly favored either closing all or part of the Airport, particularly if adverse impacts of noise, air pollution and perceived safety risks could not somehow be substantially mitigated. Moreover, there was a strong sentiment that the City should stop subsidizing the Airport from the General Fund.
Presented with the results of the Visioning Process, the Council concluded that, when the City's contractual obligations expired, the Airport should be completely or partially closed if adverse impacts could not otherwise be reduced and that the Airport must immediately become self-sustaining.
Accordingly, on April 30, 2013, Council directed staff to:
1. Revise the landing fee program to make fees applicable to all aircraft and make the Airport self-sustaining;
2. Approve the development of a pilot program for retrofitting aircraft used in flight training with mufflers or other sound mitigation equipment;
3. Continue to identify and analyze the possibilities for current and future actions to reduce Airport impacts;
4. Further assess the potential risks and benefits of closing or attempting to close all or a portion of the Airport; and
5. Provide an assessment of both risks and benefits so that Council can determine whether the City should, after the expiration of its current obligations, implement additional changes that will reduce adverse Airport impacts and enhance the Airport's benefit to the community or whether the City should undertake closure of all or part of the Airport.
Airport Operations Since the Last Public Hearing
In the time since the last hearing, staff has continued to monitor Airport operations. In 2013, aircraft operations continued to decline. There were a total of 95,152 operations, a 7% decline from the previous year. The most significant change was the decline in local operations, most of which are patterned operations associated with flight training. That category of operations declined by 15%.
Last year's decline continues a ten-year trend, which is depicted on the charts below. Overall operations declined. Propeller aircraft operations declined by 10%, and helicopter operations declined by 21%. However, jet aircraft operations increased by 15% above the previous year. Data for the charts and graphs was collected from the Air Traffic Control Tower, the City's landing fee equipment, and the Airport's Noise Management System.
Since April 30, 2013, staff has fulfilled the Council directives. Staff implemented a new landing fee, established a pilot program to retrofit flight school aircraft with mufflers or other sound mitigation equipment, and continued to explore all possible means of reducing adverse Airport impacts. Staff also engaged with FAA senior staff in Washington on mitigating Airport impacts; met with regional FAA personnel regarding the implementation and possible impact of the FAA’s Los Angeles Metroplex study; monitored new developments in sustainable aviation technology; reviewed recent environmental airport pollution studies; undertook an audit of Airport leases; formulated proposed revisions to current leasing guidelines; and, handled a very large volume of legal work, including litigation.
Staff implemented the revised landing fees on August 1, 2013. Initially, staff forecast annual revenues of $1,602,201 from the revised fee. Staff's revised projection, based upon six months of receipts, is $1,102,998 in FY 2013-14. This is less than projected due to several factors, including that the new landing fee did not become effective until August 2013 (one month into the fiscal year) and that revenues from the landing fees are not fully realized until 90 days after the implementation of the new fee. Graph 1. below depicts the total landing fee revenues for the past two fiscal years compared to the estimated revenues for FY 2013-14.
Graph 2. depicts the year-to-date actual Landing Fee revenues by month from July 2013 to January 2014, and the estimated Landing Fee revenues by month from March to June 30, 2014.
Although revenues from landing fees are less than projected this fiscal year, the budget was adjusted accordingly; and the Airport’s enterprise fund will not require any additional subsidies from the General Fund in FY 2013-14. Additionally, the increased Landing Fee revenues allowed the Airport Fund to cover the interest on the $13.6 million existing loan balance this fiscal year.
Aircraft Retrofitting Program and Noise Complaints
On September 24, 2013, Council approved implementation of a pilot program for retrofitting aircraft used in flight training with mufflers or other sound mitigation equipment. Staff identified several technologies that reduce noise from piston-powered aircraft, such as enhanced muffler systems, propeller designs, and devices that reduce propeller revolutions per minute (RPM). Staff set aside $200,000 for FY 2013-15 to equip flight school aircraft with devices to reduce their overall noise impact. Any proposed equipment must be accompanied by documentation of FAA certification and proof that the device can reduce the noise signature of the aircraft on a normal departure profile.
