EXHIBIT 

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### UNITED STATES DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION

WASHINGTON, DC

) IN THE MATTER OF COMPLIANCE ) WITH FEDERAL OBLIGATIONS ) BY THE CITY OF SANTA MONICA, ) CALIFORNIA ) )



## ------------- ) FAA Docket No. 16-02-08

ORDER TO SHOW CAUSE This matter isbefore the Federal Aviation Administration (FAA) based on aNotice of Investigation initiated by the Director ofthe Office ofAirport Safety and Standards on October 8, 2002, into the legality ofthe City of Santa Monica, California's ("the City") proposed Ordinance, an Aircraft Conformance Program (ACP), banning certainjet aircraft from the Santa Monica Municipal Airport (SMO). The Notice ofInvestigation (NOI) was issued in accordance with the FAA Rules ofPractice for Federally Assisted Airport Enforcement Proceedings, 14C.F.R. Part 16, Subpart D. This investigation has remained pending because the City had not adopted the proposed ordinance and had engaged in discussions with the FAA to resolve the matter until its recent action adopting the Ordinance. On March 25, 2008, the City adopted anew Ordinance banning Category C and Djet aircraft from SMO effective within 30 days, on or about April 24, 2008. These circumstances require expedited handling ofthis matter. The City ishereby provided the opportunity to show cause why the FAA should not supplement the existing Part 16investigation with the facts pertaining to the adopted Ordinance and expedite said investigation and issuance ofthe initial determination, pursuant to 14C.F.R. § 16.11. SUMMARY OF FACTS UNDER REVIEW The Santa Monica Municipal Airport is apublic-use airport owned and operated by the City of Santa Monica, California. The facility, classified as areliever airport.' is the base ofoperations for over 400 aircraft and accounts for approximately 130,000 operations each year.' FAA records indicate that the planning and development ofthe airport has been financed, inpart, with funds

I FAA Form 5010 "Airport Master Record" for APF. Date: 10/11/2001. 2National Plan ofIntegrated Airport Systems (NPIAS), 1998-2002. SMO serves as an important reliever airport to Los Angeles International Airport (LAX). 3 FAA From 50I0 "Airport Master Record" for 2005 reported 165,000 annual operations but the number ofoperations today is believed to be about 135,000. The executive summary to the 2008 Ordinance estimates 130,000 operations.provided by the FAA under the Airport Improvement Program (AlP), authorized by the Airport

and Airway Improvement Act of 1982,(AAIA), as amended, 49 USC §47101, etseq. Between 1985 and 1994, the Airport has received atotal of$9.7 million in Federal airport development assistance." In addition, the Airport was transferred to the City from the Federal government under the provisions ofthe Surplus Property Act (SPA) of 1944. On July 22, 2002, the Santa Monica Airport Commission voted to recommend that the Santa Monica City Council implement, by ordinance, an Aircraft Conformance Program (ACP) at SMa. The ACP would restrict aircraft operations at SMa to aircraft that meet the standards for an airport with an Airport Reference Code (ARC)5 designation ofB-II. Essentially, the ACP would prohibit Category C and D aircraft from operating atthe Airport. On October 1,2002, FAA representatives from the Air Traffic, Flight Standards, Airports Divisions and the Regional Counsel met with Santa Monica to address the proposed ACP. FAA cautioned the Santa Monica representatives that the proposal was not consistent with the City's Federal obligations and Federal law. FAA commented that safety determinations involving flight ofaircraft are the responsibility ofthe FAA and the agency does not consider itinherently unsafe for an aircraft ofalarger design category to use an airport designed to accommodate alesser category aircraft. Additionally, Air Traffic and Flight Standards representatives reiterated that design standards limitations do not translate into operational limitations and that FAA develops instrument approaches to permit safe aircraft operations. Finally, the FAA told Santa Monica that the agency holds the expectation that the City must comply with Section 9 ofthe 1984 Agreement to maintain the existing runway length and width," and that any action taken by the City that conflicts with its federal obligations would be ofconcern to the FAA.

