TIMOTHY l. MCCULLOCH TMCCULLOCH@GORDONREES,COM DIRECT DIAL: (602) 794-2467

Admitted In: Arizona California

VIA FEDERALEXPRESS 

### JUl 3 2013

July 2,2013 

### GORDON 

# &- REES UP

ATTORNEYS AT LAW 111 W. MONROESTREET, SUITE 1600 PHOENIX, AZ 85003 PHONE: (602) 794-2460

FAX: (602) 265-4716 WWW.GORDONREES.COM

Office 0 e ChiefCounsel Att on: FAA Part 16 AirportProceedings DocketAGC-610 DERALAVIATION ADMINISTRATION 800 Independence Ave. S.W. Washington, D.C. 20591

Re: ChandlerMunicipal Airport

Dear Sir orMadam:
This complaint is broughtpursuantto 14 C.F.R. Part 16.23 againstthe City of Chandler (the "City"), Arizona, as the owner, operator and sponsor ofChandler Municipal Airport (the "Airport"). This complaintis brought on behalfofChandlerAir Service.
The complaint centers on the City's mismanagement ofthe Airport. The City's mismanagement is illustratedby its neglect ofthe Airport's day-to-day and long term capital needs, the diversion ofaviation revenue from the AirportEnterprise 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 otherthings, 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 ChandlerMunicipal Airport (the "Airport"). Chandlerhas 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. FLORIDAOffice ofthe ChiefCounsel July 2, 2013 Page 2

SUBJECT OF THE COMPLAINT
ChandlerAir Service requests the City revise Chandler City Ordinance 8-10 so that an appropriate decision may be made regarding the necessity ofarunway extension atthe Airport. ChandlerAir Service believes the extension ofthe Runway will yield economic, safety and noise abatementbenefits. A 5,700 foot runway will not enable additional classes ofaircraftto use the Airport; rather, the extension willprovide alonger runway to the classes ofaircraftpresently using the Airport. The extension will allow these aircraftto take offand landwith additional room for safety as well as to ascend
more rapidly, thereby reducing the noise overportions ofthe City.
ChandlerAir Servicerequests that all fuel taxes thathave been paid into the Chandler City General Fund be returnedto the AirportEnterprise Fund. ChandlerAir Service also requests thatthe fundbe utilized for Airportimprovements as required by Chandler's federal grant agreements. Finally, ChandlerAir Service requests thatthe 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 ChandlerAir Service. Ifthe City is going to be competing with ChandlerAir Service, itmay not operate at a loss to put ChandlerAir Service at a competitive disadvantage and may notuse AirportEnterprise Funds and other sources offunds to subsidize the operation. 

### FACTUALBACKGROUND

Runway Length Inhibition
A suitable length for the Runway 4R/22L is along standing commitment ofthe City. As early as 1982, the City anticipatedthe construction ofRunway 4R/22L. In the 1982 AirportMasterPlan ("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 ofdevelopment. During the years of1987-1989 the City received federal funding through the Airport ImprovementProgramto purchase land required for the planned extension. Inthe vicinity ofthe northeast comer ofthe Chandler Municipal Airportthe City purchased 2.416 acres ofland from ExeterReal Estate Investors in 1987 (AIP GrantNo. 3-04-008-04), 6.971 acres ofland from Airpark Limited Partnership in 1987 (AIP GrantNo. 3-04-008-04), 4.16 acres ofland from D.W. Patterson in 1988 (AlP GrantNo. 3-04-008-05), and 9.728 acres ofland from D.W. Patterson in 1989 (AlP GrantNo. 3-04-008-06). On the southwest comer ofthe Chandler Municipal Airportthe City purchased 7.83 acres ofland from Queen Creek Trust in 1986Office ofthe ChiefCounsel July 2, 2013 Page 3

(AlP GrantNo. 3-04-008-03), 21.043 acres ofland from John DemetriaLTD in 1987 (AlP GrantNo. 3-04-008-04), and 6.0 acres ofland from D.W Patterson in 1991 (AlP Grant No. 3-04-008-07).

In orderto 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 informedus that the City has also received funding as part ofa 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 inNovember, 1989, when a special election was held with an initiative to "Ban Jets" onthe ballot. Due to the campaign efforts ofarelatively small number ofindividuals, the measure passed. However, in 1990, inthe 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 aban onjets 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 believedthatthe length ofthe Runway would result in jets notbeing able to use the Runway. This was notborne out as somejets were able to use the runway, especially on days with a lower ambienttemperature. Butthe ordinance effectively banned certainjets due to the fact that manyjets require runway lengths in
excess of4,850 feet for safe take-offs and landings. This restriction came on the heels of the City's receipt ofmillions ofdollars 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 AirportMasterPlan ("1998 AMP") which anticipated an ultimate runway length of6,800 feet for Runway 4RJ22L. The 1998 AMP suggestedthat, in orderto accommodate 75% ofbusinessjets at 60% useful load, arunway length of5,500 feet would be required, and in orderto accommodate 100% ofbusinessjets at 60% useful load, arunway length of6,800 feet would be required. The 1998 AMP adopted an intermediate term planto extend Runway 4RJ22L to 5,500 feet and a long-termplan to extend the Runway to 6,800 feet.
The 1998 AMP also contained a financial plan which set forth cost estimates for various Airportprojects. The 1998 AMP anticipated the need, in 2003, for $519,000 to "ExtendRunway 4R-22L 500 Feet South." It also anticipated, in its intermediate term, an estimated $1,602;000 to "ExtendRunway 4R-22L 1,450 FeetNorth." In terms of additional landrequired to construct a 6,800 foot runway, the 1998 AMP outlinedthe 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 ofour information and belief, neitherpiece 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 ChandlerMunicipal Airportto 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 approvedbonds 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 submittedthe Runway extension decision to the voters. The bond measure failed by 3.8% ofthe vote, and the Runway was not extended, even thoughthere were ample funds in the AirportEnterprise Fund to pay the City's share ofthe Runway cost.
In August 2003, the City unanimously approved Resolution 3669, authorizing a development agreementbetween the City and Vestar ArizonaXXXVII, LLC ("Vestar") for Crossroads Towne Center, a large retail center. The basic terms ofthe agreement were:

