B-159175, JUN. 9, 1966, 45 COMP. GEN. 773

B-159175: Jun 9, 1966

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UTILITY LINE RELOCATIONS IS AN ALLOWABLE PROJECT COST. UNDER SECTION 4 OF THE FEDERAL AIRPORT ACT THE ADMINISTRATOR OF THE FEDERAL AVIATION AGENCY (FAA) IS AUTHORIZED TO MAKE GRANTS TO PUBLIC AGENCIES FOR AIRPORT DEVELOPMENT. YOU ADVISE THAT THE GRANTS ARE MADE FOR THE PURPOSE OF ESTABLISHING A NATIONWIDE SYSTEM OF PUBLIC AIRPORTS IN CONFORMITY WITH THE NATIONAL AIRPORT PLAN PREPARED UNDER SECTION 3 (49 U.S.C. 1102) OF THE ABOVE-CITED ACT. THAT GRANT AGREEMENTS ARE MADE BETWEEN THE PUBLIC AGENCY OWNING THE AIRPORT AND THE FAA WHICH PROVIDE. THE CITY OF ATLANTA AND THE FAA HAVE EXECUTED OVER TWENTY GRANT AGREEMENTS UNDER WHICH SUBSTANTIAL SUMS OF MONEY HAVE BEEN PAID TO THE CITY FOR THE DEVELOPMENT OF THE CITY OF ATLANTA AIRPORT.

B-159175, JUN. 9, 1966, 45 COMP. GEN. 773

STATES - FEDERAL AID, GRANTS, ETC. - AIRPORT DEVELOPMENT COSTS - LAND ACQUISITION UNDER SECTION 4 OF THE FEDERAL AIRPORT ACT AUTHORIZING GRANT AGREEMENTS TO ESTABLISH A NATIONWIDE SYSTEM OF PUBLIC AIRPORTS, THE UNITED STATES TO PAY 50 PERCENT OF ALLOWABLE COSTS, THE TOTAL COST OF LAND ACQUISITION BY A LOCAL PUBLIC AGENCY UNDER A CONTRACT NEGOTIATED WITH A NEIGHBORING CITY THAT PROVIDED FOR STREET CLOSINGS, EASEMENT CONVEYANCES, AND UTILITY LINE RELOCATIONS IS AN ALLOWABLE PROJECT COST, NOTWITHSTANDING THAT UNDER STATE LAW THE AREA OF THE CLOSED STREETS REVERTS TO THE GRANTEE AS THE ABUTTING PROPERTY OWNER, THE CONTRACT ARRANGEMENT BEING MORE ADVANTAGEOUS TO THE GOVERNMENT THAN ALTERNATIVE CONDEMNATION PROCEEDINGS THAT COULD GIVE RISE TO LITIGATION AND DELAY, WITH ENSUING COSTS THAT WOULD BE IN EXCESS OF THE CONTRACT PRICE PAID FOR THE AREA OF THE CLOSED STREETS; THEREFORE, ONE- HALF THE COST OF THE PROPERTY ACQUIRED THAT INCLUDES THE AREA OF THE CLOSED STREETS MAY BE REIMBURSED TO THE GRANTEE AS A NECESSARY AND REASONABLE COST INCURRED IN ACCOMPLISHING THE AIRPORT DEVELOPMENT CONTEMPLATED BY THE ACT.

TO THE ADMINISTRATOR, FEDERAL AVIATION AGENCY, JUNE 9, 1966:

YOUR LETTER OF MAY 11, 1966, CONCERNS GRANTS MADE UNDER SECTION 4 OF THE FEDERAL AIRPORT ACT, AS AMENDED, 49 U.S.C. 1103.

UNDER SECTION 4 OF THE FEDERAL AIRPORT ACT THE ADMINISTRATOR OF THE FEDERAL AVIATION AGENCY (FAA) IS AUTHORIZED TO MAKE GRANTS TO PUBLIC AGENCIES FOR AIRPORT DEVELOPMENT. YOU ADVISE THAT THE GRANTS ARE MADE FOR THE PURPOSE OF ESTABLISHING A NATIONWIDE SYSTEM OF PUBLIC AIRPORTS IN CONFORMITY WITH THE NATIONAL AIRPORT PLAN PREPARED UNDER SECTION 3 (49 U.S.C. 1102) OF THE ABOVE-CITED ACT; AND THAT GRANT AGREEMENTS ARE MADE BETWEEN THE PUBLIC AGENCY OWNING THE AIRPORT AND THE FAA WHICH PROVIDE, GENERALLY, FOR PAYMENT BY THE UNITED STATES OF 50 PERCENT OF THE ALLOWABLE PROJECT COSTS (49 U.S.C. 1109). YOU STATE THAT A QUESTION HAS ARISEN AS TO THE ELIGIBILITY FOR PAYMENT OF THE UNITED STATES SHARE OF A PROJECT COST INCURRED BY THE CITY OF ATLANTA, GEORGIA, IN THE DEVELOPMENT OF ITS AIRPORT. ACCORDINGLY, YOU REQUEST A DECISION AS TO THE PROPRIETY OF THE PAYMENT INVOLVED HERE UNDER THE CIRCUMSTANCES OUTLINED BELOW.

