A House-approved tax hike plan — which would help general aviation and commercial airports avoid falling far short of more than $730 million needed for fixes in the next five years — is stuck in the Senate in part because of concerns by Delta Air Lines, the state’s biggest commercial passenger air carrier.
At stake is nearly $190 million in runway and taxiway reconstruction, as well as demolition of the Smith and Berry terminals at Detroit Metropolitan Airport, included in the state’s five-year plan. The airport emphasizes it is a self-financing operation that receives federal dollars through the state.
Other big-dollar projects include $70 million in improvements at Willow Run in Ypsilanti, $60 million at Gerald R. Ford International Airport in Grand Rapids and $29 million at Bishop International Airport in Flint.
Holland’s West Michigan Regional Airport plans $642,000 in taxiway improvements and breaks ground in 2015 on a $3.6-million terminal built with local money and $500,000 from the state to replace a converted ranch-style house. The project will require a new $3-million apron, where airplanes are parked, refueled or boarded, that will go on the next five-year plan.
Some upgrades and fixes could be delayed or scrapped because the 3-cent-per-gallon aviation fuel tax isn’t generating enough revenue — just as Michigan’s gasoline and diesel taxes are falling an estimated $1.2 billion short on road and bridge repairs. Collections have been declining for at least a decade.
Rising challenges
The state increasingly is challenged not only to pay for airport amenities that assist travelers, but also to cover the costs of safety-related maintenance such as runway signaling and crack sealing, said Kevin Klein, president of the Michigan Association of Airport Executives.
“It’s a question of having enough money to meet our infrastructure needs,” said Klein, who runs Traverse City’s Cherry Capital Airport where $8 million in improvements are proposed through 2019.
“We can’t have potholes in our runways.”
But Michigan’s overall fuel tax costs — including sales tax and environmental fees — are the highest among Delta’s hubs and third-highest behind California and Illinois among all states with major airline hubs, said Delta spokesman Trebor Banstetter.
“Michigan has one of the least competitive fuel tax structures in the nation,” Banstetter said. “That’s why we’re working with legislative leaders to find a solution that both addresses the competition problem and creates a permanent, stable funding source for Michigan’s airports.”
Michigan has received about $90 million a year in federal funds for airport maintenance and capital improvements with a $10 million state-local government match, Klein said, but is in danger of experiencing a significant federal funding dip.
Revenues from the aviation tax — adopted in 1929 — were just under $8 million in 2004, subsequently dropped below $6 million and now threaten to fall below $5 million even as airports require more money for maintenance, Klein said.
With no revenue increase, Michigan can expect a $16 million drop in federal funding per year and “a degraded airport system,” a 2007 study committee report said.
Lawmakers adopted a temporary fix in 2012. It moved two-thirds of the revenue from Michigan’s six-percent sales tax on aviation fuel transactions — $10 million — from the state General Fund to airport maintenance for a year.
In December, the state House approved a two-bill package that would provide a permanent $17-million annual boost. The compromise legislation is $9 million less than originally proposed but a good start toward a permanent solution, Klein said.
It would switch the aviation fuel tax from 3 cents a gallon to 2 percent of the average per-gallon wholesale price. It also would soften the hike by exempting pilots and airlines from one-third of the 6-cent sales tax — 2 cents on the dollar.
That 2 percent was added to the state sales tax in 1994 under Proposal A’s school funding plan. If the aviation legislation passes, the School Aid Fund would lose about $16 million a year, according to a House Fiscal Agency analysis.
The legislation also would end a 1.5-cent-per-gallon rebate, half the per-gallon rate, which interstate airlines, like Delta, have enjoyed since 1945.
The legislation is in the Senate Finance Committee chaired by Republican Sen. Jack Brandenburg, of Harrison Township, the sponsor of overlapping Senate-approved bills to exempt airlines and pilots from one-third of the sales tax.
Rep. Wayne Schmidt, R-Traverse City, architect of the House-passed bills, said he and Brandenburg are discussing how to proceed given Delta’s concerns.
