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

RESPONDENT CITY OF CHANDLER, ARIZO NA’S REBUTTAL IN SUPPORT OF ITS MOTION TO DISMISS AND ANSWER

Designation of persons to receive servi ce for the City of Chandler, Arizona:

Kay Bigelow, Acting City Attorney Chandler City Attorney’s Office P.O. Box 4008 Chandler, AZ 85244-4008 Kay.Bigelow@chandleraz.gov Telephone: 480-782-4645 Facsimile: 480-782-4652 W. Eric Pilsk Daniel S. Reimer Kaplan Kirsch & Rockwell LLP 1001 Connecticut Ave., NW, Suite 800 Washington, D.C. 20036 epilsk@kaplankirsch.com dreimer@kaplankirsch.com Telephone: (202) 955-5600 Facsimile: (202) 955-5616i TABLE OF CONTENTS

I. INTRODUCTION ............................................................................................................ 1 II. ARGUMENT .................................................................................................................. .. 3 A. The City Has No Obligation To Extend The Runway ................................................ 3 B. CAS Has Failed To Show That Th e Claims Asserted In Its Complaint Have Any Merit .......................................................................................................... 6 1. The City Has Not Violated Assurance 5 ............................................................... 6 2. CAS Appears to Have Abandoned Its ANCA Claim ........................................... 7 3. The City’s Collection of Its Pre-1987 Tax on Fuel Sales Does Not Violate Revenue Diversion Rules ......................................................................... 8 4. The City Has Not Economically Discriminated Against CAS ............................. 9 C. None of CAS’s Newly Assert ed Claims Have Any Merit ........................................ 12 1. Ordinance 3888 Is Not An Unr easonable Restriction on Access ....................... 13 2. The City’s Decision to Appr ove the Vestar Development in 2003 Did Not Violate Assurance 21 ............................................................................ 16 3. The City’s Decision Not to Extend the Runway Did Not Violate Assurance 24 ....................................................................................................... 18 4. The City Has Implemented an Adequate Pavement Maintenance Program in Compliance with Assurance 11 ........................................................ 19 5. None of CAS’s Remaining F actual Assertions Demonstrate Any Violation of a Federal Obligation ....................................................................... 21 III. CONCLUSION ............................................................................................................... 24ii TABLE OF AUTHORITIES

FAA DECISIONS 41 North 73 West, Inc, dba Avitat West chester v. Westchester Cnty., N.Y. , FAA Docket No. 16-07-13, Director’s Determination (June 12, 2008) ...............................11, 22 Aero Ways, Inc

. v. Del. River & Bay Auth., FAA Docket No. 16-09-12, Director’s Determination (Aug. 30, 2010) ................................................................................7, 20, 21 ALCA, et al. v. Miami-Dade Cnty., Fla. , FAA Docket No. 16-08-05, Director’s Determination (Aug. 31, 2010) ............................................................................................4 Heide v. Carol Molnau, et al. , FAA Docket No. 16-04-11, Final Agency Decision (July 7, 2006) ...............................................................................................................1 2, 13 Henrihetta and Lindsay Tulloch v. City of Harlingen, Tex. , FAA Docket No. 16- 05-07, Director’s Determination (Aug. 21, 2006) .............................................................12 In the Matter of City of Santa Monica Cal. , FAA Docket No. 16-02-08, Final Agency Decision and Order (July 8, 2009) .......................................................................15 Jeff Bodin & Garlic City Skydivi ng v. Cnty. of Santa Clara, Cal. , FAA Docket No. 16-11-06, Final Agency Decision (Aug. 12, 2013).......................................................7 JetAway Aviation, Inc. v. Montrose Cnty., Colo. , FAA Docket No. 16-08-01, Director’s Determination (July 2, 2009) ..............................................................................4 Northern Air, Inc. v Cnty. of Kent, Mich. , FAA Docket No. 16-11-10, Director’s Determination (March 28, 2013) ...................................................................................4, 18 Pac. Coast Flyers, Inc., et al. v. Cnty. of San Diego, Cal. , FAA Docket No. 16-04- 08, Director’s Determination (July 25, 2005) ......................................................................4 Santa Monica Airport Ass’n v. City of Santa Monica, Cal. , FAA Docket No. 16- 99-21, Final Agency Decision (Feb. 4, 2003) ......................................................................4 Thermco Aviation, Inc. v. Cnty. of Los Angeles, et al. , FAA Docket No. 16-06-07, Final Agency Decision (Dec. 17, 2007)...................................................................4, 18, 19 Town of Fairview, Tex. v. City of McKinney, Tex. , FAA Docket No. 16-99-04, Director’s Determination (July 26, 2000) ..........................................................................14 Truman Arnold Co. v. Chattanooga Metro. Airport Auth., FAA Docket No. 16- 11-08, Director’s Determination (Oct. 4, 2013) ................................................................10iii STATUTES AND PUBLIC LAWS 49 U.S.C. § 47107 ............................................................................................................. ...............8 49 U.S.C. § 47133 ............................................................................................................. ...........8, 9

REGULATIONS, ORDERS, AND AGENCY GUIDANCE 14 C.F.R. § 16.21 ............................................................................................................. ..........3, 12 14 C.F.R. § 16.23 ...................................................................................................1, 3, 6, 1 2, 14, 21

U.S. Dep’t of Transp., Federal Aviation Admin., AC No. 150/5380-6B Guidelines and Procedures for Maintenance of Airport Pavements , Appendix A (Sept. 28, 2007) ......................20 U.S. Dep’t of Transp., Federa l Aviation Admin., Order 5190.6B, Airport Compliance Manual (Sept. 30, 2009)............ ..............................................................................................4, 15, 19, 2 01 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

RESPONDENT CITY OF CHANDLER, ARIZO NA’S REBUTTAL IN SUPPORT OF ITS MOTION TO DISMISS AND ANSWER

Respondent, City of Chandler, Arizona (the “C ity”), respectfully submits this Rebuttal in Support of its Motion to Dismiss and Answer, in accordance with 14 C.F.R. § 16.23, as amended by 78 Fed. Reg. 56135 (Sept. 12, 2 013), and the FAA’s Letter Or ders dated August 27, 2013, and October 22, 2013.

