U.S. Department of Transportation Federal Aviation Administration



### HOV 11 

### 2016 JoyDay, Mayor City ofJonesboro 124 NorthAvenue Jonesboro, Georgia 30236 Office ofthe Chief Counsel

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

The Administrator asked me to respond to your September 13, 2016letter, submitting an amendmentto the Clayton County Entities' 1December 8, 2015 Action Plan.2
As you know, the FAA's November 7, 2014, "Policy Amendment" required state and local governments to submit by December 8, 2015, an Action Plan detailing how, and by when, they would come into compliance with federal lawrequiring revenue raised from all aviation fuel taxes

- excise and general alike

- be dedicated to supportthe operation and development ofairports, air transportation ofgoods andpassengers or a state aviation program. 3
The Clayton County Entities' December 8, 2015 ActionPlan, which is a part ofthe Aviation Fuel Tax Docket, described the Entities' proposal to comply with the Policy Amendment, the impact ontheir localjurisdictions, and impediments to intended compliance. The Clayton County Entities' September 13,2016 amendedAction Plan, which also has been made a part ofthe AviationFuel Tax Docket, provides the Entities' positionthat the Policy Amendment does not apply to them since they are not grant recipients and have no

1 The September 13, 2016 letter was submitted on behalfofthe following local govermnental entities ofthe State ofGeorgia: Clayton County Georgia Government, Clayton County Georgia Public Schools, and the Cites ofForestPark, 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 TaxDocketNo. 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)).

### 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 ActionPlan is their contention that federal lawpermits themto 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-related projects orprograms. Specifically, the Entities contendthey are (or should be) exempt from generally applicable federal lawbecause they neither received federal airport improvement grants nor are they responsible for the operation ofHartsfield-JacksonAtlantaInternational Airport and, hence are unable to spend aviation fuel tax revenue for aviation-related purposes 4


### Inthe event the FAA disagrees with their contention as to permissible uses ofaviation fuel tax revenue, the Clayton County Entities alternatively propose the FAA sanction using the value oflost property taxes, due to their inability under Georgia state lawto 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 contentionthat the federal prohibition on the diversion of aviation fuel tax revenue for non-aviation purposes only applies to state or local governments who received federal airport improvement grants or are an airport sponsor. We believe federal lawprohibits all state and local governments from diverting aviation fuel tax revenues for any non-aviation related purpose. The Clayton County Entities' contentionto the contrary relies onthe text ofa version of current lawthat originated inthe House ofRepresentatives in 1996. It

### is true that the House bill applied to only airport sponsors ("certificate holders"). However, as the Entities acknowledge, the House language did not become law as itwas amended in 

### conference to include the Senate's broader language. The Senate'sbroader language is the final language ofPublic Law I04-264 § 804, whichprovides; "(a) Prohibition. Local taxes on aviationfuel (except taxes in effect on December 30, 1987) orthe revenues generated by an airport that is the

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 airportto aneighboring county.

5

### Letter from Irene Elizabeth Howie, Esq., to Eduardo Angeles, the FAA's Associate Administrator for Airports, September 15,2016. 2subject ofFederal assistance 

### may not be expended for anypurpose other than the capital or operating costs of(1) the airport; (2) the local airport system; or "(3) any other local facility that is owned or operated by the person or entity that owns or operates the airport that is directly and substantially related to the air transportation ofpassengers orproperty." (Emphasis added). By its express terms, this provision ofcurrent law clearly is not limitedtojurisdictions that either receive federal financial assistance or operate the airport. 6 Additionally, Public Law 104-264 

### § 802(b) expresslyprovides as one ofits purposes: "Thepurpose ofthis title is to ensure that airport users are not burdened with hiddentaxation for 

### unrelatedmunicipal services andactivities, by

... (4) clarifying limitations onrevenue diversion that 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

..." contraryto 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 viewas to the desirability ofState or local governrnents levying a general sales tax on aviation fuel. 8 That is a matter for state and local governrnents. Rather, the FAA simply is enforcing Congress' mandate requiring aviation fuel tax revenues be used solely for aviation-relatedpurposes 9 Neitherthe federal statutory prohibition on diverting aviation

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 10-yearperiod. That provision also was eliminated in Conference.

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

8 The FAA specifically solicited comments on other reasonable interpretations regarding the permissible use ofstate and local taxes because we understood there could be alternate views as to the interpretation ofthe statute. The Agency also was aware that its proposed interpretation would have substantial practical consequences both for state and local government agencies and for industry consumers ofaviation fuel. [78 Fed. Reg. 69791]. The FAA conducted outreach with Congressional Committee staff, state and local organizations, and industry organizations and solicited feedback from taxing authorities. 