The pilot program criteria require that all noise mitigation equipment be approved by the Airport Director prior to reimbursement. Staff developed procedures and an application form for the program, and notified resident flight schools of the program; but to date, no applications have been submitted. However, noise complaints diminished during the last year, and anecdotal evidence indicates that many Airport neighbors perceive a reduction in noise.
Management of Airport Property and Leases
The Airport aviation and non-aviation leases will all expire on or before June 30, 2015. In preparation for the expiration of leases, Airport and Economic Development staff engaged a qualified appraiser to prepare a comprehensive appraisal of all properties at the Airport. The last such appraisal was done in December 2010, but it did not include the aviation properties that will be reverting back to the City in 2015. The new appraisal will determine both the fair market rate for aviation leases, and the market rate for non-aviation leases. The purpose of the appraisal is to establish future lease rates. The appraisal is expected to be completed by the end of the fiscal year.
Staff has also begun an audit of the Airport leases. Staff from the Public Works, Housing and Economic Development, and Finance Departments collaboratively engaged qualified auditors to conduct independent financial audits and/or lease compliance audits for nine tenants at Santa Monica Airport. The audits will ensure that the tenants have met their obligations under their lease agreements. These audits are expected to be completed by the end of this fiscal year.
In June 2013, LAX published the third and final phase of the LAX Air Quality and Source Apportionment Study (AQSAS), an air quality source apportionment study to evaluate the contribution of on-airport aircraft emissions to off-airport pollutant concentrations. The study, the first apportionment study of its kind at an airport, was conducted by internationally recognized team of independent experts in the field of air quality and source apportionment. Their work produced new information that will support research by the scientific community. Key findings include that: all major pollutants were below National Ambient Air Quality Standards & California Ambient Air Quality Standards; air toxics are comparable or lower than elsewhere in the South Coast Air Basin; air pollutant concentrations show sharp decreases as distance from the source of emissions increases; and main sources of oxides of nitrogen, carbon monoxide, and black carbon in the study area were local traffic on or near the I-10 and I-405 freeways. Finally, the study found that 90% of the ambient particulate matter in the study area is from non-airport related sources and regional background including secondary aerosols. A supplementary study on ultra-fine particulates concluded that larger particles indicated an association with vehicle emissions and smaller particles indicated an association with jet exhaust and possibly secondary particles. Currently there are no regulatory standards for ultra-fine particulates.
On December 3, 2013, Shell Aviation, a subsidiary of the multinational oil giant Royal Dutch Shell, announced that a 10-year effort in the laboratory had produced a lead-free fuel replacement for 100LL aviation fuel that could power any aircraft in the piston fleet. Shell is the first major oil company to announce an unleaded avgas formulation. The FAA has a goal of deploying a lead-free piston aviation fuel by 2018. The Shell fuel will be submitted for approval from the FAA and other agencies with the hope that introduction to the market will occur before 2018.
In January 2013, the Boeing Company announced new research showing that "green diesel" (a fuel blend made from oils and fats) can be used to fuel jet aircraft. Boeing is seeking regulatory approval this year for aircraft use. Green diesel is a renewable source of energy and its wholesale price is competitive with petroleum fuels. At present, green diesel plant capacity cannot meet the estimated demand of the aviation industry, but with approval, market conditions could increase production.
Staff will continue to monitor and report on the technological advances and regulatory approval of these types of fuels and incorporate their use in future leasing guidelines upon approval and availability of such fuels.
Staff's Contacts with the FAA
Following the Council's direction of April 30th, senior staff met with FAA personnel in Washington. As in the past, they were willing to meet and consider the City's views. But, they made clear that the Agency would not agree to the imposition of legal restrictions on operations. The FAA representatives made only general suggestions, including that the Agency favors voluntary agreements, such as lease terms, rather than local regulations. They also suggested that the City look to approaches and solutions that have been implemented elsewhere.
