TIMOTHY l. MCCULLOCH

TMCCULLOCH@GORDONREES,COM

DIRECT DIAL: (602) 794-2467

Admitted In: Arizona

California

VIA FEDERAL EXPRESS

JUl 3 2013

July 2,2013

GORDON &- REES UP

ATTORNEYS AT LAW

111 W. MONROE STREET, SUITE 1600

PHOENIX, AZ 85003

PHONE: (602) 794-2460

FAX: (602) 265-4716

WWW.GORDONREES.COM

Office 0 e Chief Counsel

Att on: FAA Part 16 Airport Proceedings Docket AGC-610

DERAL AVIATION ADMINISTRATION

800 Independence Ave. S.W.

Washington, D.C. 20591

Re: Chandler Municipal Airport

Dear Sir or Madam:

This complaint is brought pursuant to 14 C.F.R. Part 16.23 against the City of

Chandler (the "City"), Arizona, as the owner, operator and sponsor of Chandler

Municipal Airport (the "Airport"). This complaint is brought on behalf of Chandler Air

Service.

The complaint centers on the City's mismanagement ofthe Airport. The City's

mismanagement is illustrated by its neglect ofthe Airport's day-to-day and long term

capital needs, the diversion of aviation revenue from the Airport Enterprise Fund to the

City's General Fund, the City's failure to compete fairly for fuel sales, and City

Ordinance 8-10 which restricts, among other things, the extension ofRunway 4R122L

(the "Runway"). Each ofthe acts is an explicit and serious violation ofthe City's federal

grant assurances. The Ordinance is a specific violation ofstate law.

COMPLAINANT

Chandler Air Service is a fixed based operator at Chandler Municipal Airport (the

"Airport"). Chandler has leased space at the Airport for decades. It's sole and primary

business is located on the Airport. Chandler Air Service is a multi-service fixed based

operator and provides maintenance services, fueling and ground handling services, flight

training and pilot supplies.

CALIFOKNIA. OREGON. WASHINGTON. NEVADA. AR.IZONA • COLORADO. TEXAS. ILI,INOIS • MISSOURI

NEW YOKK • NEW JERSEY. WASHINCTON D.C. • PENNSYLVANIA. MARYLAND. VIR.GINIA • CONNECTICUT. GEORGIA. FLORIDA
Office ofthe ChiefCounsel

July 2, 2013

Page 2

SUBJECT OF THE COMPLAINT

Chandler Air Service requests the City revise Chandler City Ordinance 8-10 so

that an appropriate decision may be made regarding the necessity of a runway extension

at the Airport. Chandler Air Service believes the extension ofthe Runway will yield

economic, safety and noise abatement benefits. A 5,700 foot runway will not enable

additional classes of aircraft to use the Airport; rather, the extension will provide a longer

runway to the classes of aircraft presently using the Airport. The extension will allow

these aircraft to take off and land with additional room for safety as well as to ascend

more rapidly, thereby reducing the noise over portions ofthe City.

Chandler Air Service requests that all fuel taxes that have been paid into the

Chandler City General Fund be returned to the Airport Enterprise Fund. Chandler Air

Service also requests that the fund be utilized for Airport improvements as required by

Chandler's federal grant agreements.

Finally, Chandler Air Service requests that the City be restrained from using

federal, state, and local monies to subsidize its selfservice fuel operation which operates

at a loss in direct competition with Chandler Air Service. Ifthe City is going to be

competing with Chandler Air Service, it may not operate at a loss to put Chandler Air

Service at a competitive disadvantage and may not use Airport Enterprise Funds and

other sources offunds to subsidize the operation.

FACTUAL BACKGROUND

Runway Length Inhibition

A suitable length for the Runway 4R/22L is a long standing commitment ofthe

City. As early as 1982, the City anticipated the construction ofRunway 4R/22L. In the

1982 Airport Master Plan ("1982 AMP"), the City ultimately planned to extend Runway

4R/22L to 6,800 feet during the plan's third development stage between the years of

1991-2000. The 1982 AMP included a strategy to purchase land necessary to complete

the extension goals during each stage of development. During the years of 1987-1989 the

City received federal funding through the Airport Improvement Program to purchase land

required for the planned extension. In the vicinity ofthe northeast comer ofthe Chandler

Municipal Airport the City purchased 2.416 acres ofland from Exeter Real Estate

Investors in 1987 (AIP Grant No. 3-04-008-04), 6.971 acres ofland from Airpark

Limited Partnership in 1987 (AIP Grant No. 3-04-008-04), 4.16 acres ofland from D.W.

Patterson in 1988 (AlP Grant No. 3-04-008-05), and 9.728 acres ofland from D.W.

Patterson in 1989 (AlP Grant No. 3-04-008-06). On the southwest comer ofthe Chandler

Municipal Airport the City purchased 7.83 acres of land from Queen Creek Trust in 1986
Office ofthe Chief Counsel

July 2, 2013

Page 3

(AlP Grant No. 3-04-008-03), 21.043 acres ofland from John Demetria LTD in 1987

(AlP Grant No. 3-04-008-04), and 6.0 acres ofland from D.W Patterson in 1991 (AlP

Grant No. 3-04-008-07).

In order to receive federal funding, the City entered into grant agreements with the

FAA during each ofthese years. In addition to the purchase ofthe land for extending the

Runway, Chandler Air Service has informed us that the City has also received funding as

part of a grant agreement in the early 1990's to prepare and grade land for the Runway

extension as part ofthe new parallel runway.

Despite this progress, the City's Runway plans faced opposition in November,

1989, when a special election was held with an initiative to "Ban Jets" on the ballot. Due

to the campaign efforts of a relatively small number ofindividuals, the measure passed.

However, in 1990, in the face ofpressure from threatened litigation respecting the

measure's obvious breach ofthe City'S obligations under federal law, the Mayor and City

Council passed a new ordinance. Rather than a ban on jets explicitly, the new ordinance

simply limited the Runway length to 4,850 feet - the length approved for the first stage of

the Runway construction. -It was believed that the length ofthe Runway would result in

jets not being able to use the Runway. This was not borne out as some jets were able to

use the runway, especially on days with a lower ambient temperature. But the ordinance

effectively banned certain jets due to the fact that many jets require runway lengths in

excess of 4,850 feet for safe take-offs and landings. This restriction came on the heels of

the City's receipt ofmillions of dollars in federal and state assistance to purchase land for

the Runway extension.

In the late 1990's the City determined that the limitation on the Runway length

needed to be readdressed. In 1998 the City approved an updated Airport Master Plan

("1998 AMP") which anticipated an ultimate runway length of 6,800 feet for Runway

4RJ22L. The 1998 AMP suggested that, in order to accommodate 75% of business jets at

60% useful load, a runway length of 5,500 feet would be required, and in order to

accommodate 100% of business jets at 60% useful load, a runway length of 6,800 feet

would be required. The 1998 AMP adopted an intermediate term plan to extend Runway

4RJ22L to 5,500 feet and a long-term plan to extend the Runway to 6,800 feet.

The 1998 AMP also contained a financial plan which set forth cost estimates for

various Airport projects. The 1998 AMP anticipated the need, in 2003, for $519,000 to

"Extend Runway 4R-22L 500 Feet South." It also anticipated, in its intermediate term,

an estimated $1,602;000 to "Extend Runway 4R-22L 1,450 Feet North." In terms of

additional land required to construct a 6,800 foot runway, the 1998 AMP outlined the

purchase of 10 additional acres ofland in 2004 for a Runway Safety Area and 41 acres of

land for an adequate Runway Extension Zone, both on the northeast end ofRunway 4R-
Office ofthe ChiefCounsel

July 2, 2013

Page 4

22L. To the best of our information and belief, neither piece of land has been purchased

at this point. .

In May 1999, with the 6,800 foot runway plan in mind, the Mayor and City

Council modified the City Code by passing Ordinance No. 2978, which added a Chapter

on the Chandler Municipal Airport to the City Code. Chapter 8, Section 10 ("Ordinance

8-10") allowed Runway 4R122L to be lengthened up to 6,800 feet. It was subsequently

modified to require voter approved bonds to be used to fund the City's portion ofthe

Runway extension costs, resulting in a self-imposed funding restriction. On September

12, 2000 the first Runway bond election was held and the City submitted the Runway

extension decision to the voters. The bond measure failed by 3.8% ofthe vote, and the

Runway was not extended, even though there were ample funds in the Airport Enterprise

Fund to pay the City's share ofthe Runway cost.

In August 2003, the City unanimously approved Resolution 3669, authorizing a

development agreement between the City and Vestar Arizona XXXVII, LLC ("Vestar")

for Crossroads Towne Center, a large retail center. The basic terms ofthe agreement

were:

• The Developer will build a minimum of400,000 square feet of new retail

uses on the site made up of at least two large anchor retail stores.

• The Developer will complete street improvements to Gilbert Road to City

standards.

• The City will build the Germann Road and Stearman Road Connection.

• Ifthe Developer includes a premier retail store in the project, the City will

reimburse $2.7 million for Gilbert Road improvements and provide full

credit for arterial street impact fees due for the project.

The City, in order to promote the development ofthe retail center, also chose to

modify the zoning on 82 acres ofland northeast ofthe Airport. Despite the 1998 AMP

and the Airport Layout Plan ("ALP"), which anticipated purchasing parts ofthis land for

a Runway Protection Zone for the 6,800 foot runway, the City rezoned the land from an

agricultural district (AG-l) to a planned area development (PAD) to allow Vestar to

develop in Chandler. The rezoning was adopted in Ordinance No. 3470 on August 14,

2003 even though the City Council explicitly recognized at the time that these actions

would conflict with the Airport Layout Plan and further restrict Runway development

along with the use ofthe Airport. It appears that the City recognized that its acts would

breach its grant obligations and decided to proceed anyway:
Office ofthe ChiefCounsel

July 2,2013

Page 5

"The site impacts Chandler Municipal Airport's

Runway Protection Zone for a potential northeasterly Runway

extension which will deem it necessary to amend the Airport

Layout Plan to allow the development to proceed and provide

planning for an ultimate runway length that will provide

additional safety for all aircraft types currently using the

airport." (Please see the Minutes of the Regular Chandler

Meeting, the Mayor and City Council for August 14,2003.)

