U.S. Department of Transportation Federal Aviation Administration



### .NOV 

## f 72016 Luvenia Jackson, Superintendent Dr. PamelaAdamson, Chair Office ofthe Chief Counsel

Clayton County Board ofEducation Public Schools Administrative Complex I058 5th Avenue Jonesboro, GA 30236 Re: Clayton County Entities' Amended ActionPlan Dear Superintendent Jackson and Dr. Adamson: 800 Independence Ave., S.W. Washington, D.C. 20591

The Administrator asked me to respond to your September 13, 2016letter, submitting an amendment to the Clayton County Entities,! December 8, 2015 Action Plan? As youknow, the FAA's November 7, 2014, "Policy Amendment" required state and local governments to submit by December 8, 2015, an Action Plan detailing how, and by when, they would come into compliance with federal law requiring revenue raised from all aviation fuel taxes

- excise and general alike

- be dedicated to supportthe operation and development ofairports, air transportation ofgoods and passengers or a state aviation program. 3
The Clayton County Entities' December 8, 2015 Action Plan, which is a part ofthe Aviation Fuel Tax Docket, described the Entities' proposal to comply withthe Policy Amendment, the impact ontheir localjurisdictions, and impediments to intended compliance.

1 The September 13, 2016letter was submitted on behalfofthe following local governmental entities ofthe State ofGeorgia: Clayton County Georgia Government, Clayton County Georgia Public Schools, and the Cites ofForest Park, Riverdale, Lovejoy, Morrow, Lake City, Jonesboro, and College Park (collectively referred to as "Clayton County Entities").

2 Your amended Action Plan has been posted to the FAA Aviation Fuel Tax DocketNo. 2013-0988- 198 (October 4, 2016).

3 79 Fed. Reg. 66282, the "2014 Policy Amendment" clarified application ofthe Agency's 1996 Revenue Use Policy. (Policy andProcedures Concerning the Use of AirportRevenue, 64 Fed. Reg. 7696, (February 16, 1999)).

### The Clayton County Entities' September 13, 2016 amended Action Plan, which also has beenmade a part ofthe Aviation Fuel Tax Docket, provides the Entities' positionthat the Policy Amendment does not apply to them since they are not grantrecipients and have no ability to spend revenues from their tax on aviation fuel for the purposes specified in federal law. The basis for the Clayton County Entities' amended Action Plan is their contentionthat federal lawpermits them to levy a general sales tax onthe sale ofaviation fuel and divert such revenue to fund a variety oflocal governmental services, including public education and infrastructure, in lieu offunding aviation-relatedprojects or programs. Specifically, the Entities contend they are (or should be) exempt from generally applicable federal lawbecause they neither received federal airport improvement grants nor are they responsible for the operation ofHartsfield-]ackson Atlanta International Airport and, hence, are unable to spend aviation fuel tax revenue for aviation-related purposes4


### Inthe eventthe FAA disagrees with their contention as to permissible uses ofaviation fuel tax revenue, the Clayton County Entities alternatively propose the FAA sanction using the value oflost property taxes, due to their inabilityunder Georgia state law to tax the airport's real property located in Clayton County, as an "offset" for their impermissible diversion ofaviation fuel tax revenue for non-aviation-relatedpurposes.5 

### This letter responds to each contention. Diversion ofAviation Fnel TaxRevenue For Non-Aviation Purposes 

### The FAA disagrees withyour contentionthat the federal prohibition on the diversion of aviation fuel tax revenue for non-aviationpurposes only applies to state or local governments who received federal airport improvement grants or are an airport sponsor. We believe federal lawprohibits all state and local governments from diverting aviation fuel tax revenues for any non-aviation related purpose. The Clayton County Entities' contentionto the contrary relies on the text ofa version of current lawthat originated in the House ofRepresentatives in 1996. It is true that the House bill applied to only airport sponsors ("certificate holders"). However, as the Entities acknowledge, the House language did not become law as it was amended in conference to include the Senate's broader language. The Senate's broader language is the final language ofPublic Law 104-264 

### § 804, which provides:

4Notwithstanding that contention, the FAA notes that publicly available records reflect Clayton County, as an owner ofa federally obligated airport, was subjectto prohibitions on revenue diversion at least through 2012 when the County soldthe airport to a neighboring county.
5 Letter from Irene Elizabeth Howie, Esq., to Eduardo Angeles, the FAA'sAssociate Administrator for Airports, September 15, 2016. 2"(a) Prohibition. 