I. INTRODUCTION In its Reply, Chandler Air Service (“CAS”) makes clear what it seeks in this case: to compel the City to operate the Chandler Muni cipal Airport (the “Airport” or “CHD”) in the manner CAS prefers. Indee d, Mr. Walkup makes no bones about this, and frankly pleads “Guilty” to telling the City “ how to run their airport.” D eclaration of John Walkup on the Purpose of the Complaint at ¶ 45 (“Walkup Dec. 1”). Having failed to persuade the City to adopt CAS’s preferred plan for the Airport, CAS invokes the grant assurances in an effort to compel the City to construct a runway extension, using City funds and Airport revenues (but not voterapproved bonds), because CAS’s business plan is premised on an extended runway. Similarly,2 CAS seeks to compel the City to revise its pr icing policy for commercial self-service fuel to

reflect CAS’s cost structure in order to allow CAS to maximize profits and revenues. As the City demonstrated in its Answer and Memorandu m in Support of Motion to Dismiss and Answer (“Memorandum”), however, the City has no obligati on to assure that CAS achieves its business objectives or to adopt developm ent policies that favor CAS. In an attempt to mask this fundamental flaw in its Complaint, CAS uses its Reply, and in particular the two declarations submitted by Mr. Walkup, as an opportunity to assert new claims, and to recast the history of CA S at the Airport to portray CAS as the victim, somehow, of the City’s poor management. Accordingly, CAS gives vent to complaints and gripes that have accumulated over almost 25 years regarding almost every agreement CAS has negotiated with the City and regarding almost every Airport planni ng decision the City has made. But Part 16 is not a forum for the general “airing of grievan ces.” The FAA is concerned with an airport sponsor’s current compliance with its federal obliga tions. As demonstrated in detail below, none of CAS’s long list of grie vances demonstrates that the City is in violation of any federal obligation. In general, most of CAS’s gr ievances are little more than disagreements about matters of policy and business practices, and personal ire over interpersonal conduct, that simply do not implicate federal obligations. Furt her, most of CAS’s grievances re late to incidents that occurred many years ago, and, therefore, are time-barred by th e general six-year statute of limitations for asserting violations of grant as surances. Other grievances rais e issues relating to the way nowconsummated agreements were negotiated or with certain terms of those agreements that are not actionable because CAS has consented to those agreements. Whether considered separately or3 collectively, none of the grievanc es raised in CAS’s Reply demons trate a violation of any of the City’s federal obligations.

II. ARGUMENT In its Complaint, CAS asserted that the City had violated four specific federal obligations: Assurance 5 (Preserv ing Rights and Powers), the Air port Noise and Capacity Act of 1989 (“ANCA”), Assurance 25 (Airport Re venues), and Assurance 22 (Economic Nondiscrimination). In its Answer and suppor ting Memorandum, the City demonstrated that none of those claims had any merit. In its Re ply, CAS appears to abandon its ANCA claim and offers little new evidence or legal support for its Assurance 5, 25, and 22 claims. Instead, CAS seeks to salvage its Complaint by expanding its scope to assert new claims under Assurances 22(a), 21, 24, and 11. Other than it s Assurance 21 claim, these new claims were not addressed in CAS’s pre-complaint resolution letters, as requi red by 16 C.F.R. § 16.21, and none were set forth in the Complaint, together with all supporting evidence, as required by 16 C.F.R. § 16.23(b). Accordingly, the newly asserted claims should be dismissed outright. Nonetheless, the City will show that those late-asserted claims lack any merit in order to resolve this dispute finally in this proceeding.

A. The City Has No Obligation To Extend The Runway The central theory of CAS’s Complaint is that the City is required to extend the runway because an extension to 5,700’ is recommended in the Airport’s Master Plan Update and is depicted as “ultimate” development on the Airpor t Layout Plan (“ALP”). Indeed, CAS appears to maintain that the City wa s obligated to follow through on th e 1998 Master Plan Update (“1998 MPU”) that called for a runway of 6,800 feet, and further is obligated to use airport funds to allow construction to proceed immediately. See Reply at 23. Under CAS’s theory, every action4 by the City that is inconsistent the 1998 MPU, and every action th at is inconsistent with the immediate extension of the runway, violat es the City’s federal obligations. As the City explained in its Answer a nd supporting Memorandum, however, the grant assurances do not obligate the City to construct faci lities proposed in a master plan or shown on

an ALP. See generally U.S. Dep’t of Transp., Fede ral Aviation Admin., Order 5190.6B, Airport Compliance Manual , at ¶ 7.18 (Sept. 30, 2009) (“FAA Airport Compliance Manual”) (summarizing obligations under Assuran ce 29); Director’s Determination, JetAway Aviation, Inc. v. Montrose Cnty., Colo. , FAA Docket No. 16-08-01, at 23-25 (July 2, 2009) (no requirement to

build facilities shown on an AL P); Director’s Determination, Pac. Coast Flyers, Inc., et al. v. Cnty. of San Diego, Cal. , FAA Docket No. 16-04-08, at 35 (J uly 25, 2005) (no requirement to build facilities in a master plan ). Similarly, “[a] sponsor is not required to develop any and all parcels of land in a manner consistent with the wi shes of any one party, but rather may exercise [its] proprietary rights and powers to develop and administer the Air port’s land in a manner consistent with the public’s intere st.” Final Decision and Order, Santa Monica Airport Ass’n v. City of Santa Monica, Cal. , FAA Docket No. 16-99-21, at 19 (Feb. 4, 2003). 1 Implicitly recognizing that the grant assuranc es do not impose a general duty on the City to construct the runway extension, CAS asserts in its Reply th at a series of grants the City accepted in the late 1980s and early 1990s imposed a specific obligation to construct the runway extension. Reply at 20. But a re view of those grants, copies of which are attached collectively as Exhibit 1 (omitting standard form attachments), shows that is not the case. Those grants were

