Legislature(2015 - 2016)CAPITOL 17
02/25/2016 01:00 PM House TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| HB249 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 249 | TELECONFERENCED | |
HB 249-ELECTRONIC TAX RETURNS & MOTOR FUEL TAX
1:10:34 PM
CO-CHAIR FOSTER announced that the only order of business would
be HOUSE BILL NO. 249, "An Act requiring the electronic
submission of a tax return or report with the Department of
Revenue; relating to the motor fuel tax; and providing for an
effective date."
[Before the committee was the proposed committee substitute (CS)
for HB 249, Version E.]
CO-CHAIR FOSTER announced that the committee would be working
from the proposed committee substitute (CS) for HB 249, Version
29-GH2912\N, Nauman, 2/24/16. He explained that the only change
from Version E to Version N, is that the House Transportation
Standing Committee now is listed.
[The committee treated Version N, labeled 29-GH2912\N, Nauman,
2/24/16, as the adopted working draft.]
1:11:16 PM
REPRESENTATIVE STUTES moved to adopt [Amendment 1], labeled 29-
GH2912\E.1, Nauman, 2/23/16, which read:
Page 2, line 23:
Delete "of all descriptions"
Insert "operating for
(i) the purpose of commercial fishing is
five cents a gallon; in this sub-subparagraph,
"commercial fishing" has the meaning given in
AS 16.05.940;
(ii) a purpose other than the purpose
described in (i) of this subparagraph"
Page 3, lines 30 - 31:
Delete "OF ALL DESCRIPTIONS"
Insert "OPERATING FOR
(i) THE PURPOSE OF COMMERCIAL FISHING IS
FIVE CENTS A GALLON; IN THIS SUB-SUBPARAGRAPH,
"COMMERCIAL FISHING" HAS THE MEANING GIVEN IN
AS 16.05.940;
(ii) A PURPOSE OTHER THAN THE PURPOSE
DESCRIBED IN (i) OF THIS SUBPARAGRAPH"
Page 5, line 6:
Delete "of all descriptions"
Insert "operating for
(i) the purpose of commercial fishing is
five cents a gallon; in this sub-subparagraph,
"commercial fishing" has the meaning given in
AS 16.05.940;
(ii) a purpose other than the purpose
described in (i) of this subparagraph"
Page 6, lines 14 - 15:
Delete "OF ALL DESCRIPTIONS"
Insert "OPERATING FOR
(i) THE PURPOSE OF COMMERCIAL FISHING IS
FIVE CENTS A GALLON; IN THIS SUB-SUBPARAGRAPH,
"COMMERCIAL FISHING" HAS THE MEANING GIVEN IN
AS 16.05.940;
(ii) A PURPOSE OTHER THAN THE PURPOSE
DESCRIBED IN (i) OF THIS SUBPARAGRAPH"
1:11:27 PM
CO-CHAIR FOSTER objected for purposes of discussion.
REPRESENTATIVE STUTES stated that the proposed amendment creates
an exemption for marine fuel tax and exempts commercial
fisherman from the proposed increase. She related that in the
governor's fisheries tax proposal, the commercial fishing fleet
would experience a 1 percent increase. She stated that the
current fish prices are about one third of their value from 15
years ago, and explained that there's a glut on the fish market,
the dollar is very strong, and the foreign market is very poor
for Alaskan seafood. Consequently it makes being in the
fisheries business cost prohibitive. She noted that commercial
fishermen were the only user group that had stepped up to the
plate and indicate a willingness to accept some level of
taxation in order to help with Alaska's budget deficit, but she
suggested that the proposed tax seems high. The cumulative
effects of both the fish and motor fuel tax proposals could
prove to be unbearable for fishermen.
1:13:20 PM
REPRESENTATIVE MILLETT stated support for Amendment 1, and
disclosed her son's involvement in commercial fishing.
REPRESENTATIVE STUTES pointed out that a Commercial Fisheries
Entry Commission (CFEC) card would be required to demonstrate
qualification for the exemption. She noted that "commercial
fisher" as defined by state statute is referenced in the
amendment.