According to the information available, at no time during agreement negotiations,

development agreement formation, or the construction ofthe retail center, did the City

seek to formally submit an amended Airport Layout Plan or get any other type of

approval from the FAA to deviate from the plans set forth in the 1998 AMP.

In 2004 Vestar began developing Crossroads Towne Center, a 1.3 million square

foot retail center at the comer of Germano and Gilbert Roads. Vestar has since

constructed sections ofthe retail center on the northwest, northeast, and southeast comers

ofthat intersection. The northwest comer is the only section ofthe development falling

within the City. This section ofland is northeast ofthe Airport and directly in the line

with the Airport runways. The rezoning ofthe project site and subsequent development

ofthe retail center had made a 6,800 foot runway an impossibility and, as a result, limited

the maximum runway length to 5,700 feet.

In 2006 the City received funding from the FAA to update its Airport Master Plan

("2007 AMP") in preparation for new federal funding requests. The 2007 AMP and ALP

were finally updated to include the new restrictions on runway length. Under the 2007

AMP, new funding would be used to perform various projects, including a shortened

version ofthe now long-awaited runway extension to Runway 4RJ22L. Upon completion

ofthe new plan, the 2007 AMP was passed by resolution by the City Council in January

2007, and was submitted to the FAA for approval. We do not believe that the FAA has

ever formally approved the 2007 AMP. Nonetheless, the submission ofthe 2007 AMP

was an attempt by the City to seek, over four years after the fact, approval of unilateral

deviations encouraging the construction of a retail center in the City. According to the

2013-17 National Plan ofIntegrated Airport Systems, Chandler Municipal Airport's

estimated five-year costs for airport improvements that are eligible for federal

development grants under the Airport Improvement Program are $17,961,328. This

funding provides a strong incentive and opportunity for the City to rectifY any

transgressions committed under previous grants to ensure continued support from the

FAA.
Office ofthe ChiefCounsel

July 2, 2013

Page 6

In early 2007 Ordinance No. 3888 was passed, which slightly amended Ordinance

8-10, to allow reduction ofthe approved Runway length from a 6,800 foot maximum to

5,700 feet, but only with the mandatory Runway bond vote. In addition, other restrictions

concerning weight bearing limits and Part 139 statements were included.

The current Chandler City Code Ordinance 8-10 states:

To guarantee to the citizens of the City of Chandler the continued

quiet enjoyment in and to the homes, schools, churches and work

places, the Chandler Municipal Airport shall not be permitted to

accommodate, in any fashion, aircraft which require for takeoff a

runway longer than five thousand seven hundred (5,700) feet.

Extension of the runway shall require voter approved bonds, which

specifY that the bond monies are for the purpose of extending the

runway.

In May 2007 the City once again included a bond measure on the ballot for the

purpose offinancing the extension ofthe Runway. Ofthe ten bond measures on the 2007

ballot ($452,000,000.00), the Runway extension bond ($65,000.00) was the only bond

measure to fail. The bond failed by a margin of7.8% (897 votes).

The Ordinance should be considered non-compliant for two reasons. Initially, it is

clear from its face that the Ordinance limits the length ofthe runway purely for noise

reasons. Secondly, the Ordinance impairs the City's preservation ofits rights and powers

over the development ofthe Airport in contravention of Grant Assurance 5.

Local noise-based restrictions upon aeronautical activity have long been

preempted under the Airport Noise and Capacity Act of 1990 (ANCA). See AOPA v.

City ofPompano 16-04-01. An airport sponsor seeking to implement a noise based

restriction may only do so under the ANCA and its enabling regulations. However, the

City has elected to forego meeting FAA regulations and instead implemented this noise

based Ordinance as a means of controlling aircraft noise at the Airport.

In addition, the implementation ofthe Ordinance deprives the City ofits discretion

to utilize airport funds generated on the Airport for the development ofthe Airport as

provided in the various ALP's created with federal funds. The Airport is limited in its

development because the City has elected to create a situation in which it cannot utilize

airport funds for a runway lengthening project because the City has bound itselfto only

utilize bond funds to pay for such an extension rather than airport funds. This is also an

improper limitation on the City's discretion to spend airport funding.
Office ofthe Chief Counsel

July 2, 2013

Page 7

Revenue Diversion

The City has been selling fuel for at least 50 years. Chandler Air Service, the

primary FBO at Chandler Airport, after buying from the City at retail prices for years,

negotiated the right to selffuel. Chandler Air Service's selffueling right was expanded

to retail fueling for Avgas, and then a few years later to selling Jet A. Until 2006 the City

sold self-service Avgas and Chandler Air Service sold "offthe truck" Avgas and Jet A.

Chandler Air Service also started selling self-service Avgas in 2004. At no time did

either Chandler Air Service or the City charge, collect and/or pay sales tax on either type

of fuel. In mid 2005 the accountant for Chandler Air Service, believing there was a

requirement to pay a City Jet A sales tax of2.3 cents per gallon, started paying it.

Meanwhile, Chandler Air Service was performing under a fuel service agreement

with the City ofChandler Airport, which had fuel flow fees being assessed against

Chandler Air Service for the privilege of doing business. The Airport management

(Public Works Dept.) and Chandler Air Service established the flow fees on the

assumption that there were no other City fees or taxes.

When it was discovered in 2006 a City fuel tax was to be paid to the revenue

department, Chandler Air Service complained. In its complaint, Chandler Air Service

discovered that the sales taxes, when paid, were going into the City General Fund instead

ofthe Airport Enterprise Fund. In response to Chandler Air Service's complaint, the City

sales tax auditor stated that he was not aware the City was collecting a tax:, and in

addition, had no knowledge the Airport was collecting flow fees. Chandler Air Service

felt that it was being double taxed and asked for the situation to be corrected. The City

stated that they would look into the problem.

Greg Chenoweth, the previous Airport manager, was also informed that there was

a sales tax being levied against fuel which was going into the City General Fund.

Chenoweth replied that the Airport was unaware ofthe sales tax and had never paid it. In

May 2006 Chandler Air Service was notified by letter that the sales tax was indeed due

and the flow fees Chandler Air Service was paying to the Airport were irrelevant to the

tax. In addition, the City applied the sales tax to the retail sales of 100LL fuel, and also

applied use taxes against Chandler Air Service for personal use of 100LL.

The City also informed Chandler Air Service that the taxes applied to the City's.

fueling operation. When asked, Chenoweth noted that he had received the same letter

from the City, and was going to pay the City as required in the letter. The City's letter

asked Chandler Air Service to contact the City's tax auditors to set up a meeting. It took

several months to set up a meeting, which ultimately led to a full sales tax audit in

February 2007. MeanWhile, Chandler Air Service had started paying the taxes in
Office ofthe Chief Counsel

July 2, 2013

Page 8

September 2006. Chandler Air Service believes that the Airport started paying the tax to

the City in mid 2006.

As of early 2010 the Chandler Municipal Airport was assessed over $60,000.00

and airport revenues were taken to be deposited in the General Fund to pay the past due

taxes. As ofJuly 2010 Chandler Air Service was assessed $49,000.00 for past due taxes

and informed the funds would be going into the General Fund. Both were for periods of

time when no sales taxes were collected because the City admitted it did not seek to

collect a tax. After Chandler Air Service appealed the audit, the City settled with

Chandler Air Service and abated the assessment to the date of assessment. However, the

Airport had already paid the assessment which was transferred from the Airport Fund to

the General Fund. Those monies have never been transferred back from the General

Fund to the Airport Fund.

Chandler Air Service has been paying $2,000.00 per month in fuel taxes and the

City self-serve fuel operation collecting another amount, all going into the General Fund.

The City argues that it does not have to place the revenue into the airport fund because

the tax implementation occurred prior to the federal requirement that airport fuel flow

fees are aeronautical revenue and must be funneled into the airport fund.

Our review ofthe City Tax Code provides that the jet fuel sales tax was

. implemented in 1999. In addition, the City failed to implement a specific Avgas sales tax

and is instead relying upon its general sales taxing power. Moreover, there is no

argument that the sales taxes were not collected until 2006.

Under Grant Assurance 25, "any local taxes on aviation fuel established after

December 30, 1987, will be expended by it for the capital and operating costs ofthe

airport... " Under 49 § USC 47133(a) "[l]local taxes in aviation fuel (except taxes in

effect on December 30, 1987)... " must be expended on the capital or operating costs of

the airport. Under the City's reading, any sponsor having a general sales tax would evade

the Grant Assurance 25 obligation ifit made a subsequent decision to collect fuel sales

taxes upon aviation fuels or passed a specific provision. Such a reading is in

contravention ofthe plain meaning of 49 § USC 47133 and Grant Assurance 25 which

provides clearly that only those taxes in effect at the end of 1987 would be grandfathered

from this prohibition. Ifthe FAA were to allow this reading to stand, many airport

sponsors could revisit their taxing schemes and evade their grant assurance obligation to

solely dedicate fuel sales taxes to the airport.
Office ofthe ChiefCounsel

July 2, 2013

Page 9

Economic Discrimination

The City also economically discriminates against Chandler Air Service because it

uses federal grant monies and airport enterprise funds to subsidize its self-service fueling

operation. Its fueling services are not profitable for the City. Indeed, their monthly and

quarterly reports demonstrate that the City intends the self-service fueling operation

break even, or allow a slight loss according the City's own monthly and quarterly reports.

Meanwhile Chandler Air Service is forced to compete with the City's subsidized fuel

pnces.

Federal Grant Assurance 22(g) states: "In the event that the sponsor itself

exercises any ofthe rights and privileges referred to in this assurance, the services

involved will be provided on the same conditions as would apply to the furnishing of

such services by commercial aeronautical service providers authorized by the sponsor

under these provisions." The City is clearly not complying with this assurance.