1 See also Final Agency Decision, Thermco Aviation, Inc. v. Cnty of Los Angeles, et al. , FAA Docket No. 16-06- 07, at 19 (Dec. 17, 2007) (“the federal obligations [do not] require sponsors to adhere to the location preferences of current tenants and subtenants when planning for the future development of the airport.”); Pac. Coast Flyers at 28; Director's Determination, ALCA, et al. v Miami-Dade Cnty , Fla. , FAA Docket No. 16-08-05, at 31 (Aug. 31, 2010); Director’s Determination, Northern Air, Inc. v Cnty. of Kent, Mich. , FAA Docket No. 16-11- 10, at 23 (March 28, 2013).5 all for the acquisition of the property “for future airport development,” primarily to construct the runway to its current length, including taxiways and safety z ones. Indeed, several of the grants refer only to a runway length of 4,850 feet, and none refer to any further runway construction. Moreover, all of the land acquire d with those grants is nece ssary for the current runway configuration and for the ultimate extension to 5,700 feet, including future runway safety areas and runway protection zones. A ccordingly, the City has complied w ith the terms of those grants by acquiring land needed for fu ture Airport development. In a final attempt to support its argument th at the City was locked into the 6,800 foot runway, CAS implies that the 1998 MPU somehow required the City to extend the runway to 6,800 feet because the 1998 MPU concluded that th e “do nothing” alternative was unacceptable. Reply at 20. But the City has never proposed to “do nothing;” it has always proposed to extend the runway. The 2007 Master Plan Update (“ 2007 MPU”) concluded th at a 5,700 foot runway, while shorter than the 6,800 footrunway previously proposed, accommodates a wide range of aircraft wh ile enhancing the level of operational safety at the Airport. It is believed that this alternative will garner greater acceptance from Airport users, ADOT and the FAA because the runway will be able to accommodate the greatest number of Airport users possible with an enhanced level of safety. 2007 Master Plan Update at 4-18- 19, attached as Exhibit 2 to D eclaration of Lori Quan in Support of Answer (“Quan Dec. for Answer”). The City accepted that recommendation and amended the ALP accordingly, although it has not yet constructed the extension. The 2007 MPU reflects sound planning principles and is consiste nt with the City’s federal obligations. Again, CAS may not agree with the City’s decisions, but the grant assurances do not provide CAS with a basis to compel the City to make a different decision.6 B. CAS Has Failed To Show That The Claims Asserted In Its Complaint Have Any Merit CAS’s Complaint was not supported by any evid ence whatsoever, and failed to meet the basic pleading standards of 14 C. F.R. § 16.23. In an effort to salvage its Complaint, CAS has attached to its Reply a number of documents a nd two declarations by CAS’s owner, Mr. Walkup. Even considering this additional material, howev er, CAS has failed to substantiate the claims asserted in its Complaint.

1. The City Has Not Violated Assurance 5 In its Complaint, CAS asserted that Ordina nce 3888 violates Grant Assurance 5 because Ordinance 3888 “deprives the City of its discretion to utilize airport funds generated on the Airport for the development of the Airport as pr ovided in the various ALPs created with federal funds.” Complaint at ¶ 23. In its Memorandum, the City show ed that CAS’s claim rests on a false premise because the City has no obligation to extend the runway, and therefore has not deprived itself of the authority to carry out its obligations as a s ponsor. Further, the City showed that the City had not surrendere d any municipal author ity regarding the Airport because the City Council retains the power to amend or repeal the Ordinance or othe rwise take action as needed to meet its federal obligations. In its Reply, CAS offers no ne w evidence or legal authority to support its claim. CAS simply repeats its argument that allowing voter s to vote on bond issues for a runway extension amounts to a surrender of City Co uncil authority. Reply at 23. CAS seems to rest its argument on the theory that Ordinance 3888 must be a surre nder of power because th e electorate has twice refused to approve a bond issue fo r a runway extension and the C ity has not proceeded anyway. That is simply incorrect. Assurance 5 does not prohibit the City from seeking or heeding input from the public on issues of municipal concern, even if it is not legally required to do so. Nor is7 the City barred from delegating authority, provid ed that the City Counc il retains the ultimate authority to take action as need ed to comply with federal oblig ations. Final Agency Decision, Jeff Bodin & Garlic City Skydiving v. Cnty. of Santa Clara, Cal. , FAA Docket No. 16-11-06, at 41 (Aug. 12, 2013). Ordinance 3888 does not remove that power from the City Council and

therefore does not violate Assurance 5. In a further attempt to find fault with Or dinance 3888, CAS argues that Ordinance 3888 was unnecessary because the City did not need to issue new bonds to pay for its portion of the runway extension because it could have dr awn on untapped bonding authority from a 1993 bond issue, which CAS claims was intended to pay for the runway extension. Reply at 21-22. Even if this point had any legal significance, it is f actually incorrect. The 1993 bond issue authorized bonds in the amount of $695,000 for the following specific Airport uses: To resurface the runway, taxiway and parking apron at the municipal airport; To acquire land for runway protection zones, roadways, the development of the south taxiway into aircraft apron space and future fixed based operators developments; To construct grading, drainage and parking aprons and infrastructure. City of Chandler, Informational Report and Sample Ballot, Special Bond Election , at 2 (May 18, 1993), a true copy of which is attached as Exhi bit 2. Plainly, the 1993 bond issue did not relate to a runway extension, and the bon d proceeds could not have been used for a runway extension project without further voter approval to chan ge the scope and permitted uses of the bonds. 2

