Published in Midwest Flyer – August/September 2020 issue
Small airports across Minnesota are often looking for new ways to cover their costs. One alternative revenue source might be right on the airport’s property—in the form of excess or underutilized land. Development could benefit the airport and surrounding community as a whole. But first, if an airport is federally obligated, it will need FAA approval for non-aeronautical use. Stephanie Ward, manager of aviation planning at Mead & Hunt, offers advice for airports considering their options. But first, if an airport is federally obligated, it will need FAA approval for non-aeronautical use.
During a session at the 2019 Minnesota Airports Conference, Stephanie Ward, manager of aviation planning at Mead & Hunt, discussed the process and offered advice for airports considering their options.
Land adjacent to or in the immediate vicinity of an airport must be compatible with normal airport operations. How the FAA defines non-aeronautical use can often dictate what an airport can and cannot do, Ward explained. “Put simply, if you propose a use and it needs the runway to function, then it’s an aeronautical use. If you can close the runway tomorrow and that business can still exist, then it’s non-aeronautical,” she said.
First, it’s critical that the airport references and understands what is shown on its airport layout plan (ALP) and its Exhibit A property map. A sponsor must determine if the property under consideration is federally obligated. “This could mean you’ve used federal funds to purchase the property, but it can also mean that if you’ve shown the property on either one of those documents inside your property line, then technically it’s obligated,” Ward said. Federal obligation means certain conditions and assurances must be met as a condition of the airport accepting federal money.
The FAA has traditionally denied non-aeronautical use requests, Ward said. If property is designated for the airport, then it generally wants to reserve it for the airport; however, there are more and more demands from airports to generate revenue and land releases are becoming more frequent.
The FAA Reauthorization Act of 2018 (Section 163) could give airports more flexibility to develop non-aeronautical uses. The Act limits the FAA’s authority to directly or indirectly regulate non-aeronautical property transactions at an airport except to ensure the safe and efficient operation of aircraft or the safety of people and property on the ground and to ensure the receipt of fair market value, Ward explained. But she cautioned that more guidance on implementing this is expected within the next few years from the FAA.
Airports considering a non-aeronautical use should be prepared to answer three key questions: 1) Should we do this? 2) Where could we do this? 3) How do we do this?
“The type of development is going to greatly change what you can and can’t do. So, you have to put a lot of thought into this,” she said.
When considering non-aeronautical use, airports have three options: a Section 163 request, concurrent land use, and land release. The Section 163 option is still untested and a bit ambiguous since there is no guidance on what to submit or the process that the FAA will use to consider the request, Ward said. Consequently, a concurrent land use or land release request might provide a more defined approach to a non-aeronautical use. There is no guarantee that the Section 163 will be faster or slower than the more traditional request process, nor is there any assurance that the requests will be approved for any of these three options.
Concurrent Land Use
Concurrent use is the use of dedicated airport property for a compatible non-aviation activity while simultaneously serving the primary purpose for which it was acquired. For example, portions of land needed for approach zone purposes could also be used for agriculture. Other concurrent uses include road right-of-way easements and utility easements.
“Concurrent use approval [for agricultural use] has historically been an area where few airports have asked for formal approval,” Ward noted. “In Minnesota you may want to touch base with the FAA [Airports District Office] to confirm if it wants a formal request to document what is being done.”
Concurrent use requires FAA approval, but no formal release is necessary.
Airports can also request from the FAA a release of land from obligations incurred under agreements with the federal government. Land may be released if it is no longer needed for aviation-related use, encroachment or approach protection, or noise compatibility. A release could then allow an airport to sell or lease property it owns for non-aeronautical use.
A land release can take significant time, effort, and money, Ward said. “It has to be shown on your ALP as unnecessary for aeronautical purposes first. It’s really focused on that long-term transition,” she said.
Twenty years ago, it was a much different environment; now the FAA is looking for a specific use. “That really has become a challenge because the speed at which the land release process happens does not work at the speed of development,” Ward said. “The days of a blanket release are well behind us.”
There are two types of land release. In the “release from aeronautical use,” the airport retains ownership of the land, but the land is no longer required to be used for aeronautical purposes. With a “release and removal of dedicated property,” the airport usually sells land and is no longer responsible for maintaining it as dedicated airport property.
When requesting a release, an airport will need to address the proposed purpose, history of the property, environmental factors, and financial aspects. Based on her experience, Ward said the “why” and the “what” are most critical—why is the request being made (e.g., excess property), and what are the benefits of releasing it compared to the airport maintaining the property in its existing condition.
The history of the property is critical, because surprises could surface upon closer examination, Ward continued. It will be important to know what the deed actually says, how the airport originally acquired the property, what state or federal requirements need to be carried forward in any agreements, what specific property or facilities are involved, and what the present condition of the property and its current use is. Federal surplus property and former military property are more complicated, she added.
Preparing financial information for a land release will require a fair market value appraisal of the property, which can be expensive and time consuming. “We have lost more than one proposed developer because of the time it took,” Ward said. The airport will also need to evaluate the return on investment, what proceeds are expected, and how they will be used (e.g., for capital improvements or operations) and include a summary of intangible benefits (e.g., existing revenues, future revenues).
For the environmental aspects of land release, a categorical exclusion (CATEX) is usually sufficient, Ward said. However, FAA Standard Operating Procedure 5.0 has greatly increased the cost and time for a CATEX. Knowing as much as possible about the proposed land use will help address potential environmental impacts that can complicate the process.
Ward urged airports to determine what they’re trying to do before they get too far down a path. Key aspects to consider up front are:
• Documentation (location and review of historical documents; extent of environmental documentation necessary; agreement language and duration).
• Costs (benefits of the release vs. cost to obtain release). Determine who will pay for the release and the associated elements—for example, the airport or the developer.
• Timing. How early can you ask for the release? How long will FAA approval take—and will a developer wait for the process? Expect 12 months at a minimum, Ward said, and “Be prepared that the developer will be appalled at how long it will take.”
And there’s no guarantee the FAA will say “Yes.” The agency will consider if the request is reasonable and practical, how it will affect needed aeronautical facilities and future development, and whether it’s compatible with the needs of, and will benefit, the airport and civil aviation.
Finally, if an airport buys property without federal funding, it should think carefully about whether to show that property on its ALP, Ward cautioned. The airport could be tying federal obligations to something that wasn’t intended. “Whether it’s been federally funded or not, there’s going to be a criteria review on it…Do you want to obligate it? That could make a difference in how you go through this process.”
Airports should also consider that when they receive money for selling land, if applied toward a federally funded project, those funds usually cannot be used towards the local match of federal funds. The land release funds must be applied to the primary project costs, before federal funds are considered. A long-term lease might be a better option, Ward said, since funds generated by a lease can usually be used for operations and maintenance projects, as well as capital projects, which affords the airport more flexibility.
For more information: FAA grant assurances No. 4 (Good title), No. 5 (Preserving rights and powers), No. 21 (Compatible land use), No. 25 (Airport revenues), No. 29 (Airport layout plan/Exhibit “A”), and No. 31 (Disposal of Land)
• FAA Order 5190.6B: Airport Compliance Manual
• FAA Policy and Procedures Memo 5190.6, “Guidance for Leases, Use Agreements and Land Releases”
• ACRP Report 176: Generating Revenue from Commercial Development on or Adjacent to Airports
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