The City utilizes public monies to improve and maintain its self-service fueling

operation. The City sought state funding to improve the drainage at the fuel fann and

then spent about $42,000 ofthat state funding rehabilitating the self-service area.

Meanwhile, Chandler Air Service must utilize its own resources to pay for all

improvements to its fueling facility. This places Chandler Air Service at a competitive

disadvantage because the City is not required to factor the cost ofthe improvements into

its fuel price, while Chandler Air Service has no option but to do so.

Where the City does not use federal funding to make improvements, its facility

falls far short ofthe fonnal minimum standards it requires ofChandler Air Service.

Chandler Air Service is required to carry branded fuel while the City does not. Chandler

Air Service's filtering and sump mechanisms are required to meet very specific standards

both by Airport and City personnel, yet even a cursory glance at the City facility reveals

obsolete and outdated filtering mechanisms. Chandler Air Service is required to carry

branded fuel in order to meet the City's mandated insurance requirements. The City does

carry branded fuel. Again, this places Chandler Air Service at a competitive

disadvantage.

The City compounds these actions by tracking Chandler Air Service's prices and

constantly keeping its price slightly below Chandler Air Service's. This happens

irrespective ofwhen the City receives a load offuel, which is the usual driver of fuel

prices. This indicates that the City is not being driven by any sort of profit motive, but is

instead utilizing its selfservice facility simply to keep Chandler Air Service's prices on

its fuel artificially low.
Office ofthe Chief Counsel

July 2,2013

Page 10

Pre-Complaint Resolution

On October 11, 2010, the undersigned sent a letter to Mary Wade, Esq. at the

Chandler City Attorney's Office, requesting the above referenced issues be addressed. A

copy is enclosed for your reference. In that letter, the City was invited to engage in an

informal dispute resolution process with Chandler Air Service as contemplated under

Section 14 ofthe Code of Federal Regulations, Part 16.21 (14 C.F.R. § 16).

On November 4, 2010, the City sent a responsive letter in which it refused to

address any ofthe referenced issues or entertain participation in any sort ofmediation or

discussion. Indeed, the City indicated that Chandler Air Service should simply file the

complaint with the Federal Aviation Administration as the City would rather deal with

the FAA than its stakeholders. A copy ofthat letter is enclosed for your reference.

On May 24 2013, after trying for a number ofyears to seek a political solution,

Chandler Air Service again sent a letter to May Wade, Esq at the Chandler City

Attorney's Office, again requesting that the above referenced issues be addressed. A

copy ofthat letter is enclosed for your reference. On June 11, 2013 the City ofChandler

responded to the May 24, 2013 letter again refusing to engage in any sort ofmediation.

A copy ofthat letter is also enclosed for your reference.

CONCLUSION

Chandler Air Service respectfullysubmits that the City ofChandler has failed to

abide by its grant assurances executed with the FAA. Complainant respectfully requests

that the FAA find that the City has abrogated its grant assurances and mandate that the

City enter into a corrective action plan to bring the City into compliance, including a

requirement that the City remove the offending Ordinance and that it ensures that all sales

tax revenue is appropriately utilized and that the City ensure that it competes fairly with

Chandler Air Service.

Verytrulyyo~

GORDON & REE8..LLP --.....................

.Timothy 1. McCulloch

TIM/tdh

Ene.
Office ofthe ChiefCounsel

July 2, 2013

Page 11

I hereby certify that I have this day served the foregoing

on the following persons at the following addresses by

Federal Express:

Attention: FAA Part 16 Airport Proceedings Docket

AGC-610

Federal Aviation Administration

800 Independence Ave., SW

Washington DC 20591

Glenn . rockrnan

·stant City Attorney

CITY OF CHANDLER

175 South Arizona Avenue, 2nd Floor

Chandler, AZ 85225

Dated this 2nd day ofJuly, 2013.

CASUl052237/9872330v.l
TIMOTHY I. MCCULLOCH

TMCCULlOCH@GORDONREES.COM

DIRECT DIAL: (602) 7S4-2467

Admitted in Arizona

Califomia

October 11, 2010

HAND DELIVERED

Mary Wade, Esq.

Chandler City Attorney

55 N. Arizona PI., Suite 202

Chandler, AZ 85244

Re: Chandler Municipal Airport

Dear Ms. Wade:

GORDON &. REES UP

ArrORNlh'sATLAw

111 W. MONROE SrREET, SurrE 1600

PHOENIX, AZ 85003

PHONE: (602) 794-2460

FAX: (602) 265-4716

WWW.GORDONREES.COM

This finn has been engaged by Mr. John Walkup, President of Chandler Air

Service, Inc., fixed based operators, anchor tenants and other airport stakeholders listed

on the enclosed Complaint Supporter List (collectively, the "Stakeholders") in connection

with the City of Chandler's (the "City") mismanagement of the Chandler Municipal

Airport (the "Airport"). The City's mismanagement is illustrated by its neglect of the

Airport's day-to-day and long term capital needs, the diversion of aviation revenue from

the Airport Enterprise Fund to the City's General Fund, and City Ordinance 8-10 which

restricts, among ather things, the extension ofRunway 4R122L (the "Runway"). Each of

the acts is an explicit and serious violation of the City's federal grant assurances. The

Ordinance is a specific violation of state law. A detailed explanation of each· issue

follows below.

On behalf of the Stakeholders, I am writing to request the City of Chandler to

engage in an informal dispute resolution process with the Stakeholders as contemplated

under Section 14 of the Code of Federal Regulations, Part 16 ("14 C.F.R.§ 16"). 14

C.F.R § 16.21 provides, in pertinent part:

Prior to flling a complaint under this part, a person directly and

substantially affected by the alleged noncompliance shall initiate and

engage irt good faith efforts to resolve the disputed matter informally

with those irtdividuals or entities believed responsible for the

'noncompliance. These efforts at irtformal resolution may include,

without limitation, at the parties' expenses, mediation, arbitration, or

CALlfOR.NIA + NEW YOR.K • TSXAS • ILl.IN01S • NEVADA. AR.IZONA • COLORADO + WASHINGTON. ORECON • NEW )ERSE" t FLORI
Mary Wade, Esq.

October 11, 2010

Page 2

the use of a dispute res()lution board, or other form of third party

assistance. The FAA . . . [office] responsible for administrating

financial assistance to the respondent airport proprietor will be

available upon request to assist the parties with informal resolution.

It is our hope to resolve this matter informally through mediation and in a manner

beneficial to the City, Airport, the residents ofthe City, and the Stakeholders. Consistent

with Part 16, we are addressing this letter not only to representatives ofthe City, but also

to the FAA and the Arizona Aeronautics Department We believe the early involvement

ofthe FAA and the State will facilitate a final resolution ofthis matter.

We further put forward the names of three mediators who will bring extensive

airport mediation experience to the resolution ofthis matter:

1. Christine Eberhard

2775 Tapo Street #103

Simi Valley, CA 93063

2. Stephen Pflaum

Two North LaSalle, Suite 1700

Chicago,lL 60602

3. Thomas Toone

76 E. Mitchell Drive

Phoenix, AZ 95012.

The Stakeholders request the City revise Chandler City Ordinance 8-10 and

authorize the minimal funding necessary to complete the extension of the Runway to

5,700 feet. The Stakeholders believe the extension ofthe 'Runway will yield economic,

safety and noise abatement benefits. A 5,700 foot runway will not enable additional

classes of aircraft to use the airport; rather, the extension will provide a longer runway to

the classes of aircraft presently using the Airport. The extension will allow these aircraft

to take off and land with additional room for safety as well as to ascend more rapidly,

thereby reducing the noise over portions ofthe City.

The Stakeholders request that all fuel taxes that have been paid into the Chandler

City General Fund be returned to the Airport Enterprise Fund. The Stakeholders also

request that the fund be utilized for Airport improvements as required by Chandler's

federal grant agreements.
Mary Wade, Esq.

October 11, 2010

Page 3

In the spUit of resolving these issues in the interest of both the City and the

Stakeholders, we are setting forth our understanding of the factual backgrmmd, legal

principles and the precedents involved.

FACTUAL BACKGROUND

Runway Length Inhibition

A suitable length for the Runway 4RJ22L is a long standing commitment of the

City. As early as 1982, the City anticipated the construction of Runway 4R122L. In the

1982 Airport Master Plan ("1982 AMP"), the City ultimately plarmed to extend Runway

4R122L to 6,800 feet dttringthe plall's third development stage between the years of

1991·2000. The 1982 AMP included a strategy to purchase land necessary to complete

the extension goals during each stage of development. During the years of 1987-1989 the

City received federal funding thtough the Airport Improvement Program to purchase land

required for the plarmed extension. In the vicinity ofthe northeast comer ofthe Chandler

Municipal Airport the City purchased 2.416 acres of land from Exeter Real Estate

Investors in 1987 (AlP Grant No. 3-04-008-04), 6.971 acres of land from Airpark

Limited Partnership in 1987 (AlP Grant No. 3-04-008-04), 4.16 acres ofland from D.W.

Patterson in 1988 (AlP Grant No. 3-04-008-05), and 9.728 acres of land from D.W.

Patterson in 1989 (AlP Grant No. 3-04-008-06). On the southwest comer ofthe Chandler

Municipal Airport the City purchased 7;83 acres oflalld from Queen Creek Trust in 1986

(AlP Grant No. 3-04-008-03), 21.043 acres of land from John Demetria LTD in 1987

(AlP Grant No. 3-04-008-04), alld 6.0 acres of land from D.W Patterson in 1991 (AlP

Grant No. 3-04-008-07).

In order to receive federal funding, the City entered into grant agreements with the

FAA during each ofthese years. In addition to the purchase ofthe land for extending the

Runway, the Stakeholders have informed us that the City has also received funding as

part of a grant agreement in the early 1990's to prepare and grade land for the Runway

extension as part ofthe new parallel runway.

Despite this progress, the City's Runway plans faced opposition in November,

1989, when a special election was held with an initiative to "Ban Jets" on the ballot. Due

to the campaign efforts of a relatively small number of individuals, the measure passed.

