MODOT COMPLIANCE LETTER

There might be some typo's it was a PDF and does not copy well.

December 21, 2012

Mr. Rick Childers

City Administrator

City of St. Clair

#1 Paul Parks Drive

St. Clair, MO 63077

Re: St. Clair Regional Airport

Compliance Corrective Action Plan

Dear Mr. Childers:

Thank you for your August 28, 2012 correspondence regarding the City of St. Clair’s corrective action plan for St. Clair Regional Airport (K39). On July 25, 2012, MoDOT sent you a copy of the Federal Aviation Administration’s (FAA) findings resulting from an investigation of an Office of Inspector General (OIG) hotline complaint. Four items from the investigation required corrective action by the City.

The proposed corrective actions set forth in the City’s August 28, 2012 letter are not sufficient to ensure the City’s compliance with federal grant assurances. The purpose of this letter is to provide the City with guidance to ensure compliance with federal grant assurances and to set forth a timeline for the City to achieve voluntary compliance.

Item #1 Airport Revenue Accounting —

The hotline complaint investigation confirmed the City deposits airport revenue into the City’s general fund. During the investigation, the City was asked to present a clear accounting history of airport revenue. In its reply, the City provided accounting ledgers and general fund records from 2003 through 2008. The FAA reviewed the documentation provided and made the following determination:

The City's financial records are not complete. Airport revenue and expenses must be separate from the General Fund SO separation of funds can be determined.

In response to this finding, the City provided the following statement in its August 28, 2012 correspondence:

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Elimination of non-line item budgeting for airport revenues and expenses implemented in 2008 has resulted in significantly enhanced record-keeping. This will continue.

MoDOT and the FAA appreciate the City’s interest in enhancing its record keeping, but the City’s proposal does not address the continued deposit of airport revenue into the general fund. The City did not provide accounting ledgers and general fund records from 2009 through 2012 in response to this request, but based upon the City’s response in its August 28, 2012 correspondence, MoDOT and the FAA assume that deposit of airport revenue into the general fund has continued.

By failing to provide a clear method of airport accounting and revenue use, the City could be found in violation of its federal grant assurance obligations. Grant Assurance 26d. provides in pertinent part that an airport sponsor will “in a format and time prescribed by the Secretary, provide to the Secretary and make available to the public following each of its fiscal years, an annual report listing in detail: (i) all amounts paid by the airport to any other unit of government and the purposes for which each such payment was made; and (ii) all services and property provided by the airport to other units of government and the amount of compensation received for provision of each such service and property” (See also title 49 U.S.C. §47107(a)(15), (18), and (19)).

An acceptable corrective action plan will include steps to demonstrate that the City will cease deposit of airport revenue into the general fund and will keep clear accounting records documenting airport income and expenses.

Item #2 Sewer Lift on Airport Property —

The hotline complaint alleged the airport was not receiving fair market value for the City’s sewer lift station that was constructed on the airport in 2008.

In its initial March 14, 2012 response letter, the City did not explain how the sewer lift station supported airport operations. Instead, the City stated that the sewer lift station on airport property pumps sewage back to the City’s sewer treatment plant and confirmed the City does not pay rent.

In the July 25, 2012 letter from MoDOT to the City requesting a corrective action plan, MoDOT relayed the findings of the OIG complaint investigation. The findings specifically stated the City’s failure to receive fair market rent for the property occupied by the sewer lift station may not be consistent with its federal obligations. In response to this finding, the City provided the following statement in its corrective action plan:

This land is fully owned by the City of St. Clair, as is the lift Station . . . As ills installed to provide services to the airport lands no fees will be assessed, paid or collected for its placement.

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The City’s confirmation that it has not or will not pay rent coupled with the lack of any explanation as to how the sewer lift station supports and/or benefits the airport indicates that the City may not be in compliance with Grant Assurance 24, Fee and Rental Structure. This assurance states an airport sponsor “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” (see also title 49 U.S.C., §47107(a)(13)).

A sewer lift station is considered nonaeronautical, and nonaeronautical uses of airport property must be assessed at fair market value. The FAA permits exceptions for community use leases, but this exception does not allow for general governmental purpose uses. Therefore, if any portion of the lift station is not directly supporting airport operations, the airport must receive rent at fair market value in accordance with FAA’s Policy and Procedures Concerning the Use of Airport Revenue (64 Fed. Reg. 7696, published February 1 6, 1999) (Revenue Use Policy), which states:

If a sponsor’s use of airport property qualifies as community use, and the other requirements for community-use leases are satisfied, the FAA would not object to a lease at less than fair market value. . .‘The community use provision of the Final Policy does not apply to airport property used by a department or subsidiary agency of the sponsoring government seeking an alternative site for the sponsor’s general governmental purposes at less-than-commercial value (See Revenue Use Policy at

7711).

‘The City has not identified the direct airport use and benefit ofthe sewer lift station, has not agreed to pursue obtaining fair market value for the lift station, and has not provided documentation demonstrating what portion of the sewer lift is being utilized to support airport systems. The OIG investigation found the airport restricted use of its restroom facilities to one tenant, which raises added concerns regarding possible denial of access to airport infrastructure to aeronautical users and tenants.

Because the sewer lift does not appear to provide value or a benefit to the airport, a determination should be made as to the fair market value of the property where the sewer lift is located, and the City should deposit fair market value rent for its nonaeronautical use of airport property into a separate airport account. These actions would demonstrate compliance with Grant Assurance 24 and with the FAA’s Revenue Use Policy. An acceptable corrective action plan must address these items. If the City can demonstrate that all or part of the sewer lift station is directly related to airport use, please also provide that information as part of the corrective action plan.

