       Application of the Airport and Airway Improvement Act
        to the Proposed Lease of the Albany County Airport


S ectio n 5 1 1 (a)(1 2 ) o f th e Airport an d A irw ay Im provem ent A ct perm its an airport ow ner o r
    o p e ra to r to reco up its unreim bursed capital o r operating costs from airport revenues, regard­
    le ss o f w hen th e expenses were incurred. T h e Federal A viation A dm inistration, how ever, in
    th e ex ercise o f discretion co nferred upon the Secretary o f T ransportation by th e Act, m ay
    o v ersee the rates charged to airp o rt users by private lessees to ensure that such rates rem ain
    fair an d reaso n able


                                                                                     February 12, 1991

           M   em orandum        O p in io n   f o r t h e a c t in g   G   eneral   C   o u n sel

                               Departm ent        o f t r a n s p o r t a t io n



   This memorandum responds to your request for our opinion on a pro­
posed lease arrangement pursuant to which Albany County, New York, the
owner of Albany Airport, would lease the Airport to a private joint venture.1
You have asked us to address two narrow questions. First, you have asked
whether the County’s use of an initial lease payment of thirty million dollars
for general expenditures unrelated to the Airport would violate section
511(a)(12) of the Airport and Airway Improvement Act of 1982, as amended
(the “AAIA”), 49 U.S.C. app. § 2210(a)(12). That section requires airport
owners or operators who receive federal assistance to use all airport-gener­
ated revenues “for the capital or operating costs of the airport, the local
airport system, or other local [airport-related] facilities.” Second, you have




   1 L etter for W illiam P. Barr, Assistant Attorney G eneral, Office of Legal Counsel, from Philip D. Brady,
G eneral C ounsel, Departm ent of Transportation (Mar. 5, 1990) (the “March Letter”). Mr. Brady subse­
quently provided us with an undated and unsigned memorandum o f law prepared by the Federal Aviation
A dm inistration (“ FAA” ) (the “FAA M emorandum” ) discussing the issues raised by the proposed lease.
L etter for J. M ichael Luttig, Acting A ssistant Attorney General, Office of Legal Counsel, from Philip D.
Brady, G eneral Counsel, Department o f Transportation (July 27, 1990).
   You have also provided us with internal legal memoranda prepared by the Department of Transporta­
tion and the FAA, certain correspondence between the FAA and Albany County, and a memorandum
presenting the views o f USAir, a current user of the Albany Airport. We have also received the written
views o f Baker, W orthington, Crossley, Stansbetty & Wolf, counsel to Lockheed Air Terminal.

                                                     26
asked whether the AAIA permits the FAA to oversee the lessee’s recoup­
ment of the thirty million dollars through rates charged to current and future
airport users.2
   The County maintains that its use of the thirty million dollar payment for
general municipal purposes does not violate the revenue-retention require­
ment in the statute because the payment constitutes reimbursements for capital
and operating costs that the County has incurred for the Airport over the
past three decades. The FAA argues, however, that section 511(a)(12) does
not permit an airport owner or operator to elect to recoup its capital and
operating investments in an airport as long after those investments were
made as it has been since Albany County made its investments.
    We conclude that section 51 l(a)(12) of the AAIA permits an airport owner
or operator like Albany County to recoup its unreimbursed capital and oper­
ating expenses from airport revenues, regardless of when the expenses were
incurred. The statute requires only that airport revenues be used “for the
capital or operating costs” of the airport. The use of airport revenues to
reimburse past capital or operating expenses may fairly be characterized as
an expenditure “for the capital or operating costs” of the airport within- the
meaning of the statute. We also conclude, however, that the FAA has discre­
tion under other provisions of the AAIA to oversee the rates that the private
lessee charges airport users. Therefore, whether and to what extent those
rates should be permitted to reflect the lessee’s investment, including the
thirty million dollar payment, is a judgment that must be made in the first
instance by the FAA.3

                                                    I.