Staff also worked with local FAA personnel. On January 16, 2014, staff received notification from the FAA that it will prepare an Environmental Assessment of the potential environmental impacts of the FAA’s implementation of its program to optimize airspace usage in the Southern California Metroplex, which is a geographic area covering multiple airports serving major metropolitan areas from Santa Barbara to San Diego. The letter stipulates that the goal of the Metroplex is to improve efficiency of the airspace by optimizing aircraft arrival and departure procedures at a number of Southern California airports, including Santa Monica Airport.
According to the letter, the FAA has initiated preparation of the assessment and intends to issue draft results in 2015. The letter also states that public participation in the form of workshops will be a part of the process. The workshops will give the public the opportunity to learn about the project and to submit comments and concerns.
Staff met with representatives of the FAA in early February to discuss the timeline for the Environmental Assessment and obtain further information on the public workshops. In addition, staff reiterated the City’s opposition to any modifications that would change headings on takeoff from the current heading, by which aircraft fly directly to the coast, rather than over Santa Monica's hills and more residences.
Input Received from the Airport Commission, Airport Neighbors, and Aviation Community
Since the last public hearing last April, the Airport Commission, City residents, Airport neighbors and members of the aviation community have continued to express their views about the Airport's operations and its future, both publicly and to City staff. They have provided a wide range of suggestions.
The suggestions include the adoption of City regulations, including a few that have been successfully implemented elsewhere. For instance, the Commission and members of the pubic have suggested adoption of regulations or conditions limiting operations, Flight Operations Reduction Rules, similar to one adopted in New York. They have also suggested requiring a flight operations permit. Other suggestions have included utilizing existing federal procedures. For example, the City could initiate a Part 155 proceeding (by which the federal government could be asked to excuse the City from any obligations). Or, the City could design and submit for approval a new Airport Layout Plan that would shorten the runway on the western end by excluding the Western Parcel, which is not covered by the Instrument of Transfer.
The Commission and members of the public have also suggested that regulatory measures and procedures should be avoided (because of legal risks) and that adverse impacts should be reduced through leasing policies that would curtail aviation services and thereby enhance the compatibility of business operations with the surrounding residential neighborhoods. Suggestions in this category include, but are not limited to prohibiting lessees from operating flight schools and selling aircraft fuel.
Other community members' suggestions address the broader land use question of the Airport's future. Many urge that the City should close all or part of the Airport when the grants obligations, 1984 Agreement and current leases expire. Many of those who favor partial or total closure propose rededicating the land to park use.
Most recently, the Airport Commission voted to recommend: (1) halting the sale of aviation fuel; (2) restricting the rental of airport property to uses compatible with surrounding zoning (specifically, art studios and light manufacturing); and (3) raising rents to market rate.
The aviation community has provided much less input; however staff has received some comments and complaints. Most notably, the representative of a national aviation group has urged that the Airport is an asset, for the entire community. And he claims that most City residents do not oppose the continuation of Airport operations, and that the Council should act in the best interest of the entire community and not just Airport neighbors. The same representative and others have expressed the concern that the Airport Commission is biased. Most members own property near the Airport. The City Attorney's Office has provided written information about the application of state law on conflicts of interest to this situation.
The City's Suit to Assert Its Rights As Property Owner
By early fall of 2013, senior staff's discussions with FAA personnel in Washington had yielded no significant results and public dissatisfaction and concern about Airport impacts continued to mount. The Airport leases, 1994 grant obligations and 1984 Agreement were approaching expiration, and the public portion of the visioning process was complete. And, the Council had previously committed to move forward with planning the Airport's future in March or April of 2014. Then, a private jet veered off the runway and crashed into a hangar located close to Sunset Park homes, and burst into flames, killing the pilot and all three passengers. This tragic accident intensified ongoing public demands for City action.
Council responded to these circumstances by discussing the City's litigation options in closed session and concluding that the City should file suit to clarify its rights to control the future use of its Airport land. As permitted by the Brown Act, Council did not publicly discuss filing suit because of the concern that the FAA would initiate a Part 16 proceeding. This concern arose based partly on past experience. In 2003, the FAA had initiated a Part 16 proceeding in response to the Airport Commission's recommendation that Council adopt the Aircraft Conformance Program. The proceeding was initiated prior to any Council action on the matter.
