U.S. Officials Vow to Bar Use of LAX Funds

A key plank of Los Angeles Mayor Richard Riordan’s proposed budget came under attack on Capitol Hill on Wednesday, with federal officials vowing to prevent Riordan’s plan to recoup $30 million in years-old loans from Los Angeles International Airport--or to punish the city by withholding an equal amount in federal grants to the airport.

“The current, disturbing trend of unlawful airport revenue diversion must stop,” Sen. John McCain (R-Ariz.), head of an aviation subcommittee, said at a special hearing on Riordan’s proposal. “The Los Angeles situation is an unseemly demonstration of achieving political ends through creative legal interpretations and the incestual influences that helped make it happen.”

Following through on his 1993 campaign promise to use airport revenues to fund a massive expansion of the Los Angeles Police Department, Riordan has raised landing fees at the nation’s second-busiest airport from $0.51 to $1.97 per 1,000 pounds landed.

The $4-billion spending plan he recently unveiled depends on the $30 million in loan repayments from the airport and offers the implementation of a new tax on fuel at the airport as a backup plan.

“The airlines think that they own this airport,” the mayor said during an interview Wednesday on “Good Morning America.” “The people of Los Angeles own this airport, and the people of Los Angeles deserve to have money used to have their city safer and healthier.”

But federal law prohibits the use of money generated at airports being used for non-aviation purposes, and the Federal Aviation Administration has threatened to cut off grants to any airport that it finds has diverted money. At Wednesday’s hearings, airline industry representatives and aviation officials alike urged the senators to increase fines against violators and otherwise increase enforcement of the anti-diversion rules.

A report released Wednesday by the U.S. Department of Transportation says $170 million was illegally taken from airports nationwide from 1992 to 1995, including $23 million at Los Angeles International Airport. In presenting those findings to the senators, Department of Transportation Inspector General A. Mary Schiavo sharply criticized Los Angeles “for taking revenue diversion to new heights” and said the FAA has been too lax in pursuing diversion cases.

“The FAA has not done enough . . . and lacks the necessary fortitude” to chase down the diverted funds, Schiavo said, comparing the agency’s stance to telling bank robbers that “all you have to do is pay it back if you get caught.”

Like other witnesses, Edward A. Merlis of the Air Transport Assn., which represents the airline industry, characterized Riordan’s latest budget proposal as a deliberate slap in the face to federal laws prohibiting airport revenue diversion, and suggested that new legislation is necessary to beef up enforcement.

“In Los Angeles, revenue diversion has become the latest cottage industry. . . . If LAX is permitted to continue to flout the law, soon other airports will follow suit,” Merlis warned the senators.

The airline industry contends that the Los Angeles airport--which is owned by the city but governed by a quasi-independent commission--has already repaid the loans, which date back as far as 1920. In an interview after the hearing, McCain characterized Riordan’s plan to have the airport repay loans dating back 70 years a “bizarre” product of “fertile imaginations.”

But Riordan administration staffers said the proposed budget will survive any court challenge, citing a report from the city controller’s office saying that the airport owes the city $350 million. The plan of taxing fuel flow at the airport, they say, is usedat other airports.

“They’re wrong on this, and we’re going to beat them--bad,” Riordan assistant chief of staff Steve Sugerman said of the airline industry.

Bornemeier reported from Washington and Wilgoren from Los Angeles.