U.S. Department 

of Transportation 

Federal Aviation 

Administration 

September 1, 2015 

VIA FEDERAL EXPRESS 

Konrad Kuczak 

130 West Second Street, Suite 1010 

Dayton, OH 45402 

Rachel Owlsey 

Bethany A. Breetz 

Stites & Harbison, PLLC 

400 West Market Street, Suite 1800 

Louisville, KY 40202 

Dear Mr. Kuczak and Ms. Owlsey: 

Office of Airport Compliance 

and Management Analysis 

800 Independence Ave., SW. 

Washington, DC 20591 

Re: SPA Rental, LLC, d/b/a/ MSI Aviation, v. Somerset- Pulaski County Airport Board, 

FAA Docket No. 16-13-02 

Enclosed is a copy of the determination of the Federal Aviation Administration (FAA) with 

respect to the above-referenced matter finding Somerset- Pulaski County Airport Board not in 

violation of its Federal obligations with respect to this complaint. The reasons for the finding of 

compliance are set forth in the enclosed Director's Determination. 

The Director's Determination does not constitute a Final Agency Decision and order subject to 

judicial review. [14 CFR § 16.247(b)(2)] A party adversely affected by the Director's 

Determination once issued may appeal the initial determination to the FAA Associate 

Administrator for Airports pursuant to 14 CFR § 16.33(c) within 30 days after the service of the 

Director's Determination. 

Sincerely, 

Randall S. Fiertz 

Director of Airport Compliance 

and Management Analysis 

Enclosure 
CERTIFICATE OF SERVICE 

I HEREBY CERTIFY that on September _j_, 2015, I caused to be placed in the United States mail 

(first class mail, postage paid) a true copy of the Director's Determination, addressed to: 

For Complainant 

Konrad Kuczak 

130 West Second Street, Suite 1010 

Dayton, OH 45402 

For Respondent 

Rachel Owsley 

Bethany A. Breetz 

Stites & Harbison, PLLC 

400 West Market Street, Suite 1800 

Louisville, KY 40202 

Copy to: 

FAA Part 16 Airport Proceedings Docket 

FAA Airport Compliance and Management Analysis, AC0-100 

~ -~ efo~r?a~~- Office of Airport omphance and 

Management Analysis 
UNITED STATES DEPARTMENT OF TRANSPORTATION 

FEDERAL AVIATION ADMINISTRATION 

WASHINGTON, DC 

SPA Rental, LLC, 

DBA MSI Aviation 

Complainant 

v. 

Somerset- Pulaski County Airport Board 

Respondent 

DIRECTOR'S DETERMINATION 

I. INTRODUCTION 

FAA Docket 16-13-02 

This matter is before the Federal Aviation Administration (FAA) based on a formal complaint 

filed in accordance with the FAA Rules of Practice for Federally Assisted Airport 

Enforcement Proceedings (FAA Rules of Practice), Title 14 Code of Federal Regulations 

(CFR), Part 16. 1 

SPA Rental, LLC, d/b/a MSI Aviation (Complainant, SPA, or MSI) has filed a formal complaint 

pursuant to Title 14 CFR, Part 16 against the Somerset- Pulaski County Airport Board 

(Respondent or Airport Board) owner and operator of the Lake Cumberland Regional Airport in 

Somerset, Kentucky (SME or Airport). The Complainant alleges that the Airport Board is in 

violation of Grant Assurance 24, Fee and Rental Structure. [FAA Item 1, p. 6] 

SPA is alleging that Respondent is unfairly discriminating against it by demanding it to enter 

into the new proposed Limited Fixed Base Operator (LFBO) lease with objectionable 

conditions. SPA further alleges that Respondent is demanding that SPA perform a minimum of 

ten (1 0) third party aunual inspections per annum. SPA alleges that Respondent is forcing SPA 

to alter its fundamental business by engaging in a business which it has not heretofore engaged. 

Finally, SPA alleges that Respondent is failing to credit the number of arrnual inspections 

performed by SPA's managing member Walter Iversen on aircraft owned by himself, his spouse 

or SPA against the I 0 third party minimum. [FAA Item I, pp. 4-5] 

The Respondent, in denying the allegations in the Complaint states, that it solicited LFBO 

proposals from aircraft maintenance service providers. The Respondent awarded an agreement 

to Somerset Regional Aviation, LLC, which included incentives in the form of a waiver of 

certain rental fees and reimbursement of certain insurance costs. The Respondent states that the 

incentives are available to all providers of meaningful maintenance services at the Airport. 

1 Enforcement procedures regarding airport compliance matters may be found at FAA Rules of Practice fOr 

Federally Assisted Airvort Enforcement Proceedings (14 CFR, Part 16). 
The Respondent states that it offered the arrangement to SPA but SPA failed to accept the terms 

and responded by filing this complaint. [FAA Item 5, pp 1-2] 

Further, the Respondent claims that SPA and Somerset Regional Aviation, LLC, the new 

aircraft repair and maintenance business, are not similarly situated and that the Airport 

maintains uniformly applicable minimum standards. [FAA Item I 0, p.l] The Respondent 

emphasizes that "[T]he minimum standards of which SPA complains apply only to LFBOs 

providing 'aircraft engine and accessory maintenance services at the Airport." The Respondent 

clarifies that a different section of the minimum standards applies to those businesses selling 

aircraft from the Airport. [FAA Item I 0, p.3] The Respondent contends that SPA "has no 

maintenance customers and has not for many years." [FAA Item 6, Exhibit G, p. 3] 

Additionally, SPA, in its Complaint and Reply, asserts that the Respondent violated Grant 

Assurance 22, Unjust Discrimination, and SPA in its Reply asserts a violation of Grant 

Assurance 23, Exclusive Rights. [FAA Item I, pp. 4-5, Item 9, pp. 8-10] 

The Respondent denies the allegations, and states the "fact that SPA declines this offer 

(opportunity to obtain the same incentives as Somerset Regional Aviation on the exact same 

terms and conditions) does not amount to unjust discrimination, the grant of exclusive rights, or 

any other violation of Federal grant assurance." [FAA Item 10, pp. 3 and 6] 

With respect to the allegations presented in this Complaint, under the specific circumstances at 

the Airport as discussed below and based on the evidence of record in this proceeding, the 

Director fmds the Respondent is currently not in violation of its Federal obligations with respect 

to Grant Assurance 22, Economic Nondiscrimination, Grant Assurance 23, Exclusive Rights, 

and Grant Assurance 24, Fee and Rental Structure. The FAA's decision in this matter is based 

on applicable Federal law and FAA policy, review of the pleadings and supporting 

documentation submitted by the parties and reviewed by the FAA, which comprises the 

administrative record reflected in the attached FAA Index. 

II. THE PARTIES 

Airport 

The Lake Cumberland Regional Airport (SME or Airport) is a federally-funded, public access, 

general aviation airport owned and operated by Somerset-Pulaski County, Kentucky. The 

facility is located three miles south of Somerset, Kentucky. The development of the Airport has 

been financed, in part, with funds provided to the County as the Airport sponsor under the 

Airport Improvement Program (AlP), authorized by the Airport and Airway Improvement Act of 

1982, as amended, 49 U.S. C., § 47101, et seq. As a result, the County is obligated to comply 

with the FAA sponsor assurances and related Federal law, 49 U.S.C. § 47101. The most recent 

grants awarded include $82,875 in 2012 and $99,423 in 2014, both for obstruction removal. 

[FAA Item 19] 

2 
Complainant 

The Complainant, SPA Rental, LLC, d/b/a! MSI Aviation (SPA or MSI), was a Limited 

Fixed Base Operator (LFBO) under a prior agreement with the Airport. The company has 

been engaged in purchasing, refurbishing and reselling aircraft from two privately built 

hangars that have since reverted to the Airport. [FAA Item 1, page 1] Operating from SME 

since 1986, the Complainant is currently classified as a holdover tenant under the hangar 

leases that expired on December 31, 2012. [FAA Item 6, Exhibits C and E] 

III. BACKGROUND AND PROCEDURAL HISTORY 

Background 

SPA describes itself as "engaged in the business of purchasing, refurbishing, and re-selling 

aircraft" from two leased hangars at the Lake Cumberland Regional Airport. [FAA Item I, p. 1] 

SPA constructed both hangars, sharing one common wall, at its own expense. Hanger B-3 is a 

2,400 square foot structure completed in 1988. Hanger B-4, completed in 1992, is 3,200 square 

feet. The hangars became the property of the Airport Board on January I, 2009, upon expiration 

of the ground leases between SPA and the Airport Board. [FAA Item 5, pp. 4-5] 

Walter Iversen is an FAA aircraft maintenance technician holding an Airframe and/or 

Powerplant (A & P) certificate accredited with an Inspection Authorization. He has provided 

mechanical repairs, including airworthiness inspections, to aircraft owned by SPA, himself, and 

his spouse, from the leased hangars. Three aircraft, owned by managing member of SPA, 

Mr. Iversen, and his spouse, are stored in the two hangars. During its history at SME, SPA 

mechanics have never performed, in any 12-month period, more than three I 00-hour or annual 

inspections for aircraft being refurbished and held for resale. SPA did not provide details of the 

number of aircraft it has purchased, refurbished and then sold from its hangar facilities at SME. 

SPA has not conducted airworthiness inspections of aircraft to the general public. [FAA Items 1 

and 5] 

SPA's last 'Limited Fixed Base Operator' (LFBO) agreement became effective on June 30, 

2009. As stated in the LFBO Agreement, automatic renewal required that SPA continue to meet 

all of the required qualifications contained in the Agreement. The Agreement states that SPA 

"shall operate a limited fixed base operation (aircraft, engine and accessories maintenance) in a 

40 x 142 foot airplane hangar know as Hangar B3 and Hangar B4."2 The Agreement also 

specifies that SPA "may also store two (2) non-owned aircrafts and manage said aircraft[ s] for 

another by providing pilots, light maintenance and upkeep." In addition, the Agreement states 

that SPA "shall comply with all of the Minimum Standards for Fixed Base Operations at the 

Lake Cumberland Regional Airport as they are amended from time to time." [FAA Item I, 

Exhibit A] 

2 Hangars B-3 and B-4 share a common wall. Hangar B-3 occupies approximately 2,400 square feet, and Hangar B4 comprises approximately 3,200 square feet. The LFBO Agreement lists the total square footage ofthe Hangars B3 and B-4 as 5,680 square feet.[FAA Item I, Exhibits A and C] 

3 
By letter dated November 29,2012, the Respondent provided SPA notice that all three 

agreements (LFBO and two hangar lease agreements) terminated on December 31,2012. [FAA 

Item 6, Exhibit E] Since January I, 2013, SPA has continued to occupy Hangar B-3 and Hangar 

B-4 at the Lake Cumberland Regional Airport as a hold over tenant under the expired hangar 

lease agreements. [FAA Item I, Exhibit A] 

Effective March 24, 2012, the Board approved Somerset Regional Aviation, LLC, (Somerset) to 

establish an LFBO at the airport, operating from a 4,800 square foot hangar (Hangar I 0), for the 

purposes of performing aircraft repairs, maintenance, and airworthiness inspections of aircraft. 

