TWO SETTLEMENTS REACHED WITH FEDERAL AVIATION ADMINISTRATION FOR LOS ANGELES CITY REPAYMENTS TO LOS ANGELES WORLD AIRPORTS
(Los Angeles, California) The Los Angeles City Council in closed session today approved corrective action plans to settle two unrelated cases with the Federal Aviation Administration (FAA) that the federal agency determined to be improper payments by Los Angeles World Airports (LAWA) to LA INC. The Los Angeles Convention and Visitors Bureau and the disposition of California state funds for taking property at Los AngelesInternationalAirport (LAX) to construct the Century Freeway (Interstate I05). The corrective action plans call for a consolidated series of repayments over 10 years by the Los Angeles City General Fund to LAWA of $14,851,717 for the LA INC. case and $2,838,055 for the Century Freeway case. With interest, the 10-year total for both cases is $21,257,830.
“The settlement of these two unrelated cases with the Federal Aviation Administration results in a more defined relationship with LA INC. and resolves a long-standing property issue, allowing us to avoid higher costs when legal issues are not amicably resolved,” said Gina Marie Lindsey, LAWA executive director. She added, “We appreciate the FAA’s willingness to resolve these two issues fairly and promptly”.
Rather than lump sum payments, the approved plan stipulates a series of semi-annual installments over a 10-year payback period, with the bulk of amounts due during the second five years. To effect the repayments, LAWA will withhold the amount of each repayment from what LAWA would otherwise owe LA INC. and the City for costs of future services rendered by the City to LAWA. The airport agency also will verify in a manner acceptable to the FAA that the repayments have been made.
During the summer of 2008, the FAA conducted a compliance review of LAWA payments to LA INC. for marketing and promotion of LAWA’s commercial airports (LAX, LA/Ontario International and LA/Palmdale Regional). The FAA initially determined that all of the payments made by LAWA to LA INC. during the six-year audit period did not comply with the FAA’s Airport Revenue Use Policy because LA INC.’s marketing and sales resources were directed to the Los Angeles destination rather than for specific airport purposes. However, following written and oral responses by LAWA, the FAA ultimately determined that the City General Fund should reimburse LAWA $14,041,904 (36 percent of the total $38,850,000 that LAWA paid to LA INC. over those years), plus statutory interest of $809,813 as of June 30, 2009. The settlement on the LA INC. case also includes a supplemental plan that amends LAWA’s existing contract with LA INC. (that expires in 2011) for more clearly defined marketing, air service development and maintenance, and tour operator/travel agent marketing services.
On the case related to the Century Freeway, after years of litigation that began March 1995, the FAA issued a determination on June 1, 2009, regarding the disposition of proceeds of California state’s taking of LAX property in order to build the Century Freeway. The FAA directed the City to return to LAWA $1,986,719, plus statutory interest of $851,336.
Los Angeles World Airports is a City of Los Angeles department that owns and operates three Southern California airports: LAX, LA/Ontario International (ONT), Van Nuys general aviation (VNY). LAWA also owns and manages nearly 18,000 acres in Palmdale.
