1 UNITED STATES DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION WASHINGTON, D.C.

CHANDLER AIR SERVICE

Complainant,

v.

CITY OF CHANDLER, ARIZONA

Respondent. FAA Docket No. 16-13-05

DECLARATION OF LORI QUAN IN SUPPORT OF THE ANSWER OF THE CITY OF CHANDLER , ARIZONA TO COMPLAINANT’S 14 C.F.R. PART 16 COMPLAINT

1. My name is Lori Quan. I am an employee of the City of Chandler, Arizona, and serve as the Airport Administrator of Chandler Municipal Airport. I have been acting in the role of the Airport Administrator sinc e October 2011. I make this decl aration based on my first hand knowledge, my review of Airport and City documen ts, and on information and data collected and maintained by the Airport and the City in the ordinary course of business.

2. The Chandler Municipal Airport (“Airport” or “CHD”) is located in the City of Chandler (“City”), approximately three miles sout heast of the city center. The Airport began operations in 1948, and, since that time, it has been owned and operated by the City. The Airport does not have commercial passenger operations, but is a relatively busy general aviation airport. In 2012, the Airport served over 197,000 general aviation, rotary, a nd military operations. The Airport is home to approximately 437 based aircra ft. Over the years, the City has accepted a number of AIP grants for the acquisition of pr operty, airport planning, a nd the construction of a variety of capital improvements. The most recent grant is AIP-3-04-0008-023, for San Tan Apron Repairs and the rewiring of the Taxiway A lighting circuit.

3. The Airport consists of two parallel runways: Runway 4L/22R and Runway 4R/22L. Runway 4L/22R was built in 1960, at a lengt h of 2,610 feet. It was extended in several phases in the 1970s and early 1980s to reach its current 4,401 foot length. Runway 4R/22L was built in 1994, at a length of 4,870 feet. The City’s plans for the Airport anticipate extending Runway 4R/22L to a future length of 5,700 feet. The current Airport Layout Plan is attached as Exhibit 1, and the current Airport Master Plan is attached as Exhibit 2. The current ALP and Master Plan were submitted to the FAA in 2007.

4. Chandler Air Service (“CAS”) is the so le fixed base operator (“FBO”) at the Airport. In the course of my duties as Airport Administrator, I have become familiar with the operations of CAS, and I am personally acquain ted with CAS’s owner, John Walkup. I have2 first-hand knowledge of CAS’s use of Airport prope rty. I am familiar with the City’s lease with CAS and related documents and agreements, in cluding the Fuel License and Airport Minimum Standards. CAS leases approximately five acres from the City. A copy of the Lease is attached as Exhibit 3. Aerial photogra phs of CAS’s leasehold showing th e location of CAS at the Airport and the location of CAS’s facilitie s are attached as Exhibit 4.

5. Over the years, Mr. Walkup has attemp ted to lobby City officials regarding Airport policy, and he has expressed a particular interest in extending the length of Runway 4R/22L.

6. Beginning in 2010, CAS began making more pointed complaints and alleging a variety of compliance issues, including issues rela ting to fuel-sales, revenue diversion relating to fuel taxes, and economic discrimination. Primaril y, CAS expressed frustration with the failure of the bond measures to extend the runway and ur ged the City to repeal Ordinance 3888 and construct the runway extension wi thout voter approval. CAS indi cated to City staff, various members of the Airport Commission, and me that it would not pursue its ot her alleged claims of compliance issues if the City would repeal or modify Ordinance 3888 to allow the runway extension without a vote. The City Counc il has declined to take that action. History of Airport Development

7. Airport planning and development ha ve evolved over the years and are memorialized in the official records of the C ity. True and correct c opies of the principal documents setting forth that history are at tached hereto, and described as follows:

• 1982 Airport Master Plan Update (attached as Exhibit 5)

• Ordinance 2122 (attached as Exhibit 6)

• Minutes of the Regular Meeting of the Ch andler City Council, Nov. 5, 1998 (attached as Exhibit 7)

• 1998 Airport Master Plan Update (attached as Exhibit 8)

• Ordinance 2912 (attached as Exhibit 9)

• Minutes of the Regular Meeting of the Chandler City Council, Nov. 19, 1998 (attached as Exhibit 10)

• Resolution 3253 (attached as Exhibit 11)