[FAA Item I, pp. 2-3] The one-year LFBO and Hangar I 0 lease agreements both include a 

provision allowing Somerset to extend the LFBO Agreement and Hangar Lease for two successive 

periods of one year each. The fee for each year of the LFBO Agreement is one dollar. For the 

Hangar I 0 Lease, the Airport Board waived rental fees in consideration for the on-site maintenance 

services that Somerset agreed to provide to the public under the terms of the LFBO Agreement. In 

addition, the Airport Board agreed to reimburse Somerset for the lease-mandated public liability 

insurance premiums in an amount not to exceed $8,000 per twelve month period. [FAA Item 5, p. 

5 and FAA Item 6, Exhibit F] 

On April4, 2012, Mr. James H. Williams, FAA Memphis ADO, wrote to Ms. Kellie Baker, 

Airport Manager, Somerset-Pulaski County Airport, seeking clarification regarding the new 

LFBO Agreement with Somerset. Specifically, Mr. Williams sought clarification of the 

following: 

• Has an existing FBO at the airport expressed a desire to exercise a contract 

continuation clause? If not, specify the reasons for not renewing the contract. 

• Why clid the newspaper advertisement seeking an FBO not mention the availability of 

a less than market rate incentive package? 

• Given that the Airport Board received two proposals in response to the ad, explain why 

the continued presence of SPA in conjunction with the interest of two potential FBO' s 

clid not negate the need for incentives? 

Mr. Williams cautioned Ms. Baker that "fees and hangar rental well below fair market value3 

violates the grant assurances and could be considered as 'Revenue Diversion.'" Mr. Williams 

further explained that "these terms would make it unreasonably costly or impractical for the airport 

to have more than one fixed-based operator because they would be subject to the same rates, fees, 

rentals as the other tenants making same or similar uses of the airport." [FAA Item 6, Exhibit G] 

On April 19, 2012, SPA filed an informal complaint in the form of a letter from Winter Huff, an 

attorney representing Complainant, to James H. Williams, FAA, citing refusal of the Board to 

renew the LFBO agreement with SPA while providing incentives to Somerset. In its informal 

complaint, SPA alleges that: (I) the Sponsor had refused to renew the LFBO Agreement with 

SPA; and (2) the Sponsor had offered "discriminatory incentives to Somerset to the detriment of 

SPA." [FAA Item I p. 3, and Exhibit E] 

3 See footnote 13 addressing fair market value under Issue 3. 

4 
On April23, 2012, John T. Mandt, an attorney representing the Somerset-Pulaski County 

Airport Board, replied to Mr. Williams' letter of April4, 2012, answering the questions posed 

in the April 4 letter, detailing the rationale for the new LFBO Agreement, and providing 

background on the incentive plan. In reply to Mr. Williams' first question, Mr. Mandt 

explained that the Airport Board notified SPA that it's LFBO Agreement and Hangar Lease, set 

to expire on December 31, 2011, "would expire as written." Mr. Mandt also maintained that 

SPA "has no maintenance customers and has not for many years." Responding to the second 

question, Mr. Mandt stated that the requirement for incentives originated with the bidders, 

rather than the Airport Board. Addressing the third question, Mr. Mandt reiterated that the need 

for incentives originated with the bidders. He also clarified that SPA "did not submit a bid and 

to the Board's knowledge none of the present users of the Airport do business with him." 

[FAA Item 6, Exhibit G] 

On May 9, 2012, the FAA Southern Region Memphis Airports District Office (Memphis ADO) 

issued a finding addressing the allegations raised in the informal complaint. The Memphis ADO 

determined that "this lease agreement fails to meet the Terms and Conditions of Accepting AlP 

Grants as stated in Grant Assurances 24." [FAA Item 1, Exhibit D] The Memphis ADO further 

wrote that "in its opinion, the incentives included in the lease agreement make it unreasonably 

costly or impractical for the airport to have more than one fixed based operator. Therefore, we 

request that you terminate this lease agreement or modified (sic) it to show compensation based 

on fair market value." [FAA Item 1, Exhibit D] 

The FAA specified that the Airport Board should respond with a course of corrective action to 

the Memphis ADO no later than May 31, 2012. [FAA Item 1, Exhibit D] 

On May 18,2012, Mr. Tom Halbleib, counsel for the Airport Board, replied to FAA's 

correspondence from May 9, 2012, and agreed to respond with a plan of corrective action. [FAA 

Item 6, Exhibit H] 

On July 23,2012, Mr. Richard Van Hook, Chairman of the Airport Board's Maintenance 

Committee wrote to FAA's Mr. James Williams, outlining a corrective action plan to address 

FAA concerns. The letter explained the proposed incentive program was developed to ensure 

availability of maintenance services at the Airport, and describing the source of funding from 

the local occupational license fee. Mr. Van Hook described the subsidy incentive as consisting 

of 'the deferral of rent for no more than one hangar leased from the Airport Board and the 

reimbursement of certain insurance costs (up to $8,000 toward the cost of a general commercial 

liability policy that names the Airport Board as an additional insured with limits in an amount not 

less than $1,000,000)." The funding source of the incentive program Mr. Van Hook advised was 

via Pulaski County assessing an occupational license fee on all people working in the county. He 

confirmed that the fee is not related to the use of the Airport, nor would it be subject to FAA's 

Revenue Use Policy. [FAA Item 6, Exhibit B] 

Additionally, Mr. Van Hook explained that given the Airport Board's interest in establishing and 

maintaining a meaningful volume of third party paid maintenance on the Airport, the Board 

would annually confirm that any recipient of incentives had completed no fewer than ten (1 0) 

third party annual inspections. He fnrther advised that any incentive recipient failing to meet the 

5 
inspection volume threshold, would be required to pay the rent as well as reimburse the Airport 

Board for the insurance. [FAA Item 6, Exhibit B] 

Mr. Van Hook also stated that if the proposed corrective action plan satisfactorily addressed FAA 

concerns then, pending Airport Board approval, amendments to the Hangar 1 0 Lease, the LFBO 

Agreement, and Minimum Standards would be forwarded to Somerset for execution. Mr. Van 

Hook clarified that SPA and any other maintenance service provider on the Airport would be 

offered the same arrangement. Finally, Mr. Van Hook noted that the Airport Board would 

truncate the LFBO Agreement to one year, allowing the Airport Board to solicit bids, including 

the incentive package, for a maintenance provider at the end of one year. [FAA Item 6, 

Exhibit B] 

On August 7, 2012, Tom Halbleib forwarded to FAA's James Williams justification of the 

proposed threshold of completing ten annual aircraft inspections in order to qualify for the 

incentive. Mr. Halbleib explained that the development of meaningful third party maintenance 

services would facilitate growth and development at Lake Cumberland Regional Airport by 

attracting more users and allowing the Airport to generate additional revenue streams. [FAA 

Item 6, Exhibit I] 

Mr. Halbleib emphasized that based on the Airport Board's Maintenance Committee analysis 

setting the threshold below ten annual inspections would risk the incentive exceeding the 

revenues generated by the incentive. [FAA Item 6, Exhibit I] 

On August 21, 2012, Mr. Phillip J. Braden, FAA Manager, Memphis ADO, in a letter to 

Mr. Van Hook, Chairman Somerset-Pulaski County Airport Board Maintenance Committee 

concurred with the Airport Board's "concept of providing incentives to promote additional 

commercial activities leading to additional airport revenue ... provided that these incentives are 

not funded with airport revenue." Mr. Braden advised that FAA does not object to the Airport 

Board using non-airport revenue as the source of funding for the incentives. Finally, Mr. Braden 

stressed that the incentive program would have to "be applied on an equal basis to all involved 

parties. [FAA Item 6, Exhibit A] 

On September 21,2012, the Airport Board and Somerset agreed to an amendment of the LFBO 

Agreement, as well as corresponding Minimum Standards, and the Hangar Lease Agreement. 

Modifications to the LFBO Agreement include: 

• a provision that the Airport Board would advance payment to Somerset for the cost of 

public liability insurance "in an amount not to exceed $8,000." 

• a reporting requirement that Somerset report to the Airport Board "the number ofF AA 

Annual Inspection the Second Party [SRA] performed at the Airport, and for which the 

Second Party collected a reasonable fee, for umelated third parties ("Paid Third Party 

Annuals") during the immediately preceding year." 

6 
• a confirmed report indicating that Somerset performed ten or more Paid Third Party 

Annuals during the preceding year will result in the Airport Board forgiving Somerset's 

obligation to repay the insurance advance. 

• failure to meet or exceed the annual inspection threshold will require Somerset to 

immediately repay the insurance advance within ten days of notice. [FAA Item 6, 

Exhibit F] 

The Amendment to the accompanying Minimum Standards detailed the new reporting 

requirements in addition to a new section describing the incentive as follows: 

• "Section 10. MAINTENANCE SUBSIDY INCENTIVE. The Airport Board in its sole 

discretion may from time to time determine that there exists insufficient availability of 

aircraft maintenance services at the Airport and, to incentivize the provision of such 

services, grant subsidy incentives on the terms and subject to the conditions set forth in 

the attached July 23, 2012, letter from the Chairman of the Airport Board's Maintenance 

Committee to the Federal Aviation Administration." 

• "During any period when such subsidy incentives are offered, they will be offered to all 

similarly situated providers of maintenance services at the airport." 

• The corresponding amendment to the Hangar Lease at Section 7 addresses the insurance 

premium provisions covered in the amended LFBO Agreement. 

• In addition, Section 2 of the amended Hangar Lease is modified to include the provision 

of rent abatement in the amount of $400 each month provided that Somerset is able to 

meet or exceed the ten Third Party Annual thresholds detailed above. [FAA Item 6, 

Exhibit F] 

On October 2, 2012, Mr. Halbleib sent to Winter Huff a form of hangar lease (for Hangar B-3 

only) and a form ofLFBO agreement including proposed modifications to minimum standards. 

Mr. Halbleib confirmed that the forwarded agreements "are substantially identical to those 

under which Somerset Regional Aviation will operate, upon completion of amendments to its 

Lease and FBO Agreement to conform to the Airport Board's recent actions." Mr. Halbleib 

further stipulates "[I]f other maintenance providers come onto the Airport before the Board 

modifies its actions, they too will be operating pursuant to Leases and FBO Agreements 

substantially the same as these." [FAA Item 6, Exhibit M] 

On November 29, 2012, Mr. Halbleib, via email to Winter Huff, stated that this letter constitutes 

notice of the Airport Board's intent to not renew the LFBO Agreement, the Hangar B-3 Lease 

and the Hangar B-4 Lease. Mr. Halbleib clarified "[T]o the extent any of the Agreements have 

not previously been effectively terminated, all three will terminate on December 31, 2012." 

