LAX REJECTS MILLION$ RIORDAN'S STRATEGY DESIGNED TO REAP WINDFALL.

Byline: Harrison Sheppard Staff Writer

Even as it faces a $12 billion expansion plan, Los Angeles International Airport has refused at least $50 million in federal grants in the past seven years and will likely turn down an additional $48 million over the next three years.

That's because Mayor Richard Riordan, with City Council approval, has been trying to wean LAX off the federal dole in a bid to eventually be allowed to raid the airport's pocketbook for general city government use - potentially a huge windfall since the airport earned $174 million last year.

Under federal law, it is illegal to divert revenue to city services and payroll if an airport receives federal funds - a tactic that Riordan tried unsuccessfully in 1997.

There was broad criticism of the mayor's strategy when he tried to raid LAX funds, but the long-term effort has quieted many critics, except the airline industry. Airline officials claim that the policy means Los Angeles taxpayers - whose federal income taxes go to agencies like the Federal Aviation Administration - are not getting their money's worth.

``We feel it's regrettable the citizens of Los Angeles pay hundreds of millions of dollars in taxes to the aviation trust fund and those funds cannot be used to make improvements at LAX,'' said Kris Leathers, government affairs director for the Air Transport Association, an airline industry group.

But by refusing the grants, and waiting for older grants to expire by 2013, LAX's profit can be used for other city departments, said Los Angeles World Airports spokeswoman Nancy Castles.

The airport also currently receives about $34.5 million in federal grants that were approved before Riordan took office, Castles said - funds that will eventually diminish and then disappear.

Riordan's counsel, Theresa Patzakis, said in the long run taxpayers will benefit more by the mayor's policy. The taxpayers of the city own the airport, she said, and ultimately should be allowed to use its revenue for other services like police and fire protection.

``It's in the best interest of the taxpayer for the city to have flexibility over how airport revenue is used, and to be able to use it for services that otherwise taxpayers would have to directly pay for through the general fund,'' Patzakis said.

The funds, she added, are relatively small compared with the airport's yearly budget.

In addition to the $174 million it made last year, LAX has a total of $1.1 billion in reserves, according to Castles - money that will be used for capital projects like a $12 billion master plan that is still in the early planning stages.

Controversy over this issue last erupted in 1997 when the city tried to make up a budget shortfall by diverting $31 million from the airport, claiming it was owed the money as reimbursement for decades of police and fire protection.

Ultimately the city backed down after Congress passed a law reinforcing the ban on transfers, and the federal Department of Transportation threatened to withhold $60 million in funds to the MTA.

LAX is one of the few airports around the country to refuse the funds, according to an FAA spokesman.

By comparison, Burbank Airport, which is planning a $200 million terminal expansion, will gladly accept the $2.7 million a year the feds are likely to offer under the pending bill.

``Everybody is happy when there's more money in the till and there will definitely be ways to spend it,'' said Victor Gill, spokesman for the Burbank-Glendale-Pasadena Airport Authority. ``We're like every other airport: We have more things to do than we have money to do it with.''

Every million dollars of a grant, he added, could in turn be used to help secure financing of $10 million in bonds for a project.

The $40 billion bill passed by the U.S. Senate this week, and expected to pass the House next week, would double federal improvement grants for commercial airports, meaning LAX would have been eligible for $16 million annually for the next three years.

The bill is part of a Federal Aviation Administration authorization package that would increase by roughly 30 percent funds nationwide for airport expansion, air safety and security projects.

The bill would also allow commercial airports, including LAX and Burbank, to raise revenue by increasing the passenger departure tax to $4.50, up from $3.

For LAX, which has 64 million passengers a year - about half departing - that would mean an extra $48 million a year. Raising the tax, however, has to be approved by the FAA, and can only be for a limited duration and for a specific project.

LAX spokeswoman Castles said if the airport applies for the money, it would probably apply it to the residential soundproofing program.

At Burbank, an increase in the passenger facility charge could generate $3.5 million for the airport. In total, the airport is expecting to receive about $9 million in various federal grants this year. Its total operating budget is about $30 million.