1. Under Airport Noise Compatibility Programs
Land Acquired
Under Airport Noise Compatibility Programs
Nancy S. Williams, APP-501
Airports Financial Assistance
FAA Office of Airport Planning and Programming
(202) ,

2. Airport Noise Land
Compliance with Grant Assurance 31 was the basis of the audit.
The Assurance is codified at 49 USC 47101(c):
The Secretary of Transportation may approve an application under this subchapter for an airport development project grant only if the Secretary receives written assurances, satisfactory to the Secretary, that if an airport owner or operator has received, or will receive a grant for acquiring land and (A) if the land was or will be acquired for a noise compatibility purpose -
(i) the owner or operator will dispose of the land at fair market value at the earliest practicable time after the land no longer is needed for a noise compatibility purpose;
(ii) the disposition will be subject to retaining or reserving an interest in the land necessary to ensure that the land will be used in a way that is compatible with noise levels associated with operating the airport; and
(iii) the part of the proceeds from disposing of the land that is proportional to the Government's share of the cost of acquiring the land will be paid to the Secretary for deposit in the Airport and Airway Trust Fund established under section 9502 of the Internal Revenue Code of 1986 (26 U.S.C. 9502) or, as the Secretary prescribes, reinvested in an approved noise compatibility project.

3. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed Noise Land Disposal Effort (OIG Audit)
Office of Inspector General issued audit report:
“Management of Land Acquired Under
Airport Noise Compatibility Programs” September 30, 2005
Audit focused on three areas:
- Identifying land no longer needed for noise compatibility purpose
- Disposing of noise land through sales, leases, or other means
- Ensuring that proceeds from disposed land is used for other noise compatibility projects or is returned to the Trust Fund
Audit Report is On-line at

4. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed Noise Land Disposal Effort (OIG Audit)
Audit Covered 11 Airport Noise Programs at airports with noise land grants
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

5. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed Noise Land Disposal Effort (OIG Audit)
Two Audit Results:
The Airports they reviewed “were not in compliance with grant requirements”
“Airports have not disposed of sizable amounts of unneeded noise land”
 “Airports are improperly using noise proceeds from noise land dispositions”
“FAA Program Oversight and Guidance Needed Strengthening”

6. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed Noise Land Disposal Effort (OIG Audit)
Audit Report also included six specific recommendations.
FAA was given the opportunity to review the report and its recommendations prior to publication and offered responses.

7. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed Noise Land Disposal Effort (OIG Audit)
Overall FAA Concurs in Program Improvements To Inventory and Dispose of Excess Land
Don’t Agree that Land Value or Land to Retain is Known Yet.
Memo to Regions to be Issued by APP 500 (APP 600 & AAS 400 will support the initiative)

8. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed 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.

9. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed 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 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.

10. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed 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 (such as the Eastern Region Hershey Conference) 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.

11. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed 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 FY 2006.

12. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed 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 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.

13. Proposed Noise Land Disposal Effort (OIG Audit)
Airport Noise Land
Proposed 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.

14. Fair Market Value Standard for Land Disposal
Airport Noise Land
Fair Market Value Standard for Land Disposal
Statutory Requirement – Assurance 31- Disposal of Land whether noise land or not
PGL
Real Property = $$$ When Sold or Leased
There is No Loss in Value to the Airport on A Sale/Lease of its Surplus/Obligated Property at FMV $$$
9. You may want to mention that there are different delivery methods being used in the industry. Most of the programs are using a ‘bulk bidding’ method where groups of homes are assembled into bid packages for contractors to bid on. There are a few programs that are utilizing a ‘single parcel method’ where each home is bid separately (often with the homeowner selecting contractors to prepare bids from a pre-approved list). In each of these cases, the airport sponsor holds the contract with the construction contractor. An emerging delivery method is a type of design build where the sponsor’s consultant holds the construction contracts (San Antonio International is utilizing this method). Tulsa was also using this method, but had encountered several issues including a very costly program, limited control over the program, and communication issues with their consultant. We were recently selected there to replace the prior consultant and have converted the program to a more traditional program where the sponsor will hold the contracts. I think this could prompt an interesting dialogue from the FAA staff in attendance about the pros and cons they see in the delivery methods used around the country.