• The Developerwill build a minimum of400,000 square feet ofnew retail
uses on the site made up ofat leasttwo large anchorretail stores.

• The Developerwill complete street improvements to GilbertRoad to City standards.

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

• Ifthe Developer includes a premierretail store inthe project, the City will reimburse $2.7 million for GilbertRoad improvements and provide full credit for arterial street impact fees due for the project.
The City, in orderto 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 AirportLayoutPlan ("ALP"), which anticipated purchasing parts ofthis land for
a Runway ProtectionZone for the 6,800 foot runway, the City rezoned the land from an agricultural district (AG-l) to aplanned area development (PAD) to allow Vestarto develop in Chandler. The rezoning was adopted in Ordinance No. 3470 on August 14, 2003 eventhough the City Council explicitly recognized at the time that these actions would conflictwiththe AirportLayoutPlan 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 ProtectionZone for apotential 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, orthe construction ofthe retail center, didthe City seekto formally submit an amended AirportLayoutPlan or get any othertype of approval from the FAA to deviate from the plans set forth in the 1998 AMP.

In 2004 Vestarbegan developing Crossroads Towne Center, a 1.3 million square foot retail center atthe comer ofGermano and GilbertRoads. Vestarhas 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 Airportrunways. The rezoning ofthe project site and subsequentdevelopment ofthe retail centerhad made a 6,800 foot runway an impossibility and, as aresult, limited the maximumrunway length to 5,700 feet.

In 2006 the City received funding from the FAA to update its AirportMasterPlan ("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. Underthe 2007 AMP, new funding would be used to perform various projects, including a shortened version ofthe now long-awaitedrunway extension to Runway 4RJ22L. Upon completion ofthe new plan, the 2007 AMP was passedby resolution by the City Council in January 2007, and was submittedto the FAA for approval. We do notbelieve thatthe FAA has
ever formally approved the 2007 AMP. Nonetheless, the submission ofthe 2007 AMP
was an attemptby the City to seek, over four years afterthe fact, approval ofunilateral deviations encouraging the construction ofaretail center in the City. According to the 2013-17 National Plan ofIntegratedAirport Systems, ChandlerMunicipal Airport's estimated five-year costs for airport improvements that are eligible for federal development grants underthe Airport ImprovementProgram are $17,961,328. This funding provides a strong incentive and opportunity for the City to rectifY any transgressions committed underprevious 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 bondvote. In addition, other restrictions concerning weightbearing limits and Part 139 statements were included.
The current Chandler City Code Ordinance 8-10 states:
To guarantee to the citizens ofthe 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 ofthe 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 abond 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 extensionbond ($65,000.00) was the only bond
measure to fail. The bond failed by amargin of7.8% (897 votes).
The Ordinance should be considered non-compliant for two reasons. Initially, it is clear from its face thatthe Ordinance limits the length ofthe runway purely for noise
reasons. Secondly, the Ordinance impairs the City's preservation ofits rights and powers overthe development ofthe Airport in contravention ofGrantAssurance 5.
Local noise-basedrestrictions upon aeronautical activity have long been preemptedunderthe AirportNoise and Capacity Act of 1990 (ANCA). See AOPA v. City of Pompano 16-04-01. An airport sponsor seeking to implement a noise based restriction may only do so underthe ANCA and its enabling regulations. However, the City has electedto forego meeting FAAregulations and instead implementedthis noise based Ordinance as a means ofcontrolling 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 limitedin its developmentbecause the City has electedto create a situation in which it cannotutilize airport funds for arunway lengthening projectbecause the City has bound itselfto only utilize bond funds to pay for such an extensionratherthan airport funds. This is also an improper limitation on the City's discretion to spend airport funding.Office ofthe ChiefCounsel July 2, 2013 Page 7

