FAA rules Santa Monica Municipal Airport violated federal law over revenue use

The FAA ruled that the Santa Monica Municipal Airport (SMO) violated federal law by retaining surplus revenue for the use of general city services after the airport's anticipated closure, instead of using the money for aviation needs as required.In a Director's Determination issued Dec. 22, 2025, FAA Director Michael Helvey found the airport's fee and revenue structure did not comply with federal grant assurances governing how airport-generated money must be spent. The decision requires the city to revise its aeronautical fee structure within 30 days and implement new rates within 60 days. "The Director finds that the City's actions are not in conformance with Grant Assurance 25," the filing states, referring to the requirement that airport revenue be spent on capital and operating expenses tied to the airport. The decision followed a complaint filed in July 2024 by pilot Mark Smith, Kim Davidson Aviation Inc., and the NBAA. The complaint alleged the city improperly distinguished between aeronautical and non-aeronautical surplus revenue and failed to use excess revenue to reduce rates for aviation users. According to FAA findings, the city projects a non-aeronautical surplus of about $19 million by Dec. 31, 2028, the date a 2017 settlement agreement permits the airport to close. City officials acknowledged they believed those funds could be transferred for general municipal purposes at that time. Federal law requires all airport revenue, including lease income from non-aviation tenants, to be spent on airport capital costs, operations, or facilities directly related to air transportation, according to the filing. The FAA determined Santa Monica's plans violated those restrictions. The determination also noted the city reduced aeronautical rates by 53 percent in June 2024, a move the FAA said was structured to eliminate aeronautical surplus while preserving non-aeronautical balances. The FAA rejected several other allegations in the complaint, however, finding the city acted appropriately in separating aeronautical and non-aeronautical fee structures and consulting with airport users before implementing changes. Santa Monica argued that federal revenue rules should not apply once the airport closes. The FAA disagreed, saying federal obligations remain in force for revenue generated while an airport is bound by grant assurances. The airport has received $9.9 million in federal Airport Improvement Program funds since the 1980s and sits on land transferred under the Surplus Property Act in 1948. The FAA ordered the city to review spending plans, compare actual and projected revenue activity, and document compliance with federal rules. The city must also update aviation rates annually and report to the agency. Santa Monica has 30 days to appeal.RELATED ARTICLES:FAA proposes $15.7 M fine against Aery Aviation for using uncertified LearjetsFAA states that the Nashville Airport Authority violated grant assurancesFAA warns airports against selling only unleaded aircraft fuel