Legislature(2005 - 2006)SENATE FINANCE 532
03/14/2006 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB303 | |
| SB304 | |
| SB250 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 303 | TELECONFERENCED | |
| + | SB 304 | TELECONFERENCED | |
| + | SB 250 | TELECONFERENCED | |
| + | TELECONFERENCED |
9:55:49 AM SENATE BILL NO. 304 "An Act relating to the privileges of airport parking shuttles and to fees or charges imposed on a person who is not a lessee or holder of a privilege to use the property or a facility of an airport." This was the first hearing for this bill in the Senate Finance Committee. RYAN MAKINSTER, Staff to Senator John Cowdery, paraphrased the sponsor statement, which reads as follows. Under Alaska law, commercial vehicles that deliver people to the airport fall into one of six general categories: limos, tour buses, standard bus service, off airport shuttles, off airport car rental shuttles and courtesy vehicles. Depending upon the vehicle's classification, a fee is charged for what is essentially use of the airport's curb and roadway. The authority for the setting of these specific rates can be found in AS 02.15.090, which requires the fees charged to be "reasonable and uniform for the same class of privileges and services… and (to be established) with due regard to the property and improvements used and the expense of operation by the state." At present, the rates charged by the Department of Transportation [and Public Facilities] for these different vehicles to utilize the airport curb at the Anchorage International Airport varies from $50 per year for a courtesy vehicle, taxi, or limo, to $100 per year for a tour passenger vehicle, up to a maximum of $1000 per year for a regularly scheduled bus. In early 2005, the Department of Transportation [and Public Facilities] proposed regulations, which would charge "off- airport valet parking services" a tax equal to 8% of their gross revenues. This change would constitute a drastic shift from the statutory language, which requires that the fees charged be "reasonable and uniform for the same class of privileges and services." While other courtesy services such as free hotel shuttles are charged a $50 per vehicle fee, the proposal would charge free parking shuttles 8% of gross sales or $250 annual minimum (whichever is greater). The two services are essentially the same class because both are "a free courtesy"; both offer an airport patron an off-site service and both require the same amount of accommodations on [the] part of the Airport. The purpose of SB 304 is to clarify the law with regard to the charging of off-airport businesses who simply drop patrons a the curb or pick them up upon return and reflects the sentiment that the Department should set rates, which are based on use and not as a percentage of gross revenues. SB 304 simply and specifically directs the Department that charges for usage must be consistent with other services that receive similar privileges and accommodations, may not be on a gross revenue basis and shall not have the effect of singling out one type of accommodations because it may currently or in the future compete with the airport. 9:58:45 AM Senator Bunde asked if the theory that off-airport parking competes with on-site parking was a factor in this situation. 9:59:12 AM Mr. Makinster responded that the Sponsor surmised this could be so. The Department of Transportation and Public Facilities has also suggested that ramp fees and fees assessed on concessions located on-site could increase to offset the loss of revenues to off-site parking facilities. The intent of this bill is to provide equality for all commercial curbside users, regardless of whether the users directly compete with the airport. 9:59:33 AM Senator Bunde expressed that if additional costs were incurred, perhaps the fees for all commercial curbside users should be increased. 9:59:50 AM Mr. Makinster remarked that regardless of whether the rates are considered too high, those rates should be uniform for all users. 10:00:07 AM Senator Olson asked if this issue pertains in any way to federal regulation of international airports. 10:00:25 AM Mr. Makinster was unaware of any federal rules related to this issue. State statute provides the airport authority the ability to set fee rates, although statute does not require additional fees be established. Ramp fees must be assessed in an amount adequate to cover bonding fees used to fund the on-site parking structure. 10:01:13 AM Senator Olson asked whether additional maintenance costs are incurred from the commercial use of the airport by off-site businesses. 10:01:30 AM Mr. Makinster was unsure. The Department had not indicated any specific expenses. The intention of this bill is that if such use incurred additional costs, a reasonable rate should be assessed for all users. 10:02:03 AM Co-Chair Wilken asked how the issue of commercial use by off- site businesses is addressed at other airports, such as the Seattle-Tacoma International Airport. 10:02:16 AM Mr. Makinster replied that the fees are assessed differently at different airports. Some levy different fees to off-site parking vendors; others have determined that a tax of the percentage of gross sales is an acceptable practice. This legislation proposes to levy a uniform rate on services. Court rulings have found that an assessment of a percentage of gross sales for off- airport parking operations is allowable. 10:03:08 AM Co-Chair Green clarified these court cases were filed in other states. 10:03:11 AM Mr. Makinster affirmed. 10:03:15 AM Senator Dyson relayed concerns about the rate structure expressed by small businesses that transport customers between the Ted Stevens International Airport and outlying communities, such as Eagle River. He asked whether this legislation would alleviate those concerns. 10:03:47 AM Mr. Makinster responded that a business that provides parking in such a community and transportation to and from the airport would be subject to the percent of gross sales fee. This legislation would not address the current fee structure of $50 - $1000 based generally on vehicle size. It would make the targeting of certain user groups more difficult and would provide bargaining power for all groups. 