2. CAS Appears to Have Abandoned Its ANCA Claim In its Complaint, CAS argued that Ordi nance 3888 violated ANC A. As the City demonstrated, claims under ANCA are beyond the F AA’s Part 16 jurisdiction. CAS offers no

2 As the documents attached to CA S’s Reply at Exhibit 13 show, there was an issue with the City incorrectly charging the Airport fund for certain bond interest paym ents for bonds unrelated to Airport projects. The City discovered the error and has refund ed those funds to the Airport. See Director’s Determination, Aero Ways, Inc

. v. Del. River & Bay Auth., FAA Docket No. 16-09-12, at 13 (Aug. 30, 2010) (no compliance issue under Part 16 if the alleged violation has been cured).8 response to that argument. Nor does CAS respond to the City’s arguments that the ANCA claim fails on the merits because planning decisions a bout potential future airport construction are not

“noise and access restrictions ” under ANCA. Apparently abandoning its ANCA claim, CAS

recasts its ANCA claim as an Assurance 22(a) claim argui ng that Ordinance 3888 is an unreasonable restriction on access. Reply at 19- 24. That argument has no more merit than its now-abandoned ANCA theory, however. See infra at 13-16.

3. The City’s Collection of Its Pre-1987 Tax on Fuel Sales Does Not Violate Revenue Diversion Rules In its Complaint, CAS alleged that the City ’s collection of a us e tax on the sale of

aviation fuel constituted revenue diversion becaus e the tax receipts are collected by the City and paid into the City’s General Fund. In its Memorandum, the City showed that the tax was grandfathered under 49 U.S.C. §§ 47107(b) and 47133( a) because it was in effect prior to December 30, 1987. In its Reply, CAS offers no res ponse other than to state that there is no record of tax collections prior to 1989 and to repeat its argument that the tax was not in effect prior to 2006 because that is when the City instit uted a process to collect back taxes. Reply at 25. Neither point has merit. First, as CAS’s Reply admits, its own accountan t realized that the tax on aviation fuel had been in effect before 2006 and began to pay the tax voluntarily. Id. As the City explained in detail, the tax had been in effect since 1960 and had been collected regularly from the Airport and another aviation fuel seller in the City. D eclaration of Lee Grafstro m in Support of Answer (“Grafstrom Dec. for Answer”) at ¶¶ 9-10. Th e tax was “in effect” prior to December 30, 1987, and it is therefore not subject to the revenue use rules. Second, CAS has not met its burden of proof be cause it has failed to present any evidence to support its contention that the use tax was not applied to aviation fuel sales prior to December9 30, 1987, even though the tax was in effect. Nonethel ess, the City has continued to investigate its records and, based on the recoll ection of City employees and th eir review of City practices and policies, it appears that the City did collect taxes on the sale of aviation fuel at the Airport prior to December 30, 1987. Declaration of Lee Grafstrom in Support of Rebuttal at ¶ 5, attached as Exhibit 3 (“Grafstrom Dec. for Rebuttal”). However “i n effect” is defined, the City’s

tax on aviation fuel sales has been in effect since before December 3 0, 1987, and is therefore grandfathered pursuant to 49 U.S.C. § 47133(a). 3

4. The City Has Not Economically Discriminated Against CAS CAS has focused its economic di scrimination claim on the theory that the City unfairly competes with CAS’s commercial self-service fueling operation by setting prices that CAS believes are too low. Complain t at ¶¶ 33-37. Specifically, CAS argues that the City improperly

“subsidizes” its commercial self -service fueling station by usi ng state grant funds to pay for certain improvements, thus enabling it to adopt a cost structure that is lower than CAS’s cost structure. As the City demonstrated in its Answer and supporting Memorandum, this argument

lacks merit because CAS dominates fuel sales at the Airport, belying any claim of competitive disadvantage, and because the City sets its fuel price at a reasonable level above its own costs. Memorandum at 32-33. In its Reply, CAS repeats its argument that the C ity unfairly competes because the City used state grant funds to he lp pay for drainage improvements that included replacing the pavement around the City’s self -service fueling stat ion. Reply at 27. As the Director has recently confirmed, how ever, there is no Federal obligation for an airport sponsor’s commercial operation to match the pricing policies or cost structure of a

3 In any event, as explained in the City’s Answer and supporting Memorandum, the City’s annual subsidy payment to the Airport far exceeds the amount of tax collected on the sale of aviation fuel. Accordingly, those tax receipts are effectively returned to the Airport making any allegation of revenue diversion moot. Furthermore, the City notes that it has addressed and resolved with the ADO an issue not raised in the Complaint regarding increases in tax rates since 1987.10 competing private FBO. Director’s Determination , Truman Arnold Co. v. Chattanooga Metro. Airport Auth., FAA Docket No. 16-11-08, at 27 (Oct. 4, 2013) . As long as the prices for services are reasonable and non-discriminatory, a service pr ovider, including the air port sponsor, may set prices as it sees fit. Id. Moreover, the Director specifically rejected the notion that an airport sponsor could not use grant funds, or other public funds, to construct f acilities that competed with private FBO facilities. Id. at 49. As the Director explained: The fact that [grants] and/or favorable financial terms are available to airport sponsors and not private operators does not constitute a violation of the sponsor’s Federal obligations. Private operators al so seek the most a dvantageous funding sources and financial terms available to them . It is reasonable to expect the same from airport sponsors. Id. Accordingly, the City did not violate its fe deral obligations by usi ng state grant funds to replace the pavement around the C ity’s self-fueling station. CAS attempts to bolster its economic discri mination argument by suggesting that the City imposed certain requirements on CAS when CAS in itially built its self-serving station that the City did not impose on itself. Reply at 26-27. First, CAS doe s not indicate what specific conditions were allegedly imposed improperly. A ccordingly, this argument fails for lack of specificity and proof. Second, th e City required that CAS meet certain conditions in order to construct a new facility, whereas the City’s facility had been in existence for many years. Any difference in treatment is justified by those di fferent circumstances. Finally, the City approved CAS’s fuel license in approximately 1994, Wal kup Dec. 1 at ¶ 7, and CAS constructed its commercial self-service fueling station in 2006. Whatever conditions of that construction CAS11 takes issue with were imposed well over six years ago, and any complaints about those