At Council's direction, the City Attorney's Office sought proposals from several large and well-reputed litigation firms, conducted two rounds of interviews, and ultimately recommended hiring Morrison & Forrester based upon its experience, expertise and competitive pricing. Working with the City Attorney's Office, Morrison & Forrester drafted a complaint that seeks to establish Santa Monica's rights to determine the future of the Airport. The specific causes of action were formulated partly to resolve the basic issue of land use control and also avoid a claim of Agency jurisdiction. They include a cause of action to quiet the City's title to the Airport land and also several constitutional claims relating to the federal government's attempt to assert permanent control over the City's land. The City filed suit in federal district court on October 31, 2013; and the case was assigned to Judge John F. Walter.
The FAA responded to the City's complaint by moving to dismiss it. As to the Quiet Title cause of action, the federal government argued that the City had known of the federal property interest in the land since the execution of the Instrument of Transfer in 1948, and the twelve year statute of limitation started then and therefore barred the claim. In support of this argument, the federal government relied on the language of the Instrument of Transfer and the opinion issued by the Santa Monica City Attorney in 1962. The City argued that the federal government, as a mere lessee, could not have acquired an interest in title or perpetual control of the land. The City also relied on various, prior FAA acknowledgements that the City's obligations to operate the Airport would expire in 2015 with the expiration of the 1984 Agreement.
Judge Walter granted the motion in its entirety without reaching the merits of the claims. He did not decide whether the federal government has any remaining interest in the Airport land. The Quiet Title claim was dismissed with prejudice. So, it cannot be renewed in the trial court and can only be appealed. However, the City's constitutional claims were dismissed without prejudice on the ground that they were not yet ripe for adjudication because the Council had not yet decided what to do with the Airport. And, the Fifth Amendment takings claim was dismissed based on Judge Walter's conclusion that it can only be heard by the federal Court of Claims in Washington, D.C.
The City has until April 14, 2014 to file the appeal, and the Council has not yet decided whether to file.
As the background section demonstrates, the Airport's history since the end of World War II is rife with conflict between airport neighbors, the City, the federal government and the aviation community. That conflict extends into the present and dominates the City's attempts to plan the Airport's future. And, although much time and energy have been expended in the last year by staff and the community, the basic outlines of the Airport controversy have not changed. As has been made abundantly clear in various contexts, including the Visioning Process and at myriad public hearings, many Santa Monica residents living in Sunset Park and Ocean Park strongly favor ultimate closure of all or part of the Airport in order to eliminate or reduce the adverse impacts on their health, safety and welfare that result from air pollution, noise, and the risk of accidents. Los Angeles neighbors and their representatives concur. City residents living further from the Airport have not been much engaged in the controversy about the Airport's future, perhaps because it does not significantly impact their daily lives. The aviation community continues to argue for maintenance of the status quo and will fight to preserve it. And, most important, the FAA will almost certainly continue to fight to preserve the Airport.
Closure – A Future Possibility Requiring More Litigation
For years, community members have assumed that the City could close the Airport after the 1984 Agreement expires June 30, 2015. However, the FAA contends that the City cannot close the Airport when the 1984 Agreement expires because the City will remain obligated to operate the Airport by both the last grant that the City accepted for Airport improvements in 1994 and by the Instrument of Transfer. As to the grant, the FAA contends that it obligates the City until 2023, while the City contends that the last grant was made on June 6, 1994 and expires on June 5th of this year. The federal government's claim that the obligation extends until 2023 is based upon the fact that the grant was augmented in 2003 to fully fund the blast wall. And, even if the City were not obligated until 2023 by the grants, the federal government contends the 1948 Instrument of Transfer obligates the City to operate the Airport in perpetuity.
It appears virtually certain that the disputes about the duration of the grant conditions and the impact of the Instrument of Transfer will continue and will ultimately require judicial resolution. And, that resolution is uncertain. Indeed, the City's recent experience in court demonstrates, yet again, that litigation outcomes are always difficult to predict.