Revenue Diversion
The City has been selling fuel for atleast 50 years. Chandler Air Service, the primary FBO at ChandlerAirport, afterbuying from the City atretail prices for years, negotiatedthe rightto selffuel. ChandlerAir Service's selffueling rightwas expanded to retail fueling for Avgas, and then a few years laterto selling JetA. Until 2006 the City sold self-service Avgas and Chandler Air Service sold "offthe truck" Avgas and Jet A. ChandlerAir Service also started selling self-service Avgas in 2004. At no time did either ChandlerAir Service or the City charge, collect and/orpay sales tax on eithertype offuel. In mid 2005 the accountant for ChandlerAir Service, believing there was a requirementto pay a City JetA sales tax of2.3 cents per gallon, startedpaying it. Meanwhile, ChandlerAir Service was performing under a fuel service agreement with the City ofChandlerAirport, which had fuel flow fees being assessed against ChandlerAir Service for the privilege ofdoing business. The Airportmanagement (Public Works Dept.) and ChandlerAir Service establishedthe flow fees on the assumption thatthere were no other City fees ortaxes.
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, ChandlerAir Service discovered thatthe sales taxes, when paid, were going into the City General Fund instead ofthe Airport Enterprise Fund. In response to ChandlerAir Service's complaint, the City sales tax auditor statedthathe was not aware the City was collecting atax:, and in addition, had no knowledge the Airportwas collecting flow fees. ChandlerAir Service felt thatitwas being double taxed and asked for the situation to be corrected. The City statedthatthey would look into the problem. Greg Chenoweth, the previous Airport manager, was also informed thatthere 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 neverpaid it. In May 2006 ChandlerAir Service was notified by letterthat the sales tax was indeed due and the flow fees ChandlerAir Service was paying to the Airport were irrelevantto the tax. In addition, the City applied the sales taxto the retail sales of 100LL fuel, and also applied use taxes against ChandlerAir Service for personal use of 100LL.
The City also informed ChandlerAir Service thatthe taxes applied to the City's. fueling operation. When asked, Chenoweth noted thathe 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 ChandlerAir Service to contactthe City's tax auditors to setup a meeting. Ittook several months to setup a meeting, which ultimately led to afull sales tax audit in February 2007. MeanWhile, ChandlerAir Service had started paying the taxes inOffice ofthe ChiefCounsel July 2, 2013 Page 8

September 2006. ChandlerAir Service believes thatthe Airport startedpayingthe tax to the City in mid 2006.
As ofearly 2010 the ChandlerMunicipal Airport was assessed over $60,000.00 and airport revenues were taken to be deposited in the General Fundto pay the past due taxes. As ofJuly 2010 ChandlerAir Service was assessed $49,000.00 for pastdue taxes and informed the funds wouldbe going into the General Fund. Both were forperiods of time when no sales taxes were collectedbecause the City admitted it did not seekto collect atax. After ChandlerAir Service appealedthe audit, the City settled with Chandler Air Service and abatedthe assessmentto the date ofassessment. However, the Airporthad already paidthe assessment which was transferred from the AirportFundto the General Fund. Those monies have neverbeen transferred back from the General Fund to the AirportFund.
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 thatit does nothave to place the revenue into the airportfund because the tax implementation occurredpriorto the federal requirementthat airport fuel flow fees are aeronautical revenue and mustbe funneled into the airport fund.
Ourreview ofthe City Tax Code provides thatthejet fuel sales tax was

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

and is insteadrelying upon its general sales taxing power. Moreover, there is no argumentthat the sales taxes were not collecteduntil 2006.
Under GrantAssurance 25, "any local taxes on aviation fuel established after December 30, 1987, will be expendedby it for the capital and operating costs ofthe airport

... " Under49 § USC 47133(a) "[l]local taxes in aviation fuel (excepttaxes in effect on December 30, 1987)

..." mustbe expended on the capital or operating costs of the airport. Underthe City's reading, any sponsorhaving a general sales tax would evade the GrantAssurance 25 obligation ifitmade a subsequent decisionto collect fuel sales taxes upon aviation fuels orpassed a specific provision. Such areading is in contravention ofthe plain meaning of49 § USC 47133 and Grant Assurance 25 which provides clearly that only those taxes in effect atthe end of 1987 would be grandfathered from this prohibition. Ifthe FAA were to allow this reading to stand, many airport sponsors could revisit theirtaxing 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 ChandlerAir Servicebecause it
uses federal grant monies and airport enterprise funds to subsidize its self-service fueling operation. Its fueling services are notprofitable for the City. Indeed, their monthly and quarterly reports demonstrate that the City intends the self-service fueling operation break even, or allow a slightloss according the City's own monthly and quarterly reports. Meanwhile ChandlerAir Service is forced to compete with the City's subsidized fuel pnces.
Federal Grant Assurance 22(g) states: "In the eventthatthe sponsor itself exercises any ofthe rights andprivileges 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 underthese 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, ChandlerAir Service mustutilize its own resources to pay for all improvements to its fueling facility. This places ChandlerAir Service at a competitive disadvantage because the City is notrequired to factor the cost ofthe improvements into its fuel price, while ChandlerAir Service has no option butto do so.
Where the City does notuse federal funding to make improvements, its facility falls far short ofthe fonnal minimum standards itrequires ofChandlerAir Service. ChandlerAir 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 orderto meetthe 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 ChandlerAir Service's prices and constantly keeping its price slightly below ChandlerAir Service's. This happens irrespective ofwhen the City receives a load offuel, which is the usual driver offuel prices. This indicates thatthe City is not being driven by any sort ofprofitmotive, but is instead utilizing its selfservice facility simply to keep ChandlerAir Service's prices on its fuel artificially low.Office ofthe ChiefCounsel 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. Inthat letter, the City was invitedto engage in an informal dispute resolutionprocess with ChandlerAir Service as contemplated under Section 14 ofthe Code ofFederal Regulations, Part 16.21 (14 C.F.R. 

