SENATE BILL NO. 148 "An Act imposing landing fees at state owned and operated airports; and providing for an effective date." CURT PARKINS, Deputy Commissioner, Department of Transportation and Public Facilities testified. The department appreciated the committee's concern with the cost of operating the rural airports. This would be an additional revenue source that could help close the gap. He advised that other impact should be looked at. Tape: SFC - 99 #103, Side A 9:54 AM A past effort to impose landing fees in 1993 failed. The court had ruled that the department inappropriately imposed those fees. This was because policy rather than regulation instituted them. Under this bill, the department would have the ability to impose the fees through regulation and thus meet the court requirement. Another effort was made by the Legislature in the increase the aviation fuel tax to an amount that approximated what had been collected in landing fees at the time. The 1994 legislation raising that tax stipulated the department could not impose landing fees and the fuel tax could not increase more than what was previously generated with the landing fees. That provision would expire in January 1, 2000. The benefit to the department would be that the fees generated could be used to operate the rural airports. He noted potential weakness in that it did not give the department flexibility to adjust fees over time or to modify for the weight of equipment. There was a potential disadvantage in an inequality occurring with commercial aircraft weighing less than 6000 lbs. He noted smaller aircraft weighing under 6000 lbs. would not be charged the landing fee. Two carriers servicing a community would be charged differently according to the size of their aircraft. Another concern was with the ability to monitor the activity reports to ensure compliance. He recommended additional staff to audit. He also suggested a penalty fee to impose on violators. Senator Randy Phillips wanted to know if the department charged a passenger fee for rural airports. Curt Parkins replied that there was no passenger fee. The department generated most of its fees through space rental. Some funding came from the US Air Force for the Galena and Cold Bay airports. Other funding came from the Federal Aviation Administration. Senator Randy Phillips asked what the department collected versus the cost of operations. The airports generated $2.8 million in general funds statewide. He wanted to know how much was then spent on rural airports alone. Curt Parkins estimated the cost of operating rural airports including the cost of leasing projects, at about $20 million. That was about ten-percent. Senator Randy Phillips suggested the department consider a passenger fee. Curt Parkins replied that the department had chosen to pursue passenger charges first at the international airports to access the public acceptance. Senator Al Adams suggested imposing the landing fee in Anchorage since that was were most of the landings occurred. He knew the legislation applied to state-owned airports. He wanted to know if the legislation considered state-owned and leased airports and municipal-owned airports that were maintained by the state. Curt Parkins said it was his understanding this would apply to airports state-owned and operated. The airport in Ketchikan was state-owned but was operated by the municipality and had its own fee schedule that was considerably higher than what was proposed here. Airports that were owned and operated by the municipalities, such as Juneau and Kenai would remain the same using their own fee schedules. The legislation would apply to 25 certificated airports that the state owned and operated. Senator Al Adams asked if this legislation would impose the fee based on weight rather than on the number of passengers. Curt Parkins affirmed and detailed the fees imposed on the different types of aircraft. A Cessna 206 and 207 would not pay any landing fee. A Navaho weighing 7000 lbs. would pay $3.50 each time it landed. A DC-6, often used for cargo shipments would pay $50. Senator Al Adams was concerned how this would affect Prudoe Bay and the impact on the economy. Curt Parkins said the fee would not be based on the number of passengers but on the gross weight of the aircraft. He had done some figures on what the cost per passenger would be and would give that information to the committee it the members were interested. Senator Al Adams then asked about mail, noting that the carriers were subsidized by the US Postal Service. How would that be affected? Curt Parkins was unsure. Co-Chair John Torgerson said it was his intention that if the mail was handled by a private carrier they would be charged the fee. Senator Gary Wilken asked what was the take-off weight of a Cessna 206 and a 207. Curt Parkins answered the 206 was 3600 lbs. and the 207 was slightly larger. Senator Gary Wilken then wanted to know why floatplanes were exempted. Curt Parkins understood this was similar to what was proposed in the earlier landing fee in 1991-93. He deferred to Steve Pabish (?) to give more information. STEVE PARISH (incorrect last name provided by teleconference operator) testified via teleconference from Anchorage. He explained that the float plane operation cost the rural airports nothing. This was discovered during the public testimony process of the earlier attempt. There were relatively few floatplanes that exceeded the 6000 lb. limit. Co-Chair John Torgerson asked why the 1992 regulations were not written to include all commercial aircraft rather than just charging by weight. Curt Parkins was unsure but said they did not want to push the airlines into using smaller aircraft to avoid the fees. He noted it was a potential safety concern. There was discussion between the co-chair and Curt Parkins about the use of the different aircraft. Senator Loren Leman asked how the Ketchikan airport landing fees compared. Curt Parkins responded it was a different mechanism in that a