10:04:42 AM Senator Bunde noted the fiscal note for this bill mentions the possibility of increased costs in the event the percent of gross sales were not permitted. He questioned the impact of the off- site parking shuttles to the airport facilities, unless the impact is calculated as a loss of parking revenues to the airport from competition. 10:05:15 AM Mr. Makinster stated that this legislation would incur no cost, as the percent of gross tax has not been implemented to date. The explanatory statement accompanying the fiscal note pertains to the anticipated cost of this bill if the proposed regulation was adopted. 10:05:37 AM Senator Bunde concluded, "A decrease of an increase is a cut." 10:05:51 AM Co-Chair Wilken hypothesized a businessperson contemplating establishing an off-site parking facility. This entrepreneur would likely develop a business plan incorporating the fee structure of the nearby airport. Co-Chair Wilken requested the fee structure for the airports in Portland, Oregon and Seattle, Washington. 10:06:33 AM Mr. Makinster indicated he would provide this information. 10:06:36 AM MIKE NEELY, Regional Vice President, Diamond Parking, testified that the former Mayor Wuerch of the Municipality of Anchorage had been instrumental in facilitating a land swap in which Diamond Parking obtained the site of the Spenard community dump. Although rehabilitated, the use of this land is limited primarily for parking. Mr. Neely asserted that Diamond Parking sells a service. In this location, customers park their vehicle and Diamond Parking transports them and their luggage to the airport terminal. While not as convenient as parking on-site, the cost is lower. The parking facility is staffed 24 hours a day, 365 days a year by 25 to 30 total employees. Mr. Neely stated that Diamond Parking must purchase an annual ramp pass for each of the five vehicles at total cost of $2,500 a year. Now the Airport intends to collect a percentage of the company's revenue as well. This would make the operation unprofitable. Other commercial users are only charged for the ramp pass and the parking businesses would be treated differently. He understood that Diamond Parking must pay something. 10:10:34 AM Mr. Neely informed that other airports, primarily located on the East Coast and the Midwest levy a fee on the percentage of income. The airport in Spokane, Washington charges $400 per bus. Most airports in the Pacific Northwest charge per trip, based on the size of the vehicle and the number of passengers the vehicle is equipped to transport. 10:11:39 AM Mr. Neely had proposed two options to airport officials. One suggestion was to levy a fee for each vehicle parked at the Diamond Parking facility. A customer parking at the facility would be transported once to the airport and once from the airport upon their return, regardless of the number of days their vehicle was on the lot. Mr. Neely told of another suggestion to charge the company a toll for each trip to the airport. The airport at Salt Lake City, Utah utilizes a system in which transponders installed on each vehicle emit a signal to a receiver located at the gate to the airport terminal. At the end of each month the total number of trips is calculated and the carrier is assessed a charge based on the number of times its vehicles traveled to the airport. Diamond Parking offered to fund installation of such a system at the Anchorage airport with the capital expenditure deducted from its toll charges until the debt was paid. 10:13:56 AM Senator Olson asked if Diamond Parking is being "singled out" or whether other entities would be levied a fee of eight percent of revenues. 10:14:19 AM Mr. Neely replied that his company is the only business involved in off-site parking for this airport. It therefore appears that Diamond Parking is targeted. Airport officials claim that the fee would also apply to new similar commercial ventures. However, several hotels located near the airport reserve parking spaces for travelers but would not be subjected to the same charges. If the percent of revenue fee were assessed to these hotels, Diamond Parking would not be singled out. 10:15:26 AM Co-Chair Wilken asked if the affect of this legislation would place off-site parking with valet services into the same category as off-airport shuttle services, rather then with off- airport car rentals. 10:16:20 AM Mr. Makinster clarified the proposed regulation would categorize off-airport parking and valet services with the off-airport car rental fee structure. The intent of this bill would be to retain off-airport valet parking separately from the car rental group. The legislation would not specify that the parking services would be categorized with the shuttle services, but would provide that the parking services could not be treated significantly differently than other commercial operators. 10:17:05 AM Co-Chair Wilken understood that the Department of Transportation and Public Facilities had recommended in "early 2005" that Diamond Parking and other off-site parking facilities should pay fees in the same manner levied to off site car rental businesses. 10:17:32 AM Mr. Makinster affirmed. 10:17:35 AM DAN COFFEY, Attorney representing Diamond Parking, testified via teleconference from an offnet location about an effort made by the Airport several years ago to impose a tax on the percentage of receipts of car rental businesses. Dollar Rental and other small companies were located off the Airport premises and could not be levied this fee. A "more reasonable" alternative was considered in which a charge was imposed for shuttle services between the airport and the off-site car rental locations. The level and volume of business was so minimal that a flat fee was instead adopted. Currently, off-site car rental companies are the only businesses subject to a percentage of gross revenue charge. Mr. Coffey stated that at the time of the land trade between the Municipality of Anchorage and Diamond Parking, the Airport determined it would be unable to generate revenue from Diamond Parking operations. Rather than attempt to utilize its on-site parking facilities to compete with the private business, the Airport "went after Diamond" and proposed extending the percentage of revenue charge to parking facilities as well as the car rental