### § 16).
OnNovember 4, 2010, the City sent aresponsive letter in which itrefused to address any ofthe referenced issues or entertainparticipation in any sort ofmediation or discussion. Indeed, the City indicatedthat Chandler Air Service should simply file the complaintwith the Federal Aviation Administration as the City would rather deal with the FAAthan its stakeholders. A copy ofthat letter is enclosed for your reference.
On May 24 2013, after trying for anumber ofyears to seek apolitical solution, Chandler Air Service again sent a letterto May Wade, Esq at the Chandler City Attorney's Office, again requesting thatthe above referenced issues be addressed. A copy ofthatletter 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 thatthe City ofChandlerhas 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 thatthe City enter into a corrective action plan to bring the City into compliance, including a requirementthat the City remove the offending Ordinance and that it ensures that all sales tax revenue is appropriately utilized and thatthe City ensure that it competes fairly with ChandlerAir Service.**Verytrulyyo~** GORDON & REE8..LLP

--.....................

.Timothy 1. McCulloch
TIM/tdh Ene.Office ofthe ChiefCounsel July 2, 2013 Page 11

Ihereby certify that I have this day servedthe foregoing
onthe following persons atthe following addresses by Federal Express:
Attention: FAA Part 16 AirportProceedings 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.lTIMOTHY I. MCCULLOCH TMCCULlOCH@GORDONREES.COM DIRECT DIAL: (602) 7S4-2467

Admittedin Arizona Califomia 

### October 11, 2010



### HAND DELIVERED Mary Wade, Esq. ChandlerCityAttorney 55 N. ArizonaPI., Suite 202 Chandler, AZ 85244
Re: ChandlerMunicipal Airport

DearMs. Wade: 

### GORDON 

## &. REES UP

ArrORNlh'sATLAw 111 W. MONROESrREET, 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 SupporterList (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 ofthe Airport's day-to-day and long term capital needs, the diversion ofaviation 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 ofthe City's federal grant assurances. The Ordinance is a specific violation of state law. A detailed explanation of each·issue follows below.
On behalf ofthe 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 ofthe Code ofFederal Regulations, Part 16 ("14 C.F.R.§ 16"). 14 C.F.R § 16.21 provides, inpertinentpart:
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 matterinformally with those irtdividuals or entities believed responsible for the 'noncompliance. These efforts at irtformal resolution may include, without limitation, atthe parties' expenses, mediation, arbitration, or

CALlfOR.NIA + NEW YOR.K • TSXAS • ILl.IN01S • NEVADA. AR.IZONA • COLORADO + WASHINGTON. ORECON • NEW )ERSE" t FLORIMary 

### Wade, Esq. October 11, 2010 Page 2

the use of a dispute res()lution board, or other form ofthird party assistance. The FAA

. . . [office] responsible for administrating financial assistance to 

### the respondent airport proprietor will be available uponrequestto assistthe parties with informalresolution.
It

### is ourhope to resolve this matter informally through mediation and in a manner beneficial to the City, Airport, theresidents ofthe City, and the Stakeholders. Consistent with Part 16, we are addressingthis letternot only to representatives ofthe City, but also to the FAA and the ArizonaAeronautics Department We believe the early involvement ofthe FAA andthe Statewill facilitate afinal resolution ofthis matter.
We further put forward the names ofthree mediators who will bring extensive airportmediation experienceto the resolution ofthis matter:
1. 

### ChristineEberhard 2775 Tapo Street#103 SimiValley, CA 93063
2. StephenPflaum TwoNorthLaSalle, Suite 1700 Chicago,lL 60602
3. Thomas Toone 76 E. MitchellDrive Phoenix, 

### AZ 95012.
The Stakeholders request the City revise Chandler City Ordinance 8-10 and authorize the minimal funding necessary to complete the extension ofthe 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 ofaircraft to use the airport; rather, the extension will provide a longerrunway to the classes ofaircraftpresently using the Airport. The extension will allowthese aircraft to take off and land with additional room for safety as well as to ascend more rapidly, therebyreducingthe noise overportions 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 ofresolving these issues in the interest of both the City and the Stakeholders, we are setting forth our understanding ofthe factual backgrmmd, legal principles andthe precedents involved. 

## FACTUALBACKGROUND

Runway Length Inhibition


### A suitable length for the Runway 4RJ22L is 

### a long standing commitment ofthe City. As early as 1982, the City anticipated the construction ofRunway 4R122L. 

### In the 1982 Airport Master Plan ("1982 AMP"), the City ultimately plarmedto 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 ofdevelopment. Duringthe years of1987-1989 the Cityreceived federal funding thtoughthe AirportImprovementProgramto purchase land required for the plarmed extension. Inthe 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 LimitedPartnership in 1987 (AlP 

### GrantNo. 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. Pattersonin 1989 (AlP 

### GrantNo. 3-04-008-06). Onthe southwestcomer ofthe Chandler Municipal Airportthe City purchased7;83 acres oflalld from Queen CreekTrustin 1986 (AlP 

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

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

### GrantNo. 3-04-008-07).
In orderto receive federal funding, the City entered into grant agreements with the FAA during each oftheseyears. 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 ofa grant agreement in the early 1990's to prepare and grade land for the Runway extension as part ofthe newparallelrunway. Despite this progress, the City's Runway plans faced opposition in November, 1989, when a special electionwas heldwith an initiative to "Ban Jets" onthe ballot. Due to the campaign efforts ofa relatively small number ofindividuals, the measure passed. However, in 1990, in the face of pressure from thteatened litigation respecting the measure's obvious breach ofCity's obligations under federal law, the Mayor and City Council passed a new ordinance. Ratherthan a ban onjets explicitly, the new ordinance simply limitedthe Runway lengthto 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 notbeing able to use the Runway. This was not borne out as somejets were able to use the runway, especially on days with a lower ambienttemperature. Butthe ordinanceMary Wade, Esq. October 11, 2010 Page 4

effectively banned certainjets due to the fact that manyjets 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 ofdollars 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 orderto accommodate 75% ofbusinessjets at 60% useful load, a runway length of 5,500 feet would be required, and in order to accommodate 100% ofbusiness jets at 60% useful load, a runway length of6,800 feet would be required. The 1998 AMP adopted an interIIlediate termplan to extend Runway 4RJ22L to 5,500 feet and a long-termplanto extendthe 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 ofourinformation and belief, neitherpiece 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 ofthe 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 AirportEnterprise 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:Mary Wade, Esq. October 11,2010 Page 5

