Legislature(2017 - 2018)BARNES 124
02/09/2017 01:30 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| HB60 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 60 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 60-MOTOR FUEL TAX; TRANSPORTATION MAINT. FUND
1:38:52 PM
CO-CHAIR WOOL announced that the only order of business would be
HOUSE BILL NO. 60, "An Act relating to the motor fuel tax;
relating to the disposition of revenue from the motor fuel tax;
relating to a transportation maintenance fund; and providing for
an effective date."
1:39:41 PM
NICK D'ANDREA, Vice President, Public Affairs, United Parcel
Service of America, Inc. (UPS), stated that UPS appreciates the
long-standing working relationship it has with Alaska. He added
that UPS proudly employs more than 1,100 workers in the state,
with almost 500 of those being pilots domiciled in Alaska. Mr.
D'Andrea stressed that Alaska has played an important role in
"UPS's global reach" and that for the past decade Ted Stevens
Anchorage International Airport has been its gateway to the
Asian-Pacific region. He noted that in recognizing the
geographic importance of Anchorage, UPS put a training facility
for its MD-11 and 747 fleets there. Mr. D'Andrea shared that
UPS recently expanded its fleet to include 14 "747-8s," with an
option to purchase an additional 14, and that it hopes to have
the new aircraft flying through Anchorage in the future.
MR. D'ANDREA affirmed that UPS originally chose to operate in
Alaska because of the business-friendly climate created by the
elected leadership. He said that UPS pays close to $6 million
in taxes as well as approximately $7.2 million in landing fees
annually to cover costs at the airports. He conveyed that UPS
is sympathetic to the current budgetary situation facing
lawmakers and the state of Alaska, and he assured the committee
that UPS is here to be part of the solution.
1:41:15 PM
MR. D'ANDREA explained that UPS is in a unique situation, with
regard to the proposed motor fuel tax bill, because it would
take a hit in two different ways: once on the ground in the
form of an increased motor fuel tax and then again from the
increased jet fuel tax. He stressed that UPS fully believes
users, including itself, should pay their fair share to maintain
infrastructure; therefore, UPS fully supports the proposed
increase in motor fuel tax, because it is a pure user fee. Mr.
D'Andrea alluded that he would later clarify how the pure user
fee motor fuel tax varies from the jet fuel tax. He bolstered
the notion by pointing out that UPS uses almost every road in
Alaska, so it sees paying the motor fuel tax user fee as its
duty.
MR. D'ANDREA asserted that UPS does not support an increase in
jet fuel because it is not a pure user fee. He noted that UPS
and other airlines already pay user fees to airports through
landing fees. As he previously mentioned, UPS pays $7.2 million
annually in landing fees to the Alaska International Airport
System (AIAS). He noted that the AIAS is self-sustaining and
requires little, if any, state funding, because the passenger
and commercial airlines pay for operational support and
infrastructure improvements. Mr. D'Andrea added that increasing
the jet fuel tax will also increase the indirect subsidy to
airports. He explained that there are currently 17 Federal
Aviation Administration (FAA) certified airports, which UPS
doesn't use, where there are no landing fees collected to
sustain the airports. He suggested that in essence, under HB
60, UPS would be paying money in additional fuel taxes to
directly support airports that it does not utilize. He further
suggested that UPS does not consider jet fuel tax a user fee.
MR. D'ANDREA declared that in addition to UPS and Delta Air
Lines, Inc. ("Delta"), there are other members of the aviation
community, including those involved in Airlines for America and
the Cargo Airline Association, who are concerned that targeting
the aviation industry for a state budget shortfall could cause a
reduction in both cargo and commercial flights to Alaska. He
appended that it could also cause an accelerated push toward
dependence on newer aircraft that would allow airlines to bypass
Anchorage altogether. Mr. D'Andrea stressed that a decrease of
the number of flights in this area raises further concerns,
including the potential of diminished investments in
infrastructure if fewer airlines are paying into the aviation
fund through fuel taxes. He reiterated that UPS empathizes with
Alaska and its current fiscal environment as well as being
appreciative of the growth-friendly environment Alaska has
provided to the aviation industry in the past and that the
industry urges the state to consider the consequences of an
increased jet fuel tax on the state.
1:44:02 PM
REPRESENTATIVE SULLIVAN-LEONARD asked whether Mr. D'Andrea had
an estimation of annual jet fuel if it were to be exempt.
MR. D'ANDREA asked Representative Sullivan-Leonard to clarify
whether she was talking about the jet fuel tax or the
international exemption.
REPRESENTATIVE SULLIVAN-LEONARD responded that she was
addressing the jet fuel tax.
MR. D'ANDREA asked her to rephrase her question and clarify
whether she was asking how much it would cost UPS.