However, in 1990, in the face of pressure from thteatened litigation respecting the

measure's obvious breach of City's obligations under federal law, the Mayor and City

Council passed a new ordinance. Rather than a ban on jets explicitly, the new ordinance

simply limited the Runway length to 4,850 feet - the length approved for the first stage of

the Runway construction. It was believed that the length ofthe Runway would result in

jets not being able to use the Runway. This was not borne out as some jets were able to

use the runway, especially on days with a lower ambient temperature. But the ordinance
Mary Wade, Esq.

October 11, 2010

Page 4

effectively banned certain jets due to the fact that many jets require runway lengths in

excess of4,850 feet for safe take-offs and landings. This restriction carne on the heels of

the City's receipt ofmillions of dollars in federal and state assistance to purchase land for

the Runway extension.

In the late 1990's the City determined that the limitation on the Runway length

needed to be readdressed. In 1998 the City approved an updated Airport Master Plan

("1998 AMP") which anticipated an ultimate runway length of 6,800 feet for RUIiway

4RJ22L. The 1998 AMP suggested that, in order to accommodate 75% ofbusiness jets at

60% useful load, a runway length of 5,500 feet would be required, and in order to

accommodate 100% of business jets at 60% useful load, a runway length of 6,800 feet

would be required. The 1998 AMP adopted an interIIlediate term plan to extend Runway

4RJ22L to 5,500 feet and a long-term plan to extend the Runway to 6,800 feet.

The 1998 AMP also contained a financial plan which set forth cost estimates for

various Airport projects. The 1998 AMP anticipated the need, in 2003, for $519,000 to

"Extend Runway 4R-22L 500 Feet South." It alSO anticipated, in its intermediate term,

an estimated $1,602,000 to "Extend Runway 4R-22L 1,450 Feet North." In terms of

additional land required to construct a 6,800 foot runway, the 1998 AMP outlined the

purchase of 10 additional acres ofland in 2004 for a Runway Safety Area and 41 acres of

land for an adequate Runway Extension Zone, both on the northeast end ofRunway 4R22L. To the best of our information and belief, neither piece ofland has been purchased

. at this point.

In May 1999, with the 6,800 foot runway plan in mind, the Mayor and City

Council modified the City Code by passing Ordinance No. 2978, which added a Chapter

on the Chandler Municipal Airport to the City Code. Chapter 8, Section 10 ("Ordinance

8-10") allowed Runway 4RJ22L to be lengthened up to 6,800 feet. It was subsequently

modified to require voter approved bonds to be used to fund the City's portion of the

Runway extension costs, resulting in a self-imposed funding restriction. On September

12; 2000 the fitSt Runway bond election was held and the City submitted the Runway

extension decision to the voters. The bond measure failed by 3.8% ofthe vote, and the

Runway was not extended, even though there were ample funds in the Airport Enterprise

Fund to pay the City's share ofthe Runway cost.

In August 2003, the City unanimously approved Resolution 3669, authorizing a

development agreement between the City and Vestar Arizona XXXVII, LLC ("Vestar")

for Crossroads Towne Center, a large retail center. The basic terms of the agreement

were:
Mary Wade, Esq.

October 11,2010

Page 5

•

•

•

•

The Developer will bilild a minimum of 400,000 square feet of new retail

uses on the site made up of at least two large anchor retail stores.

The Developer will complete street improvements to Gilbert Road to City

standards.

The City will build the Germann Road and Stearman Road Connection.

Ifthe Developer includes a premier retail store in the project, the City will

reimburse $2.7 million for Gilbert Road improvements and provide full

credit for arterial street impact fees due for the proj ect. .

The City, in order to promote the development of the retail center, also chose to

modify the zoning on 82 acres ofland northeast ofthe Airport. Despite the 1998 AMP

and the Airport Layout Plan ("ALP"), which anticipated purchasing parts ofthis land for

a Runway Protection Zone for the 6,800 foot runway, the City rezoned the land from an

agricultural district (AG-l) to a planned area development (pAD) to allow Vestar to

develop in Chandler. The rezoning was adopted in Ordinance No. 3470 on August 14,

2003 even though the City Council explicitly recognized at time that these actions would

conflict with the Airport Layout Plan and further restrict Runway development along

with the use ofthe Airport. It appears that the City recognized that its acts would breach

its grant obligations and decided to proceed anyway:

"The site impacts Chandler MUhicipal Airport's Runway

Protection Zone for a potential northeasterly Runway extension

which will deem it necessary to amend the Airport Layout Plan to

allow the development to proceed and provide planning for an

ultimate runway length that will provide additional safety for all

aircraft types currently using the airport" (please see the Minutes of

the Regular Chandler Meeting, the Mayor and City Council for

August 14, 2003.)

According to the information available, at no time during agreement negotiations,

development agreement formation. or the construction of the retail center, did the City

seek to formally submit an ame~ded Airport Layout Plan or get any other type of

approval from the FAA to deviate from the plans set forth in the 1998 AMP.

In 2004 Vestar began developing Crossroads Towne Center, a 1.3 million square

foot retail center at the comer of Germann and Gilbert. Roads. Vestar has since

constructed sections ofthe retail center on the northwest, northeast, and southeast comers

ofthat intersection. The northwest comer is the only section ofthe development falling

within the City. This section of land is northeast of the Airport and directly in the line
Mary Wade, Esq.

October 11,2010

Page 6

with the Airport runways. The rezoning ofthe project site and subsequent development

ofthe retail center had made a 6,800 foot runway an impossibility and, as a result, limited

the maximum runway length to 5,700 feet.

In 2006 the City received funding from the FAA to update its Airport Master Plan

("2007 AMP") in preparation for new federal funding requests. The 2007 AMP and ALP

were finally updated to include the new restrictions on runway length. Under the 2007

AMP, new funding would be used to perform various projects, including a shortened

version ofthe now long-awaited runway extension to Runway 4RJ22L. Upon completion

ofthe neW plan, the 2007 AMP was passed by resolution by the City Council in January

2007, and has now been submitted to the FAA for approval. The City now seeks, over

four years later, to have the FAA sign off on the unilateral deviations it took to encourage

the construction of a retail center in the City. According to the 2007-2011 National Plan

ofIntegrated Airport Systems, Chandler Municipal Airport's estimated five-year costs for

airport improvements that are eligible for federal development grants under the Airport

hnprovement Program is $5,218,816. This funding provides a strong incentive and

opportunity fOr the City to rectify any transgressions committed under previous grants to

ensure continued support from the FAA.

In early 2007 Ordinance No. 3888 was passed, which slightly amended Ordinance

8-10, to allow reduction ofthe approved Runway length from a 6,800 foot maximum to

5,700 feet, but only with the mandatory Runway bond vote. In addition, other restrictions

concerning weight bearing limits and Part 139 statements were included.

The current Chandler City Code Ordinance 8-10 states:

The Chandler Municipal Airport shall not be permitted to

accommodate, in any fashion, aircraft which require for takeoff a

runway longer than five thousand seven hundred (5,700) feet.

Extension of the runway shall require voter approved bonds, which

specify that the bond monies are for the purpose of extending the

runway.

In May 2007 the City once again included a bond measure on the ballot for the

purpose offinancing the extension ofthe Runway. Ofthe ten bond measures on the 2007

ballot ($452,000,000.00), the Runway extension bond ($65,000.00) was the only bond

measure to filli. The bond failed by a margin of7.8% (897 votes).
Mary Wade, Esq.

October 11,2010

Page 7

Revenue Diversion

'the City has been selling fuel for at least 50 years. Chandler Air Service, after

buying from the City at retail prices for years, negotiated the right to selffuel. Chandler

Air Services' self fueling right was expanded to retail fueling for Avgas, and then a few

years later to selling Jet A. Until 2006 the City sold self-service Avgas and Chandler Air

Service sold "off the truck" Avgas and Jet A. Chandler Air Service also started selling

self-service Avgas in 2004. At no time did either Chandler Air Service or the City

charge, collect and/or pay sales tax on either type offuel. In mid 2005 the accountant for

Chandler Air Service, believing there was a requirement to pay a City Jet A sales tax of

2.3 cents per gallon, started paying it.

Meanwhile, Chandler Air Service was performing under a fuel service agreement

with the City of Chandler Airport, which had fuel flow fees being assessed against

Chandler Air Service for the privilege of doing business. The Airport management

(Public Works Dept.) and Chandler Air Service established· the flow fees on the

assumption that there were no other City fees or taxes.

When it was discovered in 2006 City fuel tax was to be paid to the revenue

department, Chandler Air Service complained. .In its complaint, Chandlet Air Service

discovered that the sales taxes, when paid, were going into the City General Fund instead

ofthe Airport Enterprise Fund. In response to Chandler Air Service's complaint, the City

sales tax auditor stated that he was not aware· the City was collecting a tax, and in

addition, had no knowledge the Airport was collecting flow fees. Chandler Air Service

felt that it was being double taxed and asked for the situation to be corrected. The City

stated that they would look into the problem.

Greg Chenoweth, the Airport manager, was also informed that there was a sales

tax being levied against fuel which was going into the City General Fund. Chenoweth

replied that the Airport was unaware ofthe sales tax and had never paid it. In May 2006

Chandler Air Service was notified by letter that the sales tax was indeed due and the flow

fees Chandler Air Service was paying to the Airport were irrelevant to the tax. In

addition, the City applied the sales tax to the retail sales of lOOLL fuel, and also applied

use taxes against Chandler Air Service for personal use of lOOLL.

The City also informed Chandler Air Service that the taxes applied to the City's

fueling operation. When asked, Chenoweth noted that he had received the same letter

from the City, and was going to pay the City as required in the letter. The City's letter

asked Chandler Air Service to contact the City's tax auditors to set up a meeting. It took

several months to set up a meeting, which ultimately led to a full sales tax audit in

February 2007. Meanwhile, Chandler Air Service had started paying the taxes in
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October 11, 2010

Page 8

September 2006. Chandler Air Service believes that the Airport started paying the tax to

the City in mid 2006.