BEGINNING IN 1948, THE CITY OF ATLANTA AND THE FAA HAVE EXECUTED OVER TWENTY GRANT AGREEMENTS UNDER WHICH SUBSTANTIAL SUMS OF MONEY HAVE BEEN PAID TO THE CITY FOR THE DEVELOPMENT OF THE CITY OF ATLANTA AIRPORT. THE ATLANTA AIRPORT IS A MAJOR TRAFFIC HUB AT WHICH AIRCRAFT OPERATIONS HAVE BEEN CONSTANTLY INCREASING, TOTALING FOR CALENDAR YEAR 1963, 224,915, FOR 1964, 240,850 AND FOR 1965, 272,805. THE INDICATIONS ARE THESE INCREASES WILL CONTINUE. IN ORDER TO MEET THE NEEDS OF CIVIL AERONAUTICS, THE FAA ENTERED INTO SEVERAL GRANT AGREEMENTS WITH THE CITY OF ATLANTA FOR THE CONSTRUCTION OF AN ADDITIONAL PARALLEL EAST-WEST RUNWAY. THIS IMPROVEMENT WAS CALLED FOR IN THE NATIONAL AIRPORT PLAN. THE AMOUNT OF AIR TRAFFIC DEMANDED COMPLETION OF THE CONSTRUCTION OF THIS RUNWAY AS SOON AS POSSIBLE. OF THE TWO GRANT AGREEMENTS DIRECTLY INVOLVED, ONE OBLIGATED THE UNITED STATES IN THE MAXIMUM AMOUNT OF $4,751,147 FOR THE ACQUISITION OF NECESSARY LAND AND PROPERTY INTERESTS AND THE SECOND IN THE AMOUNT OF $4,223,000 FOR, AMONG OTHER THINGS, THE CONSTRUCTION OF THE RUNWAY AND PARALLEL TAXIWAY AND THE RELOCATION OF ROADS AND UTILITIES.

MUCH OF THE DEVELOPMENT CONTEMPLATED BY THESE GRANT AGREEMENTS WAS IN AREAS WITHIN THE BOUNDARIES OF THE CITY OF COLLEGE PARK. IN ORDER TO ACQUIRE THE INTERESTS OF THE CITY OF COLLEGE PARK IN THE STREETS AND EASEMENTS INCLUDED IN THE PROJECT, THE CITY OF ATLANTA ENTERED INTO A CONTRACT ON MARCH 3, 1964, WITH THE CITY OF COLLEGE PARK CALLING FOR THE CLOSING OF THESE STREETS OR PORTIONS THEREOF, CONVEYANCE OF THE EASEMENTS AND THE RELOCATION OF UTILITY LINES. IN RETURN THE CITY OF ATLANTA AGREED TO PAY $508,000, TRANSFER CERTAIN EASEMENTS, REROUTE SOME SEWER LINES AND PROVIDE A STORM SEWER SYSTEM.

THE CITY OF ATLANTA HAS REQUESTED PAYMENT BY THE UNITED STATES OF ITS SHARE OF THE LUMP-SUM PAYMENT OF $508,000. YOU STATE THAT ALL OF THE COSTS INCURRED UNDER THE AGREEMENT ARE ALLOWABLE PROJECT COSTS WITHIN THE MEANING OF THE FEDERAL AIRPORT ACT AND THE IMPLEMENTING REGULATIONS (PART 151 OF THE FEDERAL AVIATION REGULATIONS) WITH THE POSSIBLE EXCEPTION OF THE ACQUISITION OF THE AREAS OF LAND COMPRISED OF PUBLIC STREETS, AMOUNTING TO APPROXIMATELY 20 ACRES. YOU FURTHER STATE THAT AS A GENERAL PRINCIPLE OF GEORGIA LAW, UPON CLOSURE OF A PUBLIC STREET, A CITY'S INTEREST IN THE LAND REVERTS TO THE ABUTTING PROPERTY OWNER WHICH WOULD BE, IN THIS CASE, THE CITY OF ATLANTA, IT HAVING CONTEMPORANEOUSLY ACQUIRED THE ADJOINING PROPERTIES FROM THE INDIVIDUAL LOT OWNERS. THE CITY OF ATLANTA IN A BRIEF, CONTENDS, HOWEVER, THAT THIS GENERAL PRINCIPLE IS NOT APPLICABLE TO THE CIRCUMSTANCES HERE.