businesses. This fee would be "huge" in relation to the curbside access. Mr. Coffey remarked that Airport officials contend this Diamond Parking facility is dependant upon the Airport. He rejected this argument, stating that off-site parking operators should not be required to subsidize the cost of the entire Airport if they are only utilizing the access roads and curb. Mr. Coffey requested that off-site parking operators be treated the same as other commercial curbside users. Fees should be commensurate with other off-site airport use. 10:22:49 AM JOHN TORGERSON, Deputy Commissioner of Aviation, Department of Transportation and Public Facilities, testified via teleconference from an offnet location that this issue is not new. The US Supreme Court ruled in 1998 that the methodology of fees assessed on a percentage of revenue is legal. Other airports nationally and in other countries practice this. Annual operating costs of the airports in Anchorage and Fairbanks are approximately $65 million. Carriers contribute to funding this expense as leaseholders and through terminal rentals, landing fees and other charges. Mr. Torgerson informed that the proposed percent of revenue fees that would be imposed on the off-site parking facilities would have no fiscal impact to the Airport. The issue is not between government and the private sector but rather between the private vendors utilizing the airport facilities. The regulations were actually adopted in 1995 and have been subject to administrative appeal. The process was underway to select a hearing officer to determine if the Airport is constitutionally permitted to collect this fee. Twenty-five airlines participated in the residual agreement to establish the fee structure and several other businesses service the airport. Due to time constraints it was unlikely that representatives of these interests would be testifying at this hearing. Mr. Torgerson reported that while maintenance costs of the commercial curbside use would be negligible, Diamond Parking operations would result in a loss of revenue to the Anchorage airport. The sponsor of this bill claims it would treat all businesses equally. Instead, businesses located on-site would be required to contribute more to the repayment of the bonds issued for expansion and renovations to offset the lost parking fee revenues. Diamond Parking is the only business to charge customers for off-site airport parking. He agreed that some hotels advertise airport parking, but provide this service free to paying guests. 10:33:02 AM Senator Bunde empathized with the private businesses and asked if additional income must be generated to operate the airports why all shuttle operations should not be charged. 10:34:05 AM Mr. Torgerson surmised that at the time the classifications were established, Airport and Department officials recognized the uses of the airport facility, including maintenance, as well as loss of revenue to the airport, and set fees accordingly. 10:34:48 AM Co-Chair Green asked whether the witness supported or opposed this bill. 10:34:55 AM Mr. Torgerson responded that the Department, "on behalf of the airlines" was opposed to the bill. 10:34:57 AM Senator Olson asked why an eight-percent charge of gross revenues was not levied on all commercial airport users, such as the airline carriers, if such a fee were imposed on off-site parking operations. 10:35:32 AM Mr. Torgerson informed that the Airport Board was currently in negotiations with airlines over the fee amounts. Air carriers pay the entire $65 million in annual operating expenses. As these expenses increase, the fees must be increased as well. Alaska Airlines is the "highest payer" at the Anchorage airport. All carriers contribute to the operating and bond repayment costs. 10:36:20 AM Senator Olson then asked why hotels and other businesses that provide airport shuttle service, in addition to parking vendors, would not be assessed a charge based on a percent of revenues. 10:37:08 AM Mr. Torgerson replied that hotels are categorized in a "different class" and are charged for their use of the airport facilities differently. There is no intention to charge hotels a percent of revenue fee. 10:37:34 AM Senator Olson expressed concern about expecting "successful" businesses to pay for the cost overruns incurred in the expansion and reconstruction of the Airport. This was unfair to small businesses. 10:38:22 AM Mr. Torgerson responded that the proposed percent of revenue fees pertains to operating expenses and has little relation to construction costs. Repayment of the bonds issued to fund the expansion and reconstruction is included in the landing fees and other fees levied to leased space within the terminal. He anticipated the leases would increase to $52 per square foot for space within the terminal. Mr. Torgerson stressed the issue of equalization. Recipients of the "benefits that the Airport provides" should contribute. Car rental agencies located on the Airport premises pay ten percent of gross revenue to help support the operating costs of the Airport. If all the car rental companies relocated to off- airport sites, the operating costs must still be paid. 10:39:48 AM Senator Olson understood, yet questioned the imposition of high fees on businesses that cause little "wear and tear" to the Airport. 10:40:10 AM Senator Olson asked the number of businesses that would be affected by the proposed eight percent of gross revenue fee, and what businesses would not be affected. He also questioned how the Department would audit the records of the affected companies to verify the amount of gross revenue reported. He asked if a search warrant would be required. 10:41:08 AM Mr. Torgerson explained that the Department charges on fair market value across Alaska. This is accomplished either through a flat fee or a percentage of gross revenues fee. The federal government allows these different methodologies. 10:42:22 AM Senator Olson told of a small business that offers pizza delivery from Anchorage to Bush communities via small air carriers. 10:43:07 AM Mr. Torgerson stated that the figure of eight percent is levied on commercial users of all airports in the state. 10:43:48 AM Co-Chair Green ordered the bill HELD in Committee.
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