But, three things are certain. First, the City must keep the Airport open for the time being. As of the date of this report, the 1994 grant conditions, which run for twenty years, have certainly not expired, and the 1984 Settlement Agreement will not expire until July 1, 2015. So, whether or not the City can close all or part of the Airport in 2015 or in 2023, or ever, the City certainly cannot close the Airport now.
Second, definitive City action to close all or part of the Airport will very likely result in the FAA and likely also the aviation community instituting legal proceedings. The exact nature of their actions cannot be predicted with certainty and would likely depend on exactly what action the City took. For instance, if the City were to declare its intention to close the Airport in 2015, when the 1984 Agreement expires, the FAA might institute a Part 16 administrative proceeding – just as it did in 2003 when the Airport Commission decided to recommend the Aircraft Conformance Program to the City Council. Likely, the agency would claim that, whatever its ultimate rights, the City is obligated by the last grant agreement to continue to operate the Airport until 2023. At some point, the agency would also likely reassert its argument that the Instrument of Transfer obligates the City to operate the Airport in perpetuity.
Third, even under the best scenario for proponents of closure, the process will take years because the legal disputes, are not susceptible to speedy, final judicial resolution. The issue of when the grant obligations expire will, in itself, take years to resolve. The FAA will likely assert administrative jurisdiction, and the Agency would take at least a year or two to conclude its three stage quasi-judicial administrative process. Once that concludes, review by a federal circuit court would also take a year or two. Even if the FAA does not have primary jurisdiction, the case would begin in a federal district court; and the total time necessary to achieve final resolution in the appellate system would still be several years.
If the FAA were to prevail on a claim that the grant agreements do not expire until 2023, the Airport could not be closed for almost ten more years – longer if the issues relating to the Instrument of Transfer are not resolved prior to 2023. And, if the FAA ultimately prevails in its argument that the Instrument of Transfer requires the City to operate the Airport in perpetuity, the City will not be able to unilaterally close the Airport.
Moreover, environmental review of the "project" of closure would probably be required by state law. Such review is also time consuming. And, of course, planning for the reuse of all or a major portion of the Airport would be an enormous and extremely time consuming process. Past experiences suggest that the City's planning process would take at least five years even without hurdles created by federal law. And, once that was complete, additional environmental review of any new project would be required.
Thus, for better and for worse, there is time to elucidate possible ultimate goals, select among them, and identify intermediate steps and long-term measures that will move the City towards the future use or uses of the Airport land. Overall, because of the inevitability of litigation, its uncertainties, and its costs, staff recommends that the City Council approach the issue of closure systematically by identifying, studying, planning and beginning to prepare for all contingencies.
Complete vs. Partial Closure
A principle issue for Council and the community to consider is whether to strive to close all or part of the Airport. In past years, many simply called for closure of the entire Airport. And, closing the entire Airport, would afford unprecedented planning and land use opportunities. However, with growing awareness of the Airport's history, particularly the wartime acquisitions and transfer, many have expressed interest in closing the land that is commonly referred to as the "Western Parcel."
A Council decision to try to close the entire Airport or the Western Parcel would likely provoke a complaint by the FAA and the aviation community. However, the legal battle over a closure of the Western parcel could be somewhat less legally complex because the Western Parcel was not transferred via the Instrument of Transfer and therefore is apparently not subject to the reversion clause in that document.
The total land area of the Western Parcel is about 35 acres. As the following diagram illustrates, removal of the Western Parcel from airport use would significantly reduce the size of the Airport.
Advocates of closing the Western parcel and continuing to operate a much smaller and different airport note several possible benefits of this potential approach.
Adverse impacts on Airport neighbors would likely be reduced because the shorter runway would impact Airport usage.
Shortening the runway would create a buffer between the runway end and the residential neighborhood.
The continued existence of an Airport, albeit much smaller, would continue to afford opportunities for the aviation community and would honor the Airport's history.
The smaller Airport would constitute a relatively low density land use.
Maintaining a smaller Airport could continue to avert the possibility of commercial aircraft, inbound to LAX from the north being routed lower over Santa Monica.