• Resolution 3268 (attached as Exhibit 12)

• Resolution 3329 (attached as Exhibit 13)

• Memorandum from Planning Co mmission and Staff to Mayor and City Council re: Crossroads Towne Center (a ttached as Exhibit 14)

• Minutes of the Regular Meeting of th e Chandler City Council, July 24, 2003 (attached as Exhibit 15)

• Minutes of the Regular Meeting of the Chandler City Council, Aug. 14, 2003 (attached as Exhibit 16)

• Resolution No. 4034 (attached as Exhibit 17)3 • Minutes of the Regular Meeting of the Ch andler City Council, Jan. 25, 2007 (attached as Exhibit 18)

• Minutes of the Special Meeting of the Ch andler City Council, May 24, 2007 (attached as Exhibit 19)

• Ordinance No. 3888 (attached as Exhibit 20)

8. Ordinance 3888 is currently codified at Chandler Municipal Code §§ 8-10, and it provides as follows: 8-10. - Extension of runway; physical limitations. To guarantee to the citizens of the City of Chandler the continued quiet enjoyment in and to the homes, school s, 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 sp ecify that the bond monies are for the purpose of extending the runway. In addition, the Chandler Municipal Airport shall not be designed to accomm odate aircraft that weigh in excess of seventy-five thousand (75,000) po unds maximum gross weight, and/or have a wingspan of seventy-nine (79) feet or more.

9. Ordinance 3888 sets City policy regard ing the size and capability of future Airport facilities and the process for authorizing a runway extensi on. It is not intended, and has not been applied, to restrict aircraft operations . The City does not rest rict any aircraft from operating at the Airport based on ai rcraft weight, wingspan, or othe r factor. Any aircraft whose performance specifications and capabilities allow it to operate at the Airport is permitted to do so. If the runway is ultimately extended as provided in Ordinance 3888, the City intends to allow any aircraft that can ope rate on a runway of that le ngth, based on its certification and performance capabilities, to do so. Airport Revenue and Fuel Tax Collection

10. All proceeds from the sale of fuel (other than the use tax) ar e treated as airport revenue and used for Airport purposes.

11. The City endeavors to make the Airport as self-sustaining as possible. Although the City keeps all airport revenues, including the pr oceeds from the sale of fuel (other than the use tax), in an airport enterpri se fund, those funds are insufficient to cover the costs of operating the Airport. Accordingly, the C ity annually transfers funds from the General Fund to the Airport Enterprise Fund to assure the Airport does not incur a loss. The amount of the payment is based on the projected shortfall between Airport revenues and Airpor t expenses. In FY 2011/12, the City provided a $151,602 subsidy. The City has not closed out FY 2012/13, but estimates that it provided $208,103 in support to the Air port last fiscal year. Over the past several years, the City has provided annual subsidy payments to the Airport as follows: FY2006-07 $176,103 FY2007-08 $316,903 FY2008-09 $187,0194 FY2009-10 $219,193 FY2010-11 $305,126

12. The amount of the subsidy far exceeds the amount of the privilege and use tax the City collects on fuel sales as the Airport.

13. The City Council and City staff have expr essed their commitment in myriad ways to the continued financia l support of the Airport. Recent Airport Facilities Improvements

14. In 2010, the City replaced the pavement surrounding the Airp ort’s self-service fuel facility. The project was part of a larger project to improve stor m water drainage by, among other things, replacing an open water storm water ditch with an underground culvert and catch basin system, as well as a stilli ng basin and dry well west of Ai rport Boulevard. The purpose of the project was to make land west of the control to wer developable. As part of that project, the pavement around the City’s self-service fueling island was contoured to direct any accidental fuel releases into a lined retention basin to ke ep it isolated from st orm water discharge.

15. The City has also built and improved a num ber of additional facilities at the Airport, many of which directly benefit CAS. For example, the City built a paved perimeter service road that allows CAS’s fueling trucks to get to the heliport located on the Airport without crossing the runways and taxiways. The City has improved Airport Boulevard in a way that provides improved groundside acces s to CAS’s facilities. The City is in the process of constructing a new parking lot for tenants on the north side of the Airport that CAS will have almost sole use of until more tenants arrive. The City has also brought water and sewer hookups to CAS’s property line, although CAS has chos en to remain on a septic system.

