U.S. Department of Transportation Federal Aviation Administration



### NOV 17 2016 Jeffrey E. Turner, Chairman Clayton County Connnissioners 112 Smith Street Jonesboro, Georgia 30236 Office ofthe Chief Counsel

Re: Clayton County Entities' Amended Action Plan Dear Chairman Turner: 800 Independence Ave., S.W. Washington, D.C. 20591

The Administrator asked me to respond to your September 13, 2016letter, submitting an amendmentto the Clayton CountyEntities' 1December 8, 2015 Action Plan2
As you know, the FAA's November 7, 2014, "Policy Amendment" required state and local governments to submit by December 8, 2015, an Action Plandetailing how, and by when, they would come into compliance withfederal law requiring revenue raised from all aviation fuel taxes

- excise and general alike

- be dedicated to supportthe operation and development ofairports, air transportation ofgoods and passengers or a state aviation program3
The Clayton County Entities' December 8, 2015 Action Plan, whichis a part ofthe Aviation Fuel Tax Docket, described the Entities' proposal to complywiththe Policy Amendment, the impact ontheir localjurisdictions, and impediments to intended compliance. The Clayton County Entities' September 13, 2016 amended Action Plan, which also has been made a part ofthe AviationFuel Tax Docket, provides the Entities' positionthat the

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

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

3 79 Fed. Reg. 66282, the "2014 Policy Amendment" clarified application ofthe Agency's 1996 Revenue Use Policy. (Policy andProcedures Concerning the Use of AirportRevenue, 64 Fed. Reg. 7696, (February 16, 1999)).Policy Amendment does not apply to them since they are not grantrecipients and have no ability to spend revenues from their tax on aviation fuel for the purposes specified in federal law. The basis for the Clayton County Entities' amended Action Plan is their contention that federal lawpermits them to levy a general sales tax onthe sale ofaviation fuel and divert such revenue to fund a variety oflocal governmental services, including public education and infrastructure, in lieu offunding aviation-relatedprojects or programs. Specifically, the Entities contend they are (or should be) exempt from generally applicable federal law because they neither received federal airport improvement grants nor are they responsible for the operation ofHartsfield-JacksonAtlantaInternational Airport and, hence, are unable to spend aviation fuel taxrevenue for aviation-related purposes.4
In the eventthe FAA disagrees with their contention as to permissible uses ofaviation fuel tax revenue, the Clayton County Entities alternatively propose the FAA sanction usingthe value oflost propertytaxes, due to their inabilityunder Georgia state law to tax the airport's real property located in Clayton County, as an "offset" for their impermissible diversion ofaviation fuel tax revenue for non-aviation-related purposes.5
This letterresponds to each contention. Diversion ofAviation Fuel Tax Revenue For Non-Aviation Purposes The FAA disagrees withyour contentionthatthe federal prohibition on the diversion of aviation fuel tax revenue for non-aviationpurposes only applies to state or local governments who received federal airport improvement grants or are an airport sponsor. We believe federal law prohibits all state and local governments from diverting aviation fuel tax revenues for any non-aviation related purpose. The Clayton County Entities' contentionto the contrary relies onthe text ofa version of current lawthat originated in the House ofRepresentatives in 1996. It is true thatthe House bill appliedto only airport sponsors ("certificate holders"). However, as the Entities acknowledge, the House language did notbecome law as itwas amended in conference to include the Senate'sbroader language. The Senate's broader language is the final language ofPublic Law 104-264 

### § 804, which provides:

4 Notwithstanding that contention, the FAA notes that publicly available records reflect Clayton County, as an owner ofa federally obligated airport, was subjectto prohibitions on revenue diversion at least through 2012 when the County sold the airport to a neighboring county.
5 Letter from Irene Elizabeth Howie, Esq., to Eduardo Angeles, the FAA's Associate Administrator for Airports, September 15, 2016. 2"(a) Prohibition. Local taxes on aviation fuel (excepttaxes in effect on December 30, 1987) or the revenues generated by an airport that is the subject ofFederal assistance may notbe expendedfor anypurpose other than the capital or operating costs of(1) the airport; (2) the local airport system; or "(3) any other local facility that is owned or operated by the person or entity that owns or operates the airpmi that is directly and substantially related to the air transportation ofpassengers orproperty." (Emphasis added). By its express terms, this provision ofcurrent law clearly is not limited tojurisdictions that either receive federal financial assistance or operate the airport6 Additionally, Public Law 104-264 

### § 802(b) expressly provides as one ofits purposes: "Thepurpose ofthis title is to ensure that airport users are notburdenedwith hidden taxation for unrelatedmunicipal services andactivities, by

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

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

6 Congress knows how to establish a process to waive provisions when appropriate. For example, the House bill contained aprovision granting the FAA authority to issue waivers to airports not receiving grant assistance under Chapter 471, during the preceding 1 0-year period. That provision also was eliminated in Conference.

