January 06, 2016 11:00 AM | Bob Minter (Administrator)

TAA and the TENNESSEE ASSOCIATION OF AIR CARRIER Airports have sent the following letter to the Chairman outlining our position on the issues and items under consideration in advance of the final meeting. Here is that letter. It will provide the details of what is currently on the table for our membership.

December 30, 2015

Randy Boyd
Commissioner, Department of Economic and Community Development State of Tennessee - William R. Snodgrass Building – Tennessee - Tower 27th Floor - 312 Rosa L. Parks Avenue Nashville, TN 37243-1102

Via Email: Randy.Boyd@tn.gov

Dear Commissioner Boyd:

The Tennessee Association of Air Carrier Airports (TAACA) and the Tennessee Aviation Association (TAA) thank you for your leadership of the Aviation Funding Task Force. We also appreciate the time and dedication provided by the legislative leaders and aviation stakeholders represented on the Task Force.

TAACA and TAA would like to provide the following comments related to four points discussed at the December 8th meeting of the Task Force:

1. Current Aviation Related Tax Collections Being Redirected to the Transportation Equity Fund

At the initial meeting of the Task Force on October 22, 2015, TAACA proposed the Task Force identify all current aviation related taxes imposed by the State. The intent was to evaluate the potential to redirect funds generated from current taxes paid by aviation users. The redirected funds would partially replace the funding lost as a result of the aviation fuel tax cap passed under 2015 Tennessee Laws Public Chapter 462 (SB982/HB1147).

At the December 8th meeting of the Task Force, the Department of Economic and Community Development reported back the following information related to this item:

State sales tax annually from taxpayers who purchased airplanes $ 2,853,425 (5 yr. average) Sales tax annually from other aviation related sales tax accounts $ 2,100,286 (5 yr. average)

Total $ 4,953,711 Additionally, the TAA identified the following taxes that are currently being paid on aviation fuel:

a.Tennessee Motor Fuel Tax ($0.01 per gallon)

b.            Tennessee Environmental Fee ($0.004 per gallon) Total

$ 3,000,000 (estimated annual collections) $ 1,200,000 (estimated annual collections) $ 4,200,000

It is estimated these four current taxes generate $9,153,711 in annual tax revenue. These current taxes, which are generated by aircraft owners and operators, are not currently being used to reinvest into our statewide system of airports.

Commissioner Randy Boyd December 30, 2015 Page 2 of 3

Once the tax cap resulting from 2015 Public Chapter 462 is fully implemented at the maximum cap amount of $10.5 million in FY 2019, the resulting loss of revenue to the Transportation Equity Fund (TEF) will be approximately $20 million annually. This amount of funding loss is based on a comparison to FY 2015 aviation fuel tax collections.

The four sources of tax revenue identified above would restore approximately one-half of the airport improvement funding lost as a result of the aviation fuel tax cap. TAACA and TAA realize this current tax revenue is being used in other areas of the State budget and there may be some opposition to reallocating this tax revenue to airport development. However, redirecting these current aviation user based taxes to the TEF would restore essential funding that ensures a competitive airport system in Tennessee. Reallocating this funding to the TEF may encounter less opposition than a new form of taxes or fees.

These points were briefly discussed during the December 8th meeting of the Task Force. After reviewing all options discussed at the December 8th meeting, TAACA and TAA feel the potential to redirect this current aviation generated tax revenue should receive the highest consideration by the Task Force.

2.Pooling of TEF Funding with Other Transportation Funds At the December 8th meeting of the Task Force, there was discussion of pooling TEF funds with other transportation funds and allowing TDOT to direct the use of the pooled funds to the highest priority statewide transportation projects (surface, airports, etc.). TAACA and TAA would be adamantly opposed to pooling aviation generated tax revenue with other transportation funds and attempting to compete for funds from the pool each year based on some yet unknown system of prioritization. The airport community does not feel airports would be able to consistently compete against the much larger budget demands of surface transportation projects. The risk of not recovering adequate funding from a pooled transportation fund outweigh the potential benefits of airports having access to a larger pool of transportation funds.

3.Moving the Aviation Fuel Tax from a Percentage Based Tax to a Fixed Cents Per Gallon Based Tax There was discussion at the December 8th Task Force meeting of moving the aviation fuel tax from the current 4.5% based tax to a new fixed cents per gallon tax methodology. Given the limited amount of information that has been compiled on this option and the limited time remaining for the Task Force to generate the legislatively mandated report by February 1, 2016, a move to a cents per gallon tax may pose substantial risk to the long-term funding potential for TEF airport improvement funds. An equivalent cents per gallon methodology would require significant research and forecasting. The price of oil and the resulting price of aviation fuel is at an extreme low. It is unlikely the cost of fuel will continue to drop over the long-term. There is greater potential the cost of fuel will rise over the next ten years. Therefore, locking in a fuel tax at a fixed cents per gallon would prevent the potential growth of tax revenue as the price of fuel increases. A cents per gallon rate methodology would need to be set at a significantly higher base rate than the current equivalent of a cents per

Commissioner Randy Boyd December 30, 2015 Page 3 of 3

gallon based on the 4.5% tax rate of current fuel prices. TAACA and TAA are not in favor of an effort to move to a cents per gallon tax methodology without having the time and detailed data necessary to accurately forecast the impact of such a move.

4. TDOT Future Transportation Infrastructure Funding Initiatives Should Include Funds for Airports

As TDOT evaluates the future needs and funding mechanisms of the State’s transportation infrastructure, airports should be considered essential intermodal assets in the State transportation system. Tennessee’s Airports bring drive traffic into Tennessee from at least 10 adjacent states and allow flights to directly connect Tennessee to points around the world. Our airports, large and small, support Tennessee’s commerce, tourism, and industry. It would be reasonable to dedicate a portion of any future TDOT funding mechanism to keep these intermodal assets safe, secure, modern, and able to successfully compete with other states and regions of the globe. Whether it is a portion of a new gas tax initiative, or any other infrastructure funding mechanism developed by TDOT, now is the time to make sure airports are included in the funding plan and not left behind in this effort.

The Task Force and the General Assembly must remember that passage of 2015 Public Chapter 462 dramatically impacted a long-time system that had successfully supported airports and air transportation in Tennessee. A responsible approach toward restoring much of the funding lost must be a priority. Our system of airports, both commercial service and general aviation, is a transportation asset that cannot be taken for granted, nor minimized in terms of its importance to Tennessee’s economy. Relegating Tennessee’s airports to funding that is essentially a maintenance budget is detrimental to Tennessee’s future and gives away a competitive advantage currently held by the State.

The Tennessee Association of Air Carrier Airports, the Tennessee Aviation Association, and Tennessee’s entire aviation community stand ready to work closely with the Tennessee Department of Transportation, the Tennessee Department of Economic and Community Development, and our legislative leaders to ensure Tennessee’s airports have the funding necessary for maintenance, safety, security, capital improvements, and the ever-changing regulatory environment.

Thank you for your consideration of these comments. We respectfully request these comments be shared with the members of the Task Force in advance of the next Task Force Meeting.


Patrick W. Wilson, A.A.E. Scott A. Brockman, A.A.E.

Representing the Tennessee Association of Air Carrier Airports

Jo Ann Speer John Black

Representing the Tennessee Aviation Association