•

•

•



### • The Developer will bilild a minimum of400,000 square feet ofnew retail
uses onthe site made up ofat leasttwo large anchorretail stores.
The Developer will complete street improvements to Gilbert Road to City standards.
The Citywill buildthe GermannRoad and StearmanRoad Connection.
Ifthe Developer includes a premierretail store in the project, the City will reimburse $2.7 million for Gilbert Road improvements and provide full creditfor arterial streetimpactfees due forthe 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 AirportLayoutPlan ("ALP"), which anticipatedpurchasing 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 OrdinanceNo. 3470 on August 14, 2003 eventhough 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 decidedto 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 aircrafttypes 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**ame~ded** Airport Layout Plan or get any other type of approval from the FAAto deviate from the plans setforth inthe 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 centeron 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 lineMaryWade, 

### Esq. October 11,2010 Page 6

with the Airport runways. The rezoning ofthe project site and subsequent development oftheretail centerhadmade a 6,800 footrunway an impossibility and, as a result, limited the maximumrunway length to 5,700 feet.
In 2006 the City received funding from the FAA to update its AirportMaster Plan ("2007 AMP") inpreparation for new federal funding requests. The 2007 AMP and ALP were finally updated to include the new restrictions on runway length. Underthe 2007 AMP, new funding would be used to perform various projects, including a shortened version ofthe now long-awaitedrunway extensionto 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 fouryears later, to have the FAA sign offonthe unilateral deviations ittookto encourage the construction ofa retail center in the City. According to the 2007-2011 National Plan ofIntegratedAirport Systems, ChandlerMunicipalAirport's estimatedfive-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 underprevious grants to ensure continued supportfromtheFAA.
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, butonlywiththe mandatory Runwaybondvote. In addition, otherrestrictions concerningweightbearing limits andPart 139 statements were included.
The currentChandler 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 ofthe runway shall require voter approved bonds, which specify that the bond monies are for the purpose ofextending 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 bondmeasures onthe 2007 ballot ($452,000,000.00), the Runway extension bond ($65,000.00) was the only bond measure to filli. 

### The bond failedby amargin 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 rightto selffuel. Chandler Air 

### Services' selffueling right was expanded to retail fueling for Avgas, and then a few years laterto selling JetA. Until 2006 the City sold self-service Avgas and ChandlerAir 

### 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/orpay sales tax on eithertype 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 pergallon, startedpaying 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 assumptionthatthere wereno otherCity fees ortaxes.
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 thatthe sales taxes, whenpaid, were going intothe City General Fund instead ofthe AirportEnterpriseFund. In 

### responseto ChandlerAir 

### 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 statedthatthey would look into theproblem. 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 thatthe Airport was unaware ofthe sales tax and had neverpaid it. 

### In May 2006 ChandlerAir 

### Service was notifiedby letterthatthe sales tax was indeed due andthe 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 ChandlerAir 

### Service forpersonal 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 ChandlerAir 

### Serviceto contactthe City's tax auditors to setup 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 inMary

### Wade, Esq. October 11, 2010 

### Page 8

September 2006. 

### Chandler

### Air Service believes thatthe Airport startedpaying the tax to the City in mid 2006.


### As ofearly 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 informedthe funds would be going into the General Fund. Both were forperiods of time when no sales taxes were collected because the City admitted they did not know there was atax.
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 FederalLaw and FAAPolicy
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 ofcivil 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 ofAirport facilities. 

### In some ofthese programs, the airport sponsor assumes certain obligations by contractto maintain and operate its airportfacilities**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 of Harlingen, 2006 

### WL 2528730 (F.AA). 

### AirportImprovementProgram and Airport SponsorAssurances
Title 49 

### U.S.C. § 47101, 

### etseq., provides for federal airport financial assistance in the development ofpublic-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, 

### etseq., sets forth asSurances to 

### which an airport sponsormust agree as a condition ofreceiving federal financial assistance. Upon acceptance ofan All' 

### grant, the "assurances become a binding contractual obligation betweenthe airport sponsor and the federal government." 

### Monaco Coach Corp. v. 

### Eugene Airport and the City of Eugene, 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 completethe ProjectWithoutundue 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 ofthe project application." GrantAgreementFAAFotlIJ. 5100-37.
TheFAAhas a statutory mandate to ensure that airport owners cornply withthese 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.


### TheFAAAirport 

### ComplianceProgram
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 orthe 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 maintainedpublic-use airports whichairport sponsors operate in amannerconsistentwith their Federal obligations and the public's investments." fd. 

### "The Airport Compliance Program does not control or directthe operation ofairports." 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 ofFederal property to ensurethat airportsponsors servethepublic interest." ld.


### FAA Order 5190.6B sets forth policies and procedures for the FAA Airport ComplianceProgram. 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 FAApersonnel 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 ofnoncompliance, the FAA will determine whether an airport sponsor is currently in compliance with "applicable federal obligations. 