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

8 The FAA specifically solicited comments on other reasonable interpretations regarding the permissible use ofstate and local taxes because we understood there could be alternate views as to the interpretation ofthe statute. The Agency also was aware that its proposed interpretation would have substantial practical consequences both for state and local government agencies and for industry consumers ofaviation fuel. [78 Fed. Reg. 69791]. The FAA conducted outreach with Congressional Committee staff, state and local organizations, and industry organizations and solicited feedback from taxing authorities. 3aviation-relatedpurposes.9 Neitherthe federal statutory prohibition on diverting aviation fuel tax revenues nor the FAA's enforcement ofthe same in any way prohibits or restricts State or local governments from levying a general sales tax onthe sale ofaviation fuel. 10
Guidance as to Permissible Offsets
Your September 15, 2016 letterto Associate AdministratorAngeles notes the Hartsfield- ]ackson Atlanta International Airport is ownedby the City ofAtlanta, which is located in DeKalb and Fulton Counties, eventhough 3,146 ofthe Airport's 4,700 acres are located in Clayton County. In addition, I reviewed Clayton County's Comprehensive Annual Financial Reports. The 2017 BudgetDocument notes the Hartsfield-Jackson Atlanta International Airport is an economic engine contributingthousands of jobs, significanttax revenue, and international trade resources to the County. 11 Indeed, the Report notes the real andpersonal property taxes by three air carriers- Southwest, Air Iran and Delta- on property atthe airport are among the County's top tenpropertytaxpayers. Nevertheless, Clayton County proposes the FAA approve the Countyusing the value of lost tax revenue due to its inability under Georgia state lawto tax airportreal property located in County as an "offset" for the diversion ofaviation fuel tax revenue for general municipal services and activities. 12 Specifically, Clayton County seeks permissionto 

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

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

11 http://www.claytoncountyga.gov/pdfs/finance/Budget%20Book%2020I7%20Final.pdf

12 Your letter also notes the lack ofguidance as to permissible offsets applicable to taxing authorities that are not airport sponsors and do not share a "common treasury" with a taxing authority that is an airport sponsor. Nevertheless, your letter further notes during preliminary discussions FAA staff "suggested one test may be whether the offset benefits the national air transportation system and is quantifiable."offset its impermissible diversion ofapproximately $18 million in general sales tax on aviation fuel with approximately $100 million "lost" due to its inabilityunder Georgia lawto taxreal property comprising the Airport. Itis importantto note thatfederal law explicitly permits local advalorem taxation of airportproperty. See, 49 U.S.C. 

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

### 5specifically appropriate as a line item inits budget and pay into airport revenue accounts an amount at least equal to the total amount ofaviation fuel taxes levied and notused by localjurisdictions for aviation-relatedpurposes. However, the Clayton County Entities propose neither to "offset" an impermissibly diverted aviation fuel tax revenue stream with some other revenue stream from the State or a common treasury norto "offset" an impermissibly diverted revenue stream withthe value ofservices provided to the aviation-related operations or programs. Rather, the Entities propose to offset impermissibly diverted aviation fuel tax revenues withthe imputed "value" ofequally impermissible or phantomreal property taxrevenues. While your Action Planmeets the minimum requirements ofthe Policy Amendment regarding the submission ofan action plan, we are concerned that the Clayton County Entities will notbe in compliance withthe aviation fuel tax revenue use requirements by December 8, 2017, based onthe concerns expressed above. Kevin Willis, the FAA's Director ofthe Office ofAirport Compliance and Management Analysis, is available to discuss with you inmore detail permissible offsets ofdiversions ofaviation fuels tax revenues, and other potential means to achieve compliance by the December 8, 2017 deadline. In light ofthe guidance provided as to the contours ofpermissible and impermissible offsets, this letter will be submitted to DocketNo. 2013-0988. The foregoing response represents the present view ofthe FAA's Office ofChiefCounsel based onthe facts presented in your September 13, 2016letterto the Administrator, September 16, 2016 letter to the Associate Administrator for Airports and the amended Action Plan and does not constrain future FAA action or opinion. This advisory response does not constitute a final agency action or an "order issued by the Secretary of Transportation" under 49 U.S.C. 

### § 46110. We sent a letterto each ofthe cosigners ofthe September 16, 20161etter. Should you have any question or seek additional information, please do not hesitate to contact either me, or Elizabeth Newman, Senior Attorney, Airports Branch, Office ofthe ChiefCounsel.

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