Mr. Halbleib reiterates "I have submitted to you proposed amendments for SPA Rental, LLC's 

consideration. I understand that you continue to assist SPA Rental, LLC, with its consideration 

of these documents. Although the Board remains willing to discuss those amendments until 

December 31, 2012, if SPA Rental, LLC, has not reached an agreement with the Board by that 

7 
date, the Board will expect it to vacate Hangars B-3 and B-4 in accordance with the terms of the 

leases and to discontinue any operations as a fixed base operator at the Airport." [FAA Item 6, 

Exhibit E] 

On January 27, 2013, a number of email communications occurred between Winter Huff and 

Tom Halbleib. Ms. Huff claims "Since SPA has no ownership interest in any airplanes, and 

since the Board is apparently unwilling to include Hangar B-3 in the LFBO arrangement 

otherwise, our request to change the identification of the Lessee is appropriate and reasonable, 

and would have no substantive effect on your client." [FAA Item 6, Exhibit N] 

Mr. Halbleib replied that he had not been aware that MSI (SPA) had no interest in aircraft, 

emphasizing 'The pre-existing B-3 lease already limits the use of the space to the housing of 

aircraft owned or leased by MSI. Should I infer that MSI has been housing the Iverson's aircraft 

in violation of the pre-existing leases?" Mr. Halbleib clarifies "The Iverson's can then request 

that the Airport Board lease B-3 to them in the ordinary course of business, but I'm in no position 

to provide any assurance that it would be offered to them or upon what terms it might be offered. 

If MSI wants to continue negotiating other arrangements, it will first need to vacate the premises 

it currently occupies." [FAA Item 6, Exhibit N] 

Ms. Huff countered in a responding email, "It is my understanding that the prior usages of the 

B-3 hangar were in accordance with the terms and provisions of the 2009lease[s], the last one 

offered by your client." Ms. Huff stressed "that the B-3 and B-4 hangars were both built by my 

client at great expense, and we advised you early on that any new arrangement had to encompass 

both hangars." Ms. Huff concludes "It is not our fault that these issues concerning B-3 have 

arisen this month- we didn't get a timely lease proposal for B-3 at all, and when we finally did it 

was neither consistent with the old terms or the new, nor, as I understand it, consistent with the 

square footage of hangar space being made available to the other LFBO." [FAA Item 6, 

ExhibitN] 

On February 7, 2013, Mr. Walter Iverson submitted to Kellie Baker, Airport Manager, an open 

record request, seeking copies of specific current and expired hangar leases, as well as 

Somerset's LFBO Agreement. [FAA Item 6, Exhibit L] 

On February 13, 2013, Mr. Halbleib replied to Mr. Iverson confirming the Airport Board would 

provide to Mr. Iverson, by February 14,2013, its public records that are responsive to his 

request under Kentucky's Open Records Act, KRS 61.870-84. [FAA Item 6, Exhibit L] 

On April25, 2013, Mr. Iverson submitted to Somerset-Pulaski County Airport Board a proposal 

to enter into an LFBO agreement. SPA proposed to continue to occupy Hangars B3 and B4 for 

an initial lease term ofthree years with an option to renew for seven additional one year terms. 

SPA would pay $400 per month in rent for the facilities if the Airport Board would provide 

"incentives consisting of rental abatement and forgivable advance up to $8,000 as indicated in 

invitation for proposals published on April20, 2013. [FAA Item 9, Exhibit I] 

On June 18,2013, Mr. Halbleib replied to Konrad Kuczak, counsel for the Complainant, 

explaining that protracted discussions and negotiations with the Complainant ended when MSI 

8 
"advised the Airport Board that it would proceed only if the Airport Board allowed Mr. Iverson, 

individually, to lease one of the two hangars previously leased to MSI." Mr. Halbleib added, 

"the Complaint MSI filed with the FAA indicates that MSI intends to use Hangars B-3 and B-4 

for maintenance and restoration of aircraft it owns. MSI has shown no willingness to remedy it's 

[sic] past failures or comply with generally applicable Airport Board policies. Under the totality 

of the circumstances, the Airport Board declines MSI's proposal." [FAA Item 9, Exhibit 2] 

Procedural History 

The Complainant filed a Part 16 Formal Complaint dated March 27, 2013, alleging the Respondent 

violated49U.S.C., §40101 etseq., §47101 etseq.,andGrantAssurance24. [FAA Item 1] 

OnApril8, 2013, the FAA issued the Notice of Docketing. [FAA Item2] 

On April29, 2013, the Respondent filed an Agreed Motion for Additional Time to Respond to 

Complaint and a Notice of Agreement to File Electronically. [FAA Item 3 

On May 30, 2013, FAA granted the Respondent's motion for an extension to file. [FAA Item 4] 

On May 30, 2013, Respondent filed a Motion to Dismiss and Answer the Complaint. [FAA Item 5] 

On May 30,2013, Respondent filed a Supporting Memorandum ofPoints and Authorities for the 

Airport Board's Motion to Dismiss. [FAA Item 6] 

On June 5, 2013, Respondent and Complainant filed a Joint Application to Establish Responsive 

Pleading Schedule. [FAA Item 7] 

On June 7, 2013, FAA granted the Responsive Pleading Schedule Request. [FAA Item 8] 

On, July 1, 2013, Complainant filed a Memorandum Opposing Dismissal. [FAA Item 9] 

On July 18, 2013, Respondent filed a Rebuttal and Reply in Support of the Airport Board's Motion to 

Dismiss. [FAA Item 1 OJ 

On January 16, 2014, FAA issued a Notice of Extension of Time. [FAA Item 11] 

OnApril17, 2014, FAA issued a Notice of Extension ofTime. [FAA Item 12] 

On September 5, 2014, FAA issued a Notice of Extension of Time. [FAA Item 13] 

On December 8, 2014, FAA issued a Notice of Extension of Time. [FAA Item 14] 

On March 10, 2015, FAA issued a Notice of Extension of Time. [FAA Item 15] 

OnApri117, 2015, FAA issued a Notice of Extension of Time. [FAA Item 16] 

9 
On May 12,2015, FAA issued a Notice ofExtension of Time to June 30,2015. [FAA Item 17] 

On June 25,2015, FAA issued a Notice of Extension of Time to August28, 2015. [FAA Item 18] 

IV. APPLICABLE FEDERAL LAW AND FAA POLICY 

The Federal role in civil aviation has been augmented by various legislative actions that 

authorize programs for providing Federal 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 a high 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. 

The following is a discussion pertaining to the AIP, Airport Sponsor Assurances, the FAA 

Airport Compliance Program, and enforcement of Airport Sponsor Assurances. 

The Airport Improvement Program 

Title 49 U.S.C., § 47101, et seq., provides for Federal airport financial assistance for the 

development of public-use airports under the AIP established by the Airport and Airway 

Improvement Act of 1982, (AAIA) as amended. Title 49 U.S.C., § 47107, et seq., sets forth 

assurances to which an airport sponsor agrees as a condition of receiving Federal financial 

assistance. Upon acceptance of an AIP grant, the assurances become a binding contractual 

obligation between the airport sponsor and the Federal Government. The assurances made by 

airport sponsors in AIP grant agreements are important factors in maintaining a viable national 

airport system. 

Airport Sponsor Assurances 

As a condition precedent to providing airport development assistance under AIP, 49 U.S. C., 

§ 47107, et seq., the Secretary of Transportation and, by extension, the FAA must receive certain 

assurances from the airport sponsor. Title 49 U.S. C.,§ 47107(a) sets forth the statutory 

sponsorship requirements to which an airport sponsor receiving Federal financial assistance must 

agree. 

The FAA has a statutory mandate to ensure that airport owners comply with these sponsor 

assurances.4 FAA Order 5190.6B, FAA Airport Compliance Manual (Order), issued on 

September 30, 2009, provides the policies and procedures to be followed by the FAA in carrying 

out its legislatively mandated functions related to compliance with Federal obligations of airport 

sponsors. The FAA considers it inappropriate to provide Federal assistance for improvements to 

4 See, e.g., the Federal Aviation Act of 1958, as amended and recodified, Title 49 U.S.C., §§ 40101, 40113, 40114, 

46101, 46104, 46105, 46106, 46110; and the Airport and Airway Improvement Act of 1982, as amended and 

recodified, Title 49 U.S. C.,§§ 47105(d), 47106(d), 47107(k), 47107(1), 47111(d), 47122. 

10 
airports where the benefits of such improvements will not be fully realized due to inherent 

restrictions on aeronautical activities. 

The FAA grant assurances that apply to the circumstances set forth in this Complaint include: (I) 

Grant Assurance 22, Economic Nondiscrimination; (2) Grant Assurance 23, Exclusive Rights; 

and (3) Grant Assurance 24, Fee and Rental Structure. 

Grant Assurance 22, Economic Nondiscrimination 

Grant Assurance 22, Economic Nondiscrimination, requires the owner of any airport developed 

with Federal grant assistance to operate the airport for the use and benefit of the public and to 

make it available to all types, kinds, and classes of aeronautical activity on fair and reasonable 

terms, and without unjust discrimination. Grant Assurance 22 deals with both the reasonableness 

of airport access and the prohibition of adopting unjustly discriminatory conditions as a potential 

for limiting access. Grant Assurance 22 implements the provisions of 49 U.S.C., § 47107(a) (1) 

through (6), and requires, in pertinent part, that the sponsor of a federally obligated airport: 

... will 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, including commercial aeronautical activities offering 

services to the public at the airport. [Grant Assurance 22(a)] 

... may establish such fair, equal, and not unjustly discriminatory conditions to 

be met by all users of the airport as may be necessary for the safe and efficient 

operation of the airport. [Grant Assurance 22(h)] 

... may ... limit any given type, kind, or class of aeronautical use of the airport if 

such action is necessary for the safe operation of the airport or necessary to serve 

the civil aviation needs of the public. [Grant Assurance 22(i)] 

Subsection (h) qualifies subsection (a), and subsection (i) represents an exception to subsection 

(a) to permit the sponsor to exercise control of the airport sufficient to preclude unsafe and 

inefficient conditions that would be detrimental to the civil aviation needs ofthe public. 