### Id. The FAAwill considercorrective actionby an airportto cure any alleged orpastviolations of applicable federal obligations as grounds for dismissal ofa complaint. 

### Id. (citing 

### Wilson Air Centerv. Memphis andShelbyAirportAuthority, FAA DocketNo. 16-99-10 (2001».


### EnforcementofAirport 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 ofPractice 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 GrantAgreementandthe SponsorAssurances


### In grant agreements entered into with the FAA, the City pledged to comply with various assurances. Certain ofthe applicable assurances binding upon the City are set forth below:
Assurance 2. Responsibility and Authority ofthe Sponsor Ithas legal authorityto 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 containedtherein

... Assurance 3. SponsorFundAvailability It has sufficient funds available for thatportion ofthe project costs which are notto be paid by the United States. It has sufficient funds available to assure operation and maintenance of the items funded underthe grant and agreementwhichit will own or control.Mary

### Wade, Esq. October 11, 

### 2010 Page 11

Assurance Sa. Preserving Rights andPowers It 

### will not take or pennit any action which would operate to deprive it ofany ofthe rights and powers necessary to perfonn any or all ofthe terms, conditions, and assurances inthe grant agreement without the written approval ofthe Secretary and will act promptly to acquire, extinguish, or modifY any outstanding rights or claims of right ofothers which would interfere with such performance by the sponsor. This shallbe done in amanner acceptable tothe Secretary.
Assurance 16. Conformity to Plans and Specifications It

### will execute the project subjectto plans, specifications, and schedules approvedbythe Secretary. Suchplans, specifications, and schedules shall be submitted to the Secretary prior to commencement of site preparation, construction, or other perfonnanceunderthis grant agreement.
Assurance 21. CompatibleLandUse 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 ofthe airport to activities and purposes compatible with the nonnal airport operations, including landing and takeoffofaircraft.
Assurance 2Sa. AirportRevenues 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 ofpassengers or property

.... Assurance.29a. Such AirportLayout Plans and each amendment, revision, or modificationthereof, shallbe subjectto the approval ofthe Secretary which approval shall be evidenced by the signature of a duly authorized representative ofthe Secretary on the face ofthe 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 withthe airport layoutplan as approvedby the Secretary, adversely affectthe safety, utility or efficiency ofthe airport.Mary

### Wade, Esq. October 11, 2010 Page 12

Sections from Order5190.6B that are applicable to the City's assurances include:

• "Grant Assurance 29, Airport Layout Plan 

### [ALP], reqUires the spoJ:1Sorto

...identifyplans for future development onits ALP

...FAA approval ofthe ALP represents the concurrence ofthe FAA in the conformity of the plan top all applicable design standards and criteria. It 

### also reflects the agreement between the FAA and the sponsorregarding the proposed allocation ofairport 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 ofany 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, AirportLayoutPlan. 

### The Airport and Airway Safety

. and Capacity Expansion Act of 1987 further strengthened the

AirportLayoutPlan assurance language. Ifthe airport ownermakes 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 ofany 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 ofrectifying the situation." 

### Id. at § 

### 7.l8(a) (2009).

• "[a]ny alteration with the plan as approved by the FAA may constitute a violation ofGrant Assurance 29, AirportLayoutPlan." 

### FAA Order 5190.6B, Airport Compliance Requirements § 

### 7.18(a) (2009). City Ordinance 8-10 andAssurances 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 eachproposedproject, 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 ofOrdinance 8-10 may violate Assurances 2 and 3 because theMary

### 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 ofbonds to fund a runway extension. As long as Ordinance 8-10 remains unchanged, it appears that the future ofthe Runway extension will be in question. Basedonthe uncertainty, Assurance 16 may also have beenviolated. The absence ofauthority to fund theproject equates to the City's inability to execute the plans, specifications and schedule as outlined inthe applicable ALPs.
Crossroads TOWl1e Centera.nd Assurances 16 and 

### 21
The City's facilitation ofand the construction ofCrossroads Towne Center likely violates Assurances 16 and 21. Assurance 16 reflects the commitment ofthe 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 developmenteffort From 2003 to 2007 the City could not execute the plans, specifications, and schedule as approved by the FAA in the 1998 AMP andALP as itwas obligatedto do underits grimt agreements.
Assurance 21 reflects a commitment on the part ofthe City to take appropriate action, to the extent reasonable, to restrictthe use oflap,d adjacentto or inthe immediate vicinity ofthe Airport so as notto impede Airportplans oroperations. The facilitation of the shopping center, which now prevents the extension ofthe Runway past 5,700 feet, likely violated Assurance 21. See 

### Keathly v. 

### City ofMcKinney, 2004 WL 3198207 (F.A.A.); 

### C([/"ey 

### v. Afton-Lincoln County Municipal Airport Joint Powers Board, 2007 WL 430630 (F.A.A.). Use ofland 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 objectto 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 withAirport operations because itprevents 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 TaxAssessments and GrantAssurance 25
The City's diversion ofaviation fuel sales tax revenue from the Airport clearly is a violation ofGrantAssurance 25. Grant Assurance 25 is clearly grounded in 49 USC § 47133 

### whichprovides: "(a) Prohibition.--Local taxes on aviation fuel (except taxes in effectonDecember3D, 

### 1987) ortherevenues generatedby an airport that is the subject ofFederal 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 otherlocal facility thatis owned or operatedby theperson orentitythat owns or operates the airport thatis directly and substantiallyrelatedto the air transportation ofpassengers orproperty."
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 contemplatedby the statute. It 