YOU STATE THAT FAA FINDS THE PRESENTATION BY THE CITY OF ATLANTA ACCURATE IN ITS SUMMARY OF THE FACTS AND PERSUASIVE IN ITS LEGAL REASONING. YOU ADVISE THAT THERE CAN BE NO DOUBT THAT THE TIME ELEMENT WAS A VERY IMPORTANT FACTOR AND THAT EXERCISE OF THE POWER OF CONDEMNATION IN LIEU OF EXECUTION OF AN AGREEMENT WITH THE CITY OF COLLEGE PART WOULD HAVE SUBSTANTIALLY DELAYED THE COMPLETION OF A VERY NECESSARY PROJECT, AND THAT IT WOULD ALSO HAVE PROBABLY RESULTED IN MUCH HIGHER COSTS. YOUR GENERAL COUNSEL HAS ADVISED YOU THAT, IN HIS OPINION, THE CLOSING OF A STREET BY THE CITY OF COLLEGE PARK REPRESENTS THE EXERCISE OF A DISCRETIONARY FUNCTION WHICH THE CITY COULD NOT BE FORCED TO PERFORM WITHOUT SUBSTANTIAL LITIGATION. HE HAS POINTED OUT THAT, EVEN ASSUMING STREET CLOSINGS WERE NOT A DISCRETIONARY FUNCTION, THE CASE OF HOWARD V. CITY OF ATLANTA, 10 S.E.2D 190 (1940), DISCLOSES A BELIEF ON THE PART OF THE SUPREME COURT OF GEORGIA THAT ANY SUCH CONDEMNATION COULD GIVE RISE TO A SUBSTANTIAL AMOUNT OF LITIGATION AND THE INHERENT DELAY. THIS FACTOR, COUPLED WITH THE SUBSTANTIAL CERTAINTY THAT ENSUING COSTS WOULD BE IN EXCESS OF THE CONTRACT PRICE OF $508,000, REVEALS, IN YOUR OPINION, THAT THIS COST REPRESENTS AN ALLOWABLE PROJECT COST.

YOU STATE SINCE IT APPEARS THAT THE QUESTION PRESENTED HERE WILL ALSO BE RAISED IN SEVERAL SIMILAR CASES IN THE VERY NEAR FUTURE, YOU WOULD APPRECIATE US ADVISING YOU IF WE WOULD BE REQUIRED TO OBJECT TO THE PAYMENT BY THE UNITED STATES TO THE CITY OF ATLANTA OF ONE-HALF OF THE AMOUNT REQUIRED TO BE PAID BY THE CITY UNDER ITS MARCH 3, 1964, CONTRACT WITH THE CITY OF COLLEGE PARK.

SECTION 13 (A) OF THE FEDERAL AIRPORT ACT, AS AMENDED, 49 U.S.C. 1112 (A), PROVIDES, IN PERTINENT PART, THAT:

* * * A PROJECT COST SHALL BE ALLOWABLE IF---

(1) IT WAS A NECESSARY COST INCURRED IN ACCOMPLISHING AIRPORT DEVELOPMENT IN CONFORMITY WITH APPROVED PLANS AND SPECIFICATIONS FOR AN APPROVED PROJECT AND WITH THE TERMS AND CONDITIONS OF THE GRANT AGREEMENT ENTERED INTO IN CONNECTION WITH SUCH PROJECT;

(2) IT WAS INCURRED SUBSEQUENT TO THE EXECUTION OF THE GRANT AGREEMENT WITH RESPECT TO THE PROJECT, AND IN CONNECTION WITH AIRPORT DEVELOPMENT ACCOMPLISHED UNDER SUCH PROJECT AFTER THE EXECUTION OF SUCH GRANT AGREEMENT: PROVIDED, HOWEVER, THAT THE ALLOWABLE COSTS OF A PROJECT MAY INCLUDE ANY NECESSARY COSTS OF FORMULATING THE PROJECT (INCLUDING THOSE OF FIELD SURVEYS AND THE PREPARATION OF PLANS AND SPECIFICATIONS, INCLUDING COSTS OF ACQUIRING LAND OR INTERESTS THEREIN OR EASEMENTS THROUGH OR OTHER INTERESTS IN AIR SPACE, AND INCLUDING ANY NECESSARY ADMINISTRATIVE OR OTHER INCIDENTAL COSTS INCURRED BY THE SPONSOR SPECIFICALLY IN CONNECTION WITH THE ACCOMPLISHMENT OF THE PROJECT, WHICH WOULD NOT HAVE BEEN INCURRED OTHERWISE WHICH WERE INCURRED SUBSEQUENT TO THE ENACTMENT OF THIS CHAPTER; AND

(3) IT IS REASONABLE IN AMOUNT, IN THE OPINION OF THE ADMINISTRATOR: PROVIDED, THAT IF THE ADMINISTRATOR DETERMINES THAT A PROJECT COST IS UNREASONABLE IN AMOUNT, HE SHALL ALLOW, AS AN ALLOWABLE PROJECT COST UNDER THIS SECTION, ONLY SUCH AMOUNT OF SUCH PROJECT COST AS HE DETERMINES TO BE REASONABLE AND NO PROJECT COSTS IN EXCESS OF THE DEFINITE AMOUNT STATED IN THE GRANT AGREEMENT SHALL BE ALLOWABLE.

