Legislature(1993 - 1994)
03/24/1994 03:00 PM House TRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HB 520 - COURTESY CARS OPERATED AT AIRPORTS Number 033 REPRESENTATIVE ELDON MULDER introduced HB 520 by reading the following sponsor statement: Recently, the Department of Transportation has adopted regulations that will charge "off airport" rental car agencies, and other companies that operate courtesy cars at Alaska's state run airports, up to 8% of their gross sales privilege to continue to pick up customers at the airports for transport to the location of their business. HB 520 was introduced to exempt "off airport" rental car agencies, and other businesses that operate "courtesy cars" at the airport, from this fee, including them with preciously exempted groups such as hotels and motels. This fee by the International Airport is a protectionist charge that interferes in the free market place by penalizing businesses which cannot afford or choose not to be located on the airport concourse. Several on airport rental car agencies that lease space from the airport feel that off airport agencies should be required to pay a fee for free and unobstructed access to customers at the airport. In short, they feel that they are being hurt by off airport competition, but with the benefit that on airport agencies receive by being located on the airport, with its limited spaces and competition, more than offsets the expense of their lease. Finally, HB 520 would maintain the status quo. I believe the free market place is working. If a car rental business desires to have initial contact with air travelers, they should bid accordingly for the opportunity. If they don't feel that it is worth the cost, then they should relocate off airport. I strongly believe that it is inappropriate for the state to protect its lessors by manipulating the free market. Number 104 REPRESENTATIVE VEZEY asked Representative Mulder if it would be possible to amend the bill to prohibit paid parking at Fairbanks International Airport (laughter). Number 109 REPRESENTATIVE DAVIS asked Representative Mulder to clarify if hotel and motel courtesy cars are currently paying a fee. Number 112 REPRESENTATIVE MULDER responded that they are not paying a fee; however, this is the beginning of the first crack in the entire structure -- if they feel they can impose this on the car rental agencies, it will be like opening Pandora's box, and they will impose fees on hotels, motels, guides and lodges, RV distributors, tour boats and busses. He stressed that the possibilities are endless, and that this is a major policy statement in terms of the authority to tax and assess fees. REPRESENTATIVE VEZEY stated that this is all somewhat strange to him, in that he was not aware that there were fees for courtesy vehicles. Number 150 REPRESENTATIVE MULDER responded that what the department is currently proposing, through regulation, is the imposition of an 8% fee on gross for the privilege of being able to pick up patrons at the airport -- patrons of off-airport car rental agencies. Number 180 REPRESENTATIVE VEZEY stated that he was unclear on the current statute, and if he couldn't understand the current statute, than he couldn't understand what an amendment to it would do. Number 185 REPRESENTATIVE MULDER responded that, currently under statute, the airport is prohibited from keeping courtesy cars -- hotel and motel -- from picking up their patrons at the airport. He added that there is no mention of fees in the statute, and that the Anchorage International Airport feels it has the authority to assess fees. Number 193 REPRESENTATIVE VEZEY commented that "they're full of it." (laughter). Number 210 HELVI SANDVIK identified herself as Deputy Commissioner for the Department of Transportation/Public Facilities (DOT/PF), and made the point that the issue of off-airport rental car fees is not unique to Alaska; rather, it is a national issue, which has been challenged all across the country and upheld by the courts all the way through the U.S. Supreme Court in favor of the airports' right to assess fees assessed on revenues derived from passengers who arrived at the airport and went from there to off-airport car rental agencies. Deputy Commissioner Sandvik added that, from her perspective, so long as there is ample opportunity to secure on-airport locations, there is fair access to the customer. In this particular case, ample access appears to be the issue. DEPUTY COMMISSIONER SANDVIK added that the international airports are seeing a significant decline in revenues; DOT/PF is charged with responsibly managing those facilities in a manner which results in the ability to pay for the upkeep of those airports. The loss of the duty-free shop has resulted in a declining revenue situation; in addition, there is a potential threat to revenues from on-airport rental counter spaces, from which they currently derive approx $2 million in revenues (at Anchorage International Airport) -- which are currently charged a 10% (of revenues) fee (versus off-airport, which is 8%). DEPUTY COMMISSIONER SANDVIK concluded by saying that the DOT/PF has followed the proper process for public review, public hearing, and public comment, and that input was solicited, and support for this concept has been shown. REPRESENTATIVE HUDSON asked Deputy Commissioner Sandvik if, at present, there is not an off-airport fee for rental cars. Number 275 DEPUTY COMMISSIONER SANDVIK responded that the commissioner has signed an adoption order which states the off-airport rental charge will be put into effect on June 1, 1994; this will be an 8% fee assessed against the sales derived by off- airport rental firms directly attributable to the passengers they picked up at the airport. She added that, in determining the 8% figure, the DOT/PF assessed what the average rate was across the country, and then tried to determine what the best rate would be here -- 8% was determined to be a fair