### Local taxes on aviationfuel (except taxes in effect on December 30, 1987) orthe revenues generated by an airport that is the subject ofFederal assistance 

### may not be expended for anypurpose other than the capital or operating costs of(1) the airport; (2) the local airport system; or "(3) any other local facility that is owned or operated by the person or entity that owns or operates the airport that is directly and substantially related to the airtransportation ofpassengers orproperty." (Emphasis added). By its express terms, this provision ofcurrent law clearly is not limitedtojurisdictions that eitherreceive federal financial assistance or operate the airport6 Additionally, Public Law 104-264 

### § 802(b) expressly provides as one ofits purposes: "Thepurpose ofthis title is to ensure that airportusers are notburdened with hiddentaxation for 

### unrelatedmunicipal services andactivities, by

... (4) clarifying limitations on revenue diversion that are permitted under chapter 471 oftitle 49, United States Code; and (5) establishing clearpenalties and enforcement mechanisms for identifying andprosecuting airport revenue diversion." (Emphasis added). Clearly, the Clayton Counties Entities' use ofrevenue from a general sales tax on aviation fuel to support a variety ofpublic services, including public education and infrastructure, is the use ofthe tax to fund "uurelatedmunicipal services and activities

..." contraryto the express purpose ofthe federal ban on the diversion ofaviationfuel taxrevenue.7 By following the clear, unambiguous intent ofCongress, the FAA is not expressing a viewas to the desirability ofState or local governments levying a general sales tax on aviation fuel. 8 That is a matter for state and local governments. Rather, the FAA simply is enforcing Congress' mandate requiring aviation fuel tax revenues be used solely for

6 Congress knows how to establish aprocess to waive provisions when appropriate. For example, the House bill contained aprovision granting the FAA authorityto issue waivers to airports not receiving grant assistance under Chapter 471, during the preceding 10-yearperiod. That provision also was eliminated in Conference.

7 As the Clayton County Entities acknowledge, the FAA's 2013 Proposed Policy Clarification specifically referenced non-sponsor state and local governments and stated the FAA did not distinguish between types oftaxes. [78 Fed. Reg. 69791 and 69793].

8 The FAA specifically solicited comments on other reasonable interpretations regarding the permissible use ofstate and local taxes because we understood there could be alternate views as to the interpretation ofthe statute. The Agency also was aware that its proposed interpretation would have substantial practical consequences both for state and local government agencies and for industry consumers ofaviation fuel. [78 Fed. Reg. 69791]. The FAA conducted outreach with Congressional Committee staff, state and local organizations, and industry organizations and solicited feedback from taxing authorities. 3aviation-related purposes.9 Neitherthe federal statutoryprohibition on diverting aviation fuel tax revenues northe FAA's enforcement ofthe same in any way prohibits orrestricts State or local governments from levying a general sales tax onthe sale ofaviation fuel. 10


### Guidance as to Permissible Offsets
Your September 15, 20 16 letterto Associate Administrator Angeles notesthe HartsfieldJacksonAtlanta International Airport is owned by the City ofAtlanta, which is located in DeKalb and Fulton Counties, even though 3,146 ofthe Airport's 4,700 acres are located in Clayton County. In addition, I reviewed Clayton County's Comprehensive Annual Financial Reports. The 2017 Budget Document notes the Hartsfield-Jackson Atlanta International Airportis an economic engine contributing thousands of jobs, significanttax revenue, and international trade resources to the County. 11 Indeed, the Report notes the real and personal propertytaxes by three air carriers- Southwest, Air Tran and Delta- on property atthe airport are among the County's top ten property taxpayers. Nevertheless, Clayton Countyproposes the FAA approve the Countyusing the value of losttax revenue due to its inabilityunder Georgia state lawto tax airportreal property located in County as an "offset" for the diversion ofaviation fuel tax revenue for general municipal services and activities. 12 Specifically, Clayton County seeks permission to 

### 4

9 The Agency recognizes guidance priorto the 2014 Policy Amendment may have lacked clarity and precision. However, the 2014 Policy Amendment provided all State and local governments: (i) clear and precise guidance applying the application ofthe prohibition on revenue diversion, regardless of whetherthey are responsible for airports or operate State aviation programs; and (ii) three years to come into compliance conditioned on their submitting the requisite Action Plan. The Georgia Department ofLaw, on behalfofthe Georgia Departments ofTransportation and Revenue, submitted an Action Plan to the Aviation Fuel Tax Docket. That Action Plan did not address compliance by taxing authorities like the Clayton County Entities who are not responsible for operating an airport. The Clayton County Entities' initial Action Plan enclosed Georgia's Action Plan, and claimed they were "handcuffed" by the absence ofcollaboration withthe HartsfieldJackson Atlanta International Airport, the incapacityto change restrictions on use for aviation fuel taxes approved by referendum, and the State's failure to discuss the legal restriction issues in its Action Plan. The Entities advised that they were evaluating offsets for the exempted taxes against fuel tax revenues and the value ofquantifiable in-kind services.

10 The FAA rejects the Clayton County Entities' contention that federal prohibitions on diversion ofaviation fuel tax revenue are inconsistent with the federalism principles described in Executive Order 13132. The preamble ofthe 2014 Policy Amendment and aresponse to a comment summarize the Agency's views. [79 Fed. Reg. 66283 and 66287].