conditions are therefore barred by the statute of limitations. 4 Infra at 12-13. CAS’s other complaints about the City’s pri ce-setting practices are without merit. CAS continues to assert that the City prices its comme rcial self-service fuel be low cost. Reply at 14- 15; Walkup Dec. 1 at ¶¶29-30. As the City explaine d, this is not true; th e City uses a pricing

formula that accounts for all costs a nd requires that the City sell fuel above its costs. Memorandum at 33. Indeed, CAS concedes this point , although it faults th e City for not making a larger profit. Reply at 15. Paradoxically, CAS al so tries to prove that the City loses money by comparing reported fuel revenue to certain costs. Walkup Dec. 1 at ¶ 30 & Ex. 29. But, as Airport staff have explained to CAS before, and as the name of the line item makes clear, the “Airport Ops Fund-5300, Operating Supplies/Aviati on Fuel” line item includes a broad category of Airport expenses in addition to fuel-related costs. Thus, CA S relies on an “apples-to-oranges” comparison that is meaningless. Similarly, CAS points out that the City’s co sts of providing the commercial self-service fueling station have decreased between 2009 and 2013, suggesting that the current formula somehow fails to capture all of the City’s costs. Walkup Dec. 1 at ¶ 29. That inference is unfounded. The City’s baseline costs have decrease d for two reasons. First, the City has hired a new Airport Manager at a lower sa lary, so the allocation of those salary costs has decreased as well. Declaration of Lori Qu an in Support of Rebuttal (“Quan Dec. for Rebuttal”) at ¶ 2, attached as Exhibit 4. Second, the formula has b een refined to reflect lower than anticipated

labor costs associated with the self-service fuel ing station. The 2009 form ula was the first year the City used the pricing formula and was based on estimates of staff time to determine costs.

4 Furthermore, CAS agreed to those conditions, and cannot now attempt to get out of that agreement by seeking to strike certain conditions as discrimi natory. Director’s Determination, 41 North 73 West, Inc, dba Avitat Westchester v. Westchester Cnty., N.Y. , FAA Docket No. 16-07-13, at 26-27 (June 12, 2008).12 By 2012, the City had been able to track actual staff time spent per fuel load and adjusted the labor costs accordingly. Id. at ¶ 3. Accordingly, the City’s fuel pricing policy reflects the City’s actual costs to operate the self-service fueling st ation, and requires the City to sell AvGas above

those costs.

CAS’s true motives are reveal ed when it faults the City for abandoning a policy adopted for a period of time in 2007 to requ ire that fuel be sold at 7% above costs. Walkup Dec. 1 at ¶ 27. CAS approved of that approach because “C AS fared better through that time” while the City’s sales “plummeted.” Id. This reveals starkly that CAS is interested only in forcing the City to set its prices at a high enough level to allow CA S to sell self-service fuel with no genuine competition. No understanding of the City’s federal obligations requires it to set fuel prices in a way that harms consumers but benefits CAS.

C. None of CAS’s Newly Assert ed Claims Have Any Merit As explained above, CAS attempts to salvage its Complaint by adding new claims to this proceeding in its Reply. This tactic fails as a threshold matter for thre e basic reasons. First, none of these claims were set forth in the Comp laint, which is required to contain a complete statement of CAS’s case pursuant to 16 C.F.R. § 16.23(b). Second, with the exception of the Assurance 21 claim, none of these new claims were raised in the letters that purport to comprise CAS’s pre-complaint resolution effo rts pursuant to 16 C.F.R. § 16.21. Third, as detailed below, CAS’s claims under As surances 22(a), 21, and 24, as well as the miscellaneous claims asserted by Mr. Walkup in his declarations, are ba rred by the six-year statute of limitations applicable to claims under the grant assurances. Director’s Determination, Henrihetta and Lindsay Tulloch v. City of Harlingen, Tex. , FAA Docket No. 16-05-07, at 25 (Aug. 21, 2006) (declining to consider claims that arose more than six years before the complaint was filed as barred by the statute of limitations); Final Agency Decision, Heide v. Carol Molnau,13 et al. , FAA Docket No. 16-04-11, at 44 (July 7, 2006) (applying six-year statute of limitations pursuant to 28 U.S.C. § 2401(a) to a lleged violations of grant assura nces that occurred more than six years before the complaint was filed). In addition to these threshold defects, CAS fa ils to meet its burden of demonstrating that the City has violated any of its Federal obligations. Accordingly, all of CA S’s claims should be

dismissed on the merits.

1. Ordinance 3888 Is Not An Unreaso nable Restriction on Access Apparently conceding that its ANCA clai m is beyond the FAA’s Part 16 jurisdiction, CAS attempts to recast its challenge to Ordi nance 3888 as a claim under Assurance 22(a) for imposing an unreasonable restriction on access. Reply at 20-23. This claim is unavailing. First, this claim is barred by the statute of li mitations because it is asserted more than six years after the alleged acce ss restriction was adopted. Supra at 12-13. CAS’s theory is that Ordinance 3888, and the City’s decision not to extend the runway, constitute an access restriction. Reply at 20-23. The predecesso r to Ordinance 3888, Or dinance 2122, was adopted on February 8, 1990, was subsequently modified on November 18, 1998, and was amended to its current form on February 22, 2007. Quan Dec. for An swer at ¶ 7. The City electorate last voted on bonds for a runway extension on May 25, 2007. Th e only evidence CAS offers to show that it has been injured by the decision not to extend the runway was th e departure of a potential subtenant and business partner in approximatel y 2000 following a vote on Airport bonds. Walkup Dec. 1 at ¶ 15. The Complaint in this matter was filed on or about July 3, 2013, over six years after Ordinance 3888 was adopt ed, over six years after the last vote on a runway bond issue, and

