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ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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Presentation on theme: "ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans."— Presentation transcript:

1 ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans City Council August 6, 2008 A.J. Herbert III Middleberg Riddle & Gianna 201 St. Charles Ave., 31 st Floor New Orleans, LA (504) ,

2 PART I Overview of Act 927

3 Act 927 Overview Purpose and Intent: –To establish an instrumentality to provide airports, airport facilities, and improvements and access thereto; –To assist public entities in constructing, extending, rehabilitating, repairing, maintaining, and renewing airports and airport facilities; and –To assist in the financing of such needs by authorizing the issuance of general obligation bonds of the state.

4 What Act 927 Does Creates a board called the Southeast Regional Airport Authority (SERAA) and defines its powers

5 What Act 927 Does Not Do Does not effect a transfer of MSY Does not specify a method of transfer for MSY (sale, lease or cooperative endeavor) Does not appropriate state funding for SERAA Does not establish specific state commitments for airport improvements or related improvements such as transportation infrastructure which promotes utilization of MSY

6 Procedural History Notes Passed unanimously by Senate Passed by House 96-5 Signed by Governor Jindal on July 14, 2008 – one of the last bills signed before it would have become law absent a veto

7 Selected Amendments Rejected To require SERAA to enter into a cooperative endeavor with the local governing authority and share concurrent jurisdiction with the local governing authority for the purposes of property acquisition matters in Orleans, Jefferson and St. Charles parishes (Rep. Willmott) To provide for a joint agreement between SERAA and the local governing entity for the expropriation of property under certain circumstances (Rep. Willmott) To require an affirmative vote of local governing entity before any property is expropriated (Rep. Willmott)

8 Selected Amendments Adopted Require 2/3 vote of New Orleans City Council and majority vote of New Orleans citizens for any sale, transfer or conveyance of the Airport (Conf. Comm. based on proposed amendments by Sen. Murray and Rep. Richmond) All board members subject to Senate confirmation (Sen. Murray) Mandatory civil service employment for all SERAA employees (Sen. Murray)

9 Selected Amendments Adopted (cont.) Require SERAA to conform and comply with all parish and municipal zoning ordinances for any project, construction or development on property owned, acquired or governed by SERAA (Rep. Willmott) Prohibit SERAA from establishing domicile requirements for SERAA and Airport employees (Rep. Hutter)

10 Selected Amendments Adopted (cont.) 2/3 vote of the entire board (not just a quorum) required for expropriation of property (Senate Committee on Transportation, Highways & Public Works) Term of board members concurrent with their respective appointing authority (Rep. Tucker) Recruit minority and women-owned business enterprises (Rep. Richmond)

11 SERAA Timeline July 14, 2008Effective date of Act 927, formerly HB 1272 Prior to Sept. 30, 2008List of nominees appointed by the governor must be submitted to governor for appointment* September 30, 2008Deadline for governor to make all appointments to the board of commissioners of SERAA Prior to Nov. 15, 2008Board members not requiring the governors appointment must be appointed * The Digest to the Act suggests that all nominees must be submitted within 30 days of the effective date of the Act, but this is not in the final law.

12 SERAA Timeline November 15, 2008Latest date to hold first meeting of the board of commissioners (monthly meetings thereafter) First Board MeetingBoard must elect a Chairman, Vice Chairman and Secretary; additional officers may be elected March 1, 2009Annual status report to House and Senate Committees on Transportation, Highways and Public Works March 1, 2009Annual status report on financial matters to the Joint Legislative Committee on the Budget

13 SERAA Defined as a corporate and political subdivision of the state Domiciled in Jefferson Parish Geographical boundaries of SERAA are coextensive with the territorial boundaries of Jefferson Parish, Orleans Parish and St. Charles Parish SERAA may not intervene in the administration or operation of any existing airport facility Governed by a 9-member board of commissioners