   Albany County has requested the FAA to approve a proposal made by a
joint venture consisting of British American, Ltd. and Lockheed Air Termi­
nal (“BALLAT”), to lease Albany Airport from the County for forty years,
with an option to renew the lease for an additional forty years, and to man­
age the Airport either directly or through BALLAT’s affiliates.4 Under the
   2 In his original request, Mr. Brady framed the issue raised by the proposed lease in term s of whether
“recoupment of a private lessee's up-front or periodic payments from airport user charges would be
inconsistent with [section 51l(a)(12)]” if the private lessee “retain[s] any portion” of such charges for
its own use. March Letter at 1, 2 (emphasis added). Mr. Brady thereafter recast the request and asked
us to address (1) whether the AAIA permits Albany County to use the thirty million dollar paym ent for
general expenditures; (2) whether the lessee may charge the thirty million dollar payment, as well as
certain other expenses, such as management and construction fees, to airport users; and (3) whether,
under the proposed lease, the County would retain sufficient control of the Airport to satisfy the contrac­
tual assurance and funding eligibility requirements of the AAIA. FAA Memorandum at 3. As we have
discussed with your office, the only issues we address herein are the two presented by your m odified
request and set forth in the text above. The remaining issues you have raised turn on policy judgm ents
that m ust be made in the first instance by the FAA. See discussion infra note 15.
   ’ In his original request, Mr. Brady asked us whether it makes any legal difference if the lessee is a
public rather than a private entity. March Letter at 2. We do not believe that it does.
   4 The Secretary of Transportation has delegated the Administrator of the FAA the authority to carry out the
functions vested in the Secretary by the AAIA. Memorandum for the Federal Aviation Administrator, from
                                                Continued

                                                    27
 terms o f the proposal, Albany County would receive an initial payment of
 thirty million dollars, lease payments of $500,000 per year for the first twenty
 years, and lease payments o f one million dollars per year thereafter. The
County, which will retain title to the airport, intends to place the annual lease
payments in an interest-bearing account for use in airport development and to
use the thirty million dollar payment for general expenditures unrelated to
the Airport.5 There is no dispute that the thirty million dollar payment to the
County constitutes “revenue[] generated by the airport” within the meaning
o f section 51 l(a)( 12). See FAA Memorandum at 3-4.6 Furthermore, the FAA
does not contest that as a general matter section 511 (a)( 12) permits an airport
owner or operator to recoup airport-related capital and operating costs through
airport revenues. Id. at 5. The narrow questions before us, therefore, are
whether the statute imposes a temporal limitation on the recovery of such
costs and, if not, whether the FAA can oversee BALLAT’s recoupment of its
payment to the County through rates charged to airport users.
    According to the FAA, see id. at 4, the County contends that it may use
the thirty million dollar payment for general municipal purposes without
violating the revenue-retention requirement in section 51 l(a)(12) because
the payment represents reimbursement for capital and operating costs that
the County has incurred for the Airport over the past three decades.7 In


   ‘ (....continued)
Drew Lew is. Secretary of Transportation (Sept. 15,1982). The County cannot transfer a property interest
in the A irport w ithout the approval of the FAA because the County has received approxim ately twenty-
four m illion dollars in federal assistance under the AAIA and related programs since acquiring the A ir­
port from the City o f Albany in 1960. A s an AAIA grantee, the County has agreed that ‘‘[i]t will not sell,
lease, encum ber or otherwise transfer or dispose o f any part of its title or other interests in the [Airport]
property . . . for the duration of the term s, conditions, and assurances in the grant agreement without
approval by the Secretary.” FAA Advisory Circular No. 150/5100-16A, app. I at 3 (Oct. 4, 1988). Even
if the proposed lease is executed, the County would remain subject to the assurance requirements in
section 5 1 1(a). Id. -, see also infra note 11. The County’s obligations under the grant assurance require­
m ents do not expire until the year 2010. See FAA Memorandum at 2.
   ’ The thirty m illion dollars would be paid by BALLAT to the County as consideration for a 170-acre
parcel o f land adjacent to the Airport. BALLAT will immediately transfer the parcel back to the County,
however, for one dollar for inclusion in the Airport’s layout plan. FAA Memorandum at 1.
  6See also FAA O rder No. 5100 38A at 73 (Oct. 24, 1989) ("Airport revenue is revenue generated by
facilities and activities on or off airport. Examples of airport revenue include revenue from service fees,
landing fees, lease or rental fees, usage fees, sale o f commodities such as agricultural or forest products,
proceeds from m ineral sales, or other net revenue produced from real property."). When it was origi­
nally proposed that the Airport be sold to BALLAT rather than leased, proponents of the arrangem ent
argued that the thirty million dollar paym ent to the County was not airport revenue. Memorandum of
Baker, W orthington, Crossley, Stansberry & Wolf at 7-8 (Aug. 3, 1990). To our knowledge, however,
none o f the parties now contends that the lease payment is not “revenue[] generated by the airport.”
  ’ Prelim inary inform ation furnished to the FAA by the County indicates that its unreimbursed capital
and operating costs consists o f (1) $4,437 million in cash paid to the City of Albany in 1960; (2) $8.62
m illion in outstanding debt related to the Airport; (3) $9,148 million transferred to the Airport by the
County between 1963 and 1985; and (4) $4,194 million in services contributed by the County for the
benefit o f the Airport, for a total of approximately $26.3 million. FAA Memorandum at 4. We express
no view herein on the accuracy of these figures. We note, however, that the AAIA grants the FAA
discretion to im pose documentation and accounting requirements on airport owners and operators. See
49 U.S.C. app. § 2210(a)( 10) ("[T]he airport operator or owner will submit to the Secretary such . . .
airport financial and operations reports as the Secretary may reasonably req u est. . . .”). Thus, the FAA
may require the County to produce records sufficient to support the amounts claimed.

