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COMMONWEALTH of VIRGINIA
Office of the Attorney General
Mark R. Herring
202 North Ninth Street
Attorney General
Richmond, Virginia 23219
804-786-2071
Fax 804-786-1991
Virginia Relay Services
June 2, 2017
800-828-1120
7-1-1
The Honorable Aubrey L. Layne, Jr.
Secretary of Transportation
Post Office Box 1475
Richmond, Virginia 23218
Dear Secretary Layne:
I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of
the Code of Virginia.
Issue Presented
You ask whether the guarantee of a private loan to People Express Airlines ("PEX") by the
Peninsula Airport Commission (the "Commission") is permitted under Virginia law.
Background
You have provided several documents, including: a loan commitment letter, a line of credit
agreement, a line of credit note, and a commercial guarantee of a $5,000,000 loan to PEX by the
Commission. The loan was made by TowneBank, a state-chartered bank (the "Bank"). You state that
without the loan guarantee of the Commission, the Bank would not have made the loan to PEX.
You state that when the bank loan was called into default, the Commission, as the guarantor,
repaid the Bank the entire loan amount. The Commission utilized certain airport entitlement funds to pay
the bank balance. Those funds are public funds allocated to the airport from the Commonwealth.
1 You
also state the Commission made several monthly interest payments on behalf of PEX (when PEX failed
to make the payments due) from additional airport entitlement funds prior to the loan being called into
default.
Applicable Law and Discussion
As a result of Virginia's long and troubled history of incurring debt by investing public money in
private turnpike, canal, and railroad companies, the Commonwealth sought to curb such practices
1 Section 58. l-638(A)(3) ofthe Code of Virginia creates in the Department of the Treasury from sales and use tax
revenue "a special non-reverting fund which shall be part of the Transportation Trust Fund and which shall be known
as the Commonwealth Airport Fund .... The funds shall be allocated by the Virginia Aviation Board to any Virginia
airport which is owned by the Commonwealth, or a governmental subdivision thereof," in this case the Commission.
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