Rick Etter, Airport Acquisition Specialist

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Disposal of Land Acquired with Noise
Discretionary Funds
AAAE 6th Annual Airport Noise Mitigation
Symposium Boston, MA October 2, 2006
Rick Etter, Airport Acquisition Specialist (202)
267-8773, rick.etter_at_faa.gov Nancy Williams,
National Resource/Expert AIP Legislation
Policy [phone], nancy.s.williams_at_faa.gov
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Disposal / Retention of Noise Land
Topics / Objectives

• 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?

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Disposal / Retention of Noise Land

• 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 Programs
• Bellingham 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

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Disposal / Retention of Noise Land

• Noise Land Disposal Effort (OIG Audit)

• Overall FAA Concurs in Program Improvements To
  Inventory and Dispose of Excess Land
• Better oversight to ensure compliance to Grant
  Assurance (Assurance 31)
• Didnt 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)

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Disposal / Retention of Noise Land

• Noise Land Disposal Effort (OIG Audit)

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.
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Disposal / Retention of Noise Land

• Noise Land Disposal Effort (OIG Audit)

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 airports 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.
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Disposal / Retention of Noise Land

• Noise Land Disposal Effort (OIG Audit)

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.
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Disposal / Retention of Noise Land

• Noise Land Disposal Effort (OIG Audit)

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.
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Disposal / Retention of Noise Land

• Noise Land Disposal Effort (OIG Audit)

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 FAAs share (estimated at 160.6
million) from the disposition of 3,608 unneeded
noise land acres. Recover FAAs share
(estimated at 81.7 million) of the affected
lands fair market value from airports that are
misusing noise land disposition proceeds.
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Disposal / Retention of Noise Land

• Noise Land Disposal Effort (OIG Audit)

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.
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Disposal / Retention of Noise Land

• Land Inventory General Steps

• 1. 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 _at_
  par. 824)
• 2. Secure FAA Concurrence on Excess Land
  Inventory
• Mapping Change ALP / Exhibit A?
• Environmental Approvals?
• Disposal Plan Submitted to FAA.
• Timing, Appraisal Specifications, Eligible Sales
  Expenses, Re-use of Proceeds, etc as Necessary
  for Grant Compliance.

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Disposal / Retention of Noise Land

• Fair Market Value Standard for Land Disposal

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
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Disposal / Retention of Noise Land

• Fair Market Value Standard for Land Disposal

• 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 Land
• Capitalization Rate Market Rate of Return On
  and Of Investment
• Comparable 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

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Disposal / Retention of Noise Land

• Fair Market Value Standard for Land Disposal

• 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 _at_ Market with Consideration of Reversion
  Will Preserve Value
• Commercial Ground Lease Practices are the
  Standard for Appraisal

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Disposal / Retention of Noise Land

• 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.

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Disposal / Retention of Noise Land

• 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.
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Disposal / Retention of Noise Land

• 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.
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Disposal / Retention of Noise Land

• 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
• Rick.Etter_at_FAA.gov
• Nancy.S.Williams_at_FAA.gov