Federal Aviation Administration Rick Etter, Airport Acquisition Specialist (202) 267-8773, [email protected]@faa.gov Nancy Williams, National

Federal AviationAdministration

Rick Etter, Airport Acquisition Specialist(202) 267-8773, [email protected]

Nancy Williams, National Resource/Expert AIP Legislation & Policy(202) 267-8822, [email protected]

Disposal of Land Acquired with Noise Discretionary

Funds

AAAE 6th Annual AirportNoise Mitigation SymposiumBoston, MAOctober 2, 2006

2 2Federal AviationAdministration

Airports OfficePlanning and Environment Division October 2006

Topics / Objectives

Disposal / Retention of Noise Land

Noise Land Disposal Effort (OIG Audit)

Excess Land Inventory – FAA Concurrence

Fair Market Value Standard for Land Disposal

Retained Property Rights on Sale/Lease of Excess Land

Eligible Sales Expense Credits Against Proceeds

Eligible Use of Net Proceeds

Where to Get More Information?



Noise Land Disposal Effort (OIG Audit)Audit Report is On-line at http://www.oig.dot.gov/StreamFile?file=/data/pdfdocs/Final9-30.pdf

“Management of Land Acquired Under Airport Noise Compatibility Programs”

Audit Covered 11 Airport Noise ProgramsBellingham International Airport

Charlotte/Douglas International Airport

Cincinnati/Northern Kentucky International Airport

Detroit Metro Wayne County International Airport

Las Vegas McCarren International Airport

Palm Beach International Airport

Phoenix Sky Harbor International Airport

Reno-Tahoe International Airport

Seattle-Tacoma International Airport

Toledo Express Airport

Tucson International Airport




•Overall FAA Concurs in Program Improvements To Inventory and Dispose of Excess Land

•Better oversight to ensure compliance to Grant Assurance (Assurance #31)

•Didn’t Agree that Land Value or Land to Retain Was Known.

•Memo to Regions Issued by APP 500 (& APP 400 Support)

•Procedural Guidance to be Issued (End of CY 2006 or earlier)






OIG Recommendation 1. Ensure that sponsors (a) implement written, FAA-approved plans for disposing of AIP-funded noise land that is no longer needed for noise compatibility programs or for airport development, and (b) either return the proceeds from any dispositions to the Trust Fund or reinvest them in other FAA-approved noise mitigation projects at the airports.

FAA Agrees! New Grant Condition Disposal Plan Part of Exhibit A. Plan Required before Grant Close-out. Status Indicated on Exhibit A.





Recommendation 2. Improve program oversight by making disposal of unneeded noise land a high priority; by maintaining sustained surveillance of noise land; and by ensuring that basic information (such as airport master plans and land inventory maps) needed for effective program oversight is current, accurate, and complete.

FAA Agrees! Airport sponsors are already required to keep an updated Exhibit A, which shows the airport’s property interests including noise land. As a supplement (part of the plan), an inventory map will be maintained to include status of disposition and use of funds from disposition.





Recommendation 3. Provide a program of continuing education to enhance FAA staffs’ and airport sponsors’ understanding of grant requirements and their impact.

FAA Agrees! We agreed that providing better educational material and direct training to FAA staff and airport sponsors (and consultants) will improve the program. We will offer sponsor and consultant training at the regional Airports’ conferences, AAAE Meetings (e.g. Airport Noise Mitigation Symposium) and the Public Real Estate Conference, cosponsored by the FAA (as well as the other Federal Agencies) and International Right-of-Way Association, beginning in FY 2006.





Recommendation 4. Provide airport sponsors with guidance on using leases and reserve bonds to recover the Federal share of disposal proceeds.

FAA Agrees! We will develop and issue guidance on leasing, both as a handout in training sessions and as program guidance by the end of CY 2006.





Recommendation 5 & 6. For the 11 airports included in the audit, we recommend that the Federal Aviation Administrator direct airport sponsors to develop and implement plans to:

Recover FAA’s share (estimated at $160.6 million) from the disposition of 3,608 unneeded noise land acres.

Recover FAA’s share (estimated at $81.7 million) of the affected land’s fair market value from airports that are misusing noise land disposition proceeds.





FAA Agrees, w Comment! Preparing the land inventory will be the first step to meeting these recommendations. The land inventory will identify unneeded land as well as land to be retained. The excess land will be appraised at its current value as Raw Land for Redevelopment to the Highest and Best Use of Land (compatible land use w restrictions). As described in the FAA response to the OIG report, the OIG estimate ($160.6 million) is not considered a reliable value. When released for disposal, an acceptable appraisal will confirm the current fair market value of an excess land parcel.




