Legislature(1993 - 1994)
03/24/1994 03:00 PM House TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE
March 24, 1994
5:00 p.m.
MEMBERS PRESENT
Representative Gary Davis, Vice-Chair
Representative Bill Hudson
Representative Eldon Mulder
Representative Al Vezey
Representative Curt Menard
MEMBERS ABSENT
Representative Richard Foster, Chair
Representative Jerry Mackie
COMMITTEE CALENDAR
*HB 520: "An Act relating to the operation of courtesy cars
at certain airports."
HEARD AND HELD
(* First public hearing.)
WITNESS REGISTER
DEPUTY COMMISSIONER HELVI K. SANDVIK
Department of Transportation/Public Facilities
3132 Channel Drive
Juneau, Alaska 99801
465-6973
Position Statement: DOT/PF input on HB 520
DAN COFFEY
Dollar Rent-a-Car
5011 Jewel Lake Road
Anchorage, Alaska 99508
248-5338
Position Statement: In favor of HB 520
PREVIOUS ACTION
BILL: HB 520
SHORT TITLE: COURTESY CARS OPERATED AT AIRPORTS
SPONSOR(S): TRANSPORTATION
JRN-DATE JRN-PG ACTION
03/09/94 2682 (H) READ THE FIRST TIME/REFERRAL(S)
03/09/94 2683 (H) TRANSPORTATION, FINANCE
03/17/94 (H) TRA AT 05:00 PM CAPITOL 17
03/24/94 (H) TRA AT 05:00 PM CAPITOL 17
ACTION NARRATIVE
TAPE 94-14, SIDE A
Number 028
REPRESENTATIVE DAVIS called the meeting to order at 5:10
p.m., and announced that Representative Mulder would give
the introduction to HB 520.
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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