THE ADMINISTRATOR IS AUTHORIZED TO PRESCRIBE SUCH REGULATIONS, INCLUDING REGULATIONS WITH RESPECT TO THE AUDITING OF PROJECT COSTS, AS HE MAY DEEM NECESSARY TO EFFECTUATE THE PURPOSES OF THIS SECTION.

SECTION 151.41 OF THE PERTINENT REGULATIONS (14 CFR 151.41) ISSUED BY THE ADMINISTRATOR OF FAA PURSUANT TO THE AUTHORITY OF THE FEDERAL AIRPORT ACT (SECTION 13), PROVIDES THAT PROJECTS COSTS MAY INCLUDE THE COST OF---

(5) ACQUIRING LAND OR AN INTEREST THEREIN, OR ANY EASEMENT THROUGH OR OTHER INTEREST IN AIRSPACE; AND

(6) ADMINISTRATIVE AND OTHER INCIDENTAL COSTS INCURRED SPECIFICALLY IN CONNECTION WITH ACCOMPLISHING A PROJECT, AND THAT WOULD NOT HAVE OTHERWISE HAVE BEEN INCURRED.

UNDER THE ABOVE CITED PROVISIONS OF LAW AND THE IMPLEMENTING REGULATIONS ANY NECESSARY REASONABLE COST, INCLUDING THE COST OF ACQUIRING LAND OR ANY INTEREST THEREIN, AND LEGAL COSTS INCIDENT THERETO, MAY BE ALLOWED AS A PROJECT COST. IT APPEARS FROM THE FACTS AND CIRCUMSTANCES SET FORTH IN YOUR LETTER THAT THE STREET CLOSINGS WERE NECESSARY TO ACCOMPLISH THE PROJECT AND THAT IN ORDER TO CLOSE THE STREETS BELONGING TO THE CITY OF COLLEGE PARK AND ACQUIRE THE INTERESTS OF THAT CITY IN THE STREETS AND EASEMENTS, THE CITY OF ATLANTA HAD ONLY TWO ALTERNATIVES, NAMELY, (1) TO INSTITUTE CONDEMNATION PROCEEDINGS OR (2) NEGOTIATE A CONTRACT WITH THE CITY OF COLLEGE PARK CALLING FOR THE CLOSING OF THE STREETS OR PORTIONS THEREOF, CONVEYANCE OF THE EASEMENTS AND THE RELOCATION OF UTILITY LINES. OF THE TWO METHODS YOU INDICATE THAT THE USE OF THE CONDEMNATION PROCEDURE COULD HAVE GIVEN RISE TO LITIGATION AND DELAY (TIME BEING AN IMPORTANT FACTOR IN THIS CASE) WITH ENSURING COSTS IN EXCESS OF THE CONTRACT PRICE PAID FOR THE STREETS. FROM YOUR LETTER IT APPEARS THAT YOU HAVE, IN EFFECT, CONCLUDED THAT THE EXECUTION OF THE AGREEMENT BY THE CITY OF ATLANTA WITH THE CITY OF COLLEGE PARK FOR THE CLOSING OF THE STREETS WAS MORE ADVANTAGEOUS THAN IF A CONDEMNATION ACTION HAD BEEN INSTITUTED IN LIEU OF THE AGREEMENT.

UNDER THE CIRCUMSTANCES, AND CONSIDERING THE ABOVE-QUOTED PROVISIONS OF THE LAW AND THE IMPLEMENTING REGULATIONS, WE WOULD NOT BE REQUIRED TO OBJECT TO THE PAYMENT BY THE UNITED STATES TO THE CITY OF ATLANTA OF ONE- HALF THE AMOUNT REQUIRED TO BE PAID BY THE CITY UNDER ITS MARCH 3, 1964, CONTRACT WITH THE CITY OF COLLEGE PARK, FOR THE CLOSING OF THE STREETS OR PORTIONS THEREOF, CONVEYANCE OF THE EASEMENTS AND THE RELOCATION OF UTILITY LINES, IF YOU DETERMINE THE COST INCURRED BY THE CITY OF ATLANTA UNDER THE CONTRACT IN QUESTION IS AN OTHERWISE ALLOWABLE PROJECT COST.