This approach should nullify the legal argument that the Instrument of Transfer requires the City to operate the Airport in perpetuity because the Western Parcel is not covered by the Instrument of Transfer. (However, the FAA takes the position that if any part of an Airport is federally obligated, the obligations extend to the entire airport.
If the Council is interested in exploring the option of partial closure, it may be helpful to prepare at least a preliminary, conceptual layout plan for a future Airport configuration on the land covered by the Instrument of Transfer.
Long-Term and Short-term Re-use of the Airport Land
If the City Council opts to identify potential reuses of all or part of the Airport land, the array of theoretical possibilities is staggering; and many City residents have begun working on at least one possibility for reuse: a large regional park. The group points out that the City is "underparked" by national standards and that the proposed park could connect Clover Park with Airport Park. And, the group has prepared a schematic showing a conceptual park layout.
Of course, the building and maintenance costs of creating and maintaining such a park would be significant and staff has concerns about funding such a regional amenity. The residents' group airport2park argues that such a park might be funded through a combination of bond funding, charitable donations and state/regional funding, and lease revenues from commercial leases from businesses on the north side of the current Airport. However, it is too early to ascertain whether such funding would actually be available.
Others have suggested using the land for a combination of purposes including both residential and commercial with emphasis on affordable housing. Many have insisted upon the preservation of the educational and creative uses that are already on site. And, a number of public preferences and potential uses were identified in the Airport Visioning Process. These included constructing bike paths and other recreational amenities, establishing a Creative Innovation District, developing architectural standards for new construction that would maintain the Airport's historical quality and low density, and making adaptive reuse of existing structures, among many others.
Such possible alternative uses that might be made following a closure or partial closure are, at best, far ahead, beyond the inevitable litigation about City authority. Meanwhile, the City can move forward with studying these possibilities, taking preliminary steps toward them and continuing to act to reduce adverse airport impacts. Some of the steps to consider and begin implementing now include:
Zoning Airport Land: Proponents of closure have argued that the Airport land, which is presently not zoned, should be assigned a zoning designation or designations compatible with surrounding uses and that, at least while the Airport is in operation, no leasehold rights should be conferred upon lessees whose operations are inconsistent with the zoning designation(s).
Planning to Clean Up and Halt Environmental Damage: Reuse of the Airport land could require significant environmental clean-up. The Airport was a huge manufacturing site for decades. And, fuel has been stored in underground tanks on the Airport for more than fifty years. Consequently, staff recommends assessing the environmental status of the Airport and identifying future options for preventing adverse environmental impacts. One such option would be curtailing or eliminating fuel sales by lessees after July 1, 2015 through lease provisions. For instance, perhaps leases could specify that only jet and unleaded fuels could be sold by lessees. Or, perhaps only the City should sell fuel. These approaches could minimize future adverse environmental impacts, but, they require further evaluation.
Adopting and Implementing Leasing Policies That Protect Neighbors from Incompatible Uses, Safeguard the City's General Fund, and Preserve Future Options: Present leasing policy requires that leasehold activities be compatible with surrounding uses. Staff recommends fully implementing this policy when the current leases all expire next year. This would mean that either flight school operations would change significantly or there would be no leases to flight schools after the 1984 Agreement expires. Experience has shown that the low-altitude, patterned operations typical of flight training have very significant and detrimental noise impacts on residential neighborhoods near the Airport. Moreover, while they afford a valued amenity for a few, flight schools do not significantly benefit the community as a whole or the Los Angeles neighborhoods to the south of the Airport. The simplest solution would appear to be eliminating flight schools through leasing policy. But, there may be other solutions. For instance perhaps, flight school leases could require the use of Light Sport Aircraft. They are very quiet and use unleaded fuel.
Whatever the Airport's future, it is a City asset used by members of the public. As such, it must be properly maintained in order to help protect the safety of Airport users and neighbors. And, it should be self-sustaining so that it is not dependent on the General Fund, which must be used to support core public services. However, historically, the Airport's operation and maintenance have been subsidized by the General Fund. Indeed, as of June 30, 2013, the Airport has a debt obligation to the General Fund of $13.6 million. However, with the new landing fee program and current lease revenues, it is anticipated that the Airport can cover its operating expenses, maintenance costs, and interest on debt obligations.
