The following letter was sent to the FAA on January 14, 2020 by CalPilots and other advocacy groups on behalf of our members.
January 14, 2020
Associate Administrator Kirk Shaffer Federal Aviation Administration
800 Independence Avenue, SW Washington, DC 20591
TRANSMITTED VIA ELECTRONIC MAIL TO:
RE: California Airports Express Concern Regarding Revenue Diversion and Aviation Need in California
Dear Associate Administrator Shaffer:
On behalf of the California Airports Council (CAC), the Association of California Airports (ACA), The Aircraft Owners and Pilots Association (AOPA) and California Pilots Association (CalPilots), we write to express our concern for the continued revenue diversion of aviation fuel taxes from California airports to California’s General Fund. Combined, these associations represent nearly 200 airports and over 20,000 users in California, many of whom have expressed their individual concerns on this important topic.
The Airport and Airway Safety and Capacity Expansion Act of 1987, Public Law 100–223 (December 30, 1987), narrowed the permitted uses of airport revenues and required local taxes on aviation fuel enacted after December 30, 1987, to be spent on the airport or, in the case of state taxes on aviation fuel, state aviation programs including noise mitigation. In 2014, the FAA finalized a policy clarification in effort to educate and direct out of compliance jurisdictions to resolve revenue diversion of aviation fuel taxes. The FAA provided three years for jurisdictions to correct action. In recent months the FAA has moved to an enforcement posture for entities still out of compliance and has been in communication with California about the need for rectification. At risk is $250 million in annual allocations from the FAA’s Airport Improvement Program (AIP) to California’s commercial and general aviation airports. The Department of Finance has proposed complying exclusively through the calculation of spending offsets for capital and transit projects that are near airports but most of the proposed transit projects are not airport owned or operated, exclusively for the use of airport passengers or on airport land (See: Best Practices Surface-Access to Airports).
The State of California has had over five years to develop an action plan and correct revenue diversion, but our airports, both Commercial and General Aviation, have yet to see the benefit of remedial action. No jet fuel sales tax dollars have been returned to any airport or allocated to the California Department of Transportation Division of Aeronautics for the support of general aviation airports. The Division of Aeronautics continues to operate as an underfunded state aviation department that receives approximately $5-8 million from jet fuel and avgas excise taxes alone. This is not enough to support the 200+ commercial and general aviation airports in California. The Division of Aeronautics has flagged the inequity of the return of fuel sales since 2010 in the General Aviation System Needs Assessment. It was stated, “…of the $365.3 million [in various aviation user taxes], approximately $138 million was distributed to the State General Fund, while approximately $220 million was distributed to local governments to support transit, public safety, schools and special districts. Only approximately $7.4 million derived from Fuel Excise Taxes was retained for the Aeronautics Account. In sum, of the approximate $365 million brought into the State by aviation user taxes, only 2 percent was authorized for investment back into the aviation system” (Capital Aviation System Plan, 2010). Over the last decade, both commercial and general aviation activity have grown past prerecession activity levels but are now faced with the challenge of deteriorating infrastructure, deferred maintenance and state mandates that only continue to increase financial burdens year over year. The 2010 General Aviation Needs Assessment cited over $270 million in airport infrastructure needs, which has only grown with the passage of time and lack of funding.
Our airports strongly believe it would benefit the aviation system if aviation fuel tax dollars were returned to commercial and general aviation facilities on a formulaic basis that supports airports equitably. A portion of the funds should be given to the Division of Aeronautics to support general aviation airports by fully funding and potentially expanding the existing grant programs. The remaining funds should be redistributed to Part 139 commercial airports for both Airport Improvement Program (AIP) and Non-AIP eligible projects.
California’s General Aviation airports are home to more than 11 percent of all registered pilots in the United States. More than 38,000 aircraft—again more than 11 percent of the total—are registered at mostly GA airports across the state. According to the Division of Aeronautics under the California Department of Transportation (Caltrans), California GA’s annual impact is over $30 billion, the highest general aviation impact in the United States. It is clear General Aviation airports play a vital role in the National Plan of Integrated Airport Systems and yet within California these airports can only be certain to potentially receive a meager $10,000 per year in support of the myriad of GA, safety, maintenance, operations and service specific needs. Such an amount is insufficient and ineffective when compared to the millions of dollars in fuel sales taxes that are funneled to other non-aviation accounts as opposed to the GA infrastructure. Aviation user taxes generate
$350 million in revenue each year, but less than 2% is returned to support the state’s Aeronautics Program. It is worth repeating that State taxes on aviation fuel (except taxes in effect on December 30, 1987) are considered to be airport revenue and subject to the FAA revenue-use policy. Airport revenues can only be expended for the capital or operating costs of the airport; the local airport system; or other local facilities owned or
operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property. Since State taxes on aviation fuel can also be used to support state aviation programs it is vital that General Aviation Airports have a means and method to access these monetary assets.