4Airport Sponsor AlP Grant History dated July 22,2002. 5The ARC is an FAA coding system used to relate airport design criteria to the operational and physical characteristics ofthe aircraft types for which the airport was designed. FAA Advisory Circular No. 150/5300-13, "Airport Design" (September 29,1989), chapter 1,p.4. The ARC code has two components, both relating to the "critical design aircraft" for the airport. The critical design aircraft is defined as the category of aircraft which conducts 500 itinerant or more operations per year atthe airport. National Plan ofIntegrated Airport Systems (NPIAS), 1998-2002, p. 38. The first component, depicted by the letters A-E, isthe aircraft approach category and relates to aircraft approach speed. For example, aCategory A aircraft has an approach speed ofless than 91 knots while aCategory B aircraft has an approach speed of 121 knots or more, but less than 141 knots. The second component, depicted by Roman numerals I-VI, isthe airplane design group and relates to airplane wingspan. For example, a Group Iaircraft have awingspan ofup to but not including 49 feet, while a Group 11aircraft has a wingspan of49 feet up to but not including 79 feet. Id., p. 1. 6 In 1981,the Santa Monica City Council enacted aresolution to close SMO. That action resulted in extensive litigation against the City by airport associations, the FAA, and the Department ofJustice (DOJ). The litigation resulted in anegotiated settlement memorialized on January 31, 1984, referred to as the 1984 Santa Monica Airport Agreement (" 1984 Agreement"), which resolved a series ofdisputes involving SMO. The 1984 Agreement recognized that SMO serves a "vital and critical role in its functions as ageneral aviation reliever for the primary airports inthe area ... by diverting aircraft away from the air carrier airports and other heavily used airports located in the Greater Los Angeles Area." The 1984 Agreement, p. 3-4. In addition, the 1984 Agreement outlined conditions by which the City would operate and maintain the Airport as aviable functioning facility without derogation ofits role as ageneral aviation reliever airport. As the basis for the 1984 Agreement, the parties recognized several legal principals including

...the "Airport isto be open and available to and for public use as an airport on fair and reasonable terms, without unjust discrimination, and without granting any exclusive rights prohibited by law

.." and "pursuant to the
2On October 8, 2002, the FAA issued the NOI under Part 16initiating the investigation concerning

the legality ofthe ACP. The City responded to the NOI onNovember 2,2002. On December 10,2002, the City Council received the Airport Commission's recommendation to approve the ACP and areport on the pending administrative proceeding. Following apublic hearing, the City Council approved the ACP concept ofimplementing 300 foot runway safety areas at either end ofthe runway, a 300 foot relocated threshold from the departure end ofthe runway, and aban on C and D aircraft. The City Council did not adopt the ACP as an ordinance but directed City staffto continue to meet with the FAA in an attempt to promptly resolve the matter. Attempts atresolution between the FAA and the City continued until the adoption ofthe Ordinance inMarch 2008 Between 2002 and 2008, there were several meetings and discussions between SMa officials and the FAA that included new proposals and counterproposals as alternatives to the ACP. The City's proposals included displaced thresholds 7 ofseveral hundred feet, declared distances'' and large engineered material arresting system (EMAS) installations9 which would have a significant impact on the utility ofthe Airport. On July 31, 2007, the FAA proposed the installation ofone EMAS installation at each end ofthe runway. On August 28,2007, the FAA participated atapublic hearing on SMO in Santa Monica. At the meeting the FAA reiterated that its proposal provides an actual, physical stopping effect on overrunning aircraft that directly benefits both persons onthe aircraft and the areas offthe ends of the runway. The FAA believes that the proposal would significantly enhance safety at SMa while maintaining the utility ofthe Airport. The City rejected the FAA's proposal. On November 27,2007, the new Ordinance was read (first reading) atthe City Council meeting. By letter dated March 7, 2008, the FAA proposed modifications to its EMAS proposal, as well as to holdline and departure procedures, and to the information pilots receive on SMO upon filing aflight plan. On March 25,2008, the City adopted the new Ordinance banning Category C and Djet aircraft from SMa effective within 30 days, on or about April 24, 2008. The effect ofthe new Ordinance is the same as the Aircraft Conformance Program (ACP) proposed by the City in 2002. Both would prohibit Category C and D aircraft from operating atthe Airport.

Federal Aviation Act of 1958, as amended, exclusive authority is vested inthe FAA for the regulation ofall aspects of air safety, the management and control ofthe safe and efficient use ofthe navigable airspace, and movement of aircraft through that airspace." 1984 Agreement pgs 3 &9. 7A displaced threshold is athreshold located at apoint on the runway other than the designated beginning ofthe runway. Displacement of athreshold reduces the length ofrunway available for landings. The portion ofrunway behind adisplaced threshold is available for takeoffs in either direction and landings from the opposite direction. 8 Declared Distances are the distances the airport owner (with FAA concurrence) declares available for the airplane's takeoff run, takeoff distance, accelerate-stop distance, and landing distance requirements. 9EMAS is abed ofhighly crushable concrete blocks that are installed atthe ends ofthe runway. When an aircraft leaves the runway traveling at speed, the landing gear will crush the EMAS bed and the aircraft will come to a quick and safe stop.

