Legislature(2005 - 2006)BUTROVICH 205
02/28/2006 01:30 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB266 | |
| SB304 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 266 | TELECONFERENCED | |
| *+ | SB 304 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 304-AIRPORT PARKING SHUTTLES/AIRPORT CHARGES
1:55:03 PM
CHAIR HUGGINS announced SB 304 to be up for consideration.
RYAN MAKINSTER, Staff to Senator John Cowdery, introduced SB
304. Under Alaska law, vehicles that deliver people to the
airport fall under one of the following categories: courtesy
vehicles, taxis and limos, shuttles and buses, or tour passenger
vehicles. A fee is charged for what is essentially curbside
service. AS 02.15.090 requires the fees charged to be reasonable
and uniform for the same class of service. At presently the
rates charged by the Department of Transportation (DOT) varies
from $50 to $1,000 per year.
In early 2005, the DOT proposed regulations, which would charge
"off-airport valet services" a tax equal to eight percent of
their gross revenues. This change would constitute a drastic
shift from the statutory language. While hotel courtesy vehicles
are charged $50 per vehicle per year, the regulation would
charge free parking shuttles eight percent of gross sales or a
$250 annual minimum. The two services are essentially the same
class and require the same amount of accommodations on the part
of the airport.
1:57:44 PM
The purpose of the bill is to clarify the law with regard to
charging off-airport businesses, and reflects the sentiment that
the DOT should set rates based on use and not on percentages of
gross revenue.
SENATOR COWDERY asked Mr. Makinster whether all entities that
bring passengers to the airport are subject to fees.
MR. MAKINSTER pointed out that included in the committee packets
is a breakdown of the fee rates. The only people currently
charged the eight percent fee are off-site car rental companies
with a valet service. Other vehicles are charged a different
rate depending on the service they provide. A hotel that picks
up and drops off customers is charged an annual $50 fee per
vehicle and a company that stores a car for a week could be
charged according to the gross sales of up to eight percent.
SENATOR COWDERY asked the fee for long-term parking.
MR. MAKINSTER did not know.
SENATOR THERRIAULT speculated it was $7 a day off-site and $11 a
day long-term.
SENATOR COWDERY noted there were several levels of parking at
the airport with different rates.
MR. MAKINSTER clarified that the bill was specific to entities
outside the airport altogether.
2:00:55 PM
CHAIR HUGGINS stated for clarification that the bill was to
require a uniform system for similar services.
MR. MAKINSTER agreed. He pointed out that commercial vehicles
require the same amount of accommodation from the airport but,
under the DOT proposal, would be charged drastically different
rates.
SENATOR COWDERY asked whether the airlines have a position on
the bill.
MR. MAKINSTER speculated they would be fairly neutral but he has
not heard from them.
2:03:27 PM
SENATOR FRENCH asked whether the schedule in the bill packet
reflected current rates.
MR. MAKINSTER said yes.
SENATOR COWDERY asked how a scheduled bus service differed from
an off-airport shuttle.
MR. MAKINSTER noted it was a different type of service and not
similar enough to fall under the same fee structure.
CHAIR HUGGINS commented that landing fees make up a majority of
the funds that go into airport expansion projects.
2:06:52 PM
MIKE NEELY, Regional Vice President, Diamond Parking Service,
testified in favor of SB 304. The location of Diamond Parking is
at the former Spenard Community Dump and through a trade
agreement they were able to take possession of the dump and have
it developed as a parking facility with a cost of approximately
$12 million dollars. The reason for the exorbitant cost is
because of the significant environmental issues, such as methane
gas emissions.
The difference between scheduled bus service and Diamond
shuttles is that Diamond operates totally on-demand. People
drive to the facility and a bus picks them up and takes them to
the airport. Conversely when they return, they call Diamond to
pick them up and drop them off at their vehicle. Diamond Parking
sells service, he said, and not parking. They are open 24 hours
a day and they employ 25 people. The annual payroll is
approximately $500,000. Diamond pays an annual fee of $500 each
vehicle and with five buses brings the cost of doing business at
the airport to $2,500 year.
2:10:07 PM
CHAIR HUGGINS asked Mr. Neely whether he had any objection to
the current charges.
MR. NEELY said no.
SENATOR FRENCH noted that, according to the fee schedule,
Diamond should be classified as an off-airport shuttle and
should only be charged $500 for the first vehicle and $50 each
after that.
MR. NEELY said he thought they were classified as a shuttle bus
and was not aware of the fee schedule.
CHAIR HUGGINS clarified that the intent of SB 304 was to ensure
uniformity of the fee schedule.
MR. NEELY added the $500 per vehicle cost was comparable to that
of other airports, such as Spokane. In addition to the ramp
pass, the airport is looking for a business activity permit and
that is where the eight percent comes in. The eight percent
would mean that Diamond would have to pay $120,000 for the
current year.
2:12:51 PM
MR. NEELY said when the percentage fee was first broached to
Diamond Parking they attempted to propose a fee structure that
seemed more commiserate with the usage of the airport, such as a
flat fee per vehicle that comes into the Diamond Parking
Services lot. The proposal was that a flat fee of 70 cents would
be imposed on each vehicle and that money would be turned over
to the airport. The airport came back requesting 70 cents per
car per day, which in effect is a gross tax, he said.