                                                     28
other words, the County maintains that the lease proposal would merely per­
mit it to recover its earlier airport-related expenses which, consistent with
section 511(a)(12), it could have elected to recover from airport revenues at
the time the expenses were incurred. See id. at 5.8
   The FAA, on the other hand, argues that section 51 l(a)(12) “contem­
plates a timing relationship between the expenditures for capital or operating
costs (or the commitment to do so) and the actual recoupment o f revenues.”
Id.9 The FAA does not define the time period within which capital or oper­
ating expenditures must be recouped. It simply contends that section
511 (a)( 12) implicitly requires that an airport owner or operator elect to re­
coup such costs at the time the costs are incurred, or within a relatively
short period of time thereafter. Id .10

                                                    II.

   Under the AAIA, both “public” and “public-use” airports may apply for
federal grants to help fund airport development projects. 49 U.S.C. app. §§
2202(a)(22), 2208(a)(1). If an application for AAIA assistance is approved,
the United States will typically bear ninety percent of the project costs. Id.
§ 2209(a). Section 511(a) of the AAIA requires that as a condition to ap­
proval of a project grant, the airport owner or operator must provide certain
written “assurances” to the Secretary of Transportation. Id. § 2210(a).11 In
order to comply with section 511(a), an airport owner or operator who receives

  •The perm issibility o f the County’s proposed use of the thirty million dollar payment depends entirely
upon the County’s unreimbursed capital and operating costs, not the capital or operating costs o f BALLAT.
In turn, whether BALLAT can charge the thirty million dollars to airport users depends upon whether,
in the FAA’s view, the inclusion of the thirty million dollars in BALLAT’s rates is consistent with the
County's continuing obligation under the AAIA to make the Airport available for public use on fair and
reasonable terms. See discussion infra Part III.
  9 In recent years, the FAA appears to have expressed different views on the timing issue. In 1985, the
FAA relied upon an argument sim ilar to the one it advances here in rejecting a proposal by the C ity o f
Burlington, Vermont, to use surplus revenues from Burlington International Airport to reim burse the
City for unreimbursed airport subsidies. Letter for the Honorable Bernard Sanders, M ayor o f Burlington,
Vermont, from J.W. Murdock III, Chief Counsel, FAA (Jan. 8, 1985).
  In 1989, however, in response to a proposal by the Albany Capital District Transit Agency whereby
the Transit Agency should have acquired a long-term lease interest in the Airport for $25.25 m illion,
the FAA Chief Counsel replied that “if the payment to Albany County is limited to payment o f the
currently outstanding debt incurred for the capital or operating costs of the airport, we would not expect
m ajor obstacles to transfer." Letter for the Honorable James T. Coyne, Albany County Executive, from
Gregory S. Walden, Chief Counsel, FAA at 2 (Dec. 4, 1989).
  For the reasons discussed in Part II below, we believe that the latter view more accurately reflects the
correct interpretation of section 511 (a)( 12)
  10We do not understand the FAA to argue that once an airport owner or operator has elected to recover
capital or operating costs, the recovery must necessarily be accomplished within a particular period of
time. Indeed, section 511 (a)( 12) itself contemplates the use of airport revenues to retire long-term debt.
  " Section 511 provides in part:
         (a) Sponsorship
         As a condition precedent to approval of an airport development project contained in a
       project grant application submitted under this chapter, the Secretary [of Transportation]
       shall receive assurances, in writing, satisfactory to the Secretary, that