As of early 2010 the Chandler Municipal Airport was assessed over $60,000.00

and airport revenues were taken tobe deposited in the General Fund to pay the past due

taxes. As ofJuly 2010 Chandler Air Service was assessed $49,000.00 for past due taxes

and informed the funds would be going into the General Fund. Both were for periods of

time when no sales taxes were collected because the City admitted they did not know

there was a tax.

Chandler Air Seryice has been paying $2,000.00 per month in fuel taxes and the

City self-serve fuel operation collecting another amount, all going into the General Fund.

LEGAL PRINCIPLES

Applicable Federal Law and FAA Policy

The Federal Aviation Act of 1958, as amended, assigns the FAA Administrator

Board responsibilities for the regulation, of air commerce in the interests of safety,

security, and development of civil aeronautics. See 49, U.S.C. § 40101, et seq. (2000).

The federal role in civil aviation had been enlarged by various legislative actions that

authorize programs for providing federal funds and other assistance to local conununities

for the development of Airport facilities. In some ofthese programs, the airport sponsor

assumes certain obligations by contract to maintain and operate its airport facilities sa~ely

and efficiently and in accordance with specified conditions. "Commitinents assumed by

airport sponsors in . . . grant agreements are important factors in maintaining a high

degree of safety and efficiency in airport designs, construction, operation and

maintenance, as well as ensuring the public fair and reasonable access to the airport."

Tulloch v. City ofHarlingen, 2006 WL 2528730 (F.AA).

Airport Improvement Program and Airport SponsorAssurances

Title 49 U.S.C. § 47101, et seq., provides for federal airport financial assistance in

the development of public-use airports under the Airport Improvement Program ("All''')

established by the Airport and Airway Improvement Act of 1982, as amended. Title 49

U.S.C. § 47101, et seq., sets forth asSurances to which an airport sponsor must agree as a

condition ofreceiving federal financial assistance. Upon acceptance of an All' grant, the

"assurances become a binding contractual obligation between the airport sponsor and the

federal government." Monaco Coach Corp. v. Eugene Airport and the City ofEugene,

Oregon, 2005 WL 825551 (FA.A.). The grant agreement form explicitly states, " ,This

offer is made on and subject to the following terms and conditions: . .. The Sponsor

shall carry out and complete the Project Without undue delays and in accordance with the
Mary Wade, Esq.

October 11, 2010

Page 9

terms hereof, and such regulations and procedures as the Secretary shall prescribe, and

agrees to comply with the assurances which were made part of the project application."

Grant Agreement FAA FotlIJ. 5100-37.

The FAA has a statutory mandate to ensure that airport owners cornply with these

sponsor assurances. (Airport Compliance Requirements, FAA Order 5190.6B (2009)).

Order 5190.6B provides the policies and procedures to be followed by the FAA in

carrying out its legislatively mandated functions related to federally obligated airport

owners' compliance with their SpOtlSor aSsurances. The FAA "considers it inappropriate

to provide Federal assistance for improvements to airports where the benefits of such

improvements will not be fully realized due to inherent restrictions 'on aeronautical

activities." Tulloch, 2006 WL 2528730 at *8.

The FAA Airport Compliance Program

The FAA discharges its responsibilities for ensuring airport owners' compliance

with their federal obligations through its Airport Compliance Program. Monaco, 2005

WL 825551 at *9. The FAA's airport compliance efforts are based on the contractual

obligations an airport owner accepts when receiving federal grant funds or the transfer of

federal property for airport purposes. The FAA Airport Compliance Program is

"designed . . . to ensure the availability of a national system of safe and properly

maintained public-use airports which airport sponsors operate in a manner consistent with

their Federal obligations and the public's investments." fd. "The Airport Compliance

Program does not control or direct the operation of airports." ld. Rather, it "monitors the

administration ofthe valuable rights, which airport sponsors pledge to the people ofthe

United Sates in exchange for the monetary grants and donations of Federal property to

ensure that airport sponsors serve the public interest." ld.

FAA Order 5190.6B sets forth policies and procedures for the FAA Airport

Compliance Program. ld. Order 5190.6B is not controlling with regard to airport sponsor

conduct. ld. Rather, it establishes the policies and procedures to be followed by FAA

personnel in carrying out the FAA's responsibilities for ensuring airport ·compliance. It

provides basic guidance for FAA personnel in inteIlJreting and administering the various

continuing commitments made to the United States by airport owners as a condition of

receiving a grant of federal funds or the conveyance of federal property for airport

purposes. ld. Order 5190.6B "analyzes the various obligations set forth in the standard

airport sponsor assurances, addresses the application ofthe assurances in the operation of

public-use airports and facilitates interpretations of the assurances by the FAA

personnel." fd.
Mary Wade, Esq.

October 11,2010

Page 10

In addressing a complaint of noncompliance, the FAA will determine whether an

airport sponsor is currently in compliance with "applicable federal obligations. Id. The

FAA will consider corrective action by an airport to cure any alleged or past violations of

applicable federal obligations as grounds for dismissal of a complaint. Id. (citing Wilson

Air Center v. Memphis and Shelby Airport Authority, FAA Docket No. 16-99-10 (2001».

Enforcement ofAirport SponsorAssurances

FAA Order 5190.6B covers all aspects ofthe Airport Compliance Program except

enforcement procedures. Enforcement procedures regarding airport compliance matters

may be found at FAA Rules of Practice for Federally Assisted Airport Enforcement

Proceedings (14 C.F.R. § 16). The Rules of Practice for Federally Assisted Airport

Proceedings contain provisions that "govern all proceedings involving Federally-assisted

airports" with only a few exceptions that do not apply to the facts here. 14 C.F.R. § 16.1

(1999). Claims can be brought directly by the FAA or by the complaint filed with the

FAA under several authorities including, but not limited to, "[t]he assurances contained

in grant-in-aid agreements issued under the Airport and Airway Improvement Act of

1982, as, amended, 49 U.S.C. § 47101 et seq., specifically section 511 (a), 49 U.S.C. §

47107 (a) and (b)." Id.

Violation ofthe Grant Agreement and the Sponsor Assurances

In grant agreements entered into with the FAA, the City pledged to comply with

various assurances. Certain of the applicable assurances binding upon the City are set

forth below:

Assurance 2. Responsibility and Authority ofthe Sponsor

It has legal authority to apply for the grant, and to finance and

carry out the proposed projects; that a resolution, motion or similar

action had been duly adopted or passed as an official act of the

applicant's governing body authorizing the filing ofthe application,

including all understandings and assurances contained therein...

Assurance 3. Sponsor Fund Availability

It has sufficient funds available for that portion ofthe project

costs which are not to be paid by the United States. It has sufficient

funds available to assure operation and maintenance of the items

funded under the grant and agreement which it will own or control.
Mary Wade, Esq.

October 11, 2010

Page 11

Assurance Sa. Preserving Rights and Powers

It will not take or pennit any action which would operate to

deprive it of any ofthe rights and powers necessary to perfonn any

or all ofthe terms, conditions, and assurances in the grant agreement

without the written approval ofthe Secretary and will act promptly

to acquire, extinguish, or modifY any outstanding rights or claims of

right of others which would interfere with such performance by the

sponsor. This shall be done in a manner acceptable to the Secretary.

Assurance 16. Conformity to Plans and Specifications

It will execute the project subject to plans, specifications, and

schedules approved by the Secretary. Such plans, specifications, and

schedules shall be submitted to the Secretary prior to

commencement of site preparation, construction, or other

perfonnance under this grant agreement.

Assurance 21. Compatible Land Use

It will take appropriate action, to the extent reasonable,

including the adoption of zoning laws, to restrict the use of land

adjacent to or in the immediate vicinity of the airport to activities

and purposes compatible with the nonnal airport operations,

including landing and takeoff of aircraft.

Assurance 2Sa. Airport Revenues

All revenues generated by the airport and any local taxes on

aviation fuel established after December 30, 1987, will be expended

by it for the capital or operating costs ofthe airport; the local airport

system; or other local facilities which are owned or operated by the

owner or operator of the airport and which are directly and

substantially related to the actual air transportation of passengers or

property....

Assurance. 29a.

Such Airport Layout Plans and each amendment, revision, or

modification thereof, shall be subject to the approval ofthe Secretary

which approval shall be evidenced by the signature of a duly

authorized representative ofthe Secretary on the face of the airport

layout plan. The sponsor will· not make or pennit any changes or

alterations in the airport or any of its facilities which are not in

confonnity with the airport layout plan as approved by the Secretary,

adversely affect the safety, utility or efficiency ofthe airport.
Mary Wade, Esq.

October 11, 2010

Page 12

Sections from Order 5190.6B that are applicable to the City's assurances include:

• "Grant Assurance 29, Airport Layout Plan [ALP], reqUires the

spoJ:1Sor to...identify plans for future development on its ALP...FAA

approval of the ALP represents the concurrence of the FAA in the

conformity of the plan top all applicable design standards and

criteria. It also reflects the agreement between the FAA and the

sponsor regarding the proposed allocation of airport areas to specific

operational and support functions...the approved ALP becomes an

important instrument for controlling the subsequent development of

airport facilities. Any construction modification, or improvement

that is consistent with the plan requires additional FAA approval."

FAA Order 5190.6B, Airport Compliance ReqUirements § 7.18

(2009). .

• "Federal grant agreements reqUire sponsors to conform airport use

and development to the ALP. The erection of any structure or any

alteration in conflict with the plan as approved by the FAA may

constitute a violation of this federal obligation under Grant

Assurance 29, Airport Layout Plan. The Airport and Airway Safety

. and Capacity Expansion Act of 1987 further strengthened the

Airport Layout Plan assurance language. Ifthe airport owner makes

a change in the airport or its facilities which is not reflected in the

ALP, and the FAA determines that the change will adversely affect

the safety, utility or efficiency of any federally owned or leased or

funded property on or off the airp.ort the FAA may reqUire the

airport to eliminate the adverse ·effect or bear the cost of rectifying

the situation." Id. at § 7.l8(a) (2009).

