### March 5 , 2012**Responses to**  **IOUs from SJU Privatization Teleconference** 
**– AP**  **P -**  **5 00** 

**Provide a copy or a link to the most recent SJU competition plan (to A CO, who will relay it to**  **the appropriate party(ies).** Copy provided to SJU by FAA Office of Airport Compliance. **Review Part 158 and Order 5500.1 to verify our previous conclusion that airline consultation is required for an amendment due to a change in the financing structure.**  The FAA has reviewed this matter and verified our previous conclusion that airline consul tation is required for an amendment due to a change in the financing structure. The reason for this is rooted in the statute (§40117(C)(2)), which specifically requires that “Before submitting an application, the eligible agency must provide reasonable no tice to, and an opportunity for consultation with, air carriers and foreign air carriers operating at the airport.” In 14 CFR Part 158, the FAA determined that this requirement extends to amendments meeting certain criteria, because to do otherwise could allow public agencies to circumvent the spirit of the law. Changes in financing structure of a project represent a material change because such changes can significantly affect the period of collection and the overall amount of PFC revenue approved for th e project. This is reflected in Order 5500.1 (Paragraph 12

- 6(c)) which requires an amendment for materially altering the scope of an approved project. Amendments that change the scope of a project require consultation per 14 CFR Part 158.37(b)(1)(ii)(C). Order 5500.1 (Paragraph 12

- 6(c)) also defines changing the method of financing for a project as constituting a material change in scope. **Verify our previous conclusion (from Chicago Midway) that the public agency can initiate the amendment process, inclu**  **ding airline notification and consultation --**  **with the F AA**  **approving the actual amendment only at or about the time the transfer occurs. A** **s a reminder, in Chicago, the complexity was that the FAA**  **could not approve the amendment without first determining t**  **hat it was reasonable and necessary, which we could not do unless the transfer to a private entity was a virtual certainty... but the transfer couldn't happen without first**  **restructuring the debt.** Verified

– the existing public agenc y can initiate the process including airline notification, consultation, and public notice prior to the transfer under 14 CFR Part 158.37 procedures. However, the FAA cannot approve the amendment until the transfer occurs because the financing is dependent on the transfer to the private entity with the Concession agreement. **Prepare response to the question of whether FAA has any concern with a use agreement**  **provision that requires PFCs to be applied first to government -**  **mandated projects.** The statutory provisions regarding th e PFC program include a specific provision (§40117(f)(1) which states that “A contract between an air carrier or foreign air carrier and an eligible agency made at time ma y not im pair the authority of the agency to impose a passenger facility fee or to use a the passenger facility revenue as provided in the section.” The FAA position continues to be that any provision in an agreement contrary to the PFC statute, such as §40117(f)(1) , would be invalid. **Verify that impose -**  **and -**  **use authority can be transferred from the public agency to the private**  **operator as part of the overall transfer agreement.** Verified with FAA counsel. The Statute (47134(g)) contemplates that a private entity upon receipt of an exemption, be allowed to impose a PFC like a public agenc y under the privatization pilot. Accordingly, once the public operator executes the transfer agreement with the private operator, the PFC authority transfers with that agreement.

### March 5 , 2012

**Follow up on question about taxation of PFC revenues when remitted to a privat e entity.**  The FAA is not in a position to render an opinion on this matter. DOT Counsel advised SJU that it ma y wish to request a ruling from the IRS on whether PFC revenues of a private operator accepted into the privatization pilot program is taxable.