REPRESENTATIVE SULLIVAN-LEONARD inquired how much was originally
figured for the jet fuel tax and whether it was estimated how
much would be saved.
CO-CHAIR WOOL offered his understanding that Representative
Sullivan-Leonard was asking how much UPS' fuel expenditures
would increase if jet fuel tax were to increase.
REPRESENTATIVE SULLIVAN-LEONARD clarified that she wanted to
know how much UPS would save if it were exempt.
CO-CHAIR WOOL rephrased his understanding that the figure the
committee was looking for was how much UPS would save if it
didn't have to pay the increase. He asked whether Mr. D'Andrea
had an estimate of how much UPS would pay out under the proposed
increase.
MR. D'ANDREA responded that the amount varies by year, but
currently ranges from $500,000 to $1 million. He noted that if
UPS started flying the 747-8s then the number would be higher.
REPRESENTATIVE KOPP inquired whether any UPS packages go out to
any of the 17 FAA certified airports.
MR. D'ANDREA answered that he was fairly sure some UPS packages
get delivered through the aforementioned airports. He offered
an estimate that less than 3,000 UPS packages go outside of the
urban areas.
1:46:47 PM
CO-CHAIR WOOL clarified his understanding that less than 3,000
UPS packages go out to the previously mentioned airports.
MR. D'ANDREA resolved that he meant outside of Anchorage and
Fairbanks when he referenced the small percentage of its
packages that travel outside of urban areas.
CO-CHAIR STUTES extended her awareness that there are two,
possibly three, UPS trucks in Kodiak, and she asked whether the
less than 3,000 packages previously quoted by Mr. D'Andrea, for
all the rural areas, was on an annual basis.
MR. D'ANDREA responded that the figure is representative of air
volume flown in. He noted that depending on the need, some
freight can be trucked from place to place. He illustrated his
point by saying that two-day delivery packages probably needed
to go by air, but ground shipping packages allowed for other,
longer delivery methods.
CO-CHAIR STUTES followed up that everything that comes to Kodiak
comes by UPS "blue," because there are no connecting roads.
MR. D'ANDREA conceded that Co-Chair Stutes was correct that
everything is delivered by air in Kodiak.
CO-CHAIR STUTES acknowledged her bewilderment with the
aforementioned figure of 3,000 packages.
CO-CHAIR WOOL provided his perception that flights traveling to
and from international destinations are already exempt from the
jet fuel tax, so that in the instance Mr. D'Andrea previously
mentioned, where 777's and other long-range aircraft are more
regularly used to fly over Anchorage, the increase in tax
wouldn't really effect those aircraft.
MR. D'ANDREA answered that is correct but noted that UPS also
flies domestic routes between the United States and Anchorage.
He added that that is where the tax would be incurred and by
passengers as well.
CO-CHAIR WOOL clarified that he meant flights flying over
Anchorage to avoid the tax would be international.
MR. D'ANDREA responded that is correct.
CO-CHAIR WOOL said that jet fuel tax is currently being paid,
but when not designated for airports, it simply goes into the
general fund. He asked whether Mr. D'Andrea has any objection
to how the jet fuel taxes are currently structured.
MR. D'ANDREA pointed out that currently UPS is essentially
paying for other airports, and it is the belief of UPS that
airports should be self-sufficient.
CO-CHAIR WOOL shared that there are over 200 airports in Alaska.
He expressed uncertainty that all of them could be self-
sufficient.
1:50:55 PM
REPRESENTATIVE DRUMMOND inquired whether Ted Stevens Anchorage
International Airport actually needs the additional revenue from
an increase in jet fuel taxes, since the air carrier consortium
funds the airport through landing fees and other taxes. She
also questioned whether the problem is something that has arisen
along the way or if the increases are something the Ted Stevens
Anchorage International Airport and AIAS are seeking.
MR. D'ANDREA deflected to Deputy Commissioner Binder for more
detail. He offered his understanding that since the AIAS is
self-sufficient, any current jet fuel taxes were directed to
other airports, besides Ted Stevens Anchorage International
Airport or Fairbanks International Airport.
CO-CHAIR WOOL stated his perception that the jet fuel tax
currently collected goes directly in the general fund, so it
could be going into schools or other things besides
transportation.
1:53:25 PM
DANA DEBEL, Managing Director, State and Local Government
Affairs, Delta Air Lines, Inc. ("Delta"), stated that Delta is
proud to be the second largest commercial carrier in the state
of Alaska and that it carries about 12 percent of the state's
passengers. She explained that Delta's service in Alaska is
year-round to Anchorage and Fairbanks and seasonal to the
Southeast communities of Juneau, Sitka, and Ketchikan. Ms.