flat fee was charged up to a certain weight. The fee was $1.62 per thousand pounds. An aircraft weighing over 12,000 lbs. was charged $8.50 per landing. Co-Chair John Torgerson asked if 50-cent charge was reasonable. Curt Parkins said it was and compared it to the Anchorage airport. Co-Chair John Torgerson asked about the size of aircraft using the rural airports. The fees charged various aircraft were again discussed. Senator Gary Wilken asked if a city-owned airport would be exempt. Co-Chair John Torgerson said they would along with the City of Ketchikan, which leased from the state. Senator Al Adams compared the tax rates on air carriers to other businesses across the state such as mining and tourism. Curt Parkins was unable to respond but noted that the aviation industry was crucial to development across the state. He referred to his earlier statement that the impact this would have in other areas should be considered. Senator Al Adams commented that this could impact rural development and asked for the department's position on the bill. Curt Parkins answered that the department supported finding mechanisms to close the funding gap for rural airport maintenance and operation costs. This was one mechanism and there could be other ways to meet the need. He was not in a position to say whether the department fully supported or opposed the legislation and that it could be improved. DON ETHERIDGE, Union Local #71, testified in opposition to the bill. This affected members of the union. KIM ROSS, Executive Director, Alaska Air Carriers Association testified in opposition to the bill. She told about her organization. The association wanted the Legislature to cut the budget. However, caution and common sense must prevail, she stressed. Any tax policy decision should be based on accurate facts and sound analysis. She gave a history of the prior attempt to impose a landing fee. She then told of other carrier's attempt to comply with FAA criteria. She gave an analogy of a carrier operated by "Charlie". To avoid paying landing fees, "Charlie" would choose to fly a smaller, less safe aircraft to transport a high school basketball team. Landing fees were discriminatory and created an additional administrative burden. Senator Gary Wilken wanted clarification of "Charlie's" problem. Kim Ross had a breakdown of the amounts the different aircraft would pay. Senator Gary Wilken wanted to understand why "Charlie" would send the basketball team on an unsafe aircraft in order to save $3.50. Kim Ross gave totals of daily amounts the aircraft would pay based on the number of flights they would have. BUTCH HALLFORD, Vice President, Northern Air Cargo, testified via teleconference from Anchorage in opposition to the bill. He felt the administrative cost would cut into the revenue generated. He believed this legislation placed an unfair expectation on rural communities to make up budget shortfalls. Co-Chair John Torgerson commented that the financial load was distributed across the state by the many bills sponsored by the committee. Senator Loren Leman noted there was an overall net gain to the rural operating budget. Butch Hallford said he had not considered that valid because the Village Safe Water projects would be done in a couple years and the airport fees would continue indefinitely. He noted that the burden would fall on nine carriers. He also pointed out that there would be a need for more administrators to oversee the program. Co-Chair John Torgerson clarified *. Senator Randy Phillips asked if the witness advocated an increase in aviation tax in lieu of this bill. Butch Hallford chose the aviation tax. Senator Pete Kelly pointed out that the money would have gone away under the current structure. Therefore that tax structure did not work. JOHN STEINER, Assistant Attorney General, Transportation Section, Civil Division, Department of Law, representing the airports, testified via teleconference from Anchorage. He noted the department was already allowed to impose landing fees, as they felt appropriate. They had the flexibility to give considerations CORBY HUNT, Alaska Airlines testified via teleconference from off net out of state. He felt the legislation was discriminatory and should be imposed on all commercial carriers. He also suggested the fees should be accessed on an airport by airport basis. He noted the last time the landing fees were imposed, they were ruled by the court. Co-Chair John Torgerson said he felt there should be a cost analysis for each airport anyway. Tape: SFC - 99 #103, Side B 10:42AM Senator Al Adams recommended the bill be left in committee. Senator Loren Leman thought there was merit to the argument that some commercial carriers would be charged because of their larger aircraft. He did not have an amendment prepared to address that. Co-Chair John Torgerson agreed but did not think the fee was sufficient. He felt that to impose the fee to smaller aircraft would entail more expenses. Senator Randy Phillips suggested the committee consider an aviation fuel tax over the landing fee. Co-Chair John Torgerson asked Corby Hunt if Alaska Airlines would prefer the aviation fuel tax over the landing fee. Corby Hunt noted the accounting of the landing fee was done with no oversight. As far as the aviation fuel tax, he said he would need to confer with his boss. Senator Lyda Green was reluctant to put the Department of Transportation and Public Facilities into the regulation process because of the difficulties with airport leasing regulations. Senator Gary Wilken asked what revenues this fee would generate. Co-Chair John Torgerson noted the fiscal note had not yet been prepared but the department estimated $1.5. Senator Gary Wilken offered a motion to move SB 148 from committee. Senator Al Adams objected. By a vote of 6-1-2, the motion passed. Senator Al Adams cast the nay vote. Senator Pete Kelly and Senator Sean Parnell were absent. ADJOURNED Senator Torgerson adjourned the meeting at 10:50 AM. SFC-99 (23) 4/21/99