Airport Rates and Charges Studies for Federally Obligated Sponsors

Most sponsors do not have a rate problem. They have a documentation problem. The rates were set years ago, adjusted by a percentage nobody can source, and carried forward in a spreadsheet. Then a tenant asks how the number was derived, or the FAA asks, or the board asks, and there is no study to point to.

A rates and charges study is the answer to that question. It sets out every rate the airport charges, the basis for each one, and the market and financial evidence behind the conclusion, in a form a board can adopt and a tenant can be shown.

Why the whole schedule, and not just hangars

Hangar rent is usually the rate that gets contested first, because it is the one tenants pay directly and compare across airports. It is rarely the only rate that is out of date.

An airport that has not reviewed its schedule in several years is typically carrying the same problem across ground lease rates, tiedowns, fuel flowage, terminal and office space, and non-aeronautical parcels. Reviewing hangars alone fixes the loudest complaint and leaves the compliance exposure in place. It also means paying for a second engagement in a year when the next category comes up.

A full study covers the categories together, which is both cheaper per rate and more defensible, because the relationships between categories are set deliberately rather than accumulating by accident.

Categories a study typically covers

• Aeronautical land and ground leases. Improved and unimproved land rates, the rate of return basis, escalation, and reversion at term.
• Hangars. T-hangar bays, shade and port-a-port, common box hangars, and corporate hangars, stated separately because they are different products on different scales.
• Tiedowns and ramp. Based, transient, and overnight parking.
• FBO and specialized aviation service operators. Concession or privilege fees, minimum standards, and the relationship to fuel flowage.
• Fuel flowage. The per gallon basis and how it compares to peer fields.
• Terminal, office, and shop space. Aeronautical and non-aeronautical occupancy.
• Non-aeronautical property. Where the fair market rent standard and the revenue obligations differ from the aeronautical side.
• Through-the-fence access. Where an access agreement exists or is being considered.

New paper

The Untested Exception: Hangar Waiting Lists and the Evidentiary Gap in FAA Rate Policy

FAA Order 5190.6C lets a federally obligated sponsor charge aeronautical rents below a self-sustaining level where market conditions require it. At an airport carrying a four-hundred-name hangar waiting list, nobody has ever tested whether they do, because nothing in the federal architecture asks.

56 min read5 figures58 notes

Read Dr. Carter’s Research

The compliance frame sponsors are working inside

An airport that has accepted federal grant funds signs the Airport Sponsor Assurances, which run with the funding. Three of them shape the rate schedule directly.

Grant Assurance 24, Fee and Rental Structure, requires the sponsor to maintain a fee and rental structure that makes the airport as self-sustaining as possible under the circumstances at that airport. Rates set well below market work against that obligation.

Grant Assurance 22, Economic Nondiscrimination, requires that the airport be made available on fair and reasonable terms and without unjust discrimination. Rates must be applied consistently within a class of user, and differences between classes need a documented basis.

Grant Assurance 25, Airport Revenues, restricts the use of airport revenue to airport purposes. Revenue diversion draws FAA attention, and so, in practice, does the reverse problem of leases priced below market to favored tenants.

Alongside the assurances, the FAA Policy Regarding Airport Rates and Charges sets the fair and reasonable standard for rates charged to aeronautical users, and FAA Order 5190.6C, the Airport Compliance Manual, is where the agency explains how it reads all of this in practice. Where the file calls for appraisal treatment, Compliance Guidance Letter 2018-3 sets the appraisal standards the FAA expects. The full framework, twenty authorities from the grant assurances through Order 5190.6C, is mapped in our guide to the FAA regulations behind airport rents and hangar value.

The enforcement route matters too. A tenant who believes rates are unfair or discriminatory can file a complaint under 14 CFR Part 16. What a sponsor wants in that situation is a current, independent study on the record.

How rates are actually derived

There is no single correct method. A defensible study states which method applies to each category and why.

Market comparison

What comparable airports charge for comparable product, adjusted for the differences that matter: the field's role and traffic mix, hangar type and condition, who built the improvement, and what the tenant is responsible for. The adjustment grid is the part that gets argued, so it belongs in the report rather than in the analyst's head.

Rate of return on land value

For ground leases, the rate is commonly expressed as a return on the underlying land value. That requires a supportable land value and a supportable return, and both need to be shown.

Cost recovery and residual approaches

Where a sponsor has built the improvement, the analysis has to reconcile what the market will pay against what the asset costs to own and operate. Where the two diverge, the study should say so plainly rather than split the difference.

Escalation

Many schedules escalate by CPI between studies. That is administratively simple and it drifts, because hangar rents and consumer prices do not move together. Part of what a study does is reset the base and give the board a defensible view on whether the escalator is still doing its job.

When sponsors commission one

• The schedule is stale. The rates have not been independently reviewed in several years and the basis for the current numbers is no longer documented.
• A rate increase is going to the board. An independent study is what turns a proposed increase from a staff recommendation into a supported one.
• A tenant has challenged a rate, formally or in the public comment period, and the sponsor needs evidence rather than assertion.
• New hangar development is planned. Ground lease terms set now will run for decades, and the reversion at the end of the term is a value question that belongs in the analysis.
• A master plan update or a compliance inquiry is under way, and the rate schedule is one of the items that has to hold up.
• The state aviation office is running a statewide review, and individual sponsors need their own field addressed within it.

Scope and deliverable

The study is delivered as a written report: scope of work, airport and market analysis, the comparable evidence with the adjustments shown, method and conclusion by rate category, a proposed schedule, and the compliance discussion. Where a category requires appraisal treatment rather than a consulting analysis, that is identified at the outset and scoped accordingly.

Sponsors generally want two more things, and both are included on request: a summary suitable for a board packet, and availability to present the conclusions and answer questions at the meeting where the schedule is adopted.

Frequently asked questions