Funding threatened in airport monies dispute

If Los Angeles doesn't return the money within a week, it could lose transportation funding, according to the Federal Aviation Administration.

In a letter on Thursday, the FAA said grant payments to all city airports - the other are L.A. International, Van Nuys and Ontario - and other transportation projects, are threatened.

Airports General Manager John Driscoll said he was surprised the FAA issued the order without giving the city a chance to respond.

"We feel like we have a right to a hearing," he said.

Senior Assistant City Attorney Bret Lobner said the city would outline its position to the FAA before complying with the order.

The money was transferred in September at Mayor Richard Riordan's urging. The decision was based on a city audit that concluded the city was owed $300 million to $350 million for contributions to the development of the airport from 1950 to 1972.

"The mayor still believes the action taken was appropriate," spokeswoman Noelia Rodriguez said. "The mayor believes the airport is a resource for the city and the taxpayers are entitled to return on its investment."

Rodriguez said the FAA ruling will have no immediate impact on the city budget because the airport revenues that were transferred were not included in the city's $4 billion spending plan for 1996-97.

Instead, the money has been held in a special account since being transferred.

Generally, cities are not permitted to tap airport funds for non-airport uses, although they are allowed to seek reimbursement for some services. The FAA letter cited a 1975 agreement that called for the Airport Commission to pay the city $5.2 million for special services.

The FAA also said it was concerned that the city made the transfer immediately before a federal law took effect that prevented reimbursements for any investments made more than six years ago.

FAA spokesman Bill Schultz said the agency was confident the city would return the funds, based on the letter and legal opinion.

Sen. John McCain, R-Ariz., who heads the subcommittee on airports, issued a statement praising the federal agency.

"I'm encouraged by the prompt action on this matter which should serve as a strong indication to other U.S. airport sponsors that (the Department of Transportation) and FAA will not tolerate future incidence of unlawful airport revenue diversion."

Councilman Nate Holden said he would try to get the City Council to consider the matter as soon as possible.

"Congress warned us they would take other transportation money unless we returned this. There is too much at risk for us to fight them on this," he said.