Hogan 

Lovells 

June 19, 2015 

Mr. Randall S. Fiertz 

Hogan Lovells US LLP 

Columbia Square 

555 Thirteenth Street, NW 

Washington, DC 20004 

T +1 202 637 5600 

F +1 202 637 5910 

WNW. hoqanlovells. com 

Robert E. Cohn 

Patrick R. Rizzi 

202.637.4999 I 5659 

robert.cohn@hoqanlovells.com 

patrick. rizzi@hoqanlovells. com 

Director, Office of Airport Compliance and Management Analysis 

Federal Aviation Administration 

800 Independence Ave., SW 

Washington, DC 20591 

Re: Denver Regional Transport District -Aviation Fuel Taxes 

Dear Randy: 

We represent the Denver Regional Transport District ("RTD"). RTD, a political 

subdivision of the State of Colorado, is a single purpose entity which develops and 

operates mass transportation in the eight-county Denver metropolitan region. Under 

Colorado law, RTD is authorized to levy and receive a general sales tax collected and 

administered by the Colorado Department of Revenue ("Colorado DOR"). The FAA, 

through the Denver Airports District Office, has inquired about whether general sales tax 

revenues received by RTD, only a small portion of which comes from a tax on sales of 

aviation fuel, complies with requirements applicable to the use of aviation fuel taxes. 

The purpose of this letter is to explain why RTD's use of aviation fuel tax 

revenues with respect to on-airport, airport-related projects fully complies with 

applicable federal aviation law and FAA policy, including the recent Final Policy 

Amendment to the FAA's Policy and Procedures concerning the Use of Airport Revenue 

("2014 Policy Amendment"), 79 Fed. Reg. 66282 (November 7, 2014). The 2014 Policy 

Amendment requires non-compliant entities to submit a remedial action plan by 

December 8, 2015. Because RTD fully complies with the aviation fuel tax requirements, 

there is no need for it to submit a remedial plan. RTD respectfully requests that your 

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office issue a letter confirming RTD's position. We believe that this letter sufficiently 

addresses the 2014 Policy Amendment. 

I. Background. 

Pursuant to Colorado law, RTD is authorized to levy and receive a general sales 

tax collected and administered by the Colorado Department of Revenue ("Colorado 

DOR"). Colo. St. Ann. 32-9-119(2). Prior to 1987, RTD levied a general sales tax in the 

amount of 0.6%. Aviation fuel is one of many items on which the general sales tax is 

imposed. In 2004, Colorado voters increased the general sales tax by 0.4%, pursuant 

to Referendum 4A, making the total current general sales tax 1%. The additional 0.4% 

is to be used solely for a specific program of transportation projects called "FasTracks". 

RTD estimates that about $10.6 million of the 1% general sales tax for CY 2014 

came from aviation fuel sales, based on industry reporting codes and data from the 

Colorado DOR.1 Approximately $6.4 million of the $10.6 million came from the pre1987 (the 0.6%) portion of the general sales tax; and about $4.2 million came from the 

post-1987 (the 0.4%) portion of the general sales tax. And, as noted above, under 

Colorado law, the 0.4% portion ($4.2 million) may only be used for FasTracks 

transportation projects. 

II. RTD's Use of Aviation Fuel Taxes Complies with FAA Law and Policy. 

For the reasons set forth below, we submit that RTD's use of the portion of the 

general sales tax from aviation fuel sales (approximately $10 million annually) fully 

complies with federal aviation law and FAA policy. 

As explained below, slightly more than $6 million in annual taxes from aviation 

fuel sales received by RTD are derived from the pre-1987 portion of RTD's general 

sales tax, and thus is grandfathered under 49 U.S.C. § 41733(a), § 47107(b), and FAA 

policy. The remaining approximately $4 million in annual taxes from aviation fuel sales 

is used to fund an airport-related rail project that is constructed on airport property of 

Denver International Airport ("DIA"). 

A. The 0.6% Component of RTD's General Sales Tax Is Grandfathered 

Under the Aviation Statute. 

Sixty percent of the current general sales tax (0.6% of the 1% tax) levied by RTD 

and collected by the Colorado DOR was authorized before, and was in effect on, 

December 30, 1987. The Aviation statute expressly excludes taxes on aviation fuel "in 

effect on December 30, 1987" from the prohibition on non-airport use: 

"Local taxes on aviation fuel (except taxes in effect on December 30, 

1987) or the revenues generated by an airport that is the subject of 

Federal assistance may not be expended for any purpose other than the 

In CY 2014, 27 vendors sold and remitted sales taxes from aviation fuel sales. 

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capital or operating costs of-(1) the airport; (2) the local airport system; 

or (3) any other local facility that is owned or operated by the person or 

entity that owns or operates the airport that is directly and substantially 

related to the air transportation of passengers or property." 