In all cases involving restrictions on airport use imposed by airport owners for safety and 

efficiency reasons, the FAA will make the final determination on the reasonableness of 

such restrictions when those restrictions deny or limit access to, or use of, the airport. [See 

FAA Order 5190.6B, ~14.3] 

FAA Order 5190.6B describes the responsibilities under Grant Assurance 22 assumed by the 

owners or sponsor of public use airports developed with Federal assistance. Among these is the 

obligation to treat in a uniform manner those users making the same or similar use of the 

airport and to make all airport facilities and services available on reasonable terms without 

unjust discrimination. [See FAA Order 5190.6B, Chapter 9] 

11 
The owner of an airport developed with Federal assistance is required to operate the airport 

for the use and benefit of the public and to make it available to all types, kinds, and classes of 

aeronautical activities on reasonable terms and without unjust discrimination. [See FAA 

Order 5190.6B, ~9.l.a] 

Grant Assurance 23, Exclusive Rights 

Grant Assurance 23, Exclusive Rights, implements the provisions of 49 U.S. C.,§§ 40103(e) and 

47107(a)( 4), and requires, in pertinent part, that the owner or sponsor of a federally obligated 

airport: 

will permit no exclusive right for the use of the airport by any persons 

providing, or intending to provide, aeronautical services to the public. 

will not, either directly or indirectly, grant or permit any person, firm, or 

corporation, the exclusive right at the airport to conduct any aeronautical 

activities ... 

In FAA Order 5190.6B, FAA Airport Compliance Manual, the FAA discusses its exclusive rights 

policy and broadly identifies aeronautical activities as subject to the statutory prohibition against 

exclusive rights. While public-use airports may impose qualifications and minimum standards 

upon those who engage in aeronautical activities, FAA has taken the position that the application 

of any umeasonab1e requirement or any standard that is applied in an unjustly discriminatory 

manner may constitute the constructive grant of an exclusive right. Courts have found the grant of 

an exclusive right where a significant burden has been placed on one competitor that is not placed 

on another. [See e.g. Pompano Beach v FAA, 774 F2d 1529 (lith Cir, 1985)] 

Leasing all available airport land and improvements planned for aeronautical activities to one 

enterprise will be construed as evidence of intent to exclude others unless it can be 

demonstrated that the entire leased area is presently required and will be immediately used to 

conduct the activities contemplated by the lease. [See Order, Sec. 8.9.d Space Limitation] 

FAA Order 5190.6B provides additional guidance on the application of the statutory 

prohibition against exclusive rights and FAA policy regarding exclusive rights at public-use 

airports. [See Order, Chapter 8.] 

Grant Assurance 24, Fee and Rental Structure 

Grant Assurance 24, Fee and Rental Structure, implements the provisions of the AAIA, 

49 U.S.C., § 471 07(a)(l3), and requires, in pertinent part, that the sponsor of a federally 

obligated airport assure that: 

It will maintain a fee and rental structure for the facilities and services at the airport 

which will make the airport as self-sustaining as possible under the circumstances 

existing at the particular airport, taking into account such .factors as the volume of 

traffic and economy of collection. [Assurance 24] 

12 
Grant Assurance 24 addresses fees the owner or sponsor levies on airport users in exchange for 

the services the airport provides and satisfies the requirements of 47107(a) (13) by addressing 

self-sustainability. The intent of the assurance is for the airport operator to charge fees that are 

sufficient to cover as much of the airport's costs as is feasible while maintaining a fee and rental 

structure consistent with the sponsor's other Federal obligations. 

In addition, FAA Order 5190.6B states: 

To aid in establishing uniform rates and charges applied to aeronautical activities on 

the airport, the sponsor should establish minimum standards to be met as a condition 

for the right to conduct an aeronautical activity on the airport. [FAA Order 5190.6B at 

Section 9.6.e.] 

The FAA Airport Compliance Program 

The FAA discharges its responsibilities for ensuring airport owners' compliance with their 

Federal obligations through its Airport Compliance Program. The FAA's airport compliance 

efforts are based on the contractual obligations an airport owner accepts when receiving 

Federal grant funds or the transfer of Federal property for airport purposes. These obligations 

are incorporated in grant agreements and instruments of conveyance in order to protect the 

public's interest in civil aviation and to ensure compliance with Federal laws. 

The FAA Airport Compliance Program is designed to ensure the availability of a national system 

of safe and properly maintained public-use airports operated in a manner consistent with the 

airport owners' Federal obligations and the public's investment in civil aviation. 

The Airport Compliance Program does not control or direct the operation of airports. Rather, it 

monitors the administration of the valuable rights pledged by airport sponsors to the people of 

the United States in exchange for monetary grants and donations of Federal property to ensure 

that the public interest is being served. FAA Order 5190.6B sets forth policies and procedures 

for the FAA Airport Compliance Program. The Order establishes the policies and procedures to 

be followed by FAA personnel in carrying out the FAA's responsibilities for ensuring airport 

compliance. It provides basic guidance for FAA personnel in interpreting and administering the 

various continuing commitments made to the United States by airport owners as a condition of 

receiving a grant of Federal funds or the conveyance of Federal property for airport purposes. 

The Order analyzes the various obligations set forth in the standard airport sponsor assurances, 

addresses the nature of those assurances, addresses the application of those assurances in the 

operation of public-use airports, and facilitates interpretation of the assurances by FAA 

personnel. 

The FAA Compliance program is designed to achieve voluntary compliance with Federal 

obligations accepted by owners and/or operators of public-use airports developed with FAAadministered assistance. Therefore, in addressing allegations of noncompliance, the FAA will 

make a determination as to whether an airport sponsor is currently in compliance with the 

applicable Federal obligations. Consequently, the FAA will consider the successful action by 

the airport to cure any alleged or potential past violation of applicable Federal obligation to be 

13 
grounds for dismissal of such allegations. [See e.g. Wilson Air Center v. Memphis and Shelby 

County Airport Authority, FAA Docket No. 16-99-10, (8/30/01) Wilson Air Center, LLC v 

FAA, 372 F.3d 807 (6th Cir. 2004)] 

FAA Enforcement Responsibilities 

The Federal Aviation Act of 1958, as amended (FAAct), 49 U.S.C., § 40101, et seq., assigns the 

FAA Administrator broad responsibilities for the regulation of air commerce in the interests of 

safety, security, and development of civil aeronautics. The Federal role in encouraging and 

developing civil aviation has been augmented by various legislative actions, which authorize 

programs for providing fimds and other assistance to local communities for the development of 

airport facilities. In each such program, the airport owner or 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, efficiently, and in accordance 

with specified conditions. Commitments assumed by airport owners or sponsors in property 

conveyance or grant agreements are important factors in maintaining a high degree of safety and 

efficiency in airport design, construction, operation and maintenance, as well as ensuring the 

public reasonable access to the airport. Pursuant to 49 U.S.C., § 47122, the FAA has a statutory 

mandate to ensure that airport owners comply with their Federal grant assurances. 

The Complaint Process 

Pursuant to 14 CFR, Part 16, § 16.23, a person directly and substantially affected by any alleged 

noncompliance may file a complaint with the FAA. The complainant shall provide a concise 

but complete statement of the facts relied upon to substantiate each allegation. The complaint 

shall also describe how the complainant was directly and substantially affected by the things 

done or omitted by the respondents. [14 CFR, Part 16, § 16.23(b) (3, 4)] 

If, based on the pleadings, there appears to be a reasonable basis for further investigation, the 

FAA will investigate the subject matter of the complaint. In rendering its initial determination, 

the FAA may rely entirely on the complaint and the responsive pleadings provided. Each party 

shall file documents it considers sufficient to present all relevant facts and arguments necessary 

for the FAA to determine whether the sponsor is in compliance. [14 CFR, Part 16, § 16.23] 

The proponent of a motion, request, or order has the burden of proof. A party who has asserted 

an affirmative defense has the burden of proving the affirmative defense. This standard burden 

of proof is consistent with the Administrative Procedure Act (AP A) and Federal case law. The 

AP A provision states, " [ e ]xcept as otherwise provided by statute, the proponent of a rule or 

order has the burden of proof." [5 U.S.C., § 556(d).] [See also, Director, Office of Worker's 

Compensation Programs, Department of Labor v. Greenwich Collieries, 512 US 267, 272 

(1994); Air Canada et al. v. Department of Transportation, 148 F3d 1142, 1155 (DC Cir, 

1998).} Title 14 CFR, § 16.229(b) is consistent with 14 CFR, § 16.23, which requires that the 

complainant must submit all documents then available to support his or her complaint. 

14 
Similarly, 14 CFR, § 16.29 states that"[ e]ach party shall file documents that it considers 

sufficient to present all relevant facts and argument necessary for the FAA to determine whether 

the sponsor is in compliance." 

Title 14 CFR, § 16.31 (b-d), in pertinent parts, provides that "(t)he Director's Determination will 

set forth a concise explanation of the factual and legal basis for the Director's Determination on 

each claim made by the complainant. A party adversely affected by the Director's Determination 

may appeal the initial determination to the Associate Administrator as provided in §16.33." In 

accordance with 14 CFR, § 16.33(b) and (e), upon issuance of a Director's Determination, "a 

party adversely affected by the Director's Determination may file an appeal with the Associate 

Administrator within 30 days after the date of service of the initial determination;" however, "(i)f 

no appeal is filed within the time period specified in paragraph (b) of this section, the Director's 

Determination becomes the final decision and order of the FAA without further action. A 

Director's Determination that becomes final because there is no administrative appeal is not 

judicially reviewable." 

Title 14 CFR, § 16.247(a) defines procedural recourse for judicial review of the Associate 

Administrator's fmal decision and order, as provided in 49 U.S. C.,§ 46110 or section 519(b)(4) 

of the Airport and Airway Improvement Act of 1982, as amended, (AAIA), 49 U.S.C., 

§§ 47106(d) and 47lll(d). 

Minimum Standards 

Advisory Circular AC 150/5190-7, Minimum Standards for Commercial Aeronautical Activities 

(August 28, 2006) provides basic information pertaining to the FAA's recommendations on 

commercial minimum standards and related policies. Although minimum standards are optional, 

the FAA highly recommends their adoption as a means of minimizing the potential for violations 

of Federal obligations at federally obligated airports. 

In accordance with the Airport and Airway Improvement Act of 1982, 49 United States Code 

(U.S.C.) § 47101, et seq., and the AlP Sponsor Assurances, the owner or operator of any airport 

(airport sponsor) that has been developed or improved with Federal grant assistance or 

conveyances of Federal property assistance is required to operate the airport for the use and benefit 

of the public and to make it available for all types, kinds, and classes of aeronautical activity. 

These Federal obligations involve several distinct requirements. Most important is that the airport 

and its facilities must be available for public use as an airport. The terms imposed on those who 

use the airport and its services must be reasonable and applied without unjust discrimination, 

whether by the airport sponsor or by a contractor or licensee who has been granted a right by the 

airport sponsor to offer services or commodities normally required to serve aeronautical users of 

the airport. 