                                                Continued

                                                    29
federal assistance must satisfy all of the contractual assurance requirements
enumerated in the statute.
    Section 511 (a)(12) requires that an airport owner or operator provide the
Secretary with assurances that “all revenues generated by the airport” will
be expended for “capital or operating costs” related to the airport. 49 U.S.C.
app. § 2210(a)(12).12 The FAA agrees (as it must) that there is no express
limitation in section 51 l(a)(l 2) on the time within which airport capital and
operating costs may be recovered through airport revenues, or any affirma­
tive evidence in the history o f section 511 (a)( 12) that such a limitation should
be implied. FAA Memorandum at 4-5, 6. The FAA argues, however, that
the text and history of the AAIA as a whole indicate that Congress intended
to incorporate such a limitation in section 511(a)(12). Id. at 5-7. We do not
discern any such intent in either the text or the legislative history.
    The FAA advances two essentially textual arguments in support o f its
position. First, the FAA analogizes unreimbursed airport expenses to “a
‘debt’ of the airport to the [owner or operator’s] general treasury.” Id. at 5.
It then reasons from the express exception to the revenue-retention requirement



  " (....continued)
          (1) the airport to which the project relates will be available for public use on fair and
        reasonable terms and without unjust discrim ination.. . .

            (12) a ll revenues generated b y the airport, if it is a public airport, and any local taxes on
          aviation fuel (other than taxes in effect on December 30, 1987) will be expended fo r the
          capital o r operating costs o f the airport, the local airport system, or other local facilities
          w hich are ow ned or operated by the owner or operator of the airport and directly and sub­
          stantially related to the actual air transportation o f passengers or property; except that if
          covenants or assurances in debt obligations issued before September 3, 1982, by the owner
          or operator o f the airport, or provisions enacted before September 3,1982, in the governing
          statutes controlling the owner o r operator’s financing, provide for the use o f revenues from
          any o f the airport owner or operator’s facilities, including the airport, to support not only
          the airport but also the airport ow ner or operator’s general debt obligations or other facili­
          ties, then this limitation on the use of all other revenues generated by the airport (and, in the
          case o f a public airport, local taxes on aviation fuel) shall not apply. . . .
          (b) Com pliance
          To insure compliance with this section, the Secretary shall prescribe such project sponsorship
        requirem ents, consistent with the terms of this chapter, as the Secretary considers necessary.
49 U .S.C. app. § 2210 (emphases added); see also FAA Advisory Circular No. 150/5100-16A, app. 1 at 6,
7 (Oct. 4, 1988) (incorporating language of sections 511(a)(1) and 511(a)(12) into the contractual assur­
ances required o f grant recipients).
   l2The phrase “capital or operating costs” in section 51 l(a)(12) is not defined. The Supreme Court has
stated, how ever, that "it should be generally assumed that Congress expresses its purposes through the
ordinary m eaning o f the words it uses.” Escondido Mut. Water Co. v. La Jolla Band o f M ission Indians,
466 U.S. 765, 772 (1984). “Capital costs" and “operating costs” are generally understood as referring,
collectively, to all o f the costs incurred by a business. See, e.g., Eric Louis Kohler, A Dictionary fo r
A ccountants at 82, 333 (5th eJ. 1975). Consistent with this common meaning, section 511(g) o f the
AAIA, which perm its the use of certain airport-generated revenues in the State of Hawaii for highway
construction projects, broadly defines the phrase “airport capital and operating costs” as “costs incurred
. . . for operation o f all airports . . and costs for debt service incurred . . . in connection with capital
projects for such airports, including interest and amortization of principal costs.” 49 U.S.C. app. §
2210(g)(4)(A ). The FAA does not suggest that a different meaning should be ascribed to the phrase
“capital or operating costs" in section 511 (a)( 12)


