SR-03-25-2014-8ACity of
Santa Monica°
• 1 1111 •
City Council Meeting: March 25, 2014
Agenda Item: 6A
To: Mayor and City Council
From: Marsha Moutrie, City Attorney
Martin Pastucha, Director of Public Works
Subject: The Future of Santa Monica Airport
Recommended Action
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.
Executive Summary
This report provides information about: the Airport's history, the legal constraints on the
City's authority to control the Airport and Airport usage, staff's work and developments
occurring since the April 30, 2013 public hearing, recent stakeholder input, and the
City's pending lawsuit against the Federal Aviation Administration (FAA).
The report discusses possibilities for long -term uses of the Airport land. For years,
community members assumed that the City could close the Airport in 2015 when the
1984 agreement with the federal government will expire. However, it is now clear that
legal disputes about the City's authority to close the Airport will inevitably extend well
beyond 2015, and their outcome is uncertain. And, beyond the legal controversies,
some level of environmental assessment would likely be required to close all or part of
the Airport and that would take time.
Thus, the City has ample time to situate and prepare itself to undertake complete or
partial Airport closure when and if those opportunities arise. This time can be used to
begin preparing potential work plans clarifying the scope of work that would be
necessary. So, staff seeks Council direction to begin formulating work plans related to
possible closure. Specifically, staff recommends preparation of conceptual renderings
of a smaller airport (excluding the western parcel that is not subject to the 1948
Instrument of Transfer) and a preliminary plan for assessment of on -site contamination,
which would probably be necessary for reuse of the property. Staff also proposes to
begin preparatory work for zoning the Airport land and thereby asserting traditional local
control over future land uses. This approach will help provide as much future protection
as possible to Airport neighbors.
Additionally, staff recommends expanding efforts to mitigate adverse Airport impacts on
neighbors through modifications to leasing policy. Specifically, staff proposes
conditioning or eliminating flight school leases after the expiration of the 1984
Settlement Agreement because flight school operations create significant and
detrimental noise impacts on surrounding neighborhoods and afford a minimal benefit to
the community. And, staff seeks direction to explore possibilities for limiting or
eliminating fuel sales through leasing policies in order to protect against adverse
environmental impacts.
As part of the overall effort to further both short- and long -term goals, staff proposes
revising leasing policies to both protect the City's future options and ensure that the
Airport does not again burden the General Fund. Under the proposed policy, non -
aviation tenants could receive up to one five -year lease with five renewal options of one
year each; and aviation tenants would be eligible for one -year leases with two one -year
options to renew. All renewal options would be at the City's sole discretion. This
approach would afford enough stability to lessees to protect the City's revenue stream
during the next several years while the City focuses on achieving resolution of legal
issues, mitigating adverse Airport impacts, and preparing for potential reuse of the land.
Finally, the report describes alternatives to staff's recommendations. They include
immediate action to physically close all or part of the Airport, adoption of a concrete
closure resolution, instituting a Part 155 application to request that the federal
government excuse any City obligations to operate the Airport; and attempting to reduce
adverse impacts by regulating Airport usage through adoption of various local laws.
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Background
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.
Legal Constraints
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.
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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 ll, 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.
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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
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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 ( "NBAX) 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
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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.
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Recent Conflicts
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
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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.
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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.
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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.
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Propeller Operations
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Jet Operations
'
Helicopter Operations
25,000
20,000
3,500
15,000
3,000
2004
2,500
--
10,000
2008
2009 2010
2011
2,000
3,210
3,746
3,642
3,130
3,204
5,000
2004
2005 2006
2007
2008 2009 2010
2011
2012
2013
Jet Operations
18,091
17,736 18,101
18,575
15,710 13,868 12,853
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'
Helicopter Operations
4,000
20,000
3,500
15,000
3,000
2004
2,500
--
10,000
2008
2009 2010
2011
2,000
3,210
3,746
3,642
3,130
3,204
5,000
2004
2005 2006
2007
2008 2009 2010
2011
2012
2013
Jet Operations
18,091
17,736 18,101
18,575
15,710 13,868 12,853
13,180
12,414
14,284
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Helicopter Operations
4,000
3,500
3,000
2004
2,500
2006
2007
2008
2009 2010
2011
2,000
3,210
3,746
3,642
3,130
3,204
2,510 2,318
2,795
3,247 2,561
Helicopters
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2004
2005
2006
2007
2008
2009 2010
2011
2012 2013
3,210
3,746
3,642
3,130
3,204
2,510 2,318
2,795
3,247 2,561
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Staffs Work
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.
Landing Fees
Staff implemented the revised landing fees on August 1, 2013. Initially, staff forecast
annual revenues of $1,602,201 from the revised fee. Staffs 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.
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am
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.
Graph 2.