rate. Number 294 REPRESENTATIVE HUDSON asked Deputy Commissioner Sandvik if the DOT/PF had considered perhaps just a license, or some other sort of set fee, without going into people's internal bookkeeping. Number 297 DEPUTY COMMISSIONER SANDVIK responded that there were several alternatives considered, and the alternative selected -- direct percentage applied to sales -- is the industry standard. She clarified that, currently, a $25.00 annual permit fee is charged for courtesy vans, etc., which come to the airport (this results in revenue of roughly $175.00 per year). Number 322 REPRESENTATIVE VEZEY stated that, under current statute, he didn't see how the DOT/PF could charge courtesy cars even a permit fee, but stated that he assumed they must be confident that they have it. Number 337 REPRESENTATIVE DAVIS asked if there was an option coming forward on minimum/maximum fees. Number 360 DEPUTY COMMISSIONER SANDVIK responded by stating that during the development of the proposal, when the analysis was being done, this option may have been one of them, but ultimately was not selected. She also acknowledged Representative Vezey's comment by stating that, under the proposed bill, the DOT/PF would be prohibited from assessing the $25.00 annual permit fee which is currently charged on courtesy vans. Number 390 REPRESENTATIVE MULDER stated that he appreciated Representative Vezey's comment because it highlighted the fact that the draft of the bill doesn't say what he wanted the drafter to make it say; that is, he had wanted the drafter of the bill to prohibit the DOT/PF from being able to tax gross proceeds, but in fact, all the drafter did was prohibit them from taxing the courtesy car -- so the bill doesn't get to the point that it was intended to go to. He stated that he was trying out how to better word the bill. Number 417 REPRESENTATIVE MULDER asked Deputy Commissioner Sandvik why this issue was never brought up to the budget subcommittee. Number 424 DEPUTY COMMISSIONER SANDVIK stated that she did not know, but she didn't believe it was intentionally omitted, though the anticipated revenues are not significant -- roughly $250 to $270,000. Number 438 REPRESENTATIVE MULDER stated that the question of to what extent are revenues derived from the presence of the airport is a philosophical question. He reiterated that this should have been brought up in budget subcommittee, and that now it appears to be a usurpation of the legislative authority to impose taxes and fees. Number 450 REPRESENTATIVE HUDSON made the point, addressing Representative Mulder, that in his mind, the international airports have both been treated somewhat like the Marine Highway System; that is, where they establish tariffs internally. He asked Representative Mulder, if the rental car business charges 50 cents a passenger to actually haul them to their off-airport base, how would that be handled -- how would the bill apply to them? Number 470 REPRESENTATIVE MULDER responded that if they charged a fee, they would fall under the regulations of being able to be taxed. He added that the point is, if a company is doing this as a courtesy to go to the off-airport site, with no fee charged by the carrier, it's not the same as being an airport. Number 479 REPRESENTATIVE MENARD commented that, if he understood correctly, all the operations of the international airports are derived from the fees -- landing fees, etc. -- and that the DOT/PF is contending that there is a benefit which the off-airport facilities are obtaining from the airport, so they should be required to contribute. When Deputy Commissioner Sandvik affirmed his interpretation, he stated that it was a reasonable assumption. Number 490 REPRESENTATIVE DAVIS stated that it seemed to him that the use of the facility is the same for the hotel/motel industry, etc., and any other businesses which use courtesy cars. He added that big busses which park in the airport lanes create inconveniences and could be considered to be using the facility. Number 497 DEPUTY COMMISSIONER SANDVIK stated that this issue has been tried in the United States Supreme Court, and the holding was consistent with DOT/PF's evaluation -- that there is a distinction between the hotels picking up passengers there, and the benefits derived by the off-airport rental car companies. Number 504 REPRESENTATIVE HUDSON asked Deputy Commissioner Sandvik if one of the concerns was the loss of on-airport rental space. Number 510 DEPUTY COMMISSIONER SANDVIK responded that yes, the concern being that one pays a price for being on-airport -- 10%. As the competition increases for that market share -- the rental car passenger -- what has been seen across the country, and specifically in Anchorage and somewhat in Fairbanks, is the proven benefit to being located off- airport, and siphoning some of the market share from the airport. It is inappropriate that these off-airport sites are not contributing to the costs. Number 520 REPRESENTATIVE MULDER stated that being located on-airport is probably worth 20% over competitors who are off-airport. Number 535 REPRESENTATIVE MENARD commented that there is also a cost of running the airport and it must be distributed by whomever uses it, which is how DOT has been doing it. He added that there is a philosophical judgment to be made, but the fact is that the revenues from the duty-free shops, etc., have been going down, landing rates have been going up, and DOT is simply trying to balance it out. People who are located off-airport may not be getting all of their revenue from airport-origin customers. Number 545 REPRESENTATIVE MULDER asked Deputy Commissioner Sandvik if the commissioner intends, in the future, to impose fees on the hotel/motel courtesy cars. Number 547 DEPUTY COMMISSIONER SANDVIK responded that DOT is planning on imposing this fee for automobile rental companies or any other companies which are specifically established and attempting to capture the market. She