1:14:19 PM
REPRESENTATIVE HUGHES stated opposition to the amendment in that
the exemption is limited to a single industry and other
industries may be able to make similar argument. Additionally,
she said, the proposed fisheries tax legislation may or may not
be passed.
1:15:03 PM
CO-CHAIR FOSTER withdrew his objection to the motion to adopt
Amendment 1, and asked if there was any further objection.
CO-CHAIR HUGHES objected.
A roll call vote was taken. Representatives Ortiz, Millet,
Stutes, and Foster voted in favor of the motion to adopt
[Amendment 1]. Representative Hughes voted against it.
Therefore, Amendment 1 was adopted by a vote of 4-1.
1:16:00 PM
CO-CHAIR HUGHES moved to adopt [Amendment 2], labeled 29-
GH2912\E.2, Nauman, 2/23/16, which read:
Page 9, line 15:
Delete "emergency vehicle, as defined in
AS 11.56.825"
Insert "aircraft, watercraft, or ground
transportation vehicle operated by an entity that
provides an emergency or ambulance service"
CO-CHAIR FOSTER objected for purposes of discussion.
CO-CHAIR HUGHES stated that [Amendment 2] is a technical fix
that would adjust language on page 9, line 15, of HB 249, to
ensure that air, water, and ground emergency vehicles would be
covered under the exemption.
CO-CHAIR FOSTER removed his objection. There being no further
objection, Amendment 2 was adopted.
1:17:19 PM
NICK D'ANDREA, Director of Government Affairs, United Parcel
Service, Inc. (UPS) Airlines, related that UPS appreciates the
long-standing history that the company has had with the state of
Alaska, where the company has 1,100 employees, and where 489 of
its pilots are domiciled. He explained that Alaska has had an
important role in UPS' global reach; not only does the company
deliver to thousands of customers daily, but also Anchorage
serves as UPS' gateway to the Asia-Pacific region. Mr. D'Andrea
indicated that Anchorage is also the training location for UPS'
MD-11 and 747 fleets. He stated that UPS is located in Alaska
because of the excellent business environment, and has paid $7.3
million in landing fees and $6 million in taxes.
1:18:32 PM
MR. D'ANDREA stated that UPS' concern with a fuel tax increase
is two-fold. First, if the Trans-Pacific Partnership is passed
and ratified by Congress, there will be a significant increase
in the volume of cargo being moved between Asia and the United
States. When air cargo companies are looking for places to
locate, the number one consideration is the fuel tax rate.
Behind labor cost, fuel is the most expensive budget item, and
he clarified that at times fuel costs can exceed the cost of
labor. He stated that it's imperative for Alaska to make sure
that it's "in the game," and a tax increase could result in some
carriers bypassing the region by purchasing longer-range
aircraft; an alternative which at least one cargo carrier has
reportedly exercised. Secondly, if cargo carriers move away
from Alaska, fewer dollars will be available to support the
airport systems. He suggested that this would be a "double
whammy" in that the state and the airports would be
simultaneously losing revenue. From an industry perspective,
Alaska has an opportunity to grow the aviation industry in the
state, but an increase in the aviation fuel tax could thwart
that effort.
1:20:26 PM
CO-CHAIR HUGHES asked where Alaska currently ranks in terms of
jet fuel pricing, and whether that would change should the
proposed legislation pass.
MR. D'ANDREA replied that Alaska is currently ranked 35th in jet
fuel prices, but if the tax were implemented the state would be
ranked 15th, thus moving from the bottom quartile to the top
quartile. He offered his understanding that the same sentiments
have been submitted to the committee by other carriers,
including: the Cargo Airline Association, Delta Airlines, and
Airlines for America.
1:21:22 PM
REPRESENTATIVE ORTIZ asked what percentage of UPS' overall
operating costs are fuel-related.
MR. D'ANDREA offered to provide further information.