49 U.S.C. § 41733(a) (emphasis added); see also 49 U.S.C. § 47107(b); FAA Order 

5190.6B, ~ 15.10(a)(6) at 15-8 ("Grandfathered arrangements also include local taxes 

on aviation fuel that were in effect before the 1987 Airport Act (i.e., fuel taxes in effect 

on December 30, 1987)."). The 2014 Policy Amendment confirms this grandfather 

exclusion: "State or local taxes on aviation fuel (except taxes in effect on December 

30, 1987) are considered subject to the revenue-use requirements in 49 U.S.C. 

47107(b) and 47133." 79 Fed. Reg. at 66287 (emphasis added). 

Accordingly, of the approximately $10 million in annual general sales taxes 

generated from aviation fuel sales, about $6-plus million comes from the pre-1987 0.6% 

grandfathered portion of the tax and can be used for any purpose.2 

B. RTD's Use of the 0.4% Portion of the Sales Tax for the On-Airport Rail 

Project Complies with FAA Requirements. 

The additional 0.4% of the general sales tax enacted in 2004 can be used only 

for the FasTracks transportation program, which includes airport-related projects. RTD 

is building a rail line (the "East Corridor Airport Rail Line") from downtown Denver to DIA 

as part of the FasTracks program. It is expected to open for service in 2016. The 

purpose of the East Corridor Airport Rail Line project will support direct rail service 

to/from DIA. The East Corridor Final Environmental Impact Statement clearly 

articulates the purpose and need for this project: 

"1.0 PURPOSE AND NEED 

Downtown Denver is the center for rail and bus transit in the region. 

DIA is a critical link in the regional and national transportation network. 

The East Corridor project serves as a connection between these two 

important areas .... " 

"1 .5 PROJECT PURPOSE 

"The purpose of this [East Corridor] project is to provide high-quality, 

high-capacity, fixed-guideway transit that improves transportation 

2 We also note that, per the FAA Airport Compliance Manual, the "City and County of Denver- Denver International" 

is a grandfathered airport that may use airport revenue for expenditures that would be impermissible for nongrandfathered airports. See FAA Order 5190.68, 1115.1 O(a) at 15-7 and at 15-12 (September 2009). 

"An airport is deemed "grandfathered" when provisions establishing certain financial arrangements 

between the airport and sponsor exist that were in effect prior to ... September 3, 1982. 

Grand fathered airports are grand fathered only as to what was in effect of September 3, 1982. A list 

of airports considered to be grandfathered is at the end of this chapter. 

A grandfalhered airport is permitted to pay the sponsor for costs that are for purposes other than 

the airport's capital and operating costs. . ' 

See FAA Order 5190.68, '!115.10(a) at 15-7. 

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access and mobility between downtown Denver and DIA, with 

connections to the rest of the RTD transit system, .... " 

East Corridor Final Environmental Impact Statement, at 1-1,1-7 (September2009). 

RTD uses the approximately $4 million in annual general sales tax revenues 

derived from aviation fuel sales to fund the nearly 11 mile portion of the East Corridor 

Airport Rail Line being constructed by RTD entirely on airport property to transport 

people between the Denver Metropolitan region and DIA. This project is airport-related 

and therefore consistent with aviation law, FAA policy, and the broader policy of the 

United States "to encourage the development of intermodal connections on airport 

property between aeronautical and other transportation modes and systems to serve air 

transportation passengers and cargo efficiently and effectively and promote economic 

development". 49 U.S.C. § 47101(a)(5). 

With respect to airport ground access projects, the FAA's Final Policy and 

Procedures concerning the Use of Airport Revenue explains: 

"Final Policy: The Final Policy has been modified to provide guidance on 

the use of airport revenues to finance airport ground access projects. The 

Final Policy states that airport revenue may be used for the capital or 

operating costs of such a project if it can be considered an airport capital 

project, or is part of a facility owned or operated by the airport sponsor and 

directly and substantially related to air transportation of passengers or 

property, relying directly on the statutory language of Sec. 47107(b) .... 

[T]he Final Policy summarizes the FAA's decision on the use of airport 

revenue to finance construction of the rail link between San Francisco 

International Airport and the Bay Area Rapid Transit (BART) rail system 

extension running past the airport .... [T]he FAA determined that the 

possibility of incidental use by nonairport passengers did not preclude 

airport revenues from being used to finance 100 percent of the otherwise 

eligible cost items. For purposes of this analysis, the FAA considered 

''airport passengers" to include airport visitors and employees working at 

the airport." 64 Fed. Reg. 7696, 7705 (February 16, 1999) ("Final Policy"). 