• "[a]ny alteration with the plan as approved by the FAA may

constitute a violation of Grant Assurance 29, Airport Layout Plan."

FAA Order 5190.6B, Airport Compliance Requirements § 7.18(a)

(2009).

City Ordinance 8-10 and Assurances 2, 3, and 16

Assurances 2 and 3 reflect the City's pledge that it (1) has the legal authority to

finance and carry'out each proposed project, and (2) had sufficient funds available for the

City's portion of each project's cost. After making this pledge, and receiving federal

monies to purchase and prepare land for a 6,800 foot runway, the City Ordinance 8-10

voluntarily divested itself of the authority to fund the completion of the Runway

extension. The passage of Ordinance 8-10 may violate Assurances 2 and 3 because the
Mary Wade, Esq.

October 11,2010

Page 13

Ordinance voluntary restricts the City's legal authority to extend the Runway as well

prevents the City from having direct availability offunds. The voters ofthe City spoke in

2000 and 2007 against the issuance of bonds to fund a runway extension. As long as

Ordinance 8-10 remains unchanged, it appears that the future of the Runway extension

will be in question. Based on the uncertainty, Assurance 16 may also have been violated.

The absence of authority to fund the project equates to the City's inability to execute the

plans, specifications and schedule as outlined in the applicable ALPs.

Crossroads TOWl1e Center a.nd Assurances 16 and 21

The City's facilitation of and the construction of Crossroads Towne Center likely

violates Assurances 16 and 21. Assurance 16 reflects the commitment of the City to

execute federally funded projects in accordance with the plans, specifications, and

schedule that was approved by the FAA in the applicable AMP/ALP. Any construction,

modification, or improvement that is inconsistent with an approved planfequires FAA

approval or a revision to the ALP. When the City entered into grant agreements under

the 1998 AMP, it became contractually obligated to adhere to the plans, specifications,

and schedule in the 1998 AMP ,and ALP. The 1998 AMP and ALP anticipated the

extension ofRunway 4R122L to 6,800 feet. Because ofthe retail center development, the

maximum runway length possible, given the current geographic limitations, is now only

5,700 feet. The City knowingly took action inconsistent with the 1998 AMP and ALP

when it became involved in Vestar's development effort From 2003 to 2007 the City

could not execute the plans, specifications, and schedule as approved by the FAA in the

1998 AMP and ALP as it was obligated to do under its grimt agreements.

Assurance 21 reflects a commitment on the part of the City to take appropriate

action, to the extent reasonable, to restrictthe use oflap,d adjacent to or in the immediate

vicinity ofthe Airport so as not to impede Airport plans or operations. The facilitation of

the shopping center, which now prevents the extension of the Runway past 5,700 feet,

likely violated Assurance 21. See Keathly v. City of McKinney, 2004 WL 3198207

(F.A.A.); C([/"ey v. Afton-Lincoln County Municipal Airport Joint Powers Board, 2007

WL 430630 (F.A.A.). Use of land as a retail center does not, in general, constitute an

incompatible use. However, just because a use, in general, may be compatible with

airport operations, does not mean it is in all situations. Here, the use of land

constructively prevents the Runway from being extended to 6,800 feet as planned for in

the 1998 AMP. The City not only failed to object to the development ofthe retail center,

but it also actively promoted its development by effectively guaranteeing to Vestar that

the Airport Runway will never extend past 5,700.feet. In this light, the construction of

the retail center IS incompatible with Airport operations because it prevents the City from

complying with the 1998 AMP and ALP. The City voluntarily chose to take this

incompatible use as evidenced by the development agreement with Vestar and zoning

changes made by the City.
Mary Wade, Esq.

October 11, 2010

Page 14

The Sales Tax Assessments and GrantAssurance 25

The City's diversion ofaviation fuel sales tax revenue from the Airport clearly is a

violation of Grant Assurance 25. Grant Assurance 25 is clearly grounded in 49 USC §

47133 which provides:

"(a) Prohibition.--Local taxes on aviation fuel (except taxes in

effect on December3D, 1987) or the revenues generated by an

airport that is the subject of Federal assistance may not be

expended for any purpose other than the capital or operating

costs of--

(1) the airport;

(2) the local airport system; or

(3) any other local facility that is owned or operated by

the person or entity that owns or operates the airport

that is directly and substantially related to the air

transportation ofpassengers or property."

The City's diversion of sales tax revenues generated from aviation fuel clearly

contravenes this requirement. .Thus far the City has diverted enough sales tax revenue

that its match for federal funds to expand the Runway would have been met. The

extension ofthe Runway is clearly a capital improvement contemplated by the statute. It

is a capital improvement which would improve the Airport by providing an extra margin

ofsafety for all aircraft taking off and landing, particularly in the sununer months.

Standing

Chandler Air Service is the largest fixed base operator at Chandler Municipal

Airport. Chandler Air Service opened its doors at Chandler Municipal Airport on May 1,

1976. Chandler Air Service provides flight training, aircraft rental, sales, aerobatic and

tailwheel training, aircraft mainWrtance, and a fueling service. As the President of

Chandler Air Service, Mr. John H. Walkup is involved in all operations ofthe business.

In addition, the fixed based operators, companies, and other individuals who have joined

this letter as Stakeholders are substantially and directly impacted by the City's noncompliance with its grant assurances.

Pursuant to 14 C.F. R. § 16.23 "any person directly and substantially affected by

any alleged noncompliance may file a complaint with the FAA." Clarke v. City of

Alamogordo, NM, 2006 WL 3041624, *10 (F.A.A.). The FAA has held that, "a

complainant engaged in a contractual business arrangement with an airport may allege it

is affected in direct and substantial effect by an airport sponsor's non-compliance."

Consolidated Service Engineers & Constructors, Inc. v. City ofPalm Springs, 2004 WL
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October 11,2010

Page 15

3198204, *25 (F.AA.) (holding that a firm that was previously a Disadvantaged Business

Enterprise in a contractual relationship with the sponsor is an appropriate complainant to

contend that the firm was directly and substantially affected any alleged non-compliance

in the Disadvantaged Business Enterprise program).

Chandler Air Service has been directly and substantially affected by the City's

noncompliance with grant agreements entered into with the FAA. Had the City

performed in accordance with the 1982 or 1998 ALP/AMPs by extending the Runway,

Chandler Air Service would have consequently seen increased business and increased

revenues from fuel sales, aircraft part sales, training and maintenance. While the exact

date of construction of the extension was never precisely set, Chandler Air Service still

relied upon the 1982 and 1998 AMP's and assurances in opening and growing its

business at the Chandler Munioipal Airport, expecting to, at some point, see the

construction of the extended Runway. Due to actions taken by the City in passing

Ordinance 8·10, facilitating the development of Crossroads Towne Center, and failing to

fund the extension.project, the City is nOw unable to construct a 6,800 foot runway at the

Airport. Without amendments to the City Code, it is unclear ifthe City will ever be able

to extend the Runway to 5,700 feet.

Indeed, every Stakeholder has been affected by the improper limitation imposed

upon the Runway and by the City's diversion ofAirport revenue. The Airport's facilities

have suffered degradation as the result ofneglect and poor maintenance which stem from

the diversion of revenue by the City, and the loss of reVenue as a result of the City's

misguided policies respecting the extension of the Runway. Maintenance Stakeholders

are not able to compete with airports in the region as the result ofthe shortened runways.

Business aviation stakeholders are limited in the type of aircraft they may operate as the

result of the shortened Runway. Property developers cannot develop the facilities

appropriate for aircraft utilizing the Airport. lndeed, the shortsighted decision to limit the

Runway length and divert revenue results in a vicious spiral in which the Airport is

increasingly impoverished, which results in fewer amenities, and facilities, and so on.

Violations ofArizona State Law

While we are primarily concerned with grant agreement violations, consideration

should also be given to possible violations of Arizona state law. The City possesses the

power and the authority to make funding available to Chandler Municipal Airport for

Runway extension efforts. AR.S. § 28-8411 (A) provides:
Mary Wade, Esq.

October 11,2010

Page 16

The governing body of a city or tOVl'Il ofthe board ofsupervisors of

a county may:

1. Acquire, establish, construct, own, control, lease, equip,

improve, maintain, operate and regulate airports for the use of

aircraft within or outside the limits of the city, tOVl'Il or

county.

2. For the purpose described in paragraph 1 of this

subsection, use property that is suitable and that is or may

hereafter be oVl'Iled or controlled by the city, tOVl'Il or county.

Cities are authorized to accept federal fimding for the construction, improvement,

or maintenance of airports. Id. at § 8413. State law also expressly authorizes a

municipality to "annually appropriate and cause to be raised by taxation monies sufficient

to carry out" improvement and construction projects. Id. at 8418 (c).

In purchasing real property for airports, municipalities are permitted to make

monies available or, wholly or partially, make monies available from proceeds ofthe sale

of bonds ofthe municipality subject to the approval ofthe sale of bonds at an election.

Id. at § 8417. This statute relates only to the purchase ofreal property. There is no law

specifically requiring a municipality to choose bond fimding for construction and

improvement projects at an airport. The City held the power to fimd the City's portion of

the Runway extension project prior to the adoption ofOrdinance 8-10. Where additional

contractual obligations and commitments exist, as they do here, such a choice, while

likely a violation ofthe contractual obligations, may also violate state law.

The current runway bond Ordinance 8-10 also may violate another state law.

Arizona prohibits a governing body in a city from ''restrict[ing] or limit[ing] the length or

width of an airstrip or runway used for the landing and takeoff of aircraft." 28 AR.S. §

8411 (B). The current City Code states that ''the Chandler Municipal Airport shall not be

permitted to accommodate, in any fashion, aircraft which require for takeoff a runway

longer than five thousand seven hundred (5,700) feet. Extension of the runway shall

require voter approved bonds, which specify that the bond monies are for the purpose of

extending the runway." While Ordinance 8-10 does not explicitly limit the length ofthe

Runway, it does implicitly limit the potential Runway length to 5,700 feet by prohibiting

the aircraft that require a runway longer than 5,700 feet. Additionally, Ordinance 8-10's

carefully crafted language seems to be an attempt by the City to discriminate against

certain aircraft, while not explicitly banning certain classes of aircraft, as was done by the

City in the late 1980's.
Mary Wade, Esq.