over thirteen years after the 2000 bond vote. Accordingly, CA S’s challenge to Ordinance 3888 is barred by the statute of limitations.14 Second, CAS lacks standing to challenge the Ci ty’s refusal to extend the runway because any injury CAS might suffer is highly speculative on seve ral levels. Fundamentally, CAS asserts that the City’s decision not to extend the runway deprived CAS of future benefits in the form of expected future profits and business opportunities. See Walkup Dec. 1 at ¶ 3. Thus, the alleged injury is a future injury. “When a litigant allege s only future injury, as the basis for standing, he must demonstrate a realistic danger of sustaining direct injury.” Director’s Determination on Remand, Town of Fairview, Tex. v. City of McKinney, Tex. , FAA Docket No. 16-99-04, at 17 (July 26, 2000) aff’d Final Decision and Order (Jan. 23, 2001). The fact that CAS pays fees and rents to the airport does not, as CAS contends, establish standing per se for future injury. Reply at 23-24. At most, CAS’s payment of rents a nd fees confers standing to allege revenue diversion, as set forth in 16 C.F. R. § 16.23(a). But the mere paym ent of rents and charges does not confer standing to allege future injury under Assurance 22 based on anticipated economic benefits from future growth due to an extended runway. Here, it is pure speculation that the City Council would approve an extended runway

even if Ordinance 3888 were invalid. It is al so speculation that CAS would secure additional business and profits if th e runway were extended. CAS fails to provide any evidence that it would in fact do so, 5 and any number of intervening events could cause CAS not to benefit from an extended runway. For example, anticipated traffic could not materialize, or a new FBO may open business at the Airport and attract business that CAS assumed it would secure. Moreover, CAS has no legal right to expect those future pr ofits; the City has no obligation to ensure those profits; and CAS is not therefore injured by its failure to realize them. Accordingly, CAS has

5 CAS refers to a parts company that withdrew from sub-lease discussions with CAS about four months after the 2000 bond proposal failed. Walkup Dec. 1 at ¶ 15. However, CAS provides no evidence that the reason for that change was the failure of the bond proposal.15 failed to meet its burden of showing standing due to its failure to realize anticipated future profits. Third, even if the FAA reaches the merits of CAS’s Assurance 22 claim, the claim fails for the simple reason that a decision regarding how or whether to build future facilities at an airport does not implicate Assurance 22(a). Ordi nance 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 con tinued 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 5,700 feet. Extension of the runway shall require voter approved bonds, which speci fy that the bond monies are for the purpose of extending the runway. In addition, the Chandler Municipal Airport shall not be designed to accommodate aircraft that weigh in excess of 75,000 pounds maximum gross weight, and/or have a wingspan of 79 feet or more. Attached as Exhibit 20 to Quan Dec. for Answ er. As the plain language of Ordinance 3888 makes clear, the Ordinance addresses only the si ze, characteristics, a nd funding of potential future runway construction; it does not purport to, and is not a pplied to, restrict in any way aircraft from operating at CHD t oday or on the airfield in its ul timate condition. Quan Dec. for Answer at ¶ 9. CAS does not, and cannot, cite any authority for the proposition that Assurance 22(a)’s regulation of access restrictions applies to decisions about future construction. See generally FAA Airport Compliance Manual, Chaps. 13 & 14 (f uture runway extensio n projects or other infrastructure development projects are not on in the list of airport sponsor actions that are subject to grant obligations relating to airpor t access). The only authority CAS cites, Final Agency Decision and Order, In the Matter of the C ity of Santa Monica, Cal. , FAA Docket No. 16-02-08 (July 8, 2009), Reply at 3, addresses an a ttempt to restrict certain current operations,16 mostly jets, from an airport. 6 Ordinance 3888 does not do that, and therefore is not an access

restriction. Moreover, CAS’s theory of Assurance 22(a) would transform every planning decision not to expand an airport beyond a given point into an impermissible access rest riction because every decision to expand only to a cert ain point necessarily limits capac ity beyond that point. That theory finds no support in the language of A ssurance 22(a) itself, which addresses only

restrictions on current access. Furthermore, it is contrary to FAA’s well-established understanding of an airport operato r’s proprietary author ity to decide for itself how to expand or enlarge airport faci lities, including the power to change ai rport master plans and Airport Layout Plans to reflect changed c onditions and planning goals. Supra at 4.

2. The City’s Decision to Approve the Vestar Development in 2003 Did Not Violate Assurance 21 As part of its attempt to recast its ANCA claim as a claim under the Grant Assurances, CAS asserts that the City’s a pproval of the Vestar commercia l development in 2003 violated Assurance 21 by somehow allowing for the construc tion of an incompatible land use. Reply at

22. This new claim fails for two reasons. First, this claim is barred by the statute of limitations. Supra at 12-13. The City approved the Vestar project in 2003. CAS wa s aware of that decision because Mr. Walkup participated in the zoning hear ings. Walkup Dec. 1 at ¶ 20. Th e Complaint was filed on or about July 3, 2013, over ten years after the Vestar development was approved. CAS is therefore timebarred from bringing these claims now.