At present, lease revenue accounts for 63% of total Airport revenues. Current uses of the non-aviation Airport property are diverse, and range from a museum, technical offices, artist day studios, educational facilities, contractor facilities, architectural offices, law offices, film related businesses, and general office space. Aviation use leases include flight schools, aviation service providers, hangars, and Fixed Based Operators.
All Airport leases expire on or before June 30, 2015 with the exception of the Santa Monica Art Studios lease, which expires on June 30, 2014, and the very long term lease to Santa Monica College. Given that it will likely take years to close or partially close the Airport, staff strongly recommends that lease revenues be maintained to promote the Airport's ongoing self-sufficiency, avoid future subsidies from the General Fund, and begin repayment of the principle on the General Fund loan to the Airport Fund. To maintain lease revenues, preserve uses that do not adversely impact the neighborhoods, and maintain future options for use of the property, staff recommends re-negotiating the current leases as follows: (1)Non-aviation use space would be leased for up to a five-year term with five 1-year options to renew, exercised at the City’s sole discretion; and (2) Aviation-use space would be leased for up to a one-year term with two 1-year options to renew, exercised at the City’s sole discretion.
Representatives of Volkswagen/Audi, The Museum of Flying, Typhoon Restaurant, and the Barker Hangar approached staff requesting extensions of their current leases. They have requested lease extensions to ensure the business security required to reasonably conduct and plan for their commercial and community operations. Renegotiating a five-year lease with five one-year options for up to a total of 10 years would assist the Airport to maintain the revenues required to meet a large portion of its fiscal obligations, and allow for the businesses to maintain their location and preserve their stability, while the City plans for the Airport's future.
Some of the Airport’s current fixed based operators that are master lease holders (i.e. Atlantic Aviation) have a mix of subtenants which include both aviation and non-aviation use businesses. In instances such as this, non-aviation portions would follow the leasing guidelines for a non-aviation use (five years with five 1-year options to renew), and aviation leaseholds would follow the leasing guidelines for aviation uses (one year with two 1-year options to renew). Master tenants with both aviation and non-aviation uses as sub-tenants would have two types of leases with the City.
The leases with Atlantic Aviation and Gunnel Properties constitute an agreement to improve the parcels through the construction of hangars and office space on their respective leaseholds. After July 1, 2015 these properties and all improvements revert back to the City. The City will then be able to lease the properties at a significantly higher rate, charging market rates for the buildings and the land.
Making the Airport Unusable
In support of this proposal, some community members point to Chicago's closure of Meigs Field, in which the mayor ordered bulldozing of the runway in the night. Some suggest that the FAA has no significant legal authority to control or punish such an action. This proposal and assessment are unrealistic. The circumstances in Chicago were quite different. Among other things, the FAA did not formally oppose the closure, and the City of Chicago did not own the airport. As to the FAA's authority, it is a virtual certainty that if the City were, for instance, to create a physical barrier to runway use, the FAA would seek an injunction requiring the City to maintain the status quo until the legal issues could be finally decided, which would take years. Meanwhile, assuming the FAA succeeded, the City would be liable for any accidents caused by shortcomings in maintenance of the Airport; and the federal government would not.
Regulating to Eliminate or Reduce Adverse Impacts
Some Airport neighbors have urged that, once the 1984 Agreement expires, the City should simply adopt regulations limiting aircraft operations. In support of this proposal, Airport neighbors cite the few cases in which local restrictions on operations have been upheld.