14 Board Composition 3 New Orleans residents –1 appointed by the mayor, 1 appointed by the governor, and 1 appointed by the governor from list by mayor 2 from Kenner –1 resident appointed by the mayor –1 without specific residency requirement appointed by the governor from list of 3 nominees by Kenners mayor 2 from St. Charles Parish –1 resident appointed by the parish president with 2/3 approval by St. Charles Parish Council –1 without specific residency requirement appointed by the governor from list of 3 nominees by St. Charles Parish Council 1 Jefferson Parish resident appointed by the parish president 1 Louisiana resident appointed by the governor from the state at large

15 Board of Commissioners Must be Louisiana residents Subject to Senate confirmation Serve terms concurrent with their appointing authority Monthly board meetings

16 Powers & Duties Fix and collect rates and rentals for the use of airports and airport facilities Acquire, construct, operate, lease, manage or maintain airports and airport facilities within territorial boundaries Acquire, hold, control, lease or sell other movable and immovable property without territorial limits Borrow money and issue bonds to acquire, construct or permanently improve airport facilities Recruit minority and women-owned vendors

17 PART II Selected Legal Issues with Act 927

18 Legal Issues with SERAAs Domicile SERAA is domiciled in Jefferson Parish Although MSY is located in Jefferson Parish, factors to consider in establishing the legal domicile include: –Possible venue to sue or be sued –Applicable parish and city ordinances –Historical jurisdictional issues

19 Legal Issues with the Board The Act does not set forth eligibility criteria other than residency The term of each board member is concurrent with the respective appointing authority, but the Digest to the Act suggests that all terms are concurrent with the governor While ethical restrictions are certainly appropriate, Act 927s provisions on board members employment and investments exceed the requirements of the Code of Governmental Ethics. It may be beneficial to include as board members individuals with experience in aviation, tourism, etc. if the intent of the legislation is to enhance and develop the Airport and to attract new air service.

20 Legal Issues with Powers & Duties SERAA was created without funding to carry out its mission –The Act does not set forth specific commitments of funds or projects to develop the Airport –Airport funding made subject to annual legislative appropriation powers The Act does not obligate SERAA to assume all liabilities and bond debts of the NOAB and/or the City of New Orleans relating to the Airport in the event of a transfer, sale or other conveyance –The NOAB has approximately $250 million of bonds outstanding Amend the Act to expand SERAAs powers with regard to a transportation infrastructure (including a rapid transit system) outside of the territorial boundaries of Jefferson, Orleans and St. Charles parishes Amend the Act to expressly permit and authorize SERAA to enter into cooperative endeavor agreements with the NOAB and/or the City of New Orleans

21 Sale, Transfer or Conveyance of MSY Act does not provide for actual transfer Act requires approval a 2/3 vote of the New Orleans City Council and a majority of New Orleans voters pursuant to the Home Rule Charter

22 Sale, Transfer or Conveyance of MSY No implicit or explicit prohibitions on transfer in the City Charter City Charter anticipates that MSY may be sold by designating the New Orleans Municipal Trust Fund as the depository for the revenues of a sale (Section 6-307) –[…]all net proceeds resulting from a sale of any immovable property owned by the City having a sale price of more than five million dollars, including but not limited to the New Orleans International Airport, shall be placed in an expendable trust fund to be designated as the New Orleans Municipal Trust Fund. Leases and sales of MSY are not prohibited by the Charter –However, a sale must comply with Charters requirements for disposing of immovable property

23 Legal Issues with Selling the Airport Charter requirements: –If property is no longer needed or –Transferred for purposes of rehabilitation Challenge of requirement that property may only be sold if not needed for a public purpose Voting restrictions imposed by Act 927 Bond indenture covenants FAA grant assurances