                                                     30
in section 51 l(a)(12) for certain non-airport-related debt obligations incurred
prior to the effective date of the AAIA that the statute generally does not
permit an airport owner or operator to recoup past capital or operating ex­
penses on a reimbursement theory. We do not believe that the exception in
section 511 (a)( 12) supports the inference that the FAA would have us draw.
The exception merely permits airport owners or operators to use airport
revenues to retire certain debt obligations that were incurred for expendi­
tures that were not airport-related. The exception implies nothing about the
recoverability of costs that were airport-related, and certainly nothing about
a time limitation on the recoverability of airport-related costs. Indeed, if the
exception suggests anything about the proper interpretation o f section
511(a)(12), it is that when Congress intended to limit or to permit the recov­
ery of costs based upon when the costs were incurred, it did so expressly.
    Second, the FAA advances a similar textual argument based upon a 1987
amendment to the revenue-retention requirement. As originally enacted in
1982, section 511 (a)( 12) of the AAIA permitted an airport owner to use
airport revenues “for . . . other local facilities which are owned or operated
by the owner or operator of the airport and directly related to the actual
transportation of passengers or property.” Tax Equity and Fiscal Responsi­
bility Act (“TEFRA”), Pub. L. No. 97-248, tit. V, § 51 l(a)(12), 96 Stat. 324,
687 (1982). In 1987, section 511 (a)( 12) was amended by, inter alia, requir­
ing that such local facilities be “directly and substantially related to the
actual air transportation of passengers or property.” Airport and Airway
Safety and Capacity Expansion Act of 1987, Pub. L. No. 100-233, tit. I, §
109, 101 Stat. 1486, 1499. The FAA asserts, without explanation, that “[t]his
limitation is inconsistent with the broad interpretation [of the statute] re­
quired for the reimbursement theory.” FAA Memorandum at 6.
    The 1987 amendment, however, is not inconsistent with the recovery of
unreimbursed, airport-related capital or operating expenses under the statute.
The 1987 amendment simply narrowed the permissible uses of airport rev­
enues to expenditures that were not only “directly” but also “substantially”
related to actual air transportation, to further ensure that such revenues would
not be diverted for general expenses. See H.R. Conf. Rep. No. 484, 100th
Cong., 1st Sess. 63-64 (1987); H.R. Rep. No. 123, 100th Cong., 1st Sess., pt.
2, at 13 (1987). The amendment thus is concerned solely with the relation­
ship between expenditures and transportation services provided by the airport
(i.e., the relationship must be “direct[] and substantial[]”); the amendment
simply does not bear on whether Congress did or did not intend to limit the
recoverability of past capital or operating costs after a certain period of time.13
  13 The FAA also submits that an airport owner or operator's recoupment o f unreimbursed investments is
inconsistent with sections 511(a)(1) and 511(a)(3) of the AAIA, 49 U.S.C. app. §§ 2210(a)(1), (a)(3),
which require, respectively, that an airport owner or operator provide assurances to the Secretary that
“the airport . . . will be available for public use on fair and reasonable terms and without unjust d is­
crim ination," and that “the airport and all facilities thereon or connected therewith will be suitably
operated and maintained ” FAA Memorandum at 5-6, 8. Although the requirement in section 511 (a)( 1)
                                              Continued

                                                 31
    Apart from its arguments from the text of the AAIA, the FAA asserts that
the “legislative history of the [Act] and predecessor legislation indicates
strong congressional concerns about the use of funds generated at [federally
financed] facilities.” FAA Memorandum at 6. The FAA, however, does not
cite to any particular passage in the legislative record that in any way sug­
gests that C ongress intended to im pose a tem poral lim itation on the
recoverability of unreimbursed “capital or operating costs” through airport
revenues, and we have not found any evidence in the legislative history that
Congress intended such a limitation.
   The AAIA was enacted in 1982 as title V of TEFRA, Pub. L. No. 97-248,
96 Stat. 324, 671. The House and Senate Conference Reports of TEFRA
describe the revenue-retention requirement in section 511 (a)( 12) as follows:

          One [requirement] is that airports receiving assistance under
          this program must dedicate all revenues generated by the air­
          port for the capital [and] operating costs o f that airport, the
          local airport system, or other local facilities which are owned
          by the owner or operator of the airport and used for the trans­
          portation of passengers or property. This provision is designed
          to ensure that airport systems which are receiving Federal as­
          sistance are utilizing all locally generated revenue for the
          systems which they operate. Airports that are part of a uni­
          fied ports authority are exempt from this requirem ent if
          covenants or assurances in previously issued debt obligations
          or controlling statutes require that these funds are available
          for use at other port facilities.

           However, airports users should not be burdened with “hid­
          den taxation” for unrelated municipal services.