3The Ordinance adds section 10.04.06.220 to the Municipal Code prohibiting Category CorD

aircraft from landing or departing SMO except in a "bonafide" emergency. Violations ofthe Ordinance are punished as misdemeanors by a $1,000 fine or six months imprisonment, orboth. The stated purpose ofthe new Ordinance isto protect the safety ofpersons living adjacent to the airport and flying in aircraft using the airport. The City claims that the Ordinance comports with agreements between the City and the FAA "recognizing the City's obligation to serve category A and B aircraft atthe Airport." Itfurther claims to be consistent with the 1984 Settlement Agreement and 1991 Airport Layout Plan (ALP) assigning an Airport Reference Code (ARC) designation ofB-II to the Airport and, obligating the City to operate it accordingly. The Ordinance prohibits all aircraft ofacategory higher than B ARC from operating atthe Airport. As explained inthe original 2002 NOI, the ARC design category ofan airport is not intended, and cannot be used, to limit operations ofan airport. The same istrue of the related runway safety areas (RSA) design standard. While the design category and geometry ofan airport are useful in airport planning, the FAA does not consider itinherently unsafe for an aircraft ofalarger design category to utilize an airport that has been designed to accommodate alesser design category of aircraft. It is incorrect to assume that Category C and D aircraft operating at SMO are not compatible with the airport's Airport Reference Code and lack of standard RSAs. Instrument approach charts published by the FAA for SMO provide instrument approach procedures for the airport up to Category D aircraft. Under 14C.F.R. § 91.3, the pilot in command ofan aircraft is directly responsible for, and isthe final authority as to, the safe operation ofthe aircraft he or she commands. The applicable FAA operational limitations, such as the FAA approved Airplane Flight Manual performance data and the regulatory frame work, such as 14CFR Part 91 and Part 135,permit safe operations ofCategory C and D aircraft on 5,OOO-foot runways. The safety ofan aircraft' s operation is afunction ofthe requirements forthat operation inthe aircraft certification manual. SMO's runway is 4987 feet. IfSMO's runway meets the FAA's requirements, there is no safety basis for prohibition ofthat operation. On several occasions since 2002, the City was advised that RSAs, [which are clear areas atthe end ofrunway varying in size depending upon the ARC code] are designed for the protection of aircrews and passengers, not to guarantee that an aircraft will never getbeyond the safety area. RSAs are problematic at SMO because they need to be level, and the land drops offatthe end of the runways at SMO. However, the RSA standard ispart ofFAA's airport design standards, and is not an operating requirement ofcondition. No FAA aircraft operating rule requires a standard RSA, and there is no basis inFAA regulations forprohibition ofany operation based on the status ofthe RSA. For protection ofpersons and property near the end ofthe runway, FAA design standards provide for arunway protection zone (RPZ) that limits land uses inthat area, and when necessary, promotes the acquisition and clearing ofRPZs by the airport. The RPZ isrecommended but not

4required at general aviation airports like SMO. It appears that the City has not acted to acquire