### 3

9 The Agency recognizes guidance prior to the 2014 Policy Amendment may have lacked clarity and precision. However, the 2014 Policy Amendment provided all State and local governments: (i) clearfuel tax revenues northe FAA's enforcement ofthe same in anywayprohibits or restricts State or local govermnents from levying a general sales tax on the sale ofaviation fuel. 10


### Guidance as to Permissible Offsets
Your September 15, 2016 letter to Associate Administrator Angeles notesthe HartsfieldJackson Atlanta International Airport is owned by 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-JacksonAtlanta International Airport is an economic engine contributing thousands of jobs, significanttax revenue, and international trade resources to the County. 11 Indeed, the Report notes the real and personal propertytaxes by three air carriers- Southwest, Air Iran and Delta- on property atthe airport are amongthe County's top ten property taxpayers. Nevertheless, Clayton County proposes the FAA approve the County using 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 ofaviationfuel tax revenue for general municipal services and activities. 12 Specifically, Clayton County seeks permissionto 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 tax real property comprising the Airport.
and precise guidance applying the application ofthe prohibition on revenue diversion, regardless of whether they are responsible for airports or operate State aviation programs; and (ii) three years to come into compliance conditioned on their submitting the requisite Action Plan. 

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The Georgia Department ofLaw, on behalfofthe Georgia Departments ofTransportation and Revenue, submitted an Action Planto the Aviation Fuel Tax Docket. That Action Plan did not address compliance by taxing authorities like the Clayton County Entities who are not responsible for operating an airport. The Clayton CountyEntities' initial Action Plan enclosed Georgia's Action Plan, and claimed they were "handcuffed" by the absence ofcollaboration with the HartsfieldJackson Atlanta International Airport, the incapacity to change restrictions on use for aviation fuel taxes approved by referendum, and the State's failure to discuss the legal restriction issues in its Action Plan. The Entities advised that they were evaluating offsets for the exempted taxes against fuel tax revenues and the value ofquantifiable in-kind services.
10 The FAA rejects the Clayton County Entities' contention that federal prohibitions on diversion ofaviation fuel tax revenue are inconsistent with the federalism principles described in Executive Order 13132. The preamble ofthe 2014 Policy Amendment and a response to a comment summarize the Agency's views. [79 Fed. Reg. 66283 and 66287].

11 http://www.clavtoncountyga.gov/pdfs/tinance/Budget%20Book%2020 17%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 "commontreasury" 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."It

### is importantto note that federal law explicitlypermits local 

### advalorem taxation of airport property. 

### 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 PolicyAmendmentnoted: The FAAbelieves that State and local officials should prepare an action plan to initiate theprocess to amend any non-compliant State laws and local ordinances as necessary to conform to federal law onuse ofaviation fuel tax revenues...The planmay include a reasonable transition period, not to exceed three 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 property taxes are made impermissible by operation ofGeorgia law, the Clayton County's "relief' from such prohibition mustbe provided by the Georgia State legislature, not by the FAA. Indeed, the three-year transition periodthe FAAprovided to jurisdictions to submit Action Plans was for the very purpose ofgiving State and local legislatures ampletime 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 providedto 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 andthe 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 tax requirements were met by the State appropriating from its general fund an amount equal to or exceeding the aviation taxes collected andremitting such funds to the State's aviation program fund or applicable airport revenue account. We further advised that the State had to have requirements in place to ensure the appropriations are implemented and enforceable by state or local agencies and mechanisms to account for and remit to the local airport entitythe dollar amount ofthe revenues generated for the applicable fuel tax. In the Agency's response to Georgia, we advised the State wouldbe required to specifically appropriate as a line item in its budget and pay into airport revenue accounts an amount at least equal to the total amount ofaviation fuel taxes levied and notused by localjurisdictions for aviation-related purposes. 

### 5However, the Clayton County Entities propose neitherto "offset" an impermissibly diverted aviation fuel taxrevenue stream with some otherrevenue stream from the State or a commontreasury nor to "offset" animpermissibly diverted revenue stream with the value ofservices provided to the aviation-related operations orprograms. Rather, the Entities propose to offset impermissibly diverted aviation fuel tax revenues withthe imputed "value" ofequally impermissible or phantom real property tax revenues. While your Action Plan meets the minimum requirements ofthe Policy Amendment regardingthe submission ofan action plan, we are concernedthatthe Clayton County Entities will not be in compliance with the aviation fuel tax revenue use requirements by December 8, 2017, based onthe concerns expressed above. KevinWillis, the FAA's Director ofthe Office ofAirport Compliance and Management Analysis, is available to discuss withyou in more detail permissible offsets ofdiversions ofaviationfuels tax revenues, and other potential means to achieve compliance bythe December 8, 2017 deadline.
In light ofthe guidance provided as to the contours ofpermissible and impermissible offsets, this letter will be submittedto DocketNo. 2013-0988. The foregoing response represents the presentview ofthe FAA's Office ofChiefCounsel based onthe facts presented inyour September 13, 2016letter to the Administrator, September 16, 2016letterto the Associate Administrator for Airports andthe amended Action Plan and does not constrain future FAA action or opinion. This advisory response does not constitute a final agency action or an "orderissued by the Secretary of Transportation" under 49 U.S.C. § 46110.
We sent a letter to each ofthe cosigners ofthe September 16, 2016letter. Shouldyouhave any question or seek additional information, please do nothesitate to contact either me, or ElizabethNewman, Senior Attorney, Airports Branch, Office ofthe Chie sel. 

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