6 CAS attempts to fit this case into the Santa Monica paradigm by characterizing Ordinance 3888 as a “jet ban” because it was adopted orig inally in response to an initiative measure seek ing to ban jets. Reply at 20-21. But as the City has made clear, Ordinance 3888 does not operate to ban or otherwise restrict access by jets or any other aircraft type. Quan Dec. for Answer at ¶ 9. Ordinance 3888 is a permissible declaratio n of the City’s current policy on the construction of additional runway facilities in lawful exercise of the City’s propri etary power regarding future airport development. Supra at 4.17 Second, even if the claim is not time-barred, it is without merit because Assurance 21 does not prevent an airport spon sor from making land use decisions that may require changes in future development plans. Assurance 21 is, on its face, concerned with assuring that land uses near an airport are compatible with current airport operations in matters such as noise, wildlife hazards, and building height: Compatible Land Use. It will take appropriate acti on, to the extent reasonable, including the adoption of zoni ng laws, to restrict the use of land adjacent to or in the immediate vicinity of the airport to activities and purposes compatible with normal airport operations, including landing and takeoff of aircraft. Assurance 21 addresses the need to adopt land us e laws that protect “normal airport operations, including landing and takeoff of aircraft.” Id. Assurance 21 does not impose an absolute prohibition on changing land use laws in ways th at might require reconsideration of proposed potential future airport operations. The Vestar development is a commercial deve lopment that is compatible with normal Airport operations from a noise perspective. The Vestar devel opment does not include wildlife hazards that could pose a danger to aircraft operations, nor does the height of the project exceed any obstruction standard. The development does not interfere with or limit current Airport operations. The Airport continues to control all of the land it needs for current operations and almost all of the land it needs for projected future expansion. In addition, the development facilitated the realignment of Germann Road to remove the road from current and projected future runway protection zones. Thus, the City has preserved compatible land uses around the airport while meeting other important City goals in full complianc e with Assurance 21. CAS would fundamentally change the sc ope of Assurance 21 by requiring airport sponsors to preserve compatib ility with potential future de velopment and potential future operations, even when those potential plans are s ubject to change. Nothing in the language of18 Assurance 21 supports such a reading. Further, th at theory is inconsistent with FAA’s general recognition that airport sponsors may revise airport master plan s and airport layout plans, and FAA’s general recognition that airport sponsors ar e not obligated to build facilities shown on such plans. Supra , at 4. If airport sponsors are not requi red to build those facilities, and may decide not to build them at all, there is no basi s to require airport sponsors to take actions to assure future land use compatibility w ith projects that may never be built.

3. The City’s Decision Not to Ex tend the Runway Did Not Violate Assurance 24 CAS next argues that the deci sion not to extend the runway violates Assurance 24 by depriving the City of potential fu ture revenues. This claim fails for two reasons. First, for the reasons detailed above, the claim is time-barred because the decision not to extend the runway was made more than six years before the Complaint was filed. Supra at 12-13. Thus, any alleged violation is barred by the statute of limitations. Second, CAS’s claim rests on a fundamenta l misunderstanding of Assurance 24. CAS argues that Assurance 24 requires the City to ex tend the runway in order to increase operating income. Reply at 24. But Assurance 24 does not require revenue maximizat ion. As the Director recently explained “Grant Assurant 24 does not requi re the sponsor to establish a fee and rental structure designed to maximize th e Airport’s profit potential, as the Complainants seem to imply.” Director’s Determination, Northern Air Inc., et al. v. Cnty. of Kent, Mich. , FAA Docket No. 16-11-10, at 53 (March 28, 2013). Assurance 24 si mply requires airport sponsors to seek to establish a schedule of rents and charges at a level that allows the airport to be self-sustaining and that does not generate unnecessary surpluses. Id. If those basic standards are met, airport sponsors enjoy broad discretion to make business d ecisions about airport de velopment priorities.

Id. See also Director’s Determination, Thermco Aviation, Inc., et al. v. Cnty. of Los Angeles, et19 al., FAA Docket No. 16-06-07, at 19 (June 21, 2007), aff’d , Final Decision and Order (Dec. 17, 2007) (noting airport sponsor’s proprietary discre tion regarding financial business matters). The FAA recognizes, moreover, that local market cond itions may not support re nts and charges at a high enough level to cover airport expenses by themselves. Airport Compliance Manual at ¶¶ 17.5 & 17.6. At CHD, the City has elected to keep rents and charges at a re latively modest level and to make contributions from City revenue s to assure that the Airport is financially

solvent. It is true that the City could reduce its subsidy payments by finding ways to increase Airport revenues. For example, the City coul d increase rents and char ges at the Airport, including the amounts it collects from CAS and ot her Airport users. As CAS knows, however, such an approach is likely to be met with resistance from CAS and other Airport users. See Walkup Dec. 1 at ¶ 29. Likewise the City could i nvest in new facilities in the hope of attracting new business and increasing operating income thr ough increased traffic. The City has opted, however, to continue its subsidy and not seek additional revenue through extending the runway in the hope of increasing othe r Airport revenues. Such bus iness decisions about airport management are vested in the City’s discretion. Thermco Aviation, supra , at 19. CAS may not agree with that approach, but because the City’s decision has not resulted in unreasonable rents and charges, the City is in compliance with Assurance 24.

4. The City Has Implemented an Ad equate Pavement Maintenance Program in Compliance with Assurance 11 CAS argues that the City is in violation of Assurance 11 because the City has had to repair the SanTan Apron, which is located adjacent to CAS’s self-service fueling station. Reply at 27. CAS’s theory appears to be that because there were problems with the SanTan Apron that required repair, the City’s pavement maintenance pr ogram is ineffective. This claim is patently20 without merit. Assurance 11 requires airpor t sponsors to inspect and monitor pavement condition on a regular basis, docum ent those inspections, and be able to make repairs in a timely

manner. See Airport Compliance Manual at ¶ 7.6; U.S. Dep’t of Transp., Federal Aviation Admin., AC No. 150/5380-6B, Guidelines and Procedures for Maintenance of Airport