land to create RPZs at SMO. The practical effect ofthe new Ordinance (like that ofthe ACP) would be to ban several thousand jet operations per year from SMO. Based on the City's own data, the new Ordinance would ban approximately 9,000 operations at the Airport. APPLICABLE LAW AND POLICY Title 49 ofthe United States Code assigns the FAA Administrator broad responsibilities for the regulation of air commerce in the interests of safety and, among other things, the promotion, encouragement, and development of civil aeronautics. 49 U.S.C. §§ 40101(c), (d), 4010410• Under these broad powers, the FAA seeks to achieve safety and efficiency ofthe total airspace system through direct regulation of airman, aircraft, and airspace. 49 U.S.C. §§ 40103, 44702- 44705. The Federal role in promoting civil aviation has been augmented by various legislative actions which authorize programs for providing funds and other assistance to local communities for the development of airport facilities. In each such program, the airport sponsor assumes certain obligations, either by contract or by restrictive covenants in property deeds and conveyance instruments, to maintain and operate its airport facilities safely and efficiently and in accordance with specified conditions. Commitments assumed by airport sponsors in property conveyance or grant agreements are important factors in maintaining ahigh degree of safety and efficiency in airport design, construction, operation and maintenance as well as ensuring the public fair and reasonable access to the airport. SMO has been financed, in part, with funds provided by the FAA and the U.S. Department of Transportation under the Airport Improvement Program (AlP). The program provides financial assistance to an airport sponsor for airport development in exchange for binding commitments designed to assure that the public interest will be served. These commitments are set forth in the sponsor's applications for Federal assistance and in the grant agreement as sponsor assurances, i.e. a list of applicable Federal laws, regulations, executive orders, statute-based assurances, and other requirements, binding the sponsor upon acceptance ofthe Federal assistance. The FAA has a statutory mandate to ensure that airport owners comply with these sponsor assurances. See 49 U.S.C. §§ 40103(e), 40113, 40114, 46104, 47122, 46101, 46105, 47107(a), (b), (g), 47106(e), 47111(d), and 47122.

10 Inadditionand with limitedexceptionsformilitaryconcerns,theFAAshallmakelong-rangeplansandpolicyfor theorderlydevelopmentanduseofthenavigableairspaceandairnavigationfacilitiesthatwillbestmeettheneedsand servetheinterestsofcivilaeronauticsandnationaldefense. 49U.S.c. §44501(a). TheU.S.GovernmenthasexclusivesovereigntyofairspaceoftheUnitedStates. 49U.S.C. §40103. Moreover,the FAAAdministratorprescribesairtrafficregulationsontheflightofaircraftfornavigating,protecting,andidentifying aircraft;protectingindividualsandpropertyontheground;usingthenavigableairspaceefficiently;andpreventing collisionbetweenaircraft,betweenaircraftandlandorwatervehicles,andbetweenaircraftandairborneobjects. 49 U.S. C. §40103(b)(2)

5Because the City ofSanta Monica assumed Federal obligations inthe form ofgrant assurances,

surplus property obligations and those incorporated into the 1984 Settlement Agreement, the City isrequired to operate its airport facilities in accordance with specified conditions, including making SMO available forpublic use on reasonable terms, and without unjust discrimination, and without granting an exclusive right, to all types, kinds, and classes ofaeronautical activities, including commercial aeronautical activities offering services to the public atthe airport. Thus, any actions taken by the airport sponsor that conflict with these obligations could be found to be in violation ofits Federal obligations. GRANT ASSURANCES As acondition ofproviding airport development assistance under the AAIA, the Secretary of Transportation must receive certain assurances from the airport sponsor. Title 49 U.S.C. §47101 et seq. sets forth assurances to which an airport sponsor receiving Federal financial assistance must agree as acondition precedent to receipt ofsuch assistance. 49 U.S.c. §47107(g» authorizes the Secretary to prescribe project sponsorship requirements to insure compliance. Grant Assurance No 22, Economic Nondiscrimination, and Grant Assurance No. 23, Exclusive Rights are applicable to the specific circumstances ofthis proceeding. II Surplus Property Obligations Under the Surplus Property Act of 1944 (SPA), surplus property instruments oftransfer are one of the means by which the Federal government provides airport development assistance to public airport sponsors. The conveyance ofsurplus Federal land to public agencies for airport purposes is administered by the FAA, in conjunction with the U.S. Department ofDefense (DOD) and the General Services Administration (GSA) pursuant to 49 USC §§ 47151, 47152, and, 47153. Upon acceptance ofsurplus property conveyance by the City, the obligations inthe instrument of disposal became abinding obligation ofthe City. The SPA deed contains Federal obligations similar to AlP grant obligations to offer access on fair and reasonable terms, that run inperpetuity until the FAA releases the SPA obligations orreverts the airport under the right to revert clause forviolations ofthe SPA deed covenants. One ofthe surplus property conveyance covenants contained inthe 1948 Surplus Property Instrument of Transfer stipulates that the Airport "shall be used forpublic airport purposes forthe use and benefit ofthe public, on reasonable terms and without unjust discrimination and without grant or exercise ofany exclusive right foruse ofthe airport

... " The FAA has the sole responsibility for determining and enforcing compliance with the terms and conditions ofall instruments oftransfer by which surplus airport property is orhas been conveyed to non-federal public agencies pursuant to the Surplus Property Act of 1944 (SPA). Accordingly,