October 11, 2010

Page 17

Requested Actions

Due to the opposition to the Airport in general, and any expansion in particular,

the City has sought to' have the voters approve the extension. Unfortunately, the two

elections resulted in a small turnout and a small percentage ofthose voting were able to

prevent passage of both resolutions. As a result, the City may have painted itself into a

politically uncomfortable comer, but this is not a reason for the City to breach its

commitments to the FAA, Airport users, and the State of Arizona. The City should

conduct the appropriate actions to increase Runway 4R/22L ~o 5,700 feet. The

Stakeholders believe that this will be a benefit to not only the users and Airport

businesses such as Chandler Air Service, but also to the City and its citizens by

improving the economic and business potential of the City,. increasing the safety and

service capacity ofthe Airport, reducing noise over portions ofthe City, and allowing the

Airport to continue to be a useful Arizona airport.

The Stakeholders have attempted to discuss the situation on numerous occasions

with City officials. None ofthose discussions have borne fruit. We now demand that the

City agree to participate in a more formal process; formal mediation. We therefore

request that the City agree to mediate the dispute with one of the mediators suggested

above. Should the City fail to agree to such mediation, this office has been authorized to

file a formal Part 16 complaint with the FAA seeking an administrative determination

with respect to the City's failure to abide by its cornrtlitments.

The .Stakeholders expect the resolution of any mediation to include the path

forward for extension of the Runway and a prompt return of all Airport funds to the

Airport Enterprise Fund.

Should you have any questions regarding the foregoing, please feel free to call the

undersigned attorney.

Very truly yours,

GORDON & REES LLP

C)

Timothy 1. McCulloch

TIMItdh

Enclosure: FAA Complaint Supporter List
Mary Wade, Esq.

October 11, 2010

Page 18

cc: Mr. John Walkup, via email

James Whitlow, Esq.

Deputy ChiefCounsel for Policy & Adjudication

Office ofthe ChiefCounsel

FEDERAL A VlATION ADMINISTRATION

800 Independence Avenue, SW

Washington, DC 20591

Mr. Mark McClardy

Division Manager

Western-Pacific Regional Airports Division

FEDERAL AVlATION ADMINISTRATION

P.O. Box 92007

Lawndale, CA 90261

Mr. Tony Garcia

Compliance Officer - AirPort Compliance Issues

Western-Pacific Regional Airports Division

FEDERAL AVlATIClN ADMINISTRATION

P.O. Box 92007

Lawndale, CA 90261

Mr. Michael Klein

Aeronautics Group Manager

ARiZONA DEPARTMENT OF TRANSPORTATION

P.O. Box 13588

Mail Drop 426M

Phoenix, AZ 85002-3588

ASII10S223718306388v.l
FAA Complaint SUQPorter List

l,Sl/l052237/8S19422v.l

1. John H. Walkup

2. Richard Glazar

3. Chad Thomas

4. Stephen J. Marinella

5. Michael K. Braegger

6. William A. Kozak

7. Roger Parrish

8. William D. Walker

9. Joseph S. Sottile, Jr.

10. Michael Still

n. Hyrum G. hatch

12. Martin Vanover

13. R. James Thorne

14. Robert E. Meyer

15. David Bryman

16. Jeff Farrar

11. Roger Kelly Wallmueller

18. Kevin Sandler

19. Lee Maxson

20. Don pew

21. George H. Sanders

22. Toby Pulsipher

23. Robert Dickinson

24. Russell J. George

25. Charles Morgan

26. Lilliane George

27. Stephen D. Woodrum

28. Jon Melby

29. Patrick McGarry

30. Joseph W. Stewart

31. Terry D. Bice

32. Larry G. Leadford

33. J. Scott Chesnut

34. Neil Jones

35. Stephen M. NOlan

36. David V. Giles

37. Erich Wissinger

38. Philip F. Remmel

39. Nelson Garrison

40. Frank Setzler

41. Juan Galban

42. Clif Rosch

43. Bob Hanson

44. Marc Miller

45. Robert Erickson

46. John A. Hurry

47. Steve Arndt

48. Leonard Rulason

49. Kurt Cunningham

50. Curt Murphree

51. Brian J. McCafferty

52. Donald Prosise

53. Mac Transtrum

54. Katherine Hertel

55. Victor G. Petersen

56. William Veatch

57. Graham Pesce

58. Doug Davies

59. Steve Neuenschwander

60. Tom Moore

61. Michael Hester

. 62. Doug Combs
.. .

D:.

....

Chandler + Arizona

Where Values Make Tbe Difference

November 4, 2010

Timothy I. McCulloch, Esq..

GORDDN& REES, l.I".P.

111 W. Monroe Street, #1600

Phoenix, Arizona 85003

RE: Chandler Municipal Airport

Dear Mr. McCulloch:

I have reviewed the letter that you delivered to Mary Wade on behalf of your client,

Chandler Air Service (CAS), dated October 11, 2010 wherein you make several allegations and

demands regarding the op'eration of the Chandler Municipal Airport (CMA). Based on that

review, and after consultation with City staff, I find the factual and legal allegations of City

wrongdoing asserted in that Igtter to be factually and legally baseless. Accordingly, the City

rejects the demands made on behalf of your client. A more detailed explanation of the City's

position ·follows below.

I. The CMA is Not Neglected or Mismanaged.

Your letter cites ahsolutely no serious or rational basis for the assertion that the CMA is

mismanaged or neglected. Rather, the charge of mismanagement arid neglect is premised

solely on the fact that the C,ity has riot extended the CMA runway in a manner, and on a

schedule, that CAS believes to be beneficial. The fact is that the facilities at the CMA are well

maintained and state of the art for the type and size of airport at issue. Moreover, while'

enhancement and contihued development of the CMA is important to the City, t~e interests of

CAS,and the tMA are not viewed by the City in a vacuum. Rather, the CMA is one component

or enterprise that is viewed in conjunction with other City interests. This includes the impact of

City actions and decisions relating to the CMA on all of its citizens. The broad allegations,

mischaracterizations and aUra of entitlement set forth in y~ur letter reflect badly on your client

and do a disservice to the continuous level of support that the City has given to the CMA over

the last several decades.

MnilingAi:ldr=

M>.il Stop 602

PO Box 4008

Cb.=dIec, ArizOIDl. 85244--4008

OtIfce 01 the Cily Attorney T&:phtm~ (480) 7824640

IWx (480) 7~52

Web WW\II:eb.andIeraz.gov

L(u!iolr

Snite20Z

55 North Arizona Fha:

Chancllec, Arizona 85225
II. The City is Not Improperly Diverting Airport Revenue to the City's General Fund.

Far from diverting revenue from the CMA to the City's General Fund, the City has

budgeted annual contributions of approximately Two Hundred ihousand Dollars ($200,000.00)

from its General Fund to support the CMA over the last several years. Since the General Fund

contributions made by the City to the CMA exceed the sums deposited in the City General Fund

from the sales tax on fuel that is the impetus for your allegations, there is no real basis to assert

that the City is improperly "diverting" fuel sales tax revenue to its General Fund. Moreover,

and contrary to the assertion in your letter, routing the sales taxes on fuel to the City's General

Fund does not violate any FAA grant assurance since that sales tax was established before

December 30,1987.

III. CAS is Not Being Double Taxed.

The imposition of a fuel flowage fee and a sales tax on fuel is a common practice - not

an improper "double taxation" as suggested in your letter. The fuel flowage fee set forth in the

fuel license granted to CAS expressly provides that such fees are "in addition to, and not a

substitute for, all other fees required by ordinance or law" and that CAS is "required to pay any

and all taxes in connection with its operations ... including any taxes for sale and storage of

aviation fuels." I suggest that you review Sections 4.0 and 11.0 of the CAS fuel license with the

City. Moreover, any issue regarding the applicability of the sales taxes raised in your letter is

already the subject of a separate, prior claim procedure initiated by CAS in September. As such,

and contrary to the plea for separate mediation on this issue in your letter, this issue should not

be the subject of a duplicate or parallel prOcess to that which has already been initiated.

IV. Chandler City Code Section 8-10 is Not Coritrarv to Any Grant Assurance.

There simply is no FAA directive, in any grant assurance language or otherwise, that

preempts a muniCipality's determination whether and when to extend the runway length of a

municipal airport. There is also nothing untoward about getting Citizen input or approval

relating to municipal deCisions that impact that muniCipality. Simply because CAS disagrees

with the legislative decision made to seek voter input or bond funding for a runway extension

does not change this dynamic. The fact of the matter is that all FAA grant funding received by

the City to date has been spent in the manner specified in those grants. Further, all

expenditures made with grant monies received were consistent with the current configuration

and runway length at the CMA, including the need for existing runway protection zones and the

potential for a runway extension sometime in the future. The FAA is fully aware Of the current

runway length, and the provisions of Chandler City Code Section 8-10, and no grant funding

r~ceived to date was based solely on any future runway extension to some specified length by

any specified date.

2
V. CAS is Not Directly and Substantially Impacted by Any Alleged Grant Assurance

Noncompliance.

Your letter states no facts establishing that CAS has been DIRECTLY and substantially

affected by any alleged noncompliance by the City with any grant assurances regarding runway

length. This is not a situation where some specific City action is directed at an individual tenant

or class of tenants like the case set forth in your letter Involving disadvantaged business

enterprises that were affected by noncompliance with a disadvantaged business enterprise

program. This is a situation involving a broad legislative action by the City relating to if and

when it will extend the runway at the CiVlA and, as such, is not an appropriate issue to be

resolved through the informal dispute resolution provision referenced in your letter. There

simply is no DIRECT impact on CAS here even if it was assumed, arguendo, that the City was not

in compliance with some specific grant assurance.

