CITY TO DEFY FAA ORDER, RETAIN FUNDS.

Byline: Rick Orlov Daily News Staff Writer

The Los Angeles City Council voted Tuesday to defy the Federal Aviation Administration and hold onto $31.1 million transferred to the general fund from airport accounts while seeking to resolve the standoff with the federal government.

Following a nearly hourlong closed session, the council voted 11-2 to keep the money transferred from the Department of Airports in a special fund that cannot be touched while the city tries to arrange a meeting with FAA officials.

The FAA has ordered the money returned to the Airports Department.

``Just because they say it, doesn't make it so,'' City Council President John Ferraro said following the meeting. ``We are entitled to an administrative process to appeal their ruling and a hearing by an administrative law judge.''

Kara Gerhardt, spokeswoman for the federal Department of Transportation, said there would be no comment until the city makes a formal response.

``Once we receive their letter, we can decide on the next steps to take,'' Gerhardt said.

However, Councilman Nate Holden, who along with Councilwoman Rita Walters opposed the action, warned the city could be facing the loss of significant amounts of federal dollars.

``Those folks in Washington will hang together on this,'' Holden said. ``They're like a rattlesnake without the rattle. You won't hear them coming, but they'll make sure we pay for this.''

Sen. John McCain, R-Ariz., who has been critical of the city's actions in the past, released a statement saying he was disappointed in its refusal to return the money.

``It is clear the FAA has determined that the money diverted from LAX was an improper and unlawful diversion of airport revenue,'' McCain said. ``The Secretary of Transportation and the acting administrator of the FAA should immediately take the appropriate action to fully enforce the law.''

Also, the Air Transport Association which represents airlines said the city was on a dangerous course.

``This will not bode too well with Congress and the FAA,'' ATA spokesman John Ek said. ``This will lead to turbulent skies in the future.''

The FAA last month demanded the city return the money to the airport funds the city said it was owed for past investments made at Los Angeles International Airport and other facilities.

Unless that was done, the agency warned the city could face the loss of federal transit funding.