11 http://www.claytoncountyga.gov/pdfs/finance/Budget%20Book%2020 1 7%20Final.pdf
12 Your letter also notes the lack ofguidance as to permissible offsets applicable to taxing authorities that are not airport sponsors and do not share a "common treasury" with ataxing authority that is an airport sponsor. Nevertheless, your letter further notes during preliminary discussions FAA staff "suggested one test may be whetherthe offset benefits the national air transportation system and is quantifiable."offset its impermissible diversion ofapproximately $18 millionin general sales tax on aviationfuel with approximately $100 million "lost" due to its inability under Georgia lawto tax real property comprising the Airport. It is important to note that federal law explicitly permits local 

### advalorem taxation of airportproperty. 

### See, 49 U.S.C. 

### § 40116. Thus, the restriction on Clayton County's revenue base solely results from Georgia State lawprohibiting it from taxing real property used for airport purposes. But for that provision ofGeorgia law, you note Clayton County would have approximately $100 millionto fund a variety ofmunicipal services and programs, includingpublic education and infrastructure. Significantly, in issuing the 2014 Policy Amendment, the FAA acknowledged the impact on state and local governments. For example, the PolicyAmendment noted: The FAA believes that State and local officials should prepare an action plan to initiate the process to amend any non-compliant State laws and local ordinances as necessary to conformto federal law onuse ofaviation fuel tax revenues...The planmay include a reasonable transitionperiod, notto exceed three years, during whichthe FAA would agree, in an exercise ofits prosecutorial discretion, notto enforce the revenue use requirement against a non-sponsor State or local government. [79 Fed. Reg. 66286]. Because the real property taxes are made impermissible by operation ofGeorgia law, the Clayton County's "relief' from such prohibition mustbeprovided by the Georgia State legislature, not bythe FAA. Indeed, the three-year transitionperiodthe FAA providedto jurisdictionsto submitAction Plans was for the verypurpose ofgiving State and local legislatures ample time to restructure fiscal policies, processes, and practices necessary to end impermissible diversions ofaviation fuel revenues. To further facilitate compliance, the FAA issued guidance permittingthe use ofoffsets in recognition ofa non-airport sponsor's legitimate charges to airport sponsors for, inter alia, payments for services or facilities providedto the airport, or for payments to compensate nonsponsoring governmental bodies for lost tax revenues not exceeding stated tax rates. OnJuly 9, 2015, the FAA's Office ofAirports provided guidance to the State of Michigan andthe State ofGeorgia as to the contours ofpermissible offsets. In Michigan, a portion ofits general sales tax (including on the sale ofaviation fuel) was constitutionally dedicated to educational purposes. We advised that federal aviation fuel tax requirements were metby the State appropriating from its general fund an amount equal to or exceeding the aviationtaxes collected and remitting such funds to the State's aviationprogram fund or applicable airport revenue account. We further advised that the State had to have requirements inplace to ensure the appropriations are implemented and enforceable by state or local agencies and mechanisms to account for and remit to the local airport entity the dollar amount ofthe revenues generated for the applicable fuel tax. In the Agency's response to Georgia, we advised the State would berequired to 5

### specifically appropriate as a line item in its budget and pay into airport revenue accounts an amount at least equal to the total amount ofaviation fuel taxes levied and notused by localjurisdictions for aviation-related purposes. However, the Clayton County Entities propose neither to "offset" an impermissibly diverted aviation fuel tax revenue stream with some otherrevenue stream from the State or a common treasury nor to "offset" an impermissibly diverted revenue stream withthe value ofservices provided to the aviation-related operations orprograms. Rather, the Entities propose to offset impermissibly diverted aviation fuel tax revenues with the imputed "value" ofequally impermissible orphantom real property tax revenues. While your ActionPlan meets the minimum requirements ofthe Policy Amendment regarding the submission ofan action plan, we are concernedthatthe Clayton County Entities will not be in compliance withthe aviation fuel tax revenue use requirements by December 8, 2017, based onthe concerns expressed above. Kevin Willis, the FAA's Director ofthe Office ofAirport Compliance and Management Analysis, is available to discuss withyou in more detail permissible offsets ofdiversions ofaviation fuels tax revenues, and otherpotential means to achieve compliance by the December 8, 2017 deadline. In light ofthe guidance provided as to the contours ofpermissible and impermissible offsets, this letter will be submitted to Docket No. 2013-0988. The foregoing response represents the present view ofthe FAA's Office ofChiefCounsel based onthe facts presented in your September 13, 2016letterto the Administrator, September 16, 2016 letter to the Associate Administrator for Airports and the amended Action Plan and does not constrain future FAA action or opinion. This advisory response does not constitute a final agency action or an "order issued by the Secretary of Transportation" under 49 U.S.C. § 46110. We sent a letter to each ofthe cosigners ofthe September 16, 2016letter. Shouldyouhave any question or seek additional information, please do nothesitate to contact either me, or ElizabethNewman, Senior Attorney, Airports Branch, Office ofthe Ch. unsel. 6