24 Legal Issues with Leasing the Airport City Charter requirements: –Procedural requirements for lease greater than 1 year –Majority vote of City Council that MSY is not currently needed by the City for public purposes –NOAB shall administer, operate and maintain all municipal airports and aviation facilities (Section 5-602(1)) Exceptions to City Charter requirements when: –Leased to a public benefit corporation –Leased to the state

25 Legal Issues with Leasing the Airport (cont.) Maximum term of 99 years State public lease laws do not apply if leased to a state agency FAA grant assurances

26 Cooperative Endeavor Not an option expressly mentioned in Act 927, but not prohibited either 3 parties: the City, SERAA and NOAB State law and the City Charter permits cooperative endeavors and provides procedures –Requires majority vote of City Council Must articulate a permissible public purpose FAA grant assurances limit the ability to transfer certain obligations and responsibilities

27 Bond Covenants In excess of $200 million of bonds outstanding Bond indenture for general airport revenue bonds ($112 million) requires payment in full of the bonds in the event of a sale or lease of the Airport, plus early termination payments estimated at $13 million PFC bonds of approximately $88 million outstanding would need to be assumed by SERAA

28 FAA Grant Assurances Grant sponsor is the City, the NOAB or sometimes both the City and the NOAB Maximum term of grant assurances is 20 years –Except for covenants against exclusive rights and real property acquired with federal funds which have no time limitations

29 FAA Grant Assurances Disposition of Interest –Sponsor will not dispose of or encumber its title or interest during the term of the grant –FAA may approve a waiver of this assurance if the performance obligation met Performance Obligation –Sponsor will not enter into any transaction which would deprive it of rights and powers to perform all covenants –May contractually delegate certain obligations –May transfer management and operation duties if sponsor retains sufficient rights and authority

30 Revenue Assurances & Revenue Diversion Airport revenues only used for capital and operating costs of the airport –Proceeds from the sale of airport property are classified as airport revenues –Use of funds more flexible under the privatization pilot program Assurance to be Self-Sustaining –Must set appropriate fee and rental structures –Must be a process to establish fair market value by an independent expert acceptable to FAA; no appraisal process is expressly required by Act 927 –A value cannot be established by legislative act Illegal diversion may result in civil penalties or the withholding of future funds Repayment of FAA grants would exceed $200 million

31 Revenue Assurances & Revenue Diversion The Act permits airport revenues to be used to meet other obligations of the state, including debt unrelated to airport purposes §706(A)(6) reads: –To fix, alter, and collect rates and rentals and other charges for the use of airports and airport facilities by the authority. Such charges shall be determined exclusively by the authority for the purpose of providing for payment of the expenses of the authority; the construction, improvement, extension, repair, maintenance, and operation of airports and airport facilities; the payment of principal and interest on bonds or other obligations; and to fulfill the terms of any agreements made with the purchasers or holders of any such bonds or other obligations, or with the state, any person, public or private corporation, public entity, or political subdivision.

32 Transfer of Grant Agreements Agreements may be transferred to the state or other pubic agency if (1) the recipient assumes all obligations and (2) is deemed eligible by the FAA FAA has authority to release, modify or amend the terms and conditions of any grant agreement, but such waivers are not routine Criteria is whether the proposed change will protect, advance, or benefit the public interest in civil aviation

33 Zoning Regulations Any project, construction or development on property owned, acquired or governed by SERAA must conform to and comply with all parish and municipal zoning ordinances The zoning restrictions in the Act do not appear to grant SERAA any greater authority to expand and develop the Airport than NOAB currently possesses.

34 Expropriation A 2/3 vote of the entire board is required for the expropriation of property, not just a 2/3 vote of the quorum present This could be problematic given the composition of the board

35 Civil Service Employment Current NOAB employees are in the City of New Orleans civil service system Act 927 requires each employee of SERAA and any employees transferred to SERAA to be members of the state civil service system Act could be amended to clarify that only subsequently hired employees of SERAA (those hired after a transfer) are required to be members of the state civil service system, but those already employed have a choice

36 Questions?


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