The FAA's policy recommending minimum standards stems from the airport sponsor's grant 

assurances to make the airport available for public use on reasonable conditions and without unjust 

discrimination. The FAA suggests that airport sponsors establish reasonable minimum standards 

that are relevant to the proposed aeronautical activity with the goal of protecting the level and 

15 
quality of services offered to the public. Once the airport sponsor has established minimum 

standards, it should apply them objectively and uniformly to all similarly situated on-airport 

aeronautical service providers. The failure to do so may result in a violation of the prohibition 

against exclusive rights and/or a finding of unjust economic discrimination for imposing 

unreasonable terms and conditions for airport use. 

The FAA objective in recommending the development of minimum standards serves to promote 

safety in all airport activities, protect airport users from unlicensed and unauthorized products and 

services, maintain and enhance the availability of adequate services for all airport users, promote 

the orderly development of airport land, and ensure efficiency of operations. 

Therefore, airport sponsors should strive to develop minimum standards that are fair and 

reasonable to all on-airport aeronautical service providers and relevant to the aeronautical activity 

to which it is applied. Any use of minimum standards to protect the interests of an exclusive 

business operation may be interpreted as the grant of an exclusive right and a potential violation of 

the airport sponsor's grant assurances and the FAA's policy on exclusive rights. 

Minimum standards can be amended periodically over time; however, a constant juggling of 

minimum standards is not encouraged. The FAA expects airport sponsors to apply their minimum 

standards consistently through their interactions with aeronautical users and service providers. 

With that said, the standard of compliance does not require that airport sponsors enforce minimum 

standards so rigidly as to require identical tone and pcsture toward all airport users that have 

different records and history with the sponsor. [See FAA Advisory Circular 150/5190-7 Minimum 

Standards for Commercial Aeronautical Activities] 

V. ANALYSIS AND DISCUSSION 

The Complainant alleges that the Respondent violated Grant Assurance 24, Fee and Rental 

Structure. In addition, the Complainant raised allegations in both the initial Complaint and the 

Memorandum Opposing Dismissal, alleging violations of Grant Assurance 22, Economic 

Nondiscrimination and Grant Assurance 23, Exclusive Rights. Thus, it has been determined that 

the following issues require analysis to provide a complete review of the Respondent's 

compliance with applicable Federal law and policy: 

1. Whether the Respondent is in violation of Grant Assurance 22, Economic 

Nondiscrimination, by requiring that Complainant (SPA) agree to a set of 

new Minimum Standards for Fixed Base Operation that would require 

changes to SPA's business model. [FAA Item 1, pp. 4-5, and Item 7, pp. 1, 

1 0-11] 

2. Whether the Respondent is in violation of Grant Assurance 23, Exclusive 

Rights, by requiring that Complainant meet the terms of revised Minimum 

Standards in order to receive incentives and subsidies. [FAA Item 7, p. 7] 

16 
3. Whether the Respondent is in violation of Grant Assurance 24, Fee and 

Rental Structure, by offering a financial incentive program to increase 

business at the airport. [FAA Item I] 

Preliminary Issues 

Respondent's Motion to Dismiss 

On May 30, 2013, the Respondent filed a Motion to Dismiss the Complaint. [FAA Item 5] The 

Respondent, in support of its Motion to Dismiss the Complaint, states that the Complainant failed 

to comply with the provisions of 14 CFR § 16.21 5 because the Complainant did not include a 

certification that SPA engaged in substantial and reasonable good faith efforts to resolve the 

disputed matter informally with the Airport Board. In addition, the Respondent claims that the 

Complainant lacks standing because SPA is not directly and substantially affected by the 

incentive program, as required by 14 CFR § 16.236 Finally, the Respondent maintains that the 

Complainant failed to state a claim that warrants investigation or further action by the FAA, as 

required by 14 CFR § 16.26. [FAA Item 5, p. 13] 

In the Complainant's Memorandum Opposing Dismissal, SPA alleges grant assurance violations 

not covered in its informal Complaint, expanding its claims beyond Grant Assurance 24, Fee and 

Rental Structure, to also encompass, via direct or indirect allegations, violations of Grant 

Assurance 22, Economic Nondiscrimination, as well as Grant Assurance 23, Exclusive Rights. In 

response to the Airport Board's claim that SPA had not engaged in efforts to resolve the matter 

informally, the Complainant details public meeting attendance by Walter Iverson, the exchange 

of multiple letters between the Complainant and the Airport Board, and the filing of an informal 

Complaint with FAA. The Complainant claims that it is adversely affected by Airport Board 

actions, maintaining that SPA faces eviction unless it enters into a new LFBO Agreement that 

includes new Minimum Standards. [FAA Item 9, pp. 2-3] 

The Director disagrees with the Respondent. Initially, the FAA investigated this matter under 

informal agency procedures, followed by acceptance of the Complainant's formal Part 16 

Complaint. The Complainant in the Complaint lists the informal efforts it took to resolve the 

dispute with the Respondent, including filing the Part 13 complaint. The Part 13 complaint 

process is recognized as a good faith effort under 14 CFR § 16.21 (a) as a means to assist the 

parties with informal resolution. Complainant's counsel closes out the Complaint by certifying 

that he believes that there is no reasonable prospect for timely resolution of the dispute by 

informal means. The Director finds that the Complainant has satisfied the requirements of 14 

CFR § 16.21. Additionally, the scope of the issues raised related to the Respondent's obligations 

under its Federal grant assurances warrants further investigation, and the Motion to Dismiss is 

denied. 

5 16.21 states in pertinent part, " ... prior to filing a complaint nnder this part, a person directly and substantially 

affected by the alleged noncompliance shall initiate and engage in good faith efforts to resolve the disputed matter 

informally with those individuals or entities believed responsible for the noncompliance." 

6 16.23 states in pertinent part," ... a person directly and substantially affected by any alleged noncompliance ... may 

file a complaint under this part.'' 

17 
Part 13 Informal Complaint 

On Aprill9, 2012, SPA filed a complaint under 14 CPR, Part 13 with the Memphis Airport 

District Office (ADO), alleging that: (1) the Sponsor had refused to renew the LFBO Agreement 

with SPA; and (2) the Sponsor had offered "discriminatory incentives to Somerset to the 

detriment of SPA." [FAA Item 1, p. 3 and Item 1, Exhibit E.] 

The ADO issued a fmding addressing the allegations raised in the informal complaint on May 9, 

2012. The ADO determined that the lease with Somerset failed to meet the "[T]erms and 

Conditions of Accepting Airport Improvement Program Grants" as stated in Grant Assurance 24 

and concluding that the incentives included in the lease agreement would make it unreasonably 

costly or impractical for the Airport Board to have more than one fixed based operator. The FAA 

specified that the Airport Board must initiate corrective action regarding the LFBO Agreement by 

either terminating the lease with Somerset or modifying it to incorporate compensation based on 

fair market value.7 [FAA Item 1, Exhibit D] 

As stated above, in the Background Section, the Airport Board initiated corrective action by 

proposing to amend the LFBO Agreement with Somerset. The amendment was found acceptable 

by the ADO, subject to that the "proposed incentive program must be applied on an equal basis to 

all involved parties." Mr. Braden adds that "[P]ending the Somerset-Pulaski County Airport 

Board's approval, the FAA concurs with your recommendation provided that these incentives are 

not funded with airport revenue (AlP Grant Assurance No. 25). In addition, FAA does not object 

to the board's use of outside revenue, as stated in your proposal, to fund these incentives."8 [FAA 

Item 5, pp. 1-2 and Item 6, Exhibit A] 

The Respondent amended its LFBO Agreement, corresponding Minimum Standards, and its 

Hangar Lease Agreement consistent with its proposed corrective action. The Respondent 

confirmed that during any period in which subsidy incentives are offered, the incentives will be 

offered to all similarly situated providers of maintenance services at the airport. [FAA Item 1, 

page 9] 

Issues 

Issue 1 - Whether the Respondent is in violation of Grant Assurance 22, Economic 

Nondiscrimination, by requiring that Complainant (SPA) agree to a set of new Minimum 

Standards for Fixed Base Operation that would require changes to SPA's business model. 

The Complainant alleges that in order to maintain its leasehold on the airport, the Airport 

Board required it to agree to new minimum standards that would significantly change its 

business model. Specifically, the Complainant alleges that the following Airport Board 

actions constitute violations of Grant Assurance 22, Economic Nondiscrimination: 

7 See footnote 13 under Issue 3 addressing fair market value. 8 In a July 23, 2012, letter to Mr. James Williams, FAA Memphis ADO, Airport Board Chairman Mr. Richard Van 

Hook provides a detailed description of the proposed incentive plan and the Pulaski County occupational license fee 

that would serve as the funding source for the financial incentives to similarly situated LFBOs. [FAA Item 6, 

Exhibit B] 

18 
o Demanding that SPA alter its fundamental business; 

o Forcing SPA to abandon its traditional business model in favor of a model dictated 

by the Airport Board; 

• Requiring SPA to perform, from a smaller hangar paid for by SPA, the same 

number of third party annual inspections as Somerset, a new LFBO; 

• Not allowing SPA to apply annual inspections performed on personally-owned 

aircraft to the third party arrnual inspection minimum; and 

• Offering incentives to Somerset that are dramatically disproportionate to those 

offered to the Complainant. [FAA Item 1, pp. 4-5 and Item 9 pp. 1, 8, 9, and 12] 

The Respondent denies that SPA, during the period in question, has been a limited fixed based 

operator (LFBO) at the airport, arguing that "to the extent that SPA's business model consists of 

purchasing, then reconditioning and reselling aircraft, these activities would appear to constitute 

self-maintenance," and as a result would not require a LFBO agreement. [FAA Item 5, p. 10] 

Grant Assurance 22, Economic Nondiscrimination, requires, in pertinent part, that the sponsor of 

a federally-obligated airport: 

will make the airport available as an airport for public use on reasonable terms and 

without unjust discrimination to all types, kinds and classes of aeronautical activities, 

including commercial aeronautical activities offering services to the public at the 

airport.[ .. ] Each fixed-base operator at the airport shall be subject to the same rates, 

fees, rentals, and other charges as are uniformly applicable to all other fixed-base 

operators making the same or similar uses of such airport and utilizing the same or 

similar facilities." [Grant Assurance 22] 

New Minimum Standards 

The Complainant asserts that conforming to the new Minimum Standards imposed by the 

Respondent "would require SPA to change its entire business model which it has employed since 

1988." [FAA Item 9, p.1] Complainant states that the new Minimum Standards require SPA to 

perform a minimum often third party annual inspections each year with no credit given for 

inspections performed on aircraft owned by SPA, Iverson or his spouse. Complainant argues 

that it would have to conduct these inspections from a smaller hangar, paid for by SP A9