Pavements , Appendix A (Sept. 28, 2007). Assurance 11 does not require airport sponsors to assure that no pavement problems ever occur. In compliance with Assurance 11, the City follows a proactive approach to pavement maintenance that includes daily inspections a nd more detailed examinations of pavement condition on a regular basis. Quan Dec. for Re buttal at ¶ 4, attached as Exhibit 4. Following that program, the City has implem ented a number of pavement repair projects in recent years, in addition to the SanTan Apron project. Id. With respect to the SanTan Apron, the City has been aware that soil conditions under the SanTan Apron made it susceptible to cracking and that it would need to be rebuilt. That project has b een on the City’s capital improvement plan since 2011, although then-current conditions did not require immediate action. Id. at ¶ 5. In late 2012, problems with the Apron increased and reached a point where repairs were needed in the near future. The City promptly implemented a te mporary repair using a hot mix, while also expediting the permanent rebuilding solution. To provide a permanent solu tion, the City secured a federal grant in 2013, put the project out to bi d in September, 2013, awar ded the bid in October 2013, and began construction in November, 2 013. As of December 13, 2013, construction is almost complete, and final completion is expected before the end of the year. Id. at ¶ 6. To the extent the there was ever an issue, the City has completely addressed it and is currently in compliance. See , Aero Ways, supra , at 13 (no compliance issue under Part 16 if the alleged violation has been cured).21 5. None of CAS’s Remaining Factua l Assertions Demonstrate Any Violation of a Federal Obligation In addition to the issues under specific gran t assurances discusse d above, CAS has used its Reply, and in particular the tw o declarations of Mr. Walkup, to le t loose a series of complaints and grievances about how the City has treated CAS for more than 20 years. On their face, those complaints primarily relate to petty matters ab out inter-personal relationships between an FBO and an airport sponsor that have accumulated over many years. Although the City generally disputes CAS’s characterization of events, a detailed response is not necessary to show that they do not rise to the level of a compliance issue. Indeed, CAS makes no systematic effort to connect these grievances to any specific grant obligation. CAS appare ntly presents these grievances as a kind of broadside against the City in an attempt to portray the City in a bad light, and as somehow singling CAS out for poor trea tment. None of these grievances merit

substantial attention. As a general matter, Part 16 practice discourag es this kind of fact “dump” because it imposes an unfair burden on the agency, and the re spondent, to sort out what the complainant is alleging. See Aero Ways, supra , at 15 (a complainant does not meet its burden of proof by simply submitting unorganized documents with its pleadings). Here, although CAS has attempted to support its grievances with docum entary evidence, neither the Reply nor the affidavits provide exhibit numbers, or internal page references, making it very difficult to piece together what documents purport to support whic h grievances. Further, CAS has now had two opportunities to lay out it s case in a coherent manner with supporting information as required by 14 C.F.R. § 16.23, and it has failed both times. CAS’ s inability to articulate and document its

case underscores the fundamental lack of merit to the Complaint.22 More specifically, most of the grievances CAS raises related to events that occurred many years ago. For example, CAS complains of:

• The way its fuel license was negotiated in the early 1990s. Walkup Dec. 1 at ¶¶ 6-7.

• Conditions placed upon CAS’s fu el license in the 1990s. Id.

• The way the City handled several Airpor t bond issues and planning processes in the 1990s and early 2000s. Id. at ¶¶ 11-15.

• The way its self-fuel licens e was negotiated in 2005-2006. Id. at ¶ 16.

• Conditions placed upon CAS’s self-service fueling license, including its term. Id.

• The manner in which the 2007 bond issue was handled. Id. at ¶ 20-23.

Each of those events occurred more than si x years before the Complaint was filed, and claim regarding those events are therefore barred by the statute of limitations. Similarly, most of those grievances relate to the manner in whic h various agreements we re negotiated, or with specific terms of those agreements. But, CAS ultimately accepted those agreements and those terms, and cannot now challenge those terms as somehow discriminatory or improper. Director’s Determination, 41 North 73 West, Inc, dba Avitat We stchester v. Westchester Cnty.,

N.Y. , FAA Docket No. 16-07-13, at 26-27 (June 12, 2008). Even with respect to current events, CA S’s grievances do not indicate a compliance issue. For example, CAS complains that the Ci ty has not executed an agreement for CAS to use and manage the transient parking area. Walkup D ec. 1 at ¶ 10. But CAS has in fact been using and managing the transient parking area as if th e agreement were fully executed, and therefore has not been harmed. Quan Dec. for Rebuttal at ¶ 8. Similarly, CAS’s current fuel license is in effect until 2017, and the City is under no obligation to begin negotiating a renewal at this time. The City is currently reviewing in a comprehens ive manner a wide range of Airport user issues, including the transient parking and fuel services, and plans to be in a position to address future23 fuel licenses and the transient parking issue based on the results of that analysis. Quan Dec. for Rebuttal at ¶ 8-9. The balance of Mr. Walkup’s declarations, a nd CAS’s other grievan ces, are little more than an attempt to rewrite the history of the Airport in a way that paints CAS as a victim, somehow, of City policies, or to portray the City as exercising poor bu siness judgment in the management of the Airport. The basic thrust of these grievances is undercut by CAS’s concession that the City has, in fact, responded to input from CAS and other Airport businesses

on issues such as rates and char ges, Walkup Dec. 1 at ¶ 29, and moving the Airport from the City’s Public Works Department to the Economic Development Department. Id. at ¶ 33. Further, CAS concedes that its own business has expanded. Id. at ¶ 39. CAS’s grievances boil

down to frustration that the C ity has not followed CAS’s other suggestions on how to run the Airport, including extending the runway or adopting the kind of business plan for the Airport that CAS advocated. FAA generally gives airport sponsor s wide latitude to manage their airports, to plan for future development, and to establish reasonable rates and charges. Supra at 4, 10, 18- 19. Nothing in CAS’s Complaint or Reply suggest s that the City has exceeded its authority or violated any federal obligation in exercising that judgment. Ag ain, CAS may not agree with the City’s management philosophy and business plan, but neither CAS nor the FAA can compel the City to adopt the busin ess plan CAS prefers.

# EXHIBIT 1

# EXHIBIT 2

# EXHIBIT 3

# EXHIBIT 4