likened the situation to that of boundary crossing fees. Number 555 DAN COFFEY identified himself as being one of the owners of Dollar Rent-A-Car, and commented on the ignorance of the DOT on the nature of the rental car business. He stated that, nationwide, the average is around 6% of net revenue; for DOT to impose 8% on gross for off-airport sites would put them out of business. He added that this amounts to a confiscatory tax, and expressed concern at the usurpation of legislative authority by the DOT. TAPE 94-14, SIDE B Number 000 MR. COFFEY continued his testimony, stressing that talking to the folks at the airport is like talking to the wall. He suggested that the DOT consider shutting down the "white elephant" international terminal at Anchorage International Airport to save money. Number 014 REPRESENTATIVE DAVIS asked Mr. Coffey what percentage of his business is picked up at the airport. Number 016 MR. COFFEY responded that the percentage is substantial, but it varies from month-to-month. His rough estimate was between 70-80% (of business coming from airport). Number 021 REPRESENTATIVE MENARD asked Mr. Coffey how many off-airport car rental companies there are. Number 023 MR. COFFEY responded that he thinks there are 11, although it's hard to say precisely. Number 025 REPRESENTATIVE MENARD asked Mr. Coffey, hypothetically, if this 8% proposal were put into effect, wouldn't the cost be passed on to the customer? Number 029 MR. COFFEY responded that if it could be done, it would be done, but the market is not that elastic and he didn't know how far that could go. Number 032 REPRESENTATIVE MENARD commented that if on-airport sites are paying 10% and all other off-airport competitors pay 8%, the playing field is being leveled off. Number 036 MR. COFFEY responded that this was absolutely not the case. He added that the people on-airport are able to charge from 15-20% more because of their locations on-airport, and if the off-airport sites had to raise rates, it would just reduce their ability to be competitive with on-airport sites. Number 043 REPRESENTATIVE MENARD asked Mr. Coffey if he would be willing to contribute some sort of fee. MR. COFFEY stated that this was correct, if the fee was reasonably related to the benefit. REPRESENTATIVE DAVIS thanked Mr. Coffey and asked Representative Mulder if he had an amendment. Number 064 REPRESENTATIVE MULDER restated his appreciation to Representative Vezey for pointing out that they were "trying to skin the wrong cat". He then proposed that the following amendment be made: in line 13, delete the words "for the operation of" and insert the words "on a business located off the airport based upon the revenue of the off-airport business which uses,". Number 071 REPRESENTATIVE DAVIS asked Representative Vezey if this amendment addressed his concerns. Number 073 REPRESENTATIVE VEZEY stated that he hadn't been concerned, he just couldn't understand it the way it had been. He added that the current statute had been on the books for awhile, and it was an example of the legislature giving out taxing authority. Number 085 REPRESENTATIVE DAVIS asked Representative Vezey if he thought there would have to be amendments to Chapter 2. Number 089 REPRESENTATIVE VEZEY stated that he had not looked at Chapter 2, only at Title 37. Number 102 REPRESENTATIVE HUDSON stated that he would not want to make it cold turkey that the DOT could not impose any charge or fee, but maybe the problem here is that they've gone overboard in charging a revenue-based fee. Number 110 REPRESENTATIVE MULDER stated that his proposed amendment would still allow the DOT to impose a fee for a courtesy car, they just couldn't impose a fee based upon the revenue of the off-airport business. Number 121 DEPUTY COMMISSIONER SANDVIK stated that she was somewhat confused on the thought process which was going on, and she asked the committee to bear in mind that the DOT and airport management need to be in a position to negotiate airport operating agreements to help offset their costs, and that they not be put in a position where they could not appropriately manage the airport. Number 132 REPRESENTATIVE DAVIS stated that the issue was complex and merited further discussion. He asked the committee to address the amendment, if it would please them. REPRESENTATIVE MULDER stated that, if the committee did not want to go in the direction of the amendment, the other option would be to say that the DOT's ability would be limited, in terms of permit fees not to exceed certain amounts. He added that he would, however, still have a problem with that. Number 147 REPRESENTATIVE VEZEY commented that he was still impressed with the fact that current statute had been on the books for 22 years, and was just coming up as authority to tax off- site businesses. He added that if they were going to err, they should err on the side of caution. Number 156 REPRESENTATIVE MENARD stated that annual adjustments are made on the landing fees, and he would not want to do anything to hamstring the DOT's ability to negotiate those kinds of contracts. Number 169 REPRESENTATIVE DAVIS asked Representative Mulder if his amendment would allow the permit fee. Number 171 REPRESENTATIVE MULDER affirmed. Number 175 REPRESENTATIVE HUDSON asked if there was perhaps different terminology which could be used as to the assessment of gross business; he added that he did not want to get involved in micromanagement. He concluded by stating that the issue appeared to be sufficiently muddied up to warrant a subcommittee. Number 188 REPRESENTATIVE DAVIS concurred. Number 193 REPRESENTATIVE VEZEY stated concern with the almost limitless possibilities of extending these requirements on anyone. Number 200 REPRESENTATIVE DAVIS appointed Representatives Mulder and Hudson to a subcommittee to work on revising the bill. Number 210 REPRESENTATIVE DAVIS adjourned the meeting at 6:15 p.m.
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