15. What is the FMV for Redevelopment?
Airport 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” or 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 Development Entitlements for the Land per Local/State Land Development Law
Find and Analyze Comparable Sales of Raw Land (Same or 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
9. You may want to mention that there are different delivery methods being used in the industry. Most of the programs are using a ‘bulk bidding’ method where groups of homes are assembled into bid packages for contractors to bid on. There are a few programs that are utilizing a ‘single parcel method’ where each home is bid separately (often with the homeowner selecting contractors to prepare bids from a pre-approved list). In each of these cases, the airport sponsor holds the contract with the construction contractor. An emerging delivery method is a type of design build where the sponsor’s consultant holds the construction contracts (San Antonio International is utilizing this method). Tulsa was also using this method, but had encountered several issues including a very costly program, limited control over the program, and communication issues with their consultant. We were recently selected there to replace the prior consultant and have converted the program to a more traditional program where the sponsor will hold the contracts. I think this could prompt an interesting dialogue from the FAA staff in attendance about the pros and cons they see in the delivery methods used around the country.

16. What is FMV for Ground Leases
Airport Noise Land
Fair Market Value Standard for Land Disposal
What is FMV for Ground Leases
Rent Escalators To Adjust Rent Over Time (at least offset inflation)
At Appraised Values (Market Conditions Change Over Time)
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 Value is less than FeeValue, than Property Value is Lost to Leasehold
Market with Consideration of Reversion Will Preserve Value
Market Determines Overall Capitalization Rate for the Property
Commercial Ground Lease Practices are the Standard for Appraisal
9. You may want to mention that there are different delivery methods being used in the industry. Most of the programs are using a ‘bulk bidding’ method where groups of homes are assembled into bid packages for contractors to bid on. There are a few programs that are utilizing a ‘single parcel method’ where each home is bid separately (often with the homeowner selecting contractors to prepare bids from a pre-approved list). In each of these cases, the airport sponsor holds the contract with the construction contractor. An emerging delivery method is a type of design build where the sponsor’s consultant holds the construction contracts (San Antonio International is utilizing this method). Tulsa was also using this method, but had encountered several issues including a very costly program, limited control over the program, and communication issues with their consultant. We were recently selected there to replace the prior consultant and have converted the program to a more traditional program where the sponsor will hold the contracts. I think this could prompt an interesting dialogue from the FAA staff in attendance about the pros and cons they see in the delivery methods used around the country.

17. What’s Coming Next? Airport Noise Land FAA teams will be formed to:
Develop training
Give Training to Regional Conferences and other groups
Develop guidance
Airports should begin reviewing their noise land program
Developing their noise land maps
Developing their noise land disposal plans
Audited airports should begin working with their FAA regional folks
Uncertain and volatile funding create a real challenge to have any sort of reliable plan for a program that stretches over many years. A program needs to be funded at a steady and predictable rate. With reliable budgets, the sponsor can plan their finances better, the construction contractors can level their work force and have confidence that packages of homes will be coming out on a regular basis. The community will see consistent progress in the program. To avoid funding fluctuations, Regional and ADO staff should work closely with sponsors to develop realistic ACIPs that FAA can support, then I think it makes for better more cost effective programs all around.
there is limited guidance available to help ensure consistency of programs nationwide. It has been our experience that homeowners can be very savvy in their research of what other programs are doing and then use that as leverage against an airport sponsor. While you probably don’t want to have a ‘one size fits all’ approach, perhaps there is a way to create a more standardized process. This would also help FAA effectively compare the costs of various programs. Given all of the variables that exist today, I don’t believe you can really compare one program to another and have any clarity

18. Suggestions/Comments? Questions?
Airport Noise Land
Suggestions/Comments?
Questions?
Uncertain and volatile funding create a real challenge to have any sort of reliable plan for a program that stretches over many years. A program needs to be funded at a steady and predictable rate. With reliable budgets, the sponsor can plan their finances better, the construction contractors can level their work force and have confidence that packages of homes will be coming out on a regular basis. The community will see consistent progress in the program. To avoid funding fluctuations, Regional and ADO staff should work closely with sponsors to develop realistic ACIPs that FAA can support, then I think it makes for better more cost effective programs all around.
there is limited guidance available to help ensure consistency of programs nationwide. It has been our experience that homeowners can be very savvy in their research of what other programs are doing and then use that as leverage against an airport sponsor. While you probably don’t want to have a ‘one size fits all’ approach, perhaps there is a way to create a more standardized process. This would also help FAA effectively compare the costs of various programs. Given all of the variables that exist today, I don’t believe you can really compare one program to another and have any clarity