Feds regulate aviation, but cannot regulate the existence of an airport. If the City wants to close SMO for all airplanes and build a Nancy Pelosi museum on the site, then there ain't a damned thing that the Feds could do about it.
That isn't quite correct. If they have taken federal monies then they can't just close the airport. Now if they pay that money back etc, then yes they can do what they want.