Diamond Parking also operates in Salt Lake City where they
charge on a per bus trip to the airport. Each commercial vehicle
has a transponder attached to it that gets tallied each time it
goes through the airport gate. At the end of the month the
airport sends a bill to the company. Diamond Parking offered to
install that equipment at the Ted Stevens Anchorage
International Airport at the cost of the company. Their fees
would be deducted from that cost to the break-even point where
they would start paying the monthly charges according to the
invoice. The airport rejected the proposal and is insisting on a
percentage fee, which Diamond Parking protests.
CHAIR HUGGINS clarified that currently Diamond Parking was
paying $2,500 annually but that DOT's proposition would cause
them to sustain a charge of up to $120,000 a year.
SENATOR COWDERY asked Mr. Neely the average number of people on
his shuttle during an average trip to the airport.
MR. NEELY responded it was three people.
2:17:56 PM
SENATOR COWDERY asked the average fee charged to their
customers.
MR. NEELY stated Diamond Parking fees were based on less than
what the airport charges and it is $8 a day. The average length
of stay is 7 days and the average ticket is $50. By comparison,
the airport charges $11 per day in the garage and $9 per day in
long-term parking.
CHAIR HUGGINS asked for clarification whether Diamond Parking's
offer to install the electronic tally equipment at the airport
would cover all commercial vehicle traffic.
MR. NEELY said it could tally all commercial vehicles and would
allow the airport to expand its revenue base.
CHAIR HUGGINS asked whether any other airports where Diamond
Parking operates charges in the vicinity of $120,000 per year.
MR. NEELY said no.
2:21:34 PM
JOHN TORGERSON, Deputy Commissioner of Aviation, DOT, testified
that he was appointed his current position on November 21, 2005
and so adopted the problem before the committee. The issue was
immediately appealed by Diamond Parking and is currently in the
process of getting a hearing officer to review the decision.
2:23:11 PM
MR. TORGERSON said he has heard the issue characterized as the
government attempting to gouge the private sector but the
airport supports many businesses in and around the facility. He
said the percentage fee being talked about has been tested in
other jurisdictions in the United States and seems to be fair
and constitutional. He suggested that the airport fees help pay
the bills at the airport and if the percentage fee does not go
into effect, the landing fees would have to be raised.
2:25:48 PM
MR. TORGERSON continued the situation is not unique to the Ted
Stevens Anchorage International Airport and most likely would
happen in Fairbanks. He expressed concern about the fiscal
impact on the rental car businesses and other leaseholders.
2:27:35 PM
MR. TORGERSON said he has not called any of the airport tenants
to get their input and suggested that none of the airlines are
aware of the bill. Monday is the annual meeting with
representatives from all the airlines to deal with signatory
issues mainly.
2:28:43 PM
MR. TORGERSON said it was the intent of the airport that anyone
picking up customers at the airport would be subject to the
eight percent fee. The airport is a billion dollar asset, he
said, and signatory airlines have signed off the okay with an
increase in landing fees if there is not another place to
collect it from. Airport parking fees have been recognized
across the nation as something that should be added to the pot
to reduce the landing fees.
2:29:44 PM
SENATOR COWDERY asked Mr. Neely the impact that the bill would
have on the landing fees.
MR. TORGERSON said that was hypothetical since the Diamond
Parking case was under administrative appeal. The airport
operating funds are currently at about $55 million dollars and
it will go up due to the bonds that were just sold. The terminal
rent is close to $50 per square foot for tenants such as coffee
shop vendors.
The impact that the bill has will end up going back to the
airport tenants because of the agreement that the state does not
make money. The state does not lose money on the airport and the
airport does not supply the state with any excess revenues and
the airport does not ask the state for general funds to run the
operation. It is all carried on the back of the signatory
airlines and others that they can charge, he stated.
2:31:51 PM
SENATOR FRENCH asked Mr. Torgerson the reason off-airport
parking should be treated differently than others with similar
uses, such as taxicabs, tour buses and limousines.
MR. TORGERSON said as soon as Diamond Parking opened, revenue at
the airport went down by over $1 million dollars. The fee based
on percentages of revenue is in response to the realization that
anyone could come in and cherry-pick certain types of businesses
off of the airports. The Ted Stevens Anchorage International
Airport currently has the lowest landing fees in the nation and
they want to keep them down. Additionally, 80 percent of the
landing fees that are paid are by cargo planes and not passenger
planes and so the cost gets passed on to the cargo industry and
they don't generally use parking lots and terminals.
2:34:54 PM
SENATOR COWDERY asked whether any cargo companies were in
opposition of the bill.
MR. TORGERSON speculated they did not know about the bill.
SENATOR COWDERY asked whether everyone who brings passengers to
the airport were subject to the fee.
MR. TORGERSON said yes unless prohibited by law, such as
courtesy buses.
SENATOR COWDERY asked Mr. Torgerson what the fee is for the
Alaska Railroad.
MR. TORGERSON did not know.