The most frequently cited case is National Helicopter Corp. v. City of New York, 137 F.3d 81 (2nd Cir. 1998). Plaintiff in that case was the long-time, fixed-base operator of the East 34th St Heliport, one of four serving Manhattan. After many disputes between the city and National Helicopter, the city adopted a resolution requiring a special operations permit and issued a permit with numerous restrictions aimed at reducing noise. The restrictions included a 47% overall reduction in operations, limits on operating hours, limits on permissible flight paths of sightseeing helicopters, and a prohibition on one type of helicopter. National filed suit, challenging the constitutionality of the restrictions. It claimed, among other things that the restrictions were preempted by federal aviation law. The federal trial court upheld the weekday and weekend curfews but struck down the conditions that would eventually eliminate weekend operations and the conditions that required a 47% reduction in operations preempted by federal law. The Court of Appeals for the Second Circuit explained that, as airport proprietor, the city could promulgate reasonable, non-arbitrary and non-discriminatory regulations of noise and other environmental concerns at the local level. On that basis and based on the City's police powers, the appellate court affirmed most of the trial court's decision to uphold the curfews but reversed the decision to strike down the ultimate weekend ban and the 47% reduction. The appellate court explained that these were also reasonable noise regulations. Thus, only the prohibition against one type of helicopter and the route restrictions were preempted.
Staff agrees that National Helicopter may provide useful guidance for City action at some point in the future. However, staff notes that the FAA was not a party to the case, and the FAA's authority to make determinations about compliance with grant conditions was not a factor. If the City were to decide to use New York's actions in National Helicopter as a guide and attempted, for instance, to attempt to impose reductions in operations, it appears likely that the FAA would challenge those restrictions in an agency proceeding as violating the grant conditions, which the FAA claims do not expire until 2023.
National Helicopter is just one example. There are a few other court cases in which cities (including Santa Monica) successfully exercised their proprietary powers to restrict operations in order to control noise and for other purposes. However, that has become much more difficult since Congress adopted the Aircraft Noise and Capacity Act. And, there is uncertainty about the extent of airport owner's proprietary powers. In some federal circuits, the appellate courts have indicated that the proprietor's exemption to federal preemption is limited to regulations that control noise. In other circuits, the federal appellate courts have indicated that airport proprietors may undertake reasonable and nondiscriminatory regulation of "noise and other environmental concerns." So, local regulation is challenging in general and much more so while grant conditions are in effect. Accordingly, staff does not recommend a regulatory approach at this time.
Initiating a Part 155 Application
Some Airport activists have suggested that the City should file an application with the FAA under Part 155 of the agency's regulations, which provide a means for airport owners to be excused from federal obligations. Staff recommends against this suggestion because the City's long history of disputes with the federal government about the Airport shows that the application would be denied. The FAA's firm determination to keep the Airport open is a matter of record. Proponents have suggested that filing the application and having it denied would eliminate the standard requirement of exhausting any administrative remedies before going to court. However, "futility " is a well-recognized exception to the requirement of exhaustion. Nonetheless, this is an alternative that could warrant further exploration.
Adopting a Resolution Of Intent to Close the Airport on a Date Certain
This option appears to appeal to many community members. It would make the City's intentions absolutely clear; and it would have the potential advantage of ripening the constitutional claims asserted in the City's presently pending lawsuit. It would likely also provoke a Part 16 proceeding filed either by an Airport business operator, an aviation industry group, and/or the FAA itself. Again, the claim would likely be that the City is obligated by the grant agreements to operate the Airport until 2023 and perhaps also that the City is obligated by the Instrument of Transfer to operate the Airport in perpetuity. Staff does not recommend this alternative at this time. The 1984 Agreement will be in effect for more than a year. And, should circumstances develop in a way that increases the desirability of this option, it could be pursued relatively easily at any time.
Next Steps: Once Council gives direction, staff will effectuate the specified leasing policy, assess options for minimizing adverse Airport impacts in the short term, and begin the preliminary steps toward full or partial Airport closure. Staff will report back to Council and the public this year.
Financial Impacts & Budget Actions
There is no immediate financial impact or budget action necessary as a result of recommended actions. The main financial impact of the possibilities discussed in this report is the impact of the leasing policies. Should Council approve the recommended lease policy changes, staff expects to maintain current revenue levels for the next few years. As the City strives to transition the Airport to other uses, a revenue stream from the leases will be needed to protect the General Fund.
Prepared by: Marsha Jones Moutrie, City Attorney
Stelios Makrides, Airport Manager
Attachment: A. Revised