FAA Rules Against Santa Monica’s Airport Revenue Surplus

The FAA has found the city of Santa Monica, California, in violation of grant assurances as it stockpiled surplus revenues generated by Santa Monica Municipal Airport (KSMO), which is scheduled to close on Dec. 31, 2028. By accumulating surplus airport revenues it intended to spend on general city services after KSMO’s closure, FAA director Michael Helvey ruled the city had violated federal law, which requires all airport revenues collected from aeronautical and non-aeronautical activities, such as airport real estate leases, to be spent on airport operations or improvements.

In 2024, a complaint filed by a pilot and a KSMO-based repair station, with support from NBAA, accused the city of failing to use the entire airport revenue surplus to reduce rates charged to aviation users. While the city slashed KSMO’s aeronautical use rates, the airport is slated to close with a non-aeronautical surplus of approximately $19 million, which it believed could be used for municipal expenditures.

“Under usual circumstances, a federally obligated airport that desires to close must have FAA approval to do so,” Helvey stated. “As part of that approval process, the FAA directs where any surplus revenue will be expended upon closure.”

The agency ordered Santa Monica to review and adjust its non-aeronautical budget to conform with federal obligations, while updating its aeronautical rates each year until closure. The city has 30 days to appeal the ruling.