to repay Los Angeles World Airports

The Los Angeles City Council has approved a settlement with the Federal Aviation Administration (FAA) to repay Los Angeles World Airports approximately $14.9 million over ten years for improper payments made by the airport department to the Los Angeles Convention and Visitors Bureau (LA INC.).

A 2008 review by the FAA determined that payments by LAWA, the city agency that operates Los Angeles International Airport, to LA INC. for marketing and promotion of the department’s three airports were improperly targeted toward the city, airport officials said.

The FAA settlement also requires the city to repay LAWA approximately $2.8 million from its general fund for the state’s taking of LAX property to construct a portion of the Century Freeway (Interstate 105), city and airport officials said. The settlement of the two unrelated cases, reached in closed session December 16th, totals approximately $21.3 million over ten years with interest.

“The settlement of these two unrelated cases with the Federal Aviation Administration results in a more defined relationship with LA INC. and resolves a long-standing property issue, allowing us to avoid higher costs when legal issues are not amicably resolved,” said Gina Marie Lindsey, LAWA executive director. “We appreciate the FAA’s willingness to resolve these two issues fairly and promptly”.

The approved plan stipulates a series of semi-annual payback installments over a ten-year period, with the bulk of amounts due during the second five years.

During a compliance review of LAWA payments to LA INC. for marketing and promotion efforts, the FAA initially determined that all of the payments made during the six-year audit period did not comply with the FAA’s Airport Revenue Use Policy because LA INC.’s marketing and sales resources were directed to the Los Angeles destination rather than for specific airport purposes, an FAA spokesman said.

Following written and oral responses by LAWA, the federal agency determined that the city general fund should reimburse the airport department about $14 million (36 percent of the total $38.9 million that LAWA paid to LA INC. over those years), plus statutory interest of $809,813 as of June 30th, 2009, according to the FAA.

The settlement on the case also includes a supplemental plan that amends the existing contract with LA INC., requiring more clearly defined marketing, air service development and maintenance, and tour operator/travel agent marketing services.

In regards to the second case settled, after years of litigation, the FAA found in June this year that there was a disposition of proceeds with the state’s taking of LAX property in order to build the Century Freeway, airport officials said. The FAA directed the city to return to LAWA nearly $2 million plus statutory interest of $851,336.

FAA spokesman Ian Gregor said the recent settlement ensures that federal regulations are followed.

“Our goal is to get agencies to comply with federal regulations and to repay any money that was improperly spent, and the settlement with LAWA accomplishes those goals,” Gregor said.

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