Land Inventory – General Steps1. Review Noise Land for Retention

• Within 75 dB DNL Contour? Noise buffer?

• Use for Airport/Aeronautical Purposes?• Noise land that is AIP eligible as aeronautical use may be

added to the airport and shown on the Exhibit A.

• Airport Development Land? (See AIP Handbook @ par. 824)

2. Secure FAA Concurrence on Excess Land Inventory

• Mapping: Change ALP / Exhibit A? • Environmental Approvals?

3. Disposal Plan Submitted to FAA. Timing, Appraisal Specifications, Eligible Sales Expenses, Re-use of Proceeds, etc; as Necessary for Grant Compliance.





Sale or Lease of the Excess Land Must be at FMV $$$

Statutory Requirement, per Assurance 31:

The airport sponsor will dispose of land that was purchased under a grant for airport noise compatibility purposes, when the land is no longer needed for such purposes (or eligible airport purposes*), at fair market value, at the earliest practicable time.

*Procedural Guidance will Clarify Land Retention Eligibility





What is the FMV for Redevelopment?

•Market Value = Sale to the Highest Bidder

•What is the Highest and Best Use? “As Is” for Development ? Raw Land is Appraised Based On Demand by Developers to Develop It (If Any?).

To Appraise Raw Land A Qualified Appraiser Will:

Determine and Support Potential Development Entitlements for the Land per Local/State Land Development Law

Find and Analyze Comparable Sales of Raw Land (Same Potential in a Comparable Market)

Include the “Development Approach”? (If “New Land” creates a market) Net Present Value – What Developer Can Afford to Pay for LandCapitalization Rate = Market Rate of Return On and Of InvestmentComparable Sales – What Developers Have Paid

Appraisal Scope of Work Must Fit Problem – Will Develop Sample For Redevelopment

Note Again: Land may be retained for Higher Value Aeronautical Use





• Short term lease is interim use, rent is airport revenue.

•Long-term Lease is Disposal (say 30 to 50 year term)• Reserve Bond Issued to Compensate FMV of Land

• Rent Payments Applied to Bond Payments

FMV Needed for ALL Ground Leases.Leased Value of the Land Should Equal Its Fee Value (For Sale Value)

Fee Value = Leased Fee + Leasehold

Leased Fee = PV Rent Payments + PV Property Reversion

If Leased Fee less than Fee Value, Property Value is Lost

Rent @ Market with Consideration of Reversion Will Preserve Value

Commercial Ground Lease Practices are the Standard for Appraisal




Retained Restrictions: Protect Airport and Prevent Incompatible Land use

Airport must retain adequate property rights and restrictions on the use and development of the land:

• Enforceable Easement and/or Deed Restriction Must be Recorded With or Prior to any Sale or Lease of Excess Noise Land.

• Land is Appraised Subject to Retained Rights & Development Restrictions.




Eligible Sale Expenses – Per AIP Handbook / Guidance

Paragraph 811 a.

(3) Costs attributable to preparing land for resale may be deducted from the proceeds of disposal, but are not allowable costs under a grant. Such costs may include, but are not limited to, rezoning, replatting and upgrading of utilities and services (infrastructure cost acceptable only to the extent that it may be shown to be cost effective, e.g. up to the increase in land value).

(4) Costs associated with holding land are not allowable under a grant, nor may they be deducted from the proceeds of resale. Such holding costs may include, but are not limited to, property taxes assessed against the sponsor during the period of ownership, charges for utilities and public services, insurance, financing charges, and assessments.




Use of Sale Proceeds – Per AIP Handbook / Guidance

Section 2. NOISE COMPATIBILITY PROJECTS

810. GENERAL.

a. Eligible noise compatibility projects generally fall into the following categories: land acquisition (including relocation assistance), noise insulation, runway and taxiway construction (including associated land acquisition, lighting and NAVAIDs), noise monitoring equipment, noise barriers and other Part 150 approved noise abatement/compatibility measures. Sponsors may from time to time propose …..

b. Noise compatibility projects usually are located in areas where aircraft noise exposure is significant, as measured in day-night average sound level (DNL) of 65 decibels (dB) or greater. However, projects may ….also be approved and made eligible in areas of less noise exposure. …




Where to Get More Information?

• Guidance Needs?Upcoming Procedural Guidance will be on FAA Airports Website? AIP Handbook Chapter 8

•Specific Questions?Discuss with your FAA project manager?

•Comments? Send to :

[email protected]

[email protected]


Documents

Federal Aviation Administration Rick Etter, Airport Acquisition Specialist (202) 267-8773, [email protected]@faa.gov Nancy Williams, National