2:36:40 PM
CHAIR HUGGINS stated that the committee supported selling bonds
to expand the airport last year but there wasn't any testimony
dealing with how to amortize the cost of doing business. He
expressed a preference for making the fees consistent all around
and expressed concern that the government would be looking at a
company's books to determine their gross revenues.
MR. TORGERSON suggested that further testimony on the issue
would be welcome.
2:39:11 PM
JOHN BARSALOU, Property Director, Ted Stevens Anchorage
International Airport, commented that John Steiner was best
suited to clarify some of the issues raised so far.
JOHN STEINER, Assistant Attorney General, DOL, informed the
committee that he was assigned primarily as the counsel to the
International Airport System including Fairbanks and the Ted
Stevens Anchorage International Airport. He said he could
provide an historical and national perspective on the uniformity
question.
Historically the airport system spreads the cost of running the
airport to the users. Users include those who land on the
runways and occupy space, as well as those that benefit from the
market that is created by the airport, specifically rental cars
and parking. As off-airport parking developed, it displaced
revenue that was coming in.
2:42:54 PM
MR. STEINER said that other airports have the same fees based on
percentages. For example, Memphis charges off-airport parking
businesses eight percent, San Jose charges eight percent, and
Kansas City charges ten percent to name a few. It is considered
a necessary and appropriate part of revenue, he said.
On the issue of conformity, when the airport parking garage
opened, the leasing people advised the developer that off-
airport rental cars would begin to be charged a usage fee. The
airport saw the shuttles being provided by the hotels as
different because riding that service was more linked to the
hotels and did not necessarily have a parking connection.
2:45:21 PM
MR. STEINER said parking is considered the connection between
the service being provided by the airport and the actual use of
it by the customer. The airport is integral to the operation of
off-site parking services and that is not the case for hotels
and other types of transportation providers.
SENATOR THERRIAULT said he has been to airports where there is a
walkway connecting an airport to a hotel. He asked whether the
airport levies a different charge to on-site hotels.
MR. STEINER said he did not know.
SENATOR COWDERY asked whether the airport charges hotels a
separate tax or fee on the revenue they receive from their
business.
MR. STEINER said no, except for the ground transportation fee
that was discussed earlier.
SENATOR COWDERY asked how SB 304 would affect the Fairbanks
Airport.
MR. TORGERSON said it would affect both airports the same since
they are under the same agreement.
SENATOR THERRIAULT noted there is no off-site parking in
Fairbanks.
MR. TORGERSON speculated there was talk about it and there are
off-site car rental agencies that the airport is collecting a
fee from.
SENATOR FRENCH advised Mr. Steiner that it sounded like he was
saying that any company that competes with the airport would be
made to pay extra if the airport determines that they lose
revenue.
2:49:21 PM
MR. STEINER responded there have been cases where that
competition factor has been acknowledged as a legitimizing
factor. The primary thing is not the competition; it is the
degree of relationship between the service that the air carriers
provide and the opportunity that is being taken advantage of by
the operators.
SENATOR FRENCH contended that there are restaurants and gift
shops located near the airport and they exist because of the
traffic in and out of there. He questioned whether the airport
would begin to charge them fees simply due to their proximity to
the airport.
MR. STEINER responded that there was a degree of separation
there. He said rental cars and parking is the particular issue
at the airport. They have been tested judicially many times and
each time the court has found the charge acceptable.
2:51:52 PM
CHAIR HUGGINS expressed a hesitation to be a part of a
government that stifles business. He reiterated his concern that
a business such as Diamond Parking would see their fees explode
from $2,500 per year to $120,000 per year because of the flat
gross sales provision when hotels, who often advertise as a
parking facility would not sustain the same fees.
MR. STEINER said the hotels that advertise as airport parking
would fall under the regulation and would not necessarily be
immune to the proposition. He suggested that the fees would get
passed on to the hotel customers anyway.
2:56:13 PM
DAN COFFEY, attorney representing Diamond Parking Services,
testified in support of the bill. He advised the committee that
he owned a car rental company up until a year ago and so has a
unique perspective. He said he wanted to debunk the myth of a
long history of the tax on off-airport car rental companies. It
was first tried in 1993 and the Legislature stopped it but a few
years later it passed. The amount of revenue received from off-
airport car rental companies is de minimus at best, he stated.
They are basically used for local insurance replacement or
travelers looking for low cost.
2:58:31 PM
MR. COFFEY said he has repeatedly suggested different methods of
collecting fees other than imposing a gross receipts tax and
that he and Mr. Steiner have an opposite conclusion of what the
law requires. The law requires that fees must be reasonable and
uniform for the same class.
3:00:32 PM
MR. COFFEY said Diamond Parking Services is being unlawfully
singled out and being asked to pay a huge amount of money for
providing a convenience to the public and having the temerity to
compete with the airport. Additionally, the airport has
summarily rejected every alternative suggested to them, be it a
per-trip fee, a per-capita fee, or the installation of an
electronic transponder used to count the cars.
3:02:26 PM
CHAIR HUGGINS held the bill in committee.
| Document Name | Date/Time | Subjects |
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