H.R. Conf. Rep. No. 760, 97th Cong., 2d Sess. 712 (1982); S. Conf. Rep.
No. 530, 97th Cong., 2d Sess. 712 (1982); see also S. Rep. No. 494, vol. 2,
97th Cong., 2d Sess. 28 (1982); S. Rep. No. 97, 97th Cong., 1st Sess. 27-28
(1981).14 As the Conference Reports state, section 511 (a)( 12) is intended to


  l3(. ...continued)
that an airport be made available "on fair and reasonable term s” may, in practical effect, ultimately limit
an ow ner or o p erato r’s ability to recoup unreimbursed investments from airport users, section 511 (a)( 1)
cannot be read to flatly prohibit such recoupm ent. The FAA alternatively suggests that section 511(a)(3)
prohibits the contem plated reimbursement because it requires an airport owner or operator “to spend its
own m oney to keep the airport running.” FAA Memorandum at 8 (emphasis added). Neither the text
nor the legislative history o f section 511 (a)(3) in any way supports this assertion.
  14 Som e legislative m aterials relevant to the interpretation o f the AAIA pre-date its enactment in 1982.
The AAIA was originally passed by the Senate in 1980, but failed to receive consideration in the House
prior to the end o f the 96th Congress In 1981, the AAIA was reported out of the Senate Comm ittee on
Com m erce, Science, and Transportation, but was not passed in either chamber. See S. Rep. No. 97,
97th Cong., 1st Sess. 1-2 (1981).

                                                   32
ensure that airport owners or operators who receive federal assistance “are
utilizing all locally generated revenue for the systems which they operate,”
and that the users of such airports are “not . . . burdened with ‘hidden taxa­
tion’ for unrelated municipal services.” The plain purpose of section 511 (a)( 12)
is simply to prevent an airport owner or operator who receives federal assis­
tance from using airport revenues for expenditures unrelated to the airport.
Thus, a grant recipient cannot use airport revenues to pay for “capital or
operating costs” that are not airport-related. There is no suggestion, how­
ever, that section 511 (a)( 12) was intended to limit the time within which an
airport owner or operator may elect to recover “capital or operating costs”
that are airport-related.
   The FAA finally argues that construing section 511(a)(12) to permit air­
port owners or operators to recoup their past capital or operating expenses
from airport revenues on a reimbursement theory is unwise as a matter of
policy, and would raise a host of administrative difficulties. FAA Memoran­
dum at 7-12. Whatever the merits of these policy arguments, they do not
support the conclusion that, as a matter of law, section 511 (a)( 12) precludes
the recoupment of such expenses on a reimbursement theory.15
   In sum, section 51 l(a)(12) does not by terms impose a temporal limita­
tion on the recovery of airport capital or operating costs through airport
revenues, nor is there any evidence that Congress intended to impose such a
limitation. Accordingly, we conclude that, consistent with section 51 l(a)(12),
an airport owner or operator may elect to recoup its airport-related capital or
operating costs when the costs are incurred or at any time thereafter.

                                                   III.

   You have additionally asked us whether, assuming that Albany County is
permitted to accept and use the thirty million dollar lease payment for gen­
eral expenditures unrelated to the Airport, the FAA retains authority to oversee
the rates the BALLAT charges to airport users. We conclude that the FAA
does retain such authority. Section 511(a)(1) of the AAIA provides in part

   15 Among other things, the FAA argues that the lease of an airport may collapse traditional distributions
between airport owners and operators, who are required to keep revenues on-airport, and airport busi­
nesses such as service providers and concessionaires, who are permitted to take revenues off-airport,
raising issues as to whether various kinds of income received by the lessee constitute “revenues gener­
ated by the airport” within the meaning of section 511 (a)( 12). FAA Memorandum at 8-10. In addition,
the FAA questions whether a lease arrangement affords an airport owner or operator sufficient control o f
the airport to satisfy its assurances o f compliance with the requirements o f section 511(a) as a whole, and
to remain eligible for federal funds. Id. at 10-13.
  These questions call for policy judgm ents that must be made — and, in our understanding, traditionally
have been made — in the first instance by the FAA. See, e.g., id. at 9 (“It would be possible, applying
principles o f traditional public utility rate regulation and existing FAA policy, to make judgm ents about
what categories of ‘costs’ can be included in the rate base.” ) (emphasis added); id. at 11 (“the [lease]
arrangement is inherently inconsistent with the sponsor’s obligation to provide adequate assurances" to
the Secretary). We therefore do not address which airport receipts received by BALLAT in its capacity as
lessee would constitute "revenues generated by the airport” within the meaning of the statute, or whether
the lease of Albany Airport is consistent with the County’s obligation under the AAIA to maintain co n ­
trol o f the Airport. See discussion supra note 2.

