The Federal Aviation Administration found last month that the city of Santa Monica failed to properly document its loans to the Santa Monica Airport.
FAA officials wrote in a Nov. 8 decision that the city drafted multiple loan agreements with the airport that lacked signatures, interest rates and other loan terms. The agency also found that the city overcharged the airport to land aircraft and allowed Santa Monica College to rent airport property at a below-market rate.
The FAA’s decision came in response to a 2016 complaint filed by airport tenants and aviation groups that alleged the city was charging excessive interest on loans to the airport without valid documentation. The complaint also alleged that the city charged unreasonable landing fees on aircraft and permitted Santa Monica College, a non-aeronautical tenant, to pay less than fair market rent.
The plaintiffs, which included the Aircraft Owners and Pilots Association, the National Business Aviation Association and airport tenants, said when they filed the complaint in 2016 that the city had adopted a strategy of financially “squeezing” aviation tenants in order to close the airport. The city reached an agreement with the FAA the following year to close the airport by the end of 2028.
The city maintained its loans were properly documented and that its landing fees met legal standards, but said it would recalculate the accumulated interest on its loans to the airport. It also agreed that Santa Monica College was, in fact, renting airport property at a below-market rate and said it had a plan to remedy the situation.
In its November decision, the FAA said the city mishandled its loans to the airport. It asked the city to stop repaying certain amounts, collecting on loans predating 2010 and provide documentation to show its interest rates match those of other loans.
“A review of the record concerning the alleged loans made by the city show numerous instances of insufficient documentation,” officials wrote in the decision. “This includes agreements lacking signatures, no stated or documented interest rate, no substantive terms to validate the transaction, backdating, no loan instrument for claimed transactions, and recent documentation ‘superseding’ earlier documentation.”
The FAA also found that the city’s landing fees do not reflect the fact that the recently shortened runway has changed how aircraft access the airport. It directed the city to update its fees to reflect the actual costs of using the airport.
Additionally, the agency directed the city to provide documentation supporting its plan to charge Santa Monica College market rent for its use of airport property.
City spokesperson Constance Farrell said the city would review its options and determine next steps, which might include appealing the decision.
madeleine@smdp.com