Section V(A)(9) of the Final Policy codifies this position as follows: 

"9. Airport revenue may be used for the capital or operating costs of those 

portions of an airport ground access project that can be considered an 

airport capital project, or of that part of a local facility that is owned or 

operated by the airport owner or operator and directly and substantially 

related to the air transportation of passengers or property, including use 

by airport visitors and employees. The FAA has approved the use of 

airport revenue for the actual costs incurred for structures and equipment 

associated with an airport terminal building station and a rail connector 

between the airport station and the nearest mass transit rail line, where 

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the structures and equipment were (1) located entirely on airport property, 

and (2) designed and intended exclusively for the use of airport 

passengers." 64 Fed. Reg. at 7718-7719. 

Nearly 11 miles of the rail project and the terminus of the rail line will be on DIA 

property, thereby effectively ensuring that most of the people using the rail line will be 

people travelling to and from the airport. 

The East Corridor Airport Rail Line's budget for project construction/development 

costs is approximately $1.4 billion. As of April 30, 2015, RTD had already spent over 

$159 million on the local capital costs for the nearly 11 miles of the East Corridor Airport 

Rail Line located on airport property. [A map showing the rail line on airport property is 

attached as Exhibit A.] This $159 million does not include costs related to land 

acquisition/relocation, rolling stock (i.e., trains) or finance charges. In addition, going 

forward for a 29-year period, RTD will spend approximately $30 million annually with 

respect to the on-airport portion of the East Corridor Airport Rail Line. These amounts 

vastly exceed (and more than account for) the approximately $4 million in annual taxes 

from sales of aviation fuel received by RTD as part of the non-grandfathered portion of 

the sales tax. 

The salient point with respect to the use of aviation fuel tax revenue is that 

the approximately $4 million, comprising the non-grandfathered portion of the 

annual general sales taxes from sales of aviation fuel, is fully used by RTD to 

fund the cost and operations of the on--airport rail project. Indeed, the annual 

costs of the on-airport portion of the project vastly exceed the $4 million in 

annual taxes. 

The $159 million of actual costs expended by RTD through April 2015 and the 

approximately $30 million to be spent annually by RTD going forward were derived 

using a mileage-based allocation. The East Corridor Airport Rail Line comprises a total 

of nearly 23 miles, of which nearly 11 miles (48%) is on DIA airport property. RTD 

submits that the mileage based allocation is the most appropriate methodology for 

allocating the airport-related costs of this project.3 First, the mileage allocation formula 

is linked to the readily measurable, on-airport property portion of the East Corridor 

Airport Rail Line. Second, the rail line is not operating to the airport yet, and thus any 

proration based on a forecast of airport/non-airport rail passengers would be 

hypothetical without any historical foundation. Third, since the final station is on airport 

property at the DIA terminal and, as the FEIS stated, the East Corridor Airport Rail 

Line's purpose is to connect Denver to the airport, the vast majority of rail passengers 

using the East Corridor Airport Rail Line will be related directly to travelers to and from 

the airport (e.g., passengers, employees, visitors, airport businesses, meeters-andgreeters). The mileage-based allocation, which allocates less than 50% of RTO's 

budget and costs to the on-airport portion of the East Corridor Airport Rail Line, would -

if anything- be a conservative proration methodology. The allocation of $159 million of 

FAA Order 5190.68 makes reference to pro-rating the airport's contribution to the forecast use of the facility. 

FAA Order 5190.68, 1J15.9 at pages 15-6 to 15-7. 

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actual costs already expended for the on-airport portion is also conservative because it 

excludes the cost of acquisition of rail cars. RTD believes it would be fair and 

reasonable for the FAA to permit the tax revenues from the sales of aviation fuel to be 

used for the acquisition of rail cars. As noted above, the primary purpose of the trains 

operating on the East Corridor Airport Rail Line is to transport people to and from the 

airport. Every train operating on the East Corridor Airport Rail Line will operate to and 

from the airport. 

In conclusion, we request that your office confirm that RTD's use of aviation fuel 

tax revenues complies with the FAA's aviation fuel tax requirements. Please let us 

know if you have any questions, need more information or would like to have a meeting 

or conference call with RTD to discuss these issues. 

Sincerely yours, 

Robert E. Cohn 

Patrick R. Rizzi 

Hogan Lovells US LLP 

cc: John P. Bauer, Manager- Denver Airports District Office (ADO) 

John.Bauer@faa.gov 

Marla Lien, General Counsel, Denver Regional Transport District 

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Denver Regional Transport District 

Exhibit A 
East Corridor on Denver Airport Property 

East Corridor runs for 10.69 miles on Denver Airport property, starting on the 

north side on Interstate 70 (lower left corner of map) within the right of way of the 

airport's Pena Transportation Corridor. In addition to the terminal platform location 

at the south s1de of the DEN terminal, there are two other station platforms located 

along the alignment on airport property. They are the 40th/Airport Station and the 

61 st/Pena Station.