## Change Request Number: 01-04 Date Received: 12/8/00

**Title: Appendix A: Rent-Free Guidance Replacement**

# NAME: Susan Freericks

BRANCH: ASU-140

PHONE: 267-8374

TYPE OF CHANGE REQUEST: Guidance

DESCRIPTION OF REQUEST: Appendix A: Rent-Free Guidance needs to be
replaced with "Guidance on Interpretation of FAA 2001 Appropriation Act
Section 349". Under the FAA 2001 Appropriation Act Section 349 the FAA
is prohibited from implementing the rent-free guidance.

REASON FOR CHANGE: Guidance needs to be issued to the Regions and Field
to understand the impact of the recent legislation.

EXTENT OF DEVELOPMENT & REVIEW: This interpretation was coordinated with
the organizations who developed the rent-free guidance, AFZ-400,
APP-510, AGC-520 and ASU-140.

TARGET AUDIENCE: Regions and Field

APPROVAL LEVELS OBTAINED: See development and review above.

BUDGET IMPACT: N/A

POTENTIAL FAST LINKS: N/A

ATTACHMENTS: Language of change

### Briefing Planned: No

**ASAG Responsibilities: None**

**[Guidance on Interpretation]{.underline}**

**[of the FAA 2001 Appropriation Act]{.underline}**

**[Section 349]{.underline}**

APP-510, AFZ-400, AGC-500 and ASU-140 met to discuss the recent language
in the FAA 2001 Appropriation Act. Below is the interpretation of the
language in the 2001 appropriation act. If you have further questions
regarding this guidance please contact ASU-140.

**A. Below is the language from the Act**:

> *Sec. 349. None of the funds in this Act shall be used to pursue or
> adopt guidelines or regulations requiring airport sponsors to provide
> to the Federal Aviation Administration without cost building
> construction, maintenance, utilities and expenses, or space in airport
> sponsor-owned buildings for services relating to air traffic control,
> air navigation or weather reporting. The prohibition of funds in this
> section does not apply to negotiations between the Agency and airport
> sponsors to achieve agreement on \`\`below-market\'\' rates for these
> items or to grant assurances that require airport sponsors to provide
> land without cost to the FAA for ATC facilities.*

1\. What does this mean for the FAA?

> The language indicates that the FAA is not allowed to expend any
> funds, i.e. salaries, on implementing the guidance. Basically the FAA
> has gone back to business prior to the issuance of the May 18, 1999
> memo implementing the guidance on October 1, 2000. Further it should
> be noted that 1) rent-free space should continue under existing leases
> until those leases expire, and 2) an airport sponsor may provide
> rent-free space for any new leases or renewal leases if done so
> voluntarily and not required by the FAA.

2.  Advantages to the Language

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a.  Senate report requested that the OIG conduct a study on the impact
    of implementing this guidance. The study report should support the
    implementation of the rent-free guidance. No date as to when the
    report will be finished.

b.  The language indicates that the FAA is entitled to negotiate below
    market rates with the airport sponsors.

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B.  **Questions and Answers:**

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1.  What is the FAA allowed to negotiate?

-   The language indicates that we should only be paying for the cost of
    the space, i.e. maintenance, utilities, services and expenses and
    not the profits. The airport sponsor should provide a breakout of
    all the cost prior to final agreement on the contract.

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-   The FAA is not prohibited from negotiating a rent-free agreement
    with the airport sponsors.

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-   The FAA should be able to negotiate below market rate as stated in
    the language. When a lease expires for a covered activity, the FAA
    should expect to be able to negotiate below market rates with
    sponsors. For example if a lease expires at a rental rate of \$30 a
    square foot, then the FAA should try to negotiate below this amount.
    It may be inferred from the appropriation language on negotiations
    to achieve below market rates, however the language does not
    [require]{.underline} the airport sponsor to negotiate below market
    rates or even market rates.

> 2\. Should the FAA only be negotiating a one year lease at a market
> rent until we know what\'s going to happen in 2002 or should we go
> with a typical 5 year lease market rent assuming this rent free
> entitlement will go away?

-   It should be noted that the FAA will try to appeal for the removal
    of Section 349 from the appropriation act next year. Yet the FAA was
    unsuccessful this year in appealing for the removal of Section 349
    prior to the passing of the act. Thus most likely the language will
    not be appealed prior to 2002.

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-   Depending upon each lease contract, the RECO will ultimately make
    the decision on which term is in the best interest of the
    government. If you have leases that would be better to negotiate on
    a yearly basis then it would be recommended to negotiate those
    leases for a one-year term. However with the current situation, the
    FAA will be better off negotiating a lease term of five years or
    less with the following contingency statement in the lease
    agreement:

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-   *The FAA reserves the right to renegotiate the rental rate to
    reflect no-cost space if the Appropriation Language Section 349 (FAA
    FY 2001 Appropriations Act) is repealed during the term of the lease
    and the FAA rent-free guidance is re-implemented. In that event, the
    lessor would be required to provide rent-free space for the fiscal
    year that Section 349 was repealed (or that a rent-free provision
    was enacted) and the remaining years of the lease, and in subsequent
    leases.*

3\. Does this include all leased space, such as tower cabs, equipment
rooms and FSS space?

-   This language applies to all the covered activities included in the
    guidance:

*ATCT - Airport Traffic Control Tower*

*CERAP - Combined Center Radar Approach Control*

*CWOS - Contract Weather Observation Station*

*FSS - Flight Service Station*

*RAPCON - Radar Approach Control*

> *TRACON - Terminal Approach Radio Control*
>
> Most likely the sponsors will not be providing space rent-free in the
> above facilities. However this does not prohibit them from agreeing to
> negotiate a rent-free agreement.

4.  Does the language apply to both old lease renewals and new lease
    negotiations?

-   This language applies to all existing lease renewals and new leases
    after October 1, 2000.