State, aviation industry examine fees, taxes to fund rural airports

  • By Elwood Brehmer
  • Thursday, August 6, 2015 10:24am
  • NewsBusiness

State aviation officials and industry leaders are looking for ways to ease the burden of the state’s 247 rural airports on the general fund.

Revenue from the rural airports with scheduled service and airports nearby the hubs covered less than 25 percent of their own operating cost over recent years.

The average annual combined revenue generated at the 22 hubs from state fiscal years 2012-14 was slightly more than $4.9 million, while the operating expenses totaled $23.2 million, leaving a funding gap of $18.2 million yearly, according to a Department of Transportation and Public Facilities report.

Deadhorse was the only airport to break even — an average of $39,000 net income on about $1.7 million in revenue — among those airports recording operating expenses. Prospect Creek and Galbraith Lake, two small airports along the Dalton Highway, did not report operating expenses during the period and are not scheduled to be open this fiscal year.

The airports listed in the revenue report are those that have scheduled service from carriers with aircraft designed to carry at least 10 passengers. They are certified by the Federal Aviation Administration as Part 139 airports.

The Anchorage and Fairbanks international airports are owned by the state of Alaska but are self-sustaining enterprise businesses. Juneau International Airport is operated by the city and borough of Juneau.

Statewide Aviation Division staff collected data on four options to increase rural airport revenue and presented them to the Aviation Advisory Board at a July 15 meeting in Anchorage.

The board is expected to make its recommendations to Gov. Bill Walker after its next meeting in Ketchikan tentatively scheduled for late August.

Aviation Division Operations Manager Troy LaRue said in an interview that personnel and operating hours at many airports have already been cut this fiscal year to save money.

Bethel’s airport, which used to be open around the clock, is now open from 6 a.m. to 10:30 p.m. The challenge with cutting operations, particularly at a busy hub such as Bethel, is getting adequate conditions reporting and surface maintenance done before each day’s flights — always a challenge in changing weather, he said.

“I still believe we’ll be able to provide safe transportation systems, but it might take longer to clean up Mother Nature’s messes when they come our way,” LaRue said.

The three widespread options for revenue enhancement include increasing the state aviation fuel tax and instituting airport user and landing fees.

Alaska Air Carriers Association Executive Director Jane Dale said her group hasn’t taken a stance on any of the proposals and is currently soliciting comments to see what member businesses are willing to support. The Air Carriers Association is also seeking more background from the state, as well.

“We’ve asked the state for some more information to describe each one of the scenarios and also, not just to provide how much revenue they expect from each one of the proposed options, but what the net is, because some are going to be more costly (to implement) than others,” Dale said.

Alaska’s taxes stand now at 3.2 cents per gallon for jet fuel and 4.7 cents per gallon for aviation gasoline, or avgas, used primarily by small, general aviation aircraft.

The state’s jet fuel tax ranks 32nd among the 47 states with similar taxes, according to the Tax Foundation, a national tax policy research firm.

In April, the Legislature approved raising the taxes on vehicle gasoline, marine and heating fuel by 0.95 cents to fund the Department of Environmental Conservation Spill Prevention and Response Division — an issue that was subject to lengthy debate. Aviation fuels are exempt from the tax hike.

Raising each fuel tax to 5 cents per gallon would generate about $2.3 million in new revenue; a tax of 7 cents per gallon would add $5.1 million and 10 cents per gallon would generate an additional $9.3 million for the state’s general fund, according to a DOT model.

At its highest level the fuel tax would get DOT to its goal of self-generating about 50 percent of the revenue needed at its Part 139 airports.

The state collected $4.6 million from aviation fuel taxes in fiscal 2014, and about 90 percent of that revenue came from the jet fuel tax.

LaRue said aviation fuel tax and airport lease revenue are poured into the general fund partially because the airports operate so far in the red and require such a significant subsidy from the general fund. If more rural airports were closer to breaking even there would be more of a reason to keep funds in-house, he said.

Dale noted that aircraft on foreign born and foreign bound flights that stop to refuel in Alaska are not subject to the state fuel tax. At the same time, she said the fuel tax increase would likely be the least expensive option to implement because the system is already in place.

An annual $300 airport user fee — a new fee — instituted on each of the more than 9,200 aircraft registered in Alaska would generate a little more than $2.7 million. A $100 fee would produce an additional $922,000 for the state. The smallest $50 fee would earn $461,000.

A user fee and sticker could be required to park aircraft in transient state parking areas, for example, LaRue said.

DOT’s model for instituting new landing fees at state airports is a slightly more complex one.

A flat $5 per landing fee for aircraft under 12,500 pounds gross weight, which is 97.8 percent of the aircraft registered in the state, would generate $391,000, the department estimates. A $10 fee would gross $783,000 and $12 per use charge would bring the revenue total up to $939,000.

For primarily commercial aircraft with a maximum gross weight of 12,500 pounds or more, a per 1,000 pound fee system was modeled. Charging $1 for each 1,000 pounds of a large aircraft would make the state $2.7 million; at $2 it would be $5.4 million and at $3 the state would generate another $8.2 million.

At the lowest end of the fees, with a 5-cent per gallon fuel tax, the state would take in $5.5 million in new money, according to DOT. At the high end, with a 10-cent per gallon tax the state could nearly break even with $21.2 million of new revenue.

In the mid-range example — a 7-cent per gallon tax, a $200 user fee and a $2 per 1,000 pounds large plane landing fee — the state would collect about $12.4 million.

LaRue said the state’s fiscal situation and subsequent discussions about getting more revenue from its airports has actually made an existing partnership with Alaska’s aviation industry stronger.

The objective with any fee or tax changes is to be fair to all users without growing the size of government just to administer changes. “The goal is to generate enough money to protect the airport system we have,” he said.

A fourth revenue option, a passenger facility charge, would help pay for capital improvements at 13 of the state’s Part 139 airports. Passengers on aircraft with at least 60 seats would be charged the fee to support work at the airport of enplanement, per FAA guidelines. There were 709,410 such enplanements in 2014, which could have generated up to $3.2 million with a $4.50 charge. 

A passenger facility fee could not be charged at airports with Essential Air Service, according to DOT.

“There’s a lot of research that needs to go into a (passenger facility charge) before it can be implemented,” LaRue said.

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