1:21:50 PM
DANA DEBEL, Director of Government Affairs, Delta Air Lines,
Inc. (Delta), explained that similar to UPS, Delta's highest
operating cost alternates between labor and fuel. She shared
that over the last five to six years, Delta has spent somewhere
between $10 billion and $12 billion annually on fuel and that
the only larger domestic purchaser is the combined branches of
the U.S. military. She explained that fuel is a "huge, huge"
driver for Delta. The labor costs only exceeded fuel costs this
year due to the dip in fuel prices. Outside of that exception,
fuel has been Delta's number one operating cost for the previous
five to six years.
1:23:00 PM
MR. D'ANDREA noted that UPS pays the state $130 million dollars
annually for fuel.
1:23:11 PM
REPRESENTATIVE STUTES sought clarification that the
aforementioned annual fuel cost of $10-$12 billion described
airlines as a whole, not just Delta.
MS. DEBEL replied that the figure was Delta's annual fuel cost
on its profit and loss statement, not that of the airline
industry as a whole.
1:23:49 PM
MS. DEBEL began a brief PowerPoint presentation entitled "Delta
Air Lines in Alaska." She stated that Delta currently operates
19 round-trip flights per day in Alaska, in five markets:
Fairbanks, Anchorage, Juneau, Sitka, and Ketchikan. She noted
that the Sitka and Ketchikan flights operate seasonally. Delta
employs 161 people in the state, which includes people employed
by the company's connecting carriers. The company's annual
expenditure on goods and services in Alaska, excluding payroll
and fuel, is $19.1 million, which includes approximately $1.4
million in landing fees; an ever increasing amount. She stated
that Delta considers itself to be a substantial contributor to
the state.
MS. DEBEL stated that, of the five markets in Alaska, the most
robust is the flight service for Anchorage connecting to five
markets in the Lower 48, which are: once daily to Atlanta,
Georgia; three times daily to Minneapolis, Minnesota; once daily
to Portland, Oregon; once daily to Salt Lake City, Utah; and
seven times daily to Seattle, Washington. She noted that a
seventh round trip to Seattle and a third round trip to
Minneapolis were added in the last year and that Delta "up-
gauged" the size of the aircraft for the Minneapolis service.
She explained that these actions are positive, as Delta up-
gauges when there is more demand than it can fill with its
current service. She stated that Delta has also up-gauged
service between Minneapolis and Fairbanks in the last year.
Additionally, Juneau has recently received year-round service,
however, Sitka and Ketchikan flights remain seasonal.
MS. DEBEL said Delta has been growing in Alaska and likes the
state as a market because there is potential for growth;
however, she stated that an increase in fuel tax would be
another cost barrier and cause for concern. She stated that the
proposed increase in fuel tax would catapult Alaska up in the
rank of fuel taxes, and people at Delta and the airline industry
in general pay very close attention to tax changes, especially
in the case of a three-fold increase. She expressed concern
that the proposed tax increase would have the most significant
effects on companies like Delta and UPS, but that the revenues
would primarily be spent at airports where neither company
operates. She indicated that Delta's preferred method of
addressing the needs of airports is through landing fees, rental
rates, and concession fees because they are all assessed at the
airport level, the money is reinvested in the airport where the
fee is levied, it is spread amongst the users of the airports,
and there is greater transparency regarding where the money
goes. She offered that Delta is willing to invest in necessary
capital and infrastructure needs and, this past year, supported
over $3 million in new capital projects at the Ted Stevens
Anchorage International Airport. She stated that Delta's
preference is to contribute these funds at the local level,
because the company's goal is to continue to grow in Alaska and
provide service as efficiently and economically as possible.
1:29:07 PM
CO-CHAIR FOSTER asked whether UPS and Delta were members of the
Alaska Aviation Advisory Board or if they had any input into the
board's process, which developed the aviation fuel tax
recommendation provided to the governor.
MS. DEBEL responded no.
MR. D'ANDREA responded no, and indicated he only recently
learned about the advisory board.
1:30:34 PM
CO-CHAIR FOSTER opened public testimony, after ascertaining no
one further wished to testify, closed public testimony.