Debel stated that over the past few years Delta has worked to
expand its footprint in Alaska, and it looks forward to
continuing that growth. She added that one area of particular
importance for expansion has been the hub of Seattle, which has
grown 100 percent in terms of seat capacity over the past three
years. Ms. Debel explained that like UPS, Delta confirms that a
tripling of jet fuel tax will take Alaska from one of the more
competitive states to one of the more expensive states in terms
of effective tax rates. She explained that a number of states
don't tax jet fuel at all, while some have an effective cap that
is significantly lower than what the effective tax rate would be
if the proposed legislation passes.
MS. DEBEL declared that Alaska is both a challenging and
competitive environment to operate in today and that anything
that will make it more challenging, from a cost perspective,
will make it more difficult to attract competition and
additional services. She declared that Delta is not opposed to
paying its "fair share." She explained that much like UPS,
Delta pays landing fees, rental rates, and passenger facility
charges and, through lease agreements with airports and fuel
flowage fees, it does its part to support airports. Ms. Debel
shared that Delta is concerned about the money from increased
taxes going to fund infrastructure and operations of airports
not utilized by Delta. She announced that Delta maintains that
the appropriate way to deal with costs of operation is in direct
negotiations with the airlines that operate there or with other
aviation partners that utilize the airport.
1:56:59 PM
REPRESENTATIVE KOPP mentioned the letter from Alaska Air
Carriers Association (AACA), included in the committee packet,
requesting an amendment to repeal the existing foreign flight
exemption. He asked whether Delta has taken a formal position
on the bill as it currently stands.
MS. DEBEL answered that Delta is not a member of AACA. She
noted that the position taken in the letter from AACA is not
reflective of Delta's position. Delta does not support the
increase as it currently sits in the bill and would be open to
working with committee members.
CO-CHAIR WOOL inquired whether Delta currently has international
flights that would be taking advantage of the fuel tax
exemption.
MS. DEBEL answered no. She said Delta only operates
domestically out of Alaska.
CO-CHAIR WOOL reiterated his question of whether Delta had any
flights that fueled up in Anchorage and then went on to Asia or
Europe.
MS. DEBEL confirmed that Delta does not.
CO-CHAIR WOOL asked Ms. Debel whether he was understanding
correctly that Delta sees the need for Alaska to increase
revenue from different sources, but instead of a jet fuel tax
tripling, Delta would prefer to see separate negotiations
instead of an across the board deal.
MS. DEBEL clarified that she intended to mean that in airports
where Delta operates, it almost always pays landing fees and/or
rental rates through terminal leases. She added that when
airports need to raise revenue it usually happens through direct
negotiations around landing fees or landing fee adjustments.
She also mentioned that airport revenue generation often
involves lease negotiations for space Delta might be utilizing
inside the terminal, on the apron, inside hangers, or "back of
house space."
CO-CHAIR WOOL said that he interpreted that Ms. Debel was
talking about facility usage and not fuel tax. He asked whether
Delta is okay with the current fuel tax level in Alaska.
MS. DEBEL asserted that Delta is not looking for additional
exemption from the existing fuel tax rate.
2:00:51 PM
JOHN BINDER, Deputy Commissioner, Office of the Commissioner;
Executive Director, Alaska International Airport System (AIAS),
Department of Transportation & Public Facilities (DOT&PF),
repeated the question previously asked about whether any of the
jet fuel tax revenue collected at Ted Stevens Anchorage
International Airport and Fairbanks International Airport flows
into the AIAS. He stated that the answer is no. He explained
that all fuel tax revenue collected across the state -
regardless of which airport - flows into the general fund. He
mentioned landing fees as an example of an additional revenue
source and said that no matter whether it is collected at Ted
Stevens Anchorage International or Fairbanks International
Airport, it flows into an enterprise fund to maintain the
operating and capital costs for that system.
REPRESENTATIVE SULLIVAN-LEONARD requested that Mr. Binder
clarify whether a portion of the landing fees went into both the
international airport fund and the state general fund.
MR. BINDER answered that landing fees collected at Ted Stevens
Anchorage International Airport and Fairbanks International
Airport flow into the international airport fund and the rest of
the airports in the state are used free of charge by carriers
and users. He added that there is no other rate or fee
structure at any of the other airports in the state.
CO-CHAIR WOOL asked whether it is Mr. Binder's sole
responsibility to oversee Ted Stevens Anchorage International
Airport or whether there are others across the state he
oversees.
MR. BINDER acknowledged that he oversees both Ted Stevens
Anchorage International Airport and Fairbanks International
Airport and also oversees the general operation of the remaining
240 other airports in the state.