, while 

Somerset could perform the same minimum number of inspections from a larger hangar for 

which Somerset did not pay to build. [FAA Item 1, p. 4] Complainant stresses that in order to 

perform ten third party inspections, it "would have to remove a considerable amount of its 

operation from the hangers [sic J it occupies and devote this space to aircraft in various stages of 

disassembly necessary for arrnual inspection." [FAA Item 9, p. !OJ 

The Complainant further alleges that "the Board's failure to offer renewal of SPA's lease on the 

same terms until at least 2018 is contrary to FAA's minimum guidelines for leases where the 

provider constructs its own facilities. SPA maintains that "by arbitrarily demanding SPA change 

its business model as a condition for SPA to renew its lease, the Board has failed to accord SPA 

9 The Respondent acknowledges that SPA built two hangars, B-3 and B-4, which share a common wall. Following 

expiration of ground leases in effect at the time SPA built the hangars, bofh hangars became the property of the 

Sponsor. [FAA Item 5, p. 4] 

19 
the opportunity to occupy the premises for what the FAA deems to be the reasonable minimum 

term for providers who develop major facilities with their own funds." [FAA Item 9, p.l2] 

Complainant claims that "at no time has SPA offered or conducted airworthiness inspections of 

aircraft mandated by FAA regulations to the general public." [FAA Item 9, p.3] Complainant 

inexplicably attempts to differentiate between SPA and Walt Iverson, explaining that "the 

applicable Federal Aviation Regulations (FAR's) do not authorize SPA to offer or perform such 

services." [FAA Item 9, p.4] Complainant contends "that SPA itself, as a corporation, did not 

unlawfully perform annual inspections does not establish that SPA, through its employees, failed 

to provide aeronautical services, including annual inspections, to the public." [FAA Item 9, p. 5] 

Complainant continues that Iverson, an FAA certified A&P mechanic accredited with an 

Inspection Authorization and a principal of SPA, "has provided mechanical repairs to aircraft 

owned by SPA, himself and his spouse and has conducted air worthiness inspections of aircraft 

mandated by FAA regulations to certify said aircraft as airworthy at the leased facilities. At no 

time has Iverson or any other mechanic associated with SPA performed more than three 

1 00-hour or annual inspections for aircraft being refurbished and held for resale in any twelve 

month period." [FAA Item 1, p.2] 

The Respondent denies that SPA, during the period in question, has been a limited fixed based 

operator (LFBO). The Respondent refers to the FAA's Airport Compliance Manual that defines 

a fixed based operator as "a commercial entity providing aeronautical services such as fueling, 

maintenance, storage, ground and flight instruction, etc., to the public. FAA Order 5190.6B, 

p. 9-3 9 (emphasis added)," yet "SPA never alleges that it provides aeronautical services to the 

public." The Respondent emphasizes that SPA admits that it has at no time offered or conducted 

airworthiness inspections to the general public. [FAA Item 5, p. 3] The Respondent contends 

that it "is not required to treat an entity that provides needed maintenance services, such as 

annual aircraft inspections, to the public the same as an entity that admits it does not provide 

such services to the public." [FAA Item 6, page 5] 

The Respondent contends that "although SPA continued to occupy during 2012 (and still 

occupies) Hangars B-3 and B-4, to the best of the Airport Board's knowledge, SPA has not 

provided aircraft maintenance services to the public during that period." The Respondent claims 

that "[A]s of March, 2012, no party was providing aircraft maintenance services to the public at 

the Airport." [FAA Item 5, p. 5] The Respondent argues that "to the extent that SPA's business 

model consists of purchasing, then reconditioning and reselling aircraft, these activities would 

appear to constitute self-maintenance," and as a result would not require a LFBO agreement. 

[FAA Item 5, p. 1 OJ 

The Respondent denies that it has required SPA to alter its business by requiring the 

Complainant to perform any third party annual inspections. Given that promoting available 

aircraft maintenance services to the public and increasing airport usage and revenue are the 

objectives of the incentive program, the Respondent admits that it will not credit inspections 

performed by SPA on its own aircraft, or those of Iverson or his spouse, toward meeting the ten 

annual inspection threshold for earning incentives. The Respondent emphasizes that although 

self-maintenance is permitted, the Respondent has no interest in subsidizing self-maintenance 

activities. [FAA Item 5, p. 11] 

20 
The Complainant alleges the Respondent improperly altered SPA's minimum standards by 

failing "to impose the same minimum standards on SRA (Somerset) as had been in place for 

SPA [and] instead, the Board concocted a new minimum standard for SRA requiring the ten 

annual inspections and then refused to renegotiate SPA's lease unless it complied with the 

standard it set for SPA [SRA]." [FAA Item 9, p.7] 

Advisory Circulars, such as the one addressing Minimum Standards, are advisory in nature, 

rather than binding Orders issued by the FAA upon Airport Sponsors. As such, Airport Sponsors 

are encouraged to develop and apply Minimum Standards, but are not required to do so either by 

law or by the grant assurances. The FAA's policy recommending minimum standards stems 

from the airport sponsor's grant assurances to make the airport available for public use on 

reasonable conditions and without unjust discrimination. 

Once the airport sponsor has established minimum standards, it should apply them objectively 

and uniformly to all similarly situated on-airport aeronautical service providers. [See FAA 

Advisory Circular, 150/5190-7, Minimum Standards for Commercial Aeronautical Activities, 

Section 1.1; Flightline v. Shreveport, 10 FAA Docket No. 16-07-05 (March 7, 2008) (Director's 

Determination) page 26.] 

In previous cases, the Director has found that minimum standards can be modified to reflect the 

airport's desire to learn from experience and to be watchful for improvements in the way it does 

business in order to protect the public interest. [See Royal Air, Inc. v. City of Shreveport through 

the Shreveport Airport Authority, FAA Docket No. 16-02-06 (January 9, 2004) (Director's 

Determination) (pages 19-20.)] 11 In the present case, the Respondent justified changes to the 

minimum standards, explaining that attracting, developing, and sustaining meaningful third party 

maintenance services would facilitate growth at Lake Cumberland Regional Airport by attracting 

more users and allowing the Airport to generate additional revenue streams. 

This is consistent with the FAA's objective in recommending the development of minimum 

standards as a means to maintain and enhance the availability of adequate services for all airport 

users, to promote the orderly development of airport land, and to ensure efficiency of operations. 

[FAA Advisory Circular, 150/5190-7, Minimum Standards for Commercial Aeronautical 

Activities, Section 1.2] 

Grant Assurance 22, Economic Nondiscrimination, prohibits only unjust economic 

discrimination, not all economic discrimination. The principle of unjust economic 

discrimination requires a party who has been allegedly discriminated against to be "similarly 

situated" to an alleged preferred party in order to establish unjust economic discrimination under 

Assurance 22. [See R/T-182, LLC v. Portage County Regional Airport Authority, FAA Docket 

No. 16-05-14, (March 29, 2007) (Final Agency Decision), page 12] 

10 Respondent Flightline amended its Minllnnm Standards as part of its corrective action plan ordered in an earlier 

14 CFR Part case. The amended Minimum Standards included specific requirements for applicants seeking an FBO 

Agreement to conduct commercial aeronautical services on the Airport. 11 "The FAA encourages airport sponsors to establish reasonable minimum standards that are relevant to the 

proposed aeronautical activity with the goal of protecting the level and quality of services offered to the public. 

Minimum standards can be modified to reflect the airport's desire to learn from experience and to be watchful for 

improvements in the way it does business in order to protect the public interest." 

21 
In this case, the Complainant self-identifies as engaging in the business of purchasing, 

refurbishing, and re-selling aircraft. The Complainant claims that in order to perform ten third 

party inspections, it "would have to remove a considerable amount of its operation from the 

hangers [sic] it occupies and devote this space to aircraft in various stages of disassembly 

necessary for annual inspection." [FAA Item I and Item 9, p. 10] The Complainant also admits 

that "at no time has SPA offered or conducted airworthiness inspections of aircraft mandated by 

FAA regulations to the general public." [FAA Item 9, p.3] By its own statements and 

descriptions, the Complainant appears not to be similarly situated to Somerset Regional 

Aviation. 

Based on a review of the Record, the Director agrees that the Airport Board has established that 

it is seeking to attract a "meaningful" maintenance service provider to Lake Cumberland 

Regional Airport. Working with FAA's Memphis ADO, the Respondent justified its definition 

of meaningful maintenance service provider. The Respondent also justified its rationale for 

establishing a minimum standards threshold of annual third party inspections that a maintenance 

service provider must complete within a designated twelve month period. SPA represented in the 

record that it has not conducted airworthiness inspections of aircraft mandated by FAA 

regulations to the general public, but rather it is in the business as a re-furbisher and reseller of 

aircraft. SPA does contend that through its employees it performs aeronautical services. As the 

principal acting in his individual capacity after hours, Mr. Iversen, it was briefly mentioned that 

fee-based services provided for significantly less than ten (1 0) clients over a period of 

approximately 25 years. [FAA Item 9, pp.S-6] 

SPA, has not provided evidence confirming that the Respondent (I) failed to make the Airport 

available to SPA on reasonable terms, and (2) failed to negotiate in good faith with SPA. 

Consequently, SPA failed to establish that it is similarly situated to Somerset and engaged in 

maintenance services to the public, but rather is only self-servicing its own aircraft. [FAA 

Item 9, pp.S-6] 

Accordingly, the Director finds the facts presented in the record do not support a finding that the 

Respondent is in violation of Grant Assurance 22, Economic Nondiscrimination. 

Issue 2 - Whether the Respondent is in violation of Grant Assurance 23, Exclusive Rights, 

by changing the Minimum Standards for Fixed Based Operators. 

Grant Assurance 23, Exclusive Rights, implements the provisions of 49 U.S.C., §§ 40103(e) and 

4 71 07(a)( 4), and requires, in pertinent part, that the sponsor of a federally-obligated airport: 

will permit no exclusive right for the use of the airport by any persons 

providing, or intending to provide, aeronautical services to the public. 

will not, either directly or indirectly, grant or permit any person, .firm, or 

corporation, the exclusive right at the airport to conduct any aeronautical 

activities ... 