### is a capital improvementwhich would improve the Airportby providing an extra margin ofsafety for all aircrafttaking offand landing, particularlyinthe sununermonths. Standing
Chandler Air Service is the largest fixed base operator at Chandler Municipal Airport. ChandlerAir Service opened its doors at ChandlerMunicipal Airport onMay 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 havejoined 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 arrangementwith an airport may allege it is affected in direct and substantial effect by an airport sponsor's non-compliance." ConsolidatedService Engineers & 

### Constructors, Inc. v. 

### City of Palm Springs, 2004 WLMary Wade, Esq. October 11,2010 Page 15

3198204, *25 (F.AA.) (holding that a firm thatwas previously a DisadvantagedBusiness Enterprise in a contractual relationship with the sponsor isan appropriate complainantto contend thatthe firm was directly and substantially affected any alleged non-compliance inthe DisadvantagedBusinessEnterpriseprogram).
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 ofconstruction ofthe 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 ofCrossroads Towne Center, and failing to fund the extension.project, the City is nOw unable to construct a 6,800 footrunway atthe Airport. Without amendments to the City Code, it is unclear ifthe City will everbe able to extendthe Runwayto 5,700 feet. Indeed, every Stakeholder has been affected by the improper limitation imposed upon the Runway and by the City's diversion ofAirportrevenue. TheAirport's facilities have suffered degradation as the result ofneglect and poormaintenance which stem from the diversion ofrevenue by the City, and the loss ofreVenue as a result ofthe City's misguided policies respecting the extension ofthe Runway. Maintenance Stakeholders
are not able to compete with airports inthe region as the result ofthe shortenedrunways. Business aviation stakeholders are limited in the type ofaircraft they may operate as the result of the shortened Runway. Property developers cannot develop the facilities appropriate for aircraftutilizing the Airport. lndeed, the shortsighted decisionto limitthe 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 ofArizona 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 ofa city or tOVl'Il ofthe board ofsupervisors of a county may:


### 1. Acquire, establish, construct, own, control, lease, equip, improve, maintain, operate andregulate airports forthe 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 hereafterbe oVl'Iled orcontrolledby 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 causeto be raisedby taxation monies sufficient to carry out" improvement and constructionprojects. 

### Id. at 8418 (c).
In purchasing real property for airports, municipalities are permitted to make monies available or, wholly orpartially, make monies available from proceeds ofthe sale ofbonds ofthe municipality subject to the approval ofthe sale ofbonds 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 improvementprojects at an airport. The City held the powerto fimd the City's portion of the Runway extensionprojectpriorto the adoption ofOrdinance 8-10. Where additional contractual obligations and commitments exist, as they do here, such a choice, while likely aviolation ofthe contractual obligations, may also violate state law.
The current runway bond Ordinance 8-10 also may violate another state law. Arizonaprohibits a governing body in a city from ''restrict[ing] orlimit[ing] the length or width ofan airstrip or runway used for the landing and takeoffofaircraft." 28 AR.S. 

### § 8411 (B). The current City Code states that ''the ChandlerMunicipal Airport shallnotbe permitted to accommodate, in any fashion, aircraft which require for takeoffa runway longer than five thousand seven hundred (5,700) feet. Extension ofthe 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 limitthe 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 ofaircraft, as was done by the City inthe 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 ofboth resolutions. As a result, the City may have painted itselfinto 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 ofArizona. 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 ofthe City,. increasing the safety and service capacity ofthe Airport, reducing noise overportions ofthe City, and allowing the Airportto continueto be ausefulArizona airport.
The Stakeholders have attempted to discuss the situation on numerous occasions with City officials. None ofthose discussions haveborne fruit. We now demandthatthe City agree to participate in a more formal process; formal mediation. We therefore request that the City agree to mediate the dispute with one ofthe mediators suggested above. Shouldthe 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 respectto the City's failure to abide by its cornrtlitments.
The

.Stakeholders expect the resolution of any mediation to include the path forward for extension ofthe Runway and a prompt return of all Airport funds to the AirportEnterprise Fund.
Shouldyou have any questions regarding the foregoing, please feel free to call the undersigned attorney. Verytruly yours, GORDON & REES LLP 

# C)
Timothy 1. McCulloch
TIMItdh Enclosure: FAA Complaint SupporterListMary Wade, Esq. October 11, 2010 Page 18

cc: 

### Mr. John Walkup, via email

James Whitlow, Esq. Deputy ChiefCounsel for Policy & Adjudication Office ofthe ChiefCounsel FEDERALAVlATIONADMINISTRATION 800 Independence Avenue, SW Washington, DC 20591
Mr. MarkMcClardy DivisionManager Western-PacificRegionalAirports Division FEDERAL

### AVlATIONADMINISTRATION P.O. Box 92007 Lawndale, CA 90261
Mr. Tony Garcia Compliance Officer

- AirPort Compliance Issues Western-Pacific RegionalAirports Division FEDERAL

### AVlATIClNADMINISTRATION P.O. Box 92007 Lawndale, CA 90261


### Mr. Michael Klein Aeronautics Group Manager ARiZONADEPARTMENT 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. MacTranstrum 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 ValuesMake TbeDifference

November4, 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 ofyour client. Amore detailed explanation ofthe City's position ·follows below.