VI. Mediation of Anv Alleged Grant Assurance Noncompliance is Not Appropriate.

Even if the City believed that a colorable claim as to its compliance with its grant

assurances had been presented, and that CAS was directly and substantially affected by the

noncompliance alleged, which the City does not, mediation would still not be appropriate. The

City already has spent considerable time with CAS in 2003 discussing and resolving issues

relating to the impact of the Crossroads Towne Center on any potential, future runway

extension and, again, in 2007 when CAS retained Lewis and F\oca to raise virtually identical

issues to those raised in your letter. There is nothing new in your letter that merits additional

discussion. Mediation generally works where a compromise position may be worked out (such

as the amount of damages) and the parties have had difficulties meaningfully discussing the

issues. In this instance, as noted above, there have been several discussions on the issue of

runway length and compliance with FAA grant assurances and resolution of this issue is more of

an "either/or" proposition with very little middle ground. Further, and importantly, the City has

no desire or intention to subvert its legislative a.uthority regarding the adoption of code

provisions (Section 8-10 in this instance) through mediation. Finally, ifthe FAA believes that

there is a potential issue regarding the City's compliance with its grant ·assurances based on

your letter, or any subsequent complaint that your client may file with the FAA, the City would

rather deal directly with the FAA to resolve that issue rather than, yet again, rehashing that

issue with CAS either indiVidually or through a mediation procedure.

Very truly yours,

<~~_----=====s...---')

~~rnsl" Assistant City Attorney

JRC/rl

3
cc: Mary Wade, City Attorney

Pat McDermott, Assistant City Manager

RJ. Zeder, Transportation and Development Director

Dan Cook,Transportation Manager

Greg Chenoweth, Airport Manager

James WhitloliV, Esq.,

Deputy Chief Counsel for Policy & Adjudication

Office of the Chief Counsel

Federal AViation Administration

Mr. Mark McClardy

Division Manager

Western-Pacific Regional Airports Division

Federal Aviation Administration

Mr. Tony Garcia

Compl,iance Officer - Airport Compliance Issues

Western-Pacific Regional Airports Division

Federal Aviation Administration

Mr. Michael Klein

Aeronautics Group Manager

Arizona Department of Transportation

4
TIMOTHY L MCCULLOCH

TMcCUlLOCH@GORDONREES.COM

DIRECT DIAL: (602) 794-2467

Admitted in Arizona

-California

May 24, 2013

HAND DELIVERED

Mary Wade, Esq.

Chandler City Attorney

55 N. Arizona PI., Suite 202

Chandler, AZ 85244

Re: Chandler Municipal Airport

Dear Ms. Wade:

GORDON &. REES LLP

ATIORNEYS AT LAW

111 W. MONROESTREET,SurrE 1600

PHOENIX, AZ 85003

PHONE: (602) 794-2460

FAX: (602) 2654716

VVWW.GORDONREES.COM

As you may recall, this fiffi1 has been engaged by Mr. John Walkup, President of

Chandler Air Service, Inc., in connection with the City of Chandler's (the "City")

mismanagement ofthe Chandler Municipal Airport (the "Airport"). On October 11, 2010

we delivered a letter to you, describing in detail, Chandler Air Service's serious

complaints regarding the City's mismanagement (copy enclosed). In that letter we

requested that the City mediate the dispute with us. That request was soundly rebuffed.

Indeed, the City suggested that the City was uninterested in entering a dialogue with its

constituent and preferred to deal directly with the Federal Aviation Administration.

Rather than approach the Federal Aviation Administration ("FAA"), Chandler Air

Service elected to work within the City of Chandler political process. Significant

progress was made in a few areas, specifically in the management ofthe Airport, but noW

that progress has stalled. The remaining areas of complaint, which have not been

addressed by the City through the political and internal process, are the subject of the

draft Part 16 Complaint Letter which we are enclosing with this letter. We intend to file

our administrative complaint with the FAA but wanted to forestall any argument by the

City that Chandler Air Service has failed to provide the City of Chandler the opportunity.

to resolve or discuss Chandler Air Service's complaint as provided in 14 C.F.R § 16.21

which provides, in pertinent part:

CALIFORNIA + OREGON + WASHINGTON. NI;VADA • AR.IZONA t COLORADO. TEXAS. ILLINOis. MIS50UIU

NEW YORK. NEW JERSEY. WASHINGTON D.C. • PENNSYLVANIA. MARYLAND. VIR.CINIA • CONNECTI,CUT • GEORCIA • FLORIDA
Mary Wade, Esq.

May 24, 2013

Page 2

Pdor to filing a complaint under this part,· a person directly and

substantially affected by the alleged noncompliance shall initiate and

engage in good faith efforts to resolve the disputed matter informally

with those individuals or entities believed responsible for the

noncompliance. These efforts at informal resolution may include,

without limitation, at the parties' expenses, mediation, arbitration, or

the use of a dispute resolution board, or other form of third party

assistance. The FAA ... [office] responsible for administrating

financial assistance to the respondent airport proprietor will be

available upon request to assist the parties with infonnal resolution.

If the City wishes to do so, we would continue to welco:£1.1e the opportunity to

meet, discuss and resolve this matter. However, if we have not heard from you by June

5, 2013, we will assume that your position. regarding resolving these issues remains

unchanged and we will file the FAA complaint accordingly.

It is also our position that the runway limiting ordinance discussed in the Part 16

Complaint runs afoul of A.R.S. § 28-8411 which provides that no "governing body of a

city or town...[may] restrict or limit the length or width of an airstrip or runway used for

the landing and takeoff of aircraft, and any such'restriction or limitation is void." See

also Northeast Phoenix Homeowners Ass'n v. Scottsdale Municipal Airport, 130 Ariz.

487, 636 P.2d 1269 (App. 1981). We.intend to seek all appropriate remedies under state

law that are available to void this unlawful ordinance.

Should you have any questions regarding the foregoing, please feel 'free to call the

undersigned attorney.

Very truly yours,

GORDON & REES

TIWtdh

Ene.

cc: .Mr. John Walkup, via email
Mary Wade, Esq.

May 24, 2013

Page 3

11r. Mark McClardy

Division Manager

Western-Pacific Regional Airports Division

FEDERAL AmTION ADMINISTRATION

P.O. Box 92007

Lawndale, CA 90261

11r. Tony Garcia

Compliance Officer· Airport Compliance Issues

Western-Pacific Regional Airports Division

FEDERAL AVIATION ADMINISTRATION

P.O. Box 92007

Lawndale, CA 90261

CASI/l 05223711 SIS 1880v.l
e:t.

Chandler + Arizona

Where Values Make T/w. Differem:e

Timothy 1. McCulloch, Esq.

Gordon & Rees, LLP

III W. Monroe St, Ste. 1600

Phoenix, AZ 85003

Re: Chandler Municipal Airport

Dear Mr. McCulloch:

JUN I 82~-;~'f:j'l

....."'-...."",,.,;..~"''''==J

June 11,2013

VIA U.S. MAIL and Email

s

The Chandler City Attorney's office received your letter ofMay 24, 2013, submitted on behalf

of J000 Walkup, President of Chandler Air Service, Inc. Thereafter, you were kind enough to extend

the City's time to reply until the end of day Tuesday, June 11.. During this time, City staff has

reviewed and considered your letter and the documents included therewith. However, ultimately, the

City has concluded that private mediation would be a futile act given the nature ofthe long-standing

issues raised by your client.

Your recent letter was a follow-up to one delivered to the City on October 11, 2010, in which

your client's claims were set forth. At that time, the City declined to engage in private mediation.

This was in part because the fuel tax issue already was the subject of a separate written protest filed by

your client and received by the City's Tax & License Division on September 9, 2010. Also, it was

because the runway length and related funding issue raised in the October letter was the subject of

legislative determinations and actions taken by the Chandler City Council, which constitute City

policies established by its governing body, and, therefore, not subject to being bargained away through

third-party mediation.

There is a long history of correspondence and discussions, formal and informal, between the

City and Mr. Walkup concerning the matters raised in the two letters from you and delivered to the

City over the last two and one-half years. Since the initial letter of October, 2010, the City airport

administration has been improved and placed under a different department ofthe City. More recently,

the City's Management Service Department has presented information to Mr. Walkup in an effort to

alleviate his concerns on some ofhis issues, notably the tax issues.

Mr. Walkup's claims simply reflect that his view of the City's responsibilities and obligations

as a public airport manager is wholly at odds with the City's view of what its responsibilities,

obligations and authority are, under applicable law, for management·and operation of the Chandler

Municipal Airport. There is no middle ground between the positions ofthe parties. Mediation would

be futile.

Finally, you have also indicated that you intend to seek appropriate remedies for an alleged

violation of A.R.S. § 28-8411, which concerns restrictions on length or width of airstrips or runways.
Timothy 1. McCulloch, Esq.

June 10,2013

Page 2

Please note that, to the extent the "remedies" you allude to consist of money damages, the City does

not believe that either your letter of October, 2010 or your recent letter May 24, 2013, constitutes a

valid notice of claim under Arizona law.

Sincerely,

Ab--a,~ Glenn A. Brockman

Assistant City Attorney

GABI

cc. Mary Wade, via email

Christine Mackay, via email

Pat McDermott, via email

Lori Quan, via email

Mr. Mark McClardy

Division Manager

Western-Pacific Regional Airports Division

Federal Aviation Administration

P.O. Box 92007

Lawndale, CA90261

:Mr. Tony Garcia

Compliance Officer - Airport Compliance Issues

Western-Pacific Regional Airports Division

Federal Aviation Administration

P.O. Box 92007

Lawndale, CA 90261

Mailing Address:

Mail Stop 602

PO Box 4008

Chandler, Arizona 85244-4008

Office ofthe City Attorney

Telephone (480) 782-4640

Fox (480) 782-4652

Location:

2nd Floor

175 South Arizona Avenue

Chandler, Arizona 85225