Item #3 City Storage in Airport Hangar —

In the course of investigating the hotline complaint, the FAA and MoDOT requested

information regarding the City’s use of an airport hangar (referred to as the “Maintenance Hangar”) to store various items. The hotline complaint stated that individuals attempted to rent the hangar to store aircraft but were denied access. In its March 14, 2012 letter, the City stated that the Maintenance Hangar “does not contain any internal mechanisms for keeping

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private aircraft secure and separate from public assets.” This letter also acknowledged there had been requests to rent part of the hangar for aeronautical storage, but “without funds to reconfigure the facility to accommodate private aircraft, it is simply not economically feasible.”

Because other hangars were available for rent on the airport at the time the requests were made to rent the Maintenance Hangar, denial of those requests is not a violation of federal grant assurances. However, failure to pay fair market value rent for nonaeronautical use of the Maintenance Hangar raises other compliance issues.

In its May 30, 20 1 2 letter, the City stated the following items were stored in the hangar:

A tractor, IWO brush hogs, three riding mowers, a spray trailer, a mower trailer, a

pump assembly, sprayer, saw horses, a table/chairs, lockers, a ladder, HVA C cabinet,

a push broom, and a fire extinguisher.

Federal grant assurances do not prohibit use of an airport maintenance shed to store airport property, but if the hangar is being used for general City storage needs, this would be considered a nonaeronautical use of the hangar. The items being stored in the Maintenance Hangar do not clearly imply an aeronautical use or airport purpose, which is why MoDOT’s July 25, 2012 letter requested the City provide a corrective action plan to address its failure to pay rent for the nonaeronautical storage in the Maintenance Hangar. In its response, the City offered the following corrective action:

All materials within the hangar are for use on the airport. It would be inappropriate to remove them from the facility.

In order to demonstrate compliance with federal grant assurances, please provide an explanation and all available supporting documentation demonstrating how and when the items stored in the Maintenance Hangar are utilized at the airport. For example, the mowers may serve a legitimate airport purpose, but documentation showing that the mowing contract for the airport includes use of City owned mowers would clearly demonstrate an airport purpose. If the City can clearly document that all items stored in the Maintenance Hangar are used solely at the airport, that will address the compliance issue identified in the OIG complaint.

If the City cannot provide such documentation and the City wishes to continue to use the hangar for nonaeronautical storage, an airport layout plan (ALP) update is required in accordance with Grant Assurance 29 (also codified at title 49 U.S.C., §47107(a)(16)). The ALP update must identify the parcel where the Maintenance Hangar is located as nonaeronautical and will need to be submitted to MoDOT within 60 days of the date of this letter.

In addition, the City must demonstrate that the airport has begun collecting fair market value rent for any stored items proportionate to their non-airport purposes and must also recapture fair market value rent for those items since the storage began, up to six years, in accordance

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with statute (see Title 49 U.S.C., §47107(b)). An acceptable corrective action plan will address all of these concerns.

Item #4 Air Evac —

‘ihe fourth issue identified during the hotline complaint investigation relates to Air Evac’s

usage and operations at the airport. MoDOT’s July 25, 2012 letter advised the City of the FAA’s finding that:

The A ir Evac unit at the airport appears to have been given special treatment not afforded to other airport tenants.

The OIG investigation report found Air Evac’s rental arrangement could be inconsistent with the City’s federal obligations. Based on the documentation the City provided, it appears Air Evac’s rent has remained unchanged ($300/month) since 2004, while other airport tenants’ rent has increased approximately 45% during that same time frame (from $ 1 20/year in 2004 to $175/year in 2012). The OIG hotline complaint also included allegations that the City had given Air Evac additional building and helipad space during this timeframe without assessing Air Evac for same. In its August 27, 2012 correspondence, the City stated that:

Air Evac Life Team is a business entity of the type intended to be attracted to the flicility to provide benefit to the airport and the community. It is treated consistently with all business entities located at the airport. All other tenants are single-hangar rental pilots not subject to business entity considerations.

This response does not specifically identify the benefit Air Evac provides to the airport, The community benefit is clear, but that does not exempt the City from its obligation to make the airport available “for public use on reasonable terms and without unjust discrimination” (see Grant Assurance 22(a)). The City has not demonstrated how Air Evac is treated consistently with all business entities located at the airport, because the City did not submit its airport rules and regulations or other “business entity” leases. An airport sponsor may apply differing terms to users that are not similarly situated, but aeronautical fees may not unjustly discriminate against aeronautical users (See FAA Order 51 90.6B   18.5).

In responding to the investigation, the City did not provide documentation or other information supporting its decision to provide Air Evac with certain favorable lease terms, which has the potential to result in findings of unjust discrimination (Grant Assurance 22), and the City did not provide an explanation or documentation supporting its fee and rate structure (Grant Assurance 24).

An acceptable corrective action plan will include documentation demonstrating that: the City’s actions in establishing the terms of its current leases are not unreasonable and not unjustly discriminatory; the City has not given Air Evac exclusive use of any of its public use infrastructure; and the airport’s fee and rental structure is not unjustly discriminatory against all its aeronautical users.

Mr. Rick Childers

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Please provide a final and comprehensive corrective action plan addressing the items herein within 60 days of the date of this letter in order to ensure that the City is not found to be in informal noncompliance status. MoDOT would be happy to work with the City in its pursuit of an acceptable corrective action plan. We are available to meet with the City at any time to discuss these issues in further detail and to identify steps the City can take to ensure future compliance. If you have any questions, please do not hesitate to contact me.

Sincerely,

Amy Ludwig

Administrator of Aviation

cc: Mr. Jim Johnson, Federal Aviation Administration

Ms. Lynn Martin, Federal Aviation Administration

Mr. Ed Hassinger, Missouri Department of Transportation