LANDING FEES REVENUES by MONTH FY13 -14
$160.000
$140,000
$135,926 $135,926 $135,926 $135,926
$120.000 , __.. ______ __ _ _ —_— _ __ 129,]55 ____
$116,/199
$100.000 __ -- $ 0.575
h
D
W $80.000
K
2,969
1,852
$40.000
I
$20,000 $24,394 $28,527 $25,023
Jul -13 Aug 13
$0 Sep 13 Oct -13 Nov 13 Dec 13 Jan -14 Feb -14 Mar 14 Apr -14 May 14 Jun -14
- _
�^^mm LANDING FEES REVENUES j25,023 $51,852 $]2,969 $1105]5 $116,1991 $129,]551 $135,926 $135,926 $135,926 $135,926
(Estimated Mar -June 2014)
$24,399 $28,527 '�, — — — — — --
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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-
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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.
Environmental Work
Staff has also continued to identify and report on current and prospective environmental
advances in aviation sustainability. In July 2013, Sierra Research conducted an
independent study at the Airport, fully funded by the Airport Cooperative Research
Program of the Transportation Research Board. The goal of this study was to refine the
methodology used to estimate lead exhaust emissions from piston- engine aircraft.
Santa Monica's Airport was one of three airports selected for the study. A draft of the
study is expected in the summer of 2015.
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 1 -10 and 1 -405 freeways.
`m
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.
Staffs 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,
19
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.
20
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
21
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 staffs 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
22
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.
23
The City has until April 14, 2014 to file the appeal, and the Council has not yet decided
whether to file.
Discussion
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
24
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.
25
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.
26
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.
27
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
Me
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.
Interim Measures
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:
Zoninq 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.
01
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.
31
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 [eased
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.
32
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.
Alternatives
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
33
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
34
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
35
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
Approved:
roved:
(µ f E
Martin Pastucha
Director of Public Works
Forwarded to Council:
•_,t n
Rod Gould
City Manager
Forwarded to Council:
Attachment: A. Revised Leasing Guidelines
36
ATTACHMENT A
REVISED LEASING GUIDELINES
GUIDELINE OBJECTIVES
The purpose of these guidelines is to allow for the Airport Fund to remain viable during
the uncertainty that lies over the future of the Airport and the recent legal process that
are not anticipated to be resolved prior to the current leases expiring. Leases represent
the largest revenue source for the Airport by far, accounting for 63 %, of the Airport
Division's total revenue. Maintaining the Fund's independence from subsidies from the
General Fund necessitates those Airport properties, especially non - aviation use spaces,
to remain an attractive and stable inventory for businesses requiring space in Santa
Monica.
The City has not yet determined what changes can and will be made to Airport property
after June 30, 2015. It is important that the Airport has the ability to offer a lease term
beyond this date in order to attract and maintain a good tenant base for non - aviation
properties located on Airport Avenue, Donald Douglas Loop South, and Donald Douglas
Loop North. Currently the properties located on Donald Douglas Loop North are
managed by Atlantic Aviation and Gunnell Properties that were established under a
thirty year development agreement where only a land lease rental rate is paid to the
Airport. This development agreement expires on July 1, 2015 and at that time these
properties will revert back to the City. Any new leases for these two properties will
follow the guidelines for aviation and non - aviation areas separately so as to offer the
City the most flexibility during these legal uncertainties.
This report excludes portions of 3400 Airport Avenue as most or all of this building will
be operated by Santa Monica College as of July 1, 2015.
USES
Currently, non - aviation airport properties are used by an eclectic mix of occupants that
include: a museum, technical offices, artist day studios, educational facilities, contractor
1
facilities, architectural offices, law offices, film related businesses, and general office
space. Diversity of tenants will be maintained based on the following criteria: provide
for a historic connection to the property; ability to pay market rental rates as a means to
support Airport fiscal self- sufficiency; purposes which serve broader community
interests and needs as long as they fall within the City's legal constraints.
RENTABLE AREA
Single occupancy and /or master tenant buildings will be leased on the basis of gross
building area. New leases for multi -user buildings will be on the basis of net interior
rentable area excluding building common areas.
TERM OF YEARS
Beginning July 1, 2015 or as vacancies arise either by lease expiration or early
termination, available non - aviation space will be leased for up to a five -year term with
five (5) 1 -Year options to be exercised at the City's own discretion. After five (5) years,
tenants who wish to be considered for lease option extensions would need to contact
City staff in writing, no more than six months or less than 60 days before the lease
terminates, to request the one -year lease extension. The City at its own digression will
approve or disapprove the one year extension.
Prospective tenants for leasing of vacant space will be selected from applications
received by City staff. Prospective tenants will be screened for confirmation of use and
credit - worthiness. All existing non - aviation airport tenants that are current in rent
payments and not otherwise in default of their current agreements, and in good
standing, will be offered the opportunity to retain use and occupancy of their currently
leased premises for up to a five -year term with the five (5) 1 -Year options. At their
option, existing tenants may request shorter lease duration.