                                                   33
that, as a condition to approval of a project grant, an airport owner or opera­
tor must assure the Secretary of Transportation that “the airport to which the
project relates will be available for public use on fair and reasonable terms.”
49 U.S.C. app. § 2210(a)(1).16 Although the FAA does not view the AAIA
as having established a “full-scale ratemaking regulatory regime,” FAA Memo­
randum at 5-6, the FAA acknowledges that under the authority of section
511(a)(1), it currently “review[s] the reasonableness of the level and struc­
ture of specific airport charges.” Id. at 6; see also id. at 9.17 Consistent with
section 511(a)(1) and the discretion that has traditionally been conferred on
administrative bodies that monitor the rates charged by a regulated industry,
we believe that the AAIA grants the Secretary of Transportation substantial
discretion to limit the rates charged to airport users by BALLAT. It would
be within the discretion of the FAA, for example, to employ historical cost
ratemaking principles or some other approach in determining whether the
rates charged by BALLAT are “fair and reasonable.” The methodology im­
posed by the FAA will in turn determine whether and to what extent the
rates BALLAT charges airport users may reflect BALLAT’s lump sum pay­
ment to the County.

                                         CONCLUSION

   We conclude for the foregoing reasons that section 511(a)(12) of the
AAIA does not limit the time within which an airport owner or operator may
recoup unreimbursed capital or operating costs through airport revenues. We




   “ Section 5 1 1(a)(1) continues a provision that originally appeared in the Federal Airport Act of 1946,
ch. 377, § 11(1), 60 Stat. 170, 176, and was subsequently reenacted in the Airport and Airway Develop­
m ent A ct o f 1970, Pub. L. No. 91-258, tit. I, § 18(1), 84 Stat. 219, 229. The phrase “fair and reasonable
term s” is not defined in the 1946 Act, the 1970 Act, or the AAIA, and the legislative history o f this
provision is sparse. See, e.g., H.R. Rep. No. 844, 79th Cong., 1st Sess. 4 (1945) (“The Administrator
[of C ivil Aeronautics] may require project sponsors to enter into agreements insuring, among other
things, the continued availability of the airport for public use on fair and reasonable terms . . . .”); see
also H.R. Rep. No. 601, 91st Cong.. 1st Sess. 24 (1969); H.R Conf. Rep. No. 760, 97th Cong., 2d Sess.
711-12 (1982). The standard in section 511(a)(1) is comparable to the standard in the Anti-Head Tax
Act, which provides in part that a State or political subdivision thereof that owns or operates an airport
may “levy[] or co!lect[] reasonable rental charges, landing fees, and other service charges from aircraft
operators fo r the use o f airport facilities." 49 U.S.C. app. § 1513(b).
   17 Cf. 49 U .S.C. app. § 2 2 18(a) (“The Secretary is empowered to perform such acts . . . pursuant to and
consistent with the provisions of this chapter, as the Secretary considers necessary to carry out the
provisions o f . . this chapter.”); New England Legal Found, v. M assachusetts P o n A u th ., 883 F.2d 157,
169 (1st Cir. 1989) (noting that “Congress has entrusted the administration of § 511 to the Secretary”
and w ithin the bounds o f the statutory framework “the Secretary has wide discretion” ), City o f Denver
v. C ontinental A ir Lines, Inc., 712 F. Supp. 834, 839 (D. Colo. 1989) (“The enforcement o f . . section
[511 (a)( 12)] is exclusively within the administrative authority of the Secretary o f the Department of
T ransportation.” ).

                                                    34
also conclude, however, that in the exercise of the discretion conferred upon
the Secretary of Transportation by the AAIA, the FAA may oversee the rates
charged to airport users by BALLAT — including the extent to which they
may permissibly reflect BALLAT’s thirty million dollar payment to Albany
County — to ensure that these rates remain fair and reasonable.

                                             J. MICHAEL LUTTIG
                                          Assistant Attorney General
                                           Office o f Legal Counsel




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