22 
Alleging a violation of Grant Assurance 23, the Complainant claims the Respondent "failed 

to impose the same minimum standard on [Somerset] as had been in place for SPA." The 

Complainant contends that the Respondent "concocted a new minimum standard for 

Somerset requiring ten annual inspections and then refused to negotiate SPA's lease unless it 

complied with the standard it set for SPA." The Complainant further argues that the 

Respondent's "attempting to impose the new Minimum Standard(s) on SPA ... violated the 

underlying consideration that the new Minimum Standards addressed the needs of both SPA 

and [Somerset] and thus imposed a patently unreasonable standard on SPA." [FAA Item 9, 

p. 7] 

In addition, the Complainant claims that the Respondent has been unable to demonstrate that 

performing ten annual inspections is attainable. The Complainant questions how such an 

inspection requirement would protect SPA from unreasonable competition, given that the 

requirement often annuals "unfairly pits SPA into direct competition with SRA (Somerset) 

for the lion's share of a very limited market. Is SPA expected to offer annual inspections as 

loss leaders or engage in a price war .. .in order to preserve its presence on the field?" [FAA 

Item 9, pp.9-10] The Complainant also argues that "FAA's Guidance on Developing 

Minimum Standards. Jd Appendix C, § 2.1 (e), do not deem the volume of a particular service 

as an appropriate area for the minimum standards." [FAA Item 9, p. I 0] 

The Respondent reiterates that SPA and Somerset are not similarly situated and that the 

Airport Board maintains uniformly applicable minimum standards. [FAA Item I 0, p.l] The 

Respondent emphasizes that "[T]he minimum standards of which SPA complains apply only 

to LFBOs providing aircraft engine and accessory maintenance services at the Airport. A 

different section of the minimum standards applies to those businesses selling aircraft from 

the Airport." [FAA Item 8, p.3] The Respondent contends that "the Airport Board's 

minimum standard for maintenance service providers relating to annual inspections is 

reasonable and applies equally. In fact, it is the equal application of the minimum standard 

of which SPA complains." [FAA Item I 0, p 4] 

The Respondent further maintains that given the annual inspection requirement is new is 

irrelevant, claiming "[t]he Airport Board developed the annual inspection requirement to 

address a current need. In developing the requirement, the Airport Board ensured that it 

allowed for multiple providers of the same service while at the same time promoting the 

revenue enhancement purposes of the incentive program. The FAA specifically referenced 

and concurred with (subject to certain conditions) the Airport Board's proposals in its 

August 21,2012, letter to the Airport Board." [FAA Item 10, pp. 4-5] 

SPA further argues that "the business of purchasing, refurbishing, and re-selling aircraft from 

facilities leased to it at the Lake Cumberland Regional Airport as alleged in paragraph 1 of 

the Complaint constitute aeronautical activities offered to the public. The Board makes no 

attempt to identify from whom SPA purchases and to whom SPA re-sells refurbished aircraft 

if not to the public." [FAA Item 9, p. 4] 

The record was reviewed. SPA submitted that the F ARs do not authorize SPA to offer or 

perform such services. Complainants cite 14 CFR § 91.409, which states the requirements 

23 
for mandatory periodic inspections. Complainants also cite 14 CFR § 43.7, which they state 

provides the list of persons authorized to conduct annual inspections. The Complainants cite 

that mandatory periodic inspections must be performed by human mechanics holding 

inspection authorizations, certified repair stations, manufacturers, or air carriers. SPA 

further states that it has never been any of the above; indeed it would have been unlawful for 

SPA to have performed periodic inspections." [FAA Item 9, p. 4] 

SPA further contends "that SPA itself, as a corporation, did not unlawfully perform annual 

inspections does not establish that SPA, through its employees, failed to provide aeronautical 

services, including annual inspections to the public." [FAA Item 9, p. 5] SPA counters that 

Mr. Iversen, as an FAA certified A & P mechanic with an Inspection Authorization has 

performed after hour repairs on aircraft. SPA further suggests an example of a previous 

maintenance customer, Mr. Bill Newell, former Chairman of the Airport Board, has his twin 

Comanche maintained and serviced by Mr. Iversen. [FAA Item 9, p. 6] SPA also suggests 

another example of"former Board member Delyn Gibson ofDiversicare's aircraft were 

inspected andre licensed by Mr. Iversen at FAA mandated periodic intervals." [FAA Item 9, 

p. 6] 

The record has been reviewed, and indicates that the Complaint in paragraph 5, SPA asserts: 

Mr. Iversen is a principal of SPA. Mr. Walter Iversen is an FAA certified A & 

P mechanic accredited with an Inspection Authorization has provided 

mechanical repairs, including airworthiness inspections, to aircraft owned by 

SPA, himself and his spouse, and has conducted airworthiness inspections of 

aircraft mandated by FAA regulations to certifY said aircraft as airworthy at 

the leased facilities. At no time has Iversen or any other mechanic associated 

with SPA performed more than three 100 hour or annual inspections for 

aircraft being refurbished and held for resale in any twelve month period. 

[FAA Item 1, p. 2] 

Immediately following in paragraph 6 of the Complaint, SPA claims: 

At no time has SPA offered or conducted airworthiness inspections of aircraft 

mandated by FAA regulations to the general public. [FAA Item 1, p. 2] 

Based on the record, SPA itself is not a certificated aircraft repair station or has the ability to 

conduct annual inspections. Thus, it cannot hold itself out to the public to conduct annual 

inspections. Thus, it is reasonable that the SPA is not a traditional FBO but an aircraft refurbisher and reseller. The airport lease is with SPA; not Mr. Iversen or other employees 

who perform aircraft maintenance repairs. 

Grant Assurance 23, Exclusive Rights, does not preclude a sponsor from modifying minimum 

standards to reflect changing needs and to protect the public interest. 12 As stated in the 

analysis oflssue 1, the grant assurances do not require sponsors to develop and implement 

12 See, Royal Air, Inc. v. City of Shreveport through the Shreveport Airport Authority, FAA Docket No. 16-02-06 

(January 9, 2004) (Director's Determination) (Pages 19-20). 

24 
minimum standards. However, FAA policy specifies that sponsors choosing to establish 

minimum standards should apply them objectively and uniformly to all similarly situated onairport aeronautical service providers. 

The Director finds that the Complainant's interpretation of the sample questions listed in Section 

2.1 (e) of Advisory Circular 150/5190-7 inaccurate. The Complainant maintains that "Minimum 

Standards setting the volume of a particular service are not authorized." [FAA Item 9, p.lO] 

Contrary to SPA's assessment, this sample question section serves merely as a reference guide to 

assist an airport sponsor in formulating effective minimum standards that address some of the 

types of commercial aeronautical services or activities frequently offered to the public. The AC 

explains that the sample questions are provided to address some of the various types of specific 

services or activities frequently offered to the public, and is not a limitation on what can be 

covered in the minimum standards. Accordingly, consistent with the ADO's August 21, 2012 

letter, an airport sponsor may establish a minimum standard provision based on the volume of a 

particular service if justified. 

The Complainant did not provide evidence that demonstrated SPA and Somerset are 

similarly-situated entities. Each provides different services. The Complainant did not 

provide evidence demonstrating that the Sponsor had not universally applied uniform 

Minimum Standards to similarly situated commercial aeronautical tenants on the airport. 

Furthermore, the Complainant did not articulate how modification to the Minimum Standards 

created an exclusive right for Somerset or how the new Minimum Standards would preclude 

SPA from continuing to engage in its business of purchasing, refurbishing, and re-selling aircraft 

from facilities leased to it at the Lake Cumberland Regional Airport. 

Accordingly, the Director finds the facts presented in the record do not support a finding that the 

Respondent is in violation of Grant Assurance 23, Exclusive Rights. 

Issue 3 -Whether the Respondent is in violation of Grant Assurance 24, Fee and Rental 

Structure, by offering a financial incentive program to increase business at the airport. 

The Complainant argues that the incentives the Airport Board provides to Somerset are 

dramatically disproportionate to those offered to SPA. The Complainant explains that there is an 

insurance rebate incentive and a rent rebate incentive, both of which may be earned upon proof of 

collection of ten paid third party annual inspections during a 12 month period. The Complainant 

maintains that the Respondent failed to provide to SPA "any credit/adjustment in the incentives 

for the fact that SPA built and paid for the hang[ a ]rs it occupies." SPA contends that "by giving 

the identical incentive to Somerset that it proposes to give to SPA, the Board has provided a 

disequal [sic] incentive because SPA has paid for its own hang[ a]r construction." [FAA Item 9, 

pp.ll-12] 

The Respondent asserts that the Complainant fails to state how SPA "is directly and substantially 

affected by the incentives provided to Somerset Regional Aviation or by the alleged violation of 

Grant Assurance 24." [FAA Item 6, p. 2] The Respondent maintains that "SPA has not alleged 

that its rents are unreasonable or that it is similarly situated with Somerset Regional Aviation such 

that it merits the same incentives. SPA admits in its complaint that it is different from Somerset 

25 
Regional Aviation and claims that it would have to 'alter its fundamental business' and 'abandon 

its traditional business model' to become similarly situated with Somerset Regional Aviation." 

[FAA Item 6, p. 2 citing FAA Item 1, pp. 4-5] 

The Respondent stresses that the Airport Board designed its incentive program with the intent to 

promote self-sufficiency. The Airport Board solicited proposals from aircraft maintenance 

service providers, explaining that Lake Cumberland Airport users had complained to the Airport 

Board regarding the lack of aircraft maintenance services. [FAA Item 6, p.3] The Respondent 

contends that "the competitive proposal process demonstrates that market conditions are such that 

the Airport Board cannot demand the payment of fees at this time. " 13 The Respondent attributes 

this to the fact that the Board received only two proposals in response to the RFP, neither of 

which was from SPA. In recognition of market conditions, the Respondent explains that "the 

Airport Board designed the incentive program and modified it in consultation with the FAA to 

meet its need for aircraft maintenance services." [FAA Item 6, p. 3] 

The Respondent claims that "SPA demands the opportunity to participate in the program without 

meeting the program's requirements, which were specifically designed to promote increased 

Airport usage and the Airport's self-sustainability." [FAA Item 6, p. 4] Contrary to the 

Complainant's assertions, the Respondent maintains that "[T]he Airport Board is not required to 

treat an entity that provides needed maintenance services, such as annual aircraft inspections[,] to 

the public[,] the same as an entity that admits it does not provide such services to the public. The 

FAA's Compliance Manual provides that 'if the services are not similar, sponsors are not required 

to charge the FBOs the same rates.' FAA Order 5190.6B, p. 9-7." [FAA Item 6, p. 5] Therefore, 

the Respondent summarizes that it has not unjustly discriminated against SPA, because SPA is 

not similarly situated to Somerset Regional Aviation. 

Moreover, the Respondent explains that SPA, initially leased only ground from the Airport Board, 

and owned the hangars it constructed, and thus did not lease the hangars. Upon expiration of the 

ground leases, ownership of the hangars vested in the Airport Board, and SPA executed leases for 

the hangars in addition to the ground. The Respondent contends that "SPA cannot now attempt to 

renegotiate the deal pursuant to which it constructed the hangars, which the Airport Board now 

owns." [FAA Item 10, p.3] 

As previously set out, the Respondent amended its lease with Somerset per guidance from the 

Memphis Airport District Office. [FAA Item 5, and Item 6, Exhibit A J 

The ADO concurred with "the concept of providing incentives to promote additional commercial 

activities leading to additional revenue at the airport. However, this proposed incentive program 

must be applied on an equal basis to all involved parties... provided that these incentives are not 

funded with airport revenue." [FAA Item 5, pp. 1-2 and Item 6, Exhibit A] 

13 "At some airports, market conditions may not permit an airport proprietor to establish fees that are sufficiently 

high to recover aeronautical costs and sufficiently low to attract and retain commercial aeronautical services. In such 

circumstances, an airport proprietor's decision to charge rates that are below those needed to achieve a selfsustaining income in order to assure that services are provided to the public is not inherently inconsistent with the 

obligation to make the airport as self-sustaining as possible in the circumstances." See Section VII, B.3. of FAA's 

Policy and Procedures Concerning the Use of Airport Revenue, 64 FR 7696 (February 16, 1999). 