Available Aviation -Use space will be leased for up to a one (1) Year with two (2) 1 -Year
Options; these options will be solely exercised at the City's discretion. Tenants who
wish to be considered for lease option extensions would need to contact City staff in
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writing not more than six months or less than 60 days before the lease terminates to
request the one -year lease extension. The City at its own digression will approve or
disapprove the one year extension.
Prospective tenants for leasing of vacant space will be selected from applications
received by City staff. Prospective tenants will be screened for confirmation of use and
credit - worthiness. All existing aviation airport tenants that are current in rent payments
and not otherwise in default of their current agreements, and in good standing, will be
offered the opportunity to retain use and occupancy of their currently leased premises
for up to one -year term with the two (2) 1 -Year options. At their option, existing tenants
may request shorter lease duration.
PERIODIC REVIEW OF RENTAL RATES
Fair market rents for individual buildings on non - aviation airport properties and
prevailing market rents for aviation properties will be appraised in the as -is condition
quantified in the spring of 2014 appraisal. Rental rates for new or renewed leases of
airport properties will be set, effective July 1, 2014, as follows:
2900 Airport Avenue and 3000 Airport Avenue will be dedicated to artist day studios
at market rate and subject to the guidelines of the Santa Monica Airport Artist Space
Program
® All leases will be subject to annual CPI adjustment on their anniversary month with a
3% Minimum and a 6% Maximum
® Airport properties will continue to be appraised for fair market rental rates at five year
intervals
• New and renewed tenancies will pay prevailing market rates for the space used
Prevailing market rates are based upon current appraisal rates with CPI
adjustments.
FACILITY CONDITION REVIEW
Master tenant leaseholds will be responsible for any and all improvements, including
roofs and exteriors of the facilities. For all other tenancies, airport facilities will be
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inspected prior to new leasehold occupancy and refurbished, by the City or tenant, to a
decent, safe and sanitary condition appropriate for use. If tenant makes improvements
to the facility as a mutually agreed upon condition of a lease, the City must first review
and approve the proposed design and scope of work. All necessary building permits
must be obtained and the work must be inspected for compliance with applicable
code(s). Appropriate rental credits for the approved work performed will be negotiated
as part of the lease.
TENANCY RELATIONSHIPS
Facilities appropriate and suitable for leasing by the City to a master tenancy basis, in
accordance with agreements prepared by the City, the master tenant will be responsible
for any structural improvements or modifications necessary and will be responsible for
all interior and exterior facility maintenance, repairs and utilities associated with
operation of the property. Master tenant activities must be compatible with airport
operations and the adjacent residential neighborhoods. Subletting of interior space by
the master tenants would be permitted.
All other airport facilities appropriate and suitable for leasing by the City to individual
occupants will also be in accordance with agreements prepared by the City with each
tenant responsible for interior maintenance and repair and prorated utility consumption;
the City will retain responsibility for maintenance and repair of roofs, building exteriors,
landscaping and common use parking. Subletting of interior space by the individual
tenants would be explicitly prohibited. Artists, however, may cooperatively share
individual Artist Day Studio spaces provided that rents charged do not exceed lease
rates.
TENANT RECRUITMENT
2900 Airport Avenue and 3000 Airport Avenue are dedicated to artist day studios.
Recruitment for these two facilities will follow the following criteria: Cultural Affairs
Division of Community and Cultural Services Department has defined eligible visual
artist criteria, and has provided to the Airport Division a waiting list of qualified artist-
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candidates for leasing of individual Artist Day Studios. The Airport and Cultural Affairs
work together to maintain the list and update financial qualifications. Candidate tenants
for available Artist Day Studio space are required to file Program applications for
screening purposes, and qualifying artists are selected only from the screened waiting
list.
All prospective tenants must file a Lease Application. Upon confirmation that the
proposed tenancy is consistent with: Guideline Objectives; verification of references
and credit history; and mutual preliminary concurrence in proposed lease terms and
conditions, a lease agreement will be prepared for review by the City Attorney and
execution by the prospective tenant before being referral to the City Manager for
approval. Leases for terms greater than terms specified in the Guideline Objectives will
require Council approval.
The City will neither pay nor receive commissions for leasing of City -owned property.
Staff will cooperate with commercial real estate brokers who are authorized to negotiate
leases on behalf of prospective tenants.
DELEGATION OF AUTHORITY
The City Manager may negotiate and execute leases of City owned non - aviation use
property providing terms of occupancy up to five years with five (5) 1 -Year options at the
City's discretion in accordance with these Leasing Guidelines on the basis of written
agreements prepared and approved as to form by the City Attorney. The City Manager
may negotiate and execute leases of City owned aviation use property providing terms
of occupancy up to one year with two (2) 1 -Year options at the City's discretion in
accordance with these Leasing Guidelines on the basis of written agreements prepared
and approved as to form by the City Attorney.
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