CO-CHAIR WOOL offered his assumption that Mr. Binder knows how
the needs of the state are and aren't being met and asked
whether he agreed that it was a good use of funds for any
additional revenue coming from jet fuel or aviation gas to go to
the other 200 airports.
MR. BINDER stated that he agreed. He explained that the general
operating cost for the rural system - which is everything
besides Ted Stevens Anchorage International Airport and
Fairbanks International Airport - is $40 million per year. He
furthered his point by elaborating the discrepancy between
current fuel tax revenue generation of about $4.5 million and
current operating costs.
CO-CHAIR WOOL asked whether Mr. Binder had a response when asked
about Ted Stevens Anchorage International Airport and Fairbanks
International Airport being totally self-sufficient through
landing fees, et cetera, and why carriers such as UPS and Delta
should be concerned with paying increased fuel taxes only to pay
for other airports that are not of concern to them.
MR. BINDER said that Co-Chair Wool addressed a fair concern. He
explained that he feels the argument holds true in regard to the
international fuel tax exemption where the international cargo
carriers, just passing through Anchorage and Fairbanks, are
certainly not using the rural airport systems. Contrary to
that, passenger carriers or UPS and FedEx do utilize the rural
airport systems.
2:06:19 PM
REPRESENTATIVE EASTMAN inquired as to how many of the 240
airports in the state charge landing fees.
MR. BINDER answered zero.
REPRESENTATIVE EASTMAN shared his opinion that there doesn't
appear to be a link between use and cost, and he wondered if the
department had an opinion on whether landing fees should be
implemented at the other airports.
MR. BINDER explained that about two years ago the governor
tasked the department with investigation of revenue generation
options because of the discrepancy between users of those
facilities and the revenue generated by those facilities. He
continued that part of the effort was to engage individuals from
the stakeholder group and that one of those was the Aviation
Advisory Board. He noted that some of the options investigated
were aircraft registration fees, airport user fees, a landing
tax, or a fuel tax. He noted that the number one goal is to be
equitable and fair across all user groups and to not increase
the cost to the administration to collect those fees.
2:08:12 PM
REPRESENTATIVE SULLIVAN-LEONARD offered her understanding of
smaller municipal airports, such as the one in Wasilla, where
fees are incurred through leases and not landing fees.
MR. BINDER confirmed Representative Sullivan-Leonard's
understanding. He reiterated that the main difference with
local sponsors of municipally operated airports is the desire to
achieve self-sufficiency through imposed rates and fees. He
added that the rural system collects fees through lease rates
for tenants.
CO-CHAIR WOOL inquired whether landing fees were included for
every plane that landed or whether there was a size limit.
MR. BINDER explained that landing fees are generally charged
based on a certain rate per 1,000 pounds of certified maximum
gross take-off weight. He noted that gross take-off weight is
used to avoid problems where individuals might want to try to
pay less because the aircraft is only half full. He said that
the smaller type aircraft below 6,000-12,000 pounds, which lots
of private general aviation categories fall into, are charged a
flat rate; the larger passenger aircraft are charged per 1000
pounds.
CO-CHAIR WOOL asked what the typical smallest flat fee would be
in Anchorage, and whether or not that included Lake Hood.
MR. BINDER answered that he did not have the current minimum
weight rates for Ted Stevens Anchorage International Airport and
Fairbanks International Airport but offered to get back to the
committee with that information. He offered an example that the
747-800 aircraft pays approximately $3,000 per landing and that
it is the largest aircraft to land there.
CO-CHAIR WOOL asked whether Lake Hood is included in the
collection of landing fees.
MR. BINDER answered no.
2:11:24 PM
CO-CHAIR WOOL announced that HB 60 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB60 Supporting Documents - Alaska Airmen Letter 2.6.17.pdf |
HTRA 2/9/2017 1:30:00 PM |
HB 60 |
| HB60 Opposing Document - Alaska Airlines Letter 1.30.17.pdf |
HTRA 2/9/2017 1:30:00 PM |
HB 60 |
| HB60 Opposing Document - UPS & Delta Jet Fuel Letter 2.1.17.pdf |
HTRA 2/9/2017 1:30:00 PM |
HB 60 |
| HB60 Supporting Docucment - UPS Letter 2.1.17.pdf |
HTRA 2/9/2017 1:30:00 PM |
HB 60 |
| HB60 Supporting Document - AACA Letter 2.1.17.pdf |
HTRA 2/9/2017 1:30:00 PM |
HB 60 |
| HB60 Supporting Document - AOPA 1.29.17.pdf |
HTRA 2/9/2017 1:30:00 PM |
HB 60 |
| HB60 Opposing Document - UPS Letter 2.9.17.pdf |
HTRA 2/9/2017 1:30:00 PM |
HB 60 |