26 
The Airport Board also confirmed that during any period in which subsidy incentives are offered, 

the incentives will be offered to all similarly situated providers of maintenance services at the 

airport. [FAA Item 5, page 9] 

A review of the Record affirms that SPA is not similarly situated to Somerset. SPA has expressed 

a preference for maintaining a business model which it purports to include the purchasing, 

refurbishing, and reselling of aircraft. [FAA Item I, p. I] SPA further contends "that SPA itself, 

as a corporation, did not unlawfully perform annual inspections does not establish that SPA, 

through its employees, failed to provide aeronautical services, including annual inspections to the 

public." [FAA Item 9, p. 5] SPA is the lessee of the airport property, and not Mr. Iversen in his 

capacity as a principal. Consequently, SPA cannot provide the necessary ten (I 0) annual 

inspections per year to increase airport business. That is the purpose of the Respondent's 

incentive program, which is allowed under FAA policy. 

Furthermore, SPA constructed both hangars, sharing one common wall, at its own expense. 

Hanger B-3 is a 2,400 square foot structure completed in 1988. Hanger B-4, completed in 1992, 

is 3,200 square feet. [FAA Item I, p. 2] The record shows the hangars became the property of 

the Airport Board on January I, 2009, upon expiration of the ground leases between SPA and the 

Airport Board. [FAA Item 5, p. 4] SPA entered new one year leases with Respondent beginning 

in 2009 [FAA Item I, Exhibit A and Item 6, Exhibit C] Respondent decided not to renew the 

lease in 2012 in order to issue a RFP for an aircraft maintenance repair business open to the 

public. SPA negotiated and entered into the different leases over the years. Respondent did not 

force the terms and conditions on SPA. 

No evidence has been provided by the Complainant that the Respondent is requiring SPA to 

change its business model. Nor was their sufficient evidence to support Complainant's claim that 

the Respondent offered incentives to Somerset, that were dramatically disproportionate or 

different to those offered to the Complainant to sustain a Grant Assurance 24 violation 

Accordingly, under the specific facts of this case, the Director finds that the Respondent, is not in 

violation of Grant Assurance 24, Fee and Rental Structure. 

Findings and Conclusions 

Upon consideration of the submissions of the parties, the entire record herein, the applicable law 

and policy and for the reasons stated above, the Director, Airport Compliance and Management 

Analysis, finds and concludes: 

• The Respondent is not in violation of Grant Assurance 22, Economic 

Nondiscrimination. 

• The Respondent is not in violation of Grant Assurance 23, Exclusive Rights. 

• The Respondent is not in violation of Grant Assurance 24, Fee and Rental Structure. 

27 
ORDER 

ACCORDINGLY, the Director finds that the Respondent Somerset-Pulaski County Airport 

Board is not in violation ofFederallaw and the Federal grant obligations. 

All Motions not expressly granted in this Determination are denied. 

RIGHT OF APPEAL 

This Director's Determination is an initial agency determination and does not constitute final 

agency action and order subject to judicial review. [14 CPR§ l6.247(b)(2)] A party to this 

Complaint adversely affected by the Director's Determination may appeal the initial 

determination to the FAA Associate Administrator for Airports pursuant to 14 CPR § 16.33( c) 

within thirty (30) days after service of the Director's Determination. 

Signed, 

lttndall S. Fiertz 

Director of Airport Compliance 

and Management Analysis 

Je,:l. I 2o1> 

Date 

28 
SPA Rental, LLC, d/b/a/ MSI Aviation 

V. 

Somerset-Pulaski County Airport 

Director's Determination 

FAADocketNo.l6-13-02 

INDEX OF ADMINISTRATIVE RECORD 

Item 1- Part 16 Complaint dated March 27,2013, alleging the Respondent violated Grant 

Assurance 24 and including Exhibits A-F. 

Exhibit A- Limited Fixed Based Operator Agreement dated June 30, 2009, between the 

Somerset-Pulaski County Airport Board and SPA Rental, LLC d/b/a MSI Aviation. 

Exhibit B - Somerset-Pulaski County Airport Board Hangar Lease dated January 1, 

2013, between the Somerset-Pulaski County Airport Board and SPA Rental, LLC d/b/a 

MSI Aviation, unsigned. 

Exhibit C -Limited Fixed Base Operator Agreement, including Exhibit A- Minimum 

Standards, undated and unsigned. 

Exhibit D- Correspondence dated May 9, 2012, from Phillip J. Braden, FAA Manager, 

Memphis ADO to Don Bandy, Chairman Somerset-Pulaski County Airport Board. 

Exhibit E- Informal Complaint Correspondence, dated Aprill9, 2012, from Winter R. 

Huff, Attorney for SPA Rental, LLC, to James H. Williams, FAA Program Manager, 

Memphis ADO, including Exhibits A-K. 

Exhibit F- Sworn Affidavit of Winter R. Huff dated March 21,2013, detailing events 

prior to the filing of a formal complaint. 

Item 2 -Notice of Docketing, dated April 8, 2013. 

Item 3- Agreed Motion for Additional Time to Respond to Complaint, dated April29, 2013. 

Item 4- FAA letter granting the request for an extension of time to file Respondent's Answer, 

dated May 30, 2013. 

Item 5- Motion to Dismiss and Answer, dated May 30,2013. 

Item 6- Supporting Memorandum of Points and Authorities for the Airport Board's Motion to 

Dismiss, dated May 30, 2013, and including Exhibits A-N. 

Exhibit A- Correspondence dated August 21,2012, from Phillip J. Braden, FAA Manager, 

Memphis ADO to Richard Van Hook, Chairman Somerset-Pulaski County Airport Board 

Maintenance Committee. 

Exhibit B- Correspondence dated July 23,2012, from Richard Van Hook to James H. 

Williams. 

Exhibit C - Somerset-Pulaski County Airport Board Hangar Lease signed and dated 

June 30, 2009, between the Somerset-Pulaski County Airport Board and SPA Rental, LLC 

29 
d/b/a MSI Aviation for Hangar Number B-3 for a one year term commencing January 1, 

2009 and terminating on December 31, 2009. 

Exhibit D - Somerset-Pulaski County Airport Board Hangar Lease unsigned and 

incomplete, between the Somerset-Pulaski County Airport Board and SPA Rental, LLC 

d/b/a MSI Aviation for Hangar Number B-4 for a one year term commencing January 1, 

2009 and terminating on December 31, 2009. 

Exhibit E - Correspondence from Torn Halbleib, Stites & Harbison, PLLC, via email dated 

November 29, 2012, to Winter R. Huff. 

Exhibit F - Limited Fixed Base Operator Agreement and separate lease for Hangar 10, 

both signed and dated March 24, 2012, for a one year term, renewable for two successive 

one year terms, between the Somerset-Pulaski County Airport Board and Somerset 

Regional Aviation, LLC, including associated amendment( s) and Minimum Standards for 

Fixed Base Operation. 

Exhibit G- Correspondence dated April4, 2012, from James H. Williams, Memphis 

ADO, to Kellie Baker, Airport Manager, Somerset-Pulaski County Airport, and reply dated 

April23, 2012, from John T. Mandt, Attorney representing Somerset-Pulaski County 

Airport Board to James H. Williams. 

Exhibit H- Correspondence dated May 18,2012, from Torn Halbleib, Stites & Harbison, 

PLLC, to Phillip Braden (FAA). 

Exhibit I- Correspondence dated August 7, 2012, from Torn Halbleib, Stites & Harbison, 

PLLC, to James Williams (FAA). 

Exhibit J- Pulaski County Fiscal Court Ordinance No: 220.30, amendment to Section 1.08 

Collection of Tax-Records, adopted June 8, 2010, and published June 13,2010. 

Exhibit K- Somerset-Pulaski County Airport Board Minutes from Special Called Meeting, 

September 10, 2012, and correspondence dated July 23, 2012 from Richard Van Hook, 

Chairman, Somerset -Pulaski County Airport Board to James H. Williams, explaining the 

subsidy incentive and amendment to minimum standards for fixed based operation. 

Exhibit L- Correspondence from Walter Iverson to Kellie Baker, dated February 7, 2013, 

regarding a request for public record, and a response from Tom Halbleib to Walter Iverson 

dated February 13, 2013. 

Exhibit M- Correspondence dated October 2, 2012, from Tom Halbleib, Stites & 

Harbison, PLLC, to Winter Huff, including proposed modifications to the Hangar Lease 

and LFBO Agreement, and Minimum Standards. 

Exhibit N- A series of email correspondence, dated January 27, 2013, between Torn 

Halbleib and Winter Huff. 

Item 7-Joint Application to Establish a Responsive Pleading Schedule, dated June 5, 2013. 

Item 8- FAA letter granting the request of a Responsive Pleading Schedule, dated June 7, 2013. 

Item 9- Complainant's Memorandum Opposing Dismissal, dated July, 1, 2013, and includes 

Exhibits 1 and 2. 

Exhibit 1- Correspondence, dated April25, 2013, unsigned from Walter P. Iversen to 

Somerset-Pulaski County Board proposing to enter into an LFBO agreement in which SPA 

30 
Rental, LLC, d/b/a MSI Aviation, would continue to rent Hangars B3 and B4 and qualify 

for incentives. 

Exhibit 2- Reply from Tom Halbleib to Komad Kuczak, dated June 18, 2013, in which the 

Somerset-Pulaski County Airport Board declines MSI Aviation's proposal. 

Item 10-Rebuttal and Reply in Support of the Airport Board's Motion to Dismiss, dated July 18, 

2013. 

Item 11- Notice of Extension of Time, dated January 16,2013 (sic- 2014). 

Item 12- Notice of Extension of Time, dated Aprill7, 2014. 

Item 13- Notice of Extension of Time, dated September 5, 2014. 

Item 14- Notice of Extension of Time, dated December 8, 2014. 

Item 15- Notice of Extension of Time, dated March l 0, 2015. 

Item 16- Notice of Extension of Time, dated Aprill7, 2015. 

Item 17 -Notice of Extension of Time dated May 12, 2015, to June 30, 2015. 

Item 18 -Notice of Extension of Time dated June 25, 2015, to August 28, 2015. 

Item 19- Grant History Report for Somerset, KY dated 08/26/2015. 

31