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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 City Council August 6, 2008 A.J. Herbert III Middleberg Riddle & Gianna 201 St. Charles Ave., 31 st Floor New Orleans, LA 70170 (504) 525-7200, [email protected]
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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.

Mar 28, 2015

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Page 1: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

ACT 927

Southeast Regional Airport AuthorityOverview and Preliminary Analysis of Selected Legal Issues

Presented to the Airport Committee of the New Orleans City CouncilAugust 6, 2008

A.J. Herbert III

Middleberg Riddle & Gianna

201 St. Charles Ave., 31st Floor

New Orleans, LA 70170

(504) 525-7200, [email protected]

Page 2: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

PART I

Overview of Act 927

Page 3: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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.

Page 4: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

What Act 927 Does

• Creates a board called the Southeast Regional Airport Authority (“SERAA”) and defines its powers

Page 5: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 6: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 7: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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)

Page 8: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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)

Page 9: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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)

Page 10: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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)

Page 11: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

SERAA TimelineJuly 14, 2008 Effective date of Act 927,

formerly HB 1272Prior to Sept. 30, 2008 List of nominees appointed by

the governor must be submitted to governor for appointment*

September 30, 2008 Deadline for governor to make all appointments to the board of commissioners of SERAA

Prior to Nov. 15, 2008 Board members not requiring the governor’s 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.

Page 12: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

SERAA Timeline

November 15, 2008 Latest date to hold first meeting of the board of commissioners

(monthly meetings thereafter)First Board Meeting Board must elect a Chairman,

Vice Chairman and Secretary; additional officers may be elected

March 1, 2009 Annual status report to House and Senate Committees on

Transportation, Highways and Public Works

March 1, 2009 Annual status report on financial matters to the Joint Legislative Committee on the Budget

Page 13: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 14: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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 Kenner’s 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

Page 15: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

Board of Commissioners

• Must be Louisiana residents

• Subject to Senate confirmation

• Serve terms concurrent with their appointing authority

• Monthly board meetings

Page 16: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 17: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

PART II

Selected Legal Issues with Act 927

Page 18: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

Legal Issues with SERAA’s 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

Page 19: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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 927’s 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.

Page 20: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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 SERAA’s 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

Page 21: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 22: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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 Charter’s requirements for

disposing of immovable property

Page 23: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 24: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 25: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 26: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 27: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 28: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 29: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 30: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 31: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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.

Page 32: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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”

Page 33: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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.

Page 34: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 35: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

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

Page 36: ACT 927 Southeast Regional Airport Authority Overview and Preliminary Analysis of Selected Legal Issues Presented to the Airport Committee of the New Orleans.

Questions?