I. The CMAis Not Neglected or Mismanaged.

Your letter cites ahsolutely no serious or rational basis forthe assertion thatthe 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 ofthe CMA is importantto 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 ofentitlement set forth in**y~ur** letter reflect badly on your client and do a disservice to the continuous level ofsupport that the City has given to the CMA over the last several decades.

MnilingAi:ldr= M>.ilStop 602 PO Box4008 Cb.=dIec, ArizOIDl. 85244--4008 OtIfce 01 the CilyAttorney**T&:phtm~** (480) 7824640 IWx (480)**7~52** Web WW\II:eb.andIeraz.gov L(u!iolr Snite20Z 55 NorthArizonaFha: Chancllec, Arizona 85225II. 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 overthe last several years. Since the General Fund contributions made by the Cityto the CMA exceed the sums deposited in the City General Fund from the sales tax on fuel that is the impetus foryour 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 afuel 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 ofthe CAS fuel license with the City. Moreover, any issue regarding the applicability of the sales taxes raised in your letter is alreadythe subject of a separate, prior claim procedure initiated by CAS in September. As such, and contraryto 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 Coritrarvto 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 atthe 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 Ofthe 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.

2V. 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 ifitwas assumed, arguendo, that the City was not in compliance with some specific grant assurance.
VI. Mediation ofAnv Alleged Grant Assurance Noncompliance is NotAppropriate.

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 letterthat 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 ofthis 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 FAAbelieves 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 orthrough a mediation procedure. Verytrulyyours,

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

# ~~rnsl" Assistant CityAttorney
JRC/rl

3cc: Mary Wade, CityAttorney 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 ofthe 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 ofTransportation

4TIMOTHY L MCCULLOCH TMcCUlLOCH@GORDONREES.COM DIRECT DIAL: (602) 794-2467

Admittedin Arizona -California

May 24, 2013



### HAND DELIVERED Mary Wade, Esq. Chandler City Attorney 55 N. ArizonaPI., Suite 202 Chandler, AZ 85244
Re: ChandlerMunicipal Airport
DearMs. 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, butnoW 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 ofthe 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 ofChandler the opportunity. to resolve or discuss Chandler Air Service's complaint as provided in 14 C.F.R § 16.21 which provides, in pertinentpart:

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 • FLORIDAMary 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 requestto assistthe 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, ifwe have not heard from you by June 5, 2013, we will assume that your position. regarding resolving these issues remains unchanged andwe will file the FAA complaint accordingly.
It is also our position that the runway limiting ordinance discussed in the Part 16 Complaint runs afoul ofA.R.S. § 28-8411 which provides that no "governing body ofa city or town

... [may] restrict or limit the length or width ofan 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 emailMary Wade, Esq. May 24, 2013 Page 3

11r. MarkMcClardy Division Manager Western-Pacific Regional Airports Division FEDERALAmTIONADMINISTRATION P.O. Box 92007 Lawndale, CA 90261
11r. Tony Garcia Compliance Officer· Airport Compliance Issues Western-Pacific Regional Airports Division FEDERALAVIATIONADMINISTRATION P.O. Box 92007 Lawndale, CA 90261

CASI/l05223711 SIS1880v.l

# e:t.

Chandler + Arizona Where ValuesMake T/w.Differem:e
Timothy 1. McCulloch, Esq. Gordon & Rees, LLP III W. Monroe St, Ste. 1600 Phoenix, AZ 85003

Re: ChandlerMunicipal Airport
DearMr. McCulloch: 

### JUN I 8

# 2~-;~'f:j'l



# ....."'-

...."",,.,;

..**~"''''==J** June 11,2013

VIAU.S. MAIL and Email 

# s

The Chandler City Attorney's office received your letter ofMay 24, 2013, submitted on behalf ofJ000 Walkup, President ofChandler 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 raisedby your client.
Yourrecent 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 partbecause the fuel tax issue already was the subject ofa separate written protestfiled 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 subjectto being bargained awaythrough third-partymediation.
There is a long history ofcorrespondence 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-halfyears. Since the initial letter ofOctober, 2010, the City airport administrationhas been improved and placedunder 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, notablythe tax issues.
Mr. Walkup's claims simply reflect that his view ofthe 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 ofthe 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 ofA.R.S. § 28-8411, which concerns restrictions on length or width ofairstrips orrunways.Timothy 1. McCulloch, Esq. June 10,2013 Page 2
Please note that, to the extent the "remedies" you allude to consist ofmoney damages, the City does not believe that either your letter ofOctober, 2010 or your recent letter May 24, 2013, constitutes a valid notice ofclaim underArizonalaw. Sincerely,

# Ab--a,~ GlennA. Brockman Assistant CityAttorney
GABI

cc. MaryWade, via email ChristineMackay, via email PatMcDermott, via email Lori Quan, via email
Mr. MarkMcClardy DivisionManager Western-Pacific Regional Airports Division Federal AviationAdministration P.O. Box 92007 Lawndale, CA90261
:Mr. Tony Garcia Compliance Officer

- Airport Compliance Issues Western-Pacific Regional Airports Division Federal AviationAdministration P.O. Box 92007 Lawndale, CA 90261

Mailing Address: Mail Stop 602 PO Box4008 Chandler, Arizona 85244-4008 Office of the CityAttorney Telephone (480) 782-4640 Fox (480) 782-4652 Location: 2nd Floor 175 South ArizonaAvenue

Chandler, Arizona 85225