Currently, there are three state funding programs for airports supported by the Aeronautics Account in the State Transportation Fund, as follows:
Annual Credits. This is essentially a grant of $10,000 dollars to approximately 140 general aviation airports. The amount of the annual credit has not been adjusted for inflation in decades. As an example, increasing the annual credit to $50,000 per eligible airport would use approximately $7 million in fuel sales tax revenue, far below the current estimate of annual diverted revenue.
AIP Matching Grants. These funds provide a portion of the local match for FAA Airport Improvement Fund grants. In recent years there have been insufficient funds to match the requests by local governments and this has at times required the local governments to forgo accepting the federal funds.
A&D Grants. The Aeronautics Account funds remaining after Annual Credits and AIP Matching Grants are programmed for Acquisition and Development grants, which mirror federal AIP grants but are state and locally funded only. In recent years there have been no funds available for this program.
Commercial airports are ineligible for grants from the Division of Aeronautics and there are no other dedicated state funding sources for these airports. Current state law will need to be amended to incorporate new funding directives for commercial service airports. As there are no existing grant programs for commercial facilities, airports are seeking fuel tax dollars be returned on a proportional basis by where the tax was generated and by the size of the airport. The funds would be used to support on airport activities eligible under the FAA’s permitted uses of revenue.
For the fourth consecutive year, commercial service airports reported handling more than 200 million passengers in total and the state’s airports represent 13.1 percent of the national air passenger enplanements. Additionally, over 5.2 million U.S. tons of air cargo moved through 22 Commercial and GA reporting airports. As of CY 2017, 11 of California’s commercial service airports rank in the top 100 primary airports. With exceptional passenger and cargo volumes comes need for infrastructure development to improve and expand before facilities reach critical capacity. Airports are investing billions in capital infrastructure to ensure that operations are as safe and efficient as possible. As such, available funding opportunities have been leveraged as far out as possible, some airports in California have had to commit their Passenger Facility Charge until almost 2040 and there simply are not enough funds in the FAA’s Airport Improvement Program to handle demand.
Following infrastructure concerns, California’s commercial airports have also fallen under intensified environmental scrutiny over the last three years. In June 2019, the California Air Resources Board (CARB) adopted a mandate for airport shuttle electrification effectively making airports uncompetitive in future years for federal grant funding through the Zero Emission Vehicle Program. The FAA’s Zero Emission Vehicle grants can provide up to an 80% match for shuttle procurement and associated project costs, including
infrastructure, but is for voluntary projects only. CARB is also investigating statewide electrification of ground support equipment. Additionally, in 2019, the State Water Resources Control Board (SWRCB) ordered all airports to begin testing for Per- and polyfluoroalkyl substances (PFAS). PFAS is a chemical used in the only firefighting foam product approved and mandated by the FAA. The hiring of consultants to guide and conduct the testing to Water Board specifications can cost is excess of $200,000 for large and small airports alike. There is no state or federal funding currently available to support airports through this process. These are just two examples of the unique challenges facing California’s airports. If fuel tax dollars were returned on an equitable basis, it would help airport facilities with infrastructure needs as well as support state airports as they work to comply with state initiatives.
As we move into 2020, it will be a top priority for our airports to continue engaging with State Legislators and the Administration to find on-airport uses of fuel tax dollars and create an enforceable tracking system for fuel sales. We understand that the State of California will be adding a new line item on tax returns for fuel sales, but unless legislation is passed, there are no penalties tied to this line item negating incentive for fuel suppliers to report correctly. We believe this should be fixed as soon as possible. With $250 million in federal grants at risk, as well as future passenger facility charge approvals, we view this as an urgent issue and ask that the FAA prioritize California’s revenue diversion so rectification can be achieved swiftly.
President, California Airports Council
President, Association of California Airports
Western Pacific Government Affairs, AOPA
President, California Pilots Association
Cc: Kevin Willis, Director, Office of Airport Compliance and Management Analysis Mark McClardy, Director, Office of Airports – Western Pacific Region
Beth Newman, Senior Attorney, Office of the Chief Counsel – Airports Law