Legislature(1993 - 1994)

03/24/1994 03:00 PM TRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  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                 
  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."                    
  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                      
  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                  
  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                     
  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                    
  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                       
  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                       
  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                   
  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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