1:31:08 PM
REPRESENTATIVE MILLETT stated her understanding that great care
was utilized in vetting the governor's proposed motor fuel tax
bill, but stated that it would be difficult for her to increase
any tax at this time. She stated that she had agreed to move
the bill to the finance committee, not because she supports the
proposal, but because of the continued process that this bill
would undergo when all of the tax bills were in front of the
House Finance Committee as a full package. She stated her
belief that while the legislature was still trimming the budget
and identifying areas for government efficiencies, it would be
hasty to pass a motor fuel tax effecting industry, commercial
fisherman, pilots, mariners, commuters, and residents if
islands, like Kodiak, where the only means of transportation to
or from requires some type of hydrocarbon. She said she
respects the governor for introducing the individual pieces of
legislation and for providing the opportunity to hear from
industry and the public via the committee process. She
reiterated that despite her disapproval of HB 249, she supports
it being passed to the House Finance Committee where it can be
considered with the rest of the finance packages that the
governor has offered, including the "sin" taxes, fishing tax,
and the plethora of others that have been introduced by the
administration, emphasizing that she is not endorsing a fuel tax
by letting HB 249 pass out of committee. Alaska is experiencing
tough times; therefore, HB 249 has to be a part of the
conversation, she finished.
1:32:54 PM
CO-CHAIR FOSTER stated that he would like to echo Representative
Millet's and Representative Hughes' comments that the job of the
committee is to hear the proposal and start the public
discussion, so that the public could have the opportunity to
provide testimony. He explained that the House Finance
Committee could further modify HB 249 and may or may not pass it
out of that committee. He stated that three changes had been
made by the House Transportation Standing Committee: the
addition of a sunset provision, the addition of an $85 per
barrel oil price trigger, and the exemption of emergency
vehicles. He noted that the House Finance Committee could make
substantive changes.
1:33:52 PM
CO-CHAIR HUGHES explained that it is important for the public to
be aware that revenue bills such as HB 249 do not have to be
assigned to a standing committee, but the legislature thought it
was important to not send HB 249 directly to the House Finance
Committee, in part because of the number of bills in that
committee and in part to give the public a chance to begin to
consider it and provide input. She stated that the House
Transportation Standing Committee has received testimony from
many people, and she surmised that individuals who have been
listening to the proceedings could probably tell that she, like
Representative Millet, has reservations about HB 249. She
opined that now is not a good time to put the payment of
government services on all Alaskans. She said eventually any
tax increases that are implemented would be visited upon
consumers and that further reductions in the budget are
necessary. She noted that the CS inserts language to ensure
that the revenues produced cannot be used for administrative
purposes and must be directed to costs associated with the
operation of infrastructure.
CO-CHAIR HUGHES related that she used to live in rural Alaska,
thus, she expressed her understanding of the high cost
associated with living there. She explained that although she
opposed the amendment offered by Representative Stutes, she also
would prefer that commercial fishers not pay the tax. She
reemphasized that the focus of the legislature should be on
reducing the cost of government, but that the bill should go to
the House Finance Committee for discussion of the numerical
figures in the bill, as the House Transportation Standing
Committee's focus is on policy. She underscored that she does
not support the bill in its current form.
1:36:16 PM
REPRESENTATIVE MILLETT moved to report CSHB 249, Version 29-
GH2912\N, Nauman, 2/24/16, as amended, from committee with
individual recommendations and the accompanying fiscal note.
There being no objection, CSHB 249(TRA) was reported from the
House Transportation Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 249 Draft Proposed Amendment Ver E.1.pdf |
HTRA 2/25/2016 1:00:00 PM |
HB 249 |
| HB 249 Draft Proposed Amendment ver E.2.pdf |
HTRA 2/25/2016 1:00:00 PM |
HB 249 |
| HB249 Draft Proposed TRA CS Ver N.pdf |
HTRA 2/25/2016 1:00:00 PM |
HB 249 |
| HB 249 Opposing Document - Letter Cargo Airline Association 2-25-2016.pdf |
HTRA 2/25/2016 1:00:00 PM |
HB 249 |
| HB249 Opposing Document - Letter Airlines for America 2-25-2016.pdf |
HTRA 2/25/2016 1:00:00 PM |
HB 249 |
| HB 249 Opposing Document - Presentation Delta Airlines 2-25-201.pdf |
HTRA 2/25/2016 1:00:00 PM |
HB 249 |