II 14Code ofFederal Regulations Part 16implements regulatory guidance for enforcement proceedings related to the grant assurances.
6such covenants continue in full force and effect until released under 50 App. U.S.C.A. § 1622(g)

(1949) (originally enacted as Surplus Property Act of 1944, ch. 479, 

### § 13,58 Stat. 765, 770, or other applicable Federal law. Other Applicable Law

- Airport Noise and Capacity Act of 1990 As stated inthe 2002 NOI, the City ofSanta Monica should also be aware ofthe FAA's concerns regarding compliance with other applicable Federal law. Under the Airport Noise and Capacity Act of 1990 (ANCA), 49 U.S.c. §47524 (c) an airport noise or access restriction that affects Stage 3 aircraft, like the C and D category aircraft affected by the City's proposed ordinance, may become effective only ifagreed to by the airport proprietor and all aircraft operators orhas been submitted and approved by the Secretary. Restrictions covered by this paragraph include any restriction on Stage 3 aircraft. The ANCA statute also provides inpart that unless the Secretary is satisfied that an airport is not imposing an airport or access restriction not in compliance with this subchapter, the airport may not receive grants orimpose Passenger Facility Charges (PFCs). 49 U.S.C. §47526. ISSUES UNDER INVESTIGATION In addition to the issues presented inthe October 8, 2002 NOI, the issues under investigation include, but are not limited to, the following issues:

• Whether Santa Monica's implementation ofthe adopted Ordinance prohibiting Category C and D aircraft is consistent with the federal obligation to make its airport available as an airport for public use on reasonable terms and without unjust discrimination to all types, kinds, and classes of aeronautical activities.

• Whether Santa Monica's implementation ofthe adopted Ordinance prohibiting Category C and D aircraft is consistent with the federal obligation prohibiting the granting ofan exclusive right atthe airport to conduct any aeronautical activities.

• Whether Santa Monica's implementation ofthe adopted Ordinance prohibiting Category C and D aircraft ispreempted under Federal Law.

• Whether Santa Monica's implementation ofthe adopted Ordinance prohibiting Category C and D aircraft is consistent with the terms ofthe 1984Agreement.

• Whether Santa Monica's implementation ofthe adopted Ordinance prohibiting Category C and D aircraft is consistent with the Surplus Property Act deed covenants. ORDER TO SHOW CAUSE Given the public interest for fair review and decision ofthis matter; the right ofthe City to be heard, and finding that the adoption ofthe ordinance requires expedited handling ofthis matter, the Director concludes that the City should beprovided with the opportunity to show cause as described below pursuant to 14C.F.R.§ 16.11.(a);(b).

7Accordingly:

1. The FAA hereby directs the City of Santa Monica to show cause why the FAA should not supplement the existing Part 16investigation with the facts pertaining to the adopted Ordinance and expedite said investigation and issuance ofthe initial determination pursuant to 14 C.F.R. § 16.11. 2. Because ofthe April 24th effective date ofthe Ordinance this matter needs to be expedited pursuant to 14 C.F.R. §16.11(b). The City may file aresponse to this Order to Show Cause within 10days from the date ofthis Order pursuant to 14 C.F.R. 16.11(b). Service of documents is limited as follows pursuant to 14 C.F.R. §16.11(b). The City's response directed to the Director ofthe Office ofAirport Safety and Standards must be served by personal delivery, or by electronic-mail to kelvin.l.solco@faa.gov. 3. Failure ofthe City to respond to this Order within the 10day period provided will result inthe FAA supplementing and expediting the investigation, and expediting issuance ofthe initial determination.

8CERTIFICATE OF SERVICE

IHEREBY CERTIFY that on March 26, 2008, Icaused to be served by electronic mail (email) and by overnight express delivery service (Federal Express), atrue copy ofthe foregoing document addressed to:

Marsha Jones Moutrie City Attorney City of Santa Monica 1685 Main Street Santa Monica, CA 90401 marsha. moutrie@smgov.net

P. Lamont Ewell City Manager City of Santa Monica 1685 Main Street, Room 209 Santa Monica, CA 90401 lamont. ewell@smgov. net Mr. Robert Trimborn Airport Manager Santa Monica Municipal Airport 3223 Donald Douglas Loop S. Santa Monica, CA 90405 bob.trimborn@smgov.net

Sharon Long Airports and Environmental La Office ofthe Chief Counsel

9