16. In late 2012, CAS complained of exte nsive cracking on the “San Tan Apron,” which is immediately adjacent to CAS’s fuel pum ps, and expressed its concern that the cracks limited access to its pumps. I explai ned that the cause of the cracki ng was the nature of the soils beneath the pavement (the San Tan Ramp sits on an environmental cap) and that the City, through the FAA’s Airport Improvement Program , had been actively planning a more than $300,000 rehabilitation of the entire San Tan Ramp to address that problem. That project is largely funded with AIP and state grants.

17. In order to promptly address CAS’s concer ns, in late 2012, I dire cted Airport staff to work with CAS to implement a temporary so lution by filling the cracks immediately adjacent to the pumps with hot mix. The City has put th e entire San Tan Ramp project out for bid and expects to award the bid in October 2013, with work to be completed early by 2014 (barring any unforeseen circumstances).

18. Based on my first-hand observations, and th e recollections of Airport staff, CAS has not undertaken any significant capital improveme nts other than an asphalt seal coat and minor cosmetic changes, such as painting its facilit ies, including its self-service fueling facility, since approximately 2005 when it installed the facility. Fuel Sales at the Airport History of Fuel Sal es at the Airport5 19. For many years, the City was the only seller of fuel at the Ai rport, providing a self-service Avgas fueling facility for the conven ience of Airport users. For a brief period of time, the City provided full-service, attended Avgas sales, sometimes referred to as “off-thetruck” service because a fuel truck delivers the fuel directly to the aircraft.

20. Starting in 1994, CAS began selling Avgas, providing full-service, off-the-truck service. Since that time, CAS has been the only full-service fuel provider at the Airport. In 1995, CAS began selling Jet A fuel, in addition to Avgas, also providing full-service fueling. In 2005, CAS requested and received permission to begin providing a comm ercial self-service fueling option, and, in late 2005, CAS began pr oviding a self-service fueling option.

21. CAS sold approximately 206,793 gallons of Jet A fuel in FY2012/13. CAS also sold 354,905.40 gallons of Avgas in FY2012/13. In contrast, the City sold 53,594.10 gallons of Avgas at its self-service fueli ng facility in FY2012/13. A chart summarizing fuel sales by the City and CAS over the past six y ears is attached as Exhibit 21. Pricing of Avgas at the Airport

22. The City has adopted a formal proce ss to set its Avgas price, which is incorporated into the Airport’s Fe e Schedule. A true and correct c opy of that process is attached hereto as Exhibit 22. Pursuant to that process, the City sets a minimum base price by calculating what its total costs are, includi ng the price of fuel, a $0.10 fuel fl owage fee, taxes, applicable overhead, capital costs, and other a llocable costs. By policy, the City cannot sell fuel for less than that base price.

23. Next, the City assesses competition by surveying Avgas prices offered by sellers at other airports in th e region as well as CAS. That survey establishes a maximum price based on market conditions. Based on the Airport admi nistrator’s judgment of market conditions, the City sets a price above the minimum base price bu t at a fair, competitive price. Over the past year, the City’s price has sometimes been highe r and has sometimes been lower than the price charged by CAS. A chart summarizing the weekly prices of aviation fuel at the Airport is attached hereto as Exhibit 23.

24. The City selects its Avgas vendor through a request for quotes on the spot market each time it places an order. In recent months , Epic Fuels has won many of those bids. CAS also sells Epic Fuels.

25. I am not aware of how CAS sets it Avgas prices. I have reviewed CAS’s Lease, Fuel License, and the Airport’ s Minimum Standards and cannot find any requirement that CAS carry “branded fuel.” I have consulted with Ai rport staff and my predecessor, and none of them are aware of such a requirement. Although CAS’s l ease does require it to carry a certain level of insurance, as do all Airport tenants, that insu rance requirement does not include a branded fuel requirement.

26. Although the City reports a ll revenue and expenditure s associated with the Airport, it does not individually report the profits on fuel sales. The fuel pricing policy is designed to insure the City has consistently made money from its fuel sales. The City also makes available Airport Quarterly Reports, whic h provide a “Snap Shot” of whether projected fuel sales volumes are above or below projections, but those reports do not s how profits or losses on fuel sales. True and correct copies of severa l recent editions of those reports are attached as Exhibit 24.