“It provides stability ... at about $17 million a year so we can draw down our usual federal match and then also can start working on our airport infrastructure,” Schmidt said. “We don’t want to get into the same situation we have with roads.”
Taxes, fee adding up for Delta
But Delta’s Banstetter said jet fuel is the airline’s largest expense — 35 percent of operating costs — and has risen more than 400 percent in price in the last decade. Michigan’s 3-cent fuel tax, 6-percent sales tax and environmental fee for underground storage tank cleanup add 20.4 cents a gallon to Delta’s fuel cost — even with the rebate, he said.
Delta made a $10.5 billion profit in 2013, following profits ranging from $593 million in 2010 to $1 billion in 2012.
The legislation is supported by the Michigan Department of Transportation, although it falls short of the $150 million a year needed for the $750 million in projects planned through 2019, said department spokesman Jeff Cranson.
“Rep. Schmidt’s proposal rights the ship, so to speak, and implements a funding mechanism that adjusts as the price of fuel increases,” Cranson said.
Schmidt, who chairs the House Transportation and Infrastructure Committee, said he intended the airport proposals to be a model for parallel legislation containing tax changes proposed by Gov. Rick Snyder to address the state’s $1.2-billion-a-year road repair shortfall.
House Speaker Jase Bolger, R-Marshall, recently rolled out a road funding plan that, instead, would boost revenue nearly $500 million a year through tax shifts, funds transfers and higher fees on heavy trucks.
“This is what taxpayers are looking for — solutions, not one-time gimmicks,” Schmidt said about the House aviation tax package.
Story, photos and comments/reaction: http://www.detroitnews.com
The runway at the Oakland County International Airport has some big cracks. An aviation fuel tax hike would fund repairs at public airports.
Airport plans
Improvements scheduled for Metro Detroit airports as part of the state’s $730.4-million five-year plan:
Detroit Metro: $189.74 million for 2015-19
Reconstruct taxiway W, displacement of runway 4R threshold, improve service road west of taxiway M, rebuild eastern taxiways for $71.8 million in 2015.
Runway 3L/21R extension environmental processing, replace airfield lighting vault, demolish Smith & Berry terminals for $13.29 million in 2016.
Reconstruct south portion of runway 3L/21R and taxiways M & F, rebuild west portion of taxiway G, reconstruct north portion of taxiway H for $68.9 million in 2017.
Rebuild north portion of runway 3L/21R and taxiways, acquire land and extend runway 3L/21R, surface monitor improvements on runways and taxiways for $79.7 million in 2018.
Reconstruct part of taxiway Z, rebuild taxiway K, reconstruct part of shoulder on runway 9R/27L, buy land and extend runway 3L/21R for $51.14 million in 2019.
■Detroit Willow Run: $70 million for 2015-19.
Remove runway 14/32, runway 5R touchdown lights and develop sign replacement program for $2.55 million in 2015.
Phase 1 of parallel taxiway for runway 5R/23L, update airport layout plan for $8.25 million in 2016.
Phase 2 of parallel taxiway for runway 5R/23L, shorten and rehabilitate runway 5L/23R, phase 1 residential sound insulation program for $19 million in 2017.
Phase 3 of parallel taxiway for runway 5R/23L, phase 1 rebuilding runway 9/27, remove displaced threshold & obstruction, phase 2 residential sound insulation program for $23.6 million in 2018.
Phase 2 rebuild runway 9/27, phase 3 residential sound insulation program for $16.6 million in 2019.
Non-primary airports
■Ann Arbor: $2.66 million for 2015-19.
Extend runway 6/24 and taxiway for $1.92 million in 2015.
Expand parking, relocate entrance drive for $242,000 in 2016.
Buy snow removal equipment for $166,667 in 2017.
Phase 1 terminal expansion and improvements for $166,667 in 2018.
Phase 2 terminal expansion for $166,667 in 2019.
■Detroit City: $9.78 million for 2015-19.
Land acquisition for mini-take area (2015) $2.93 million in 2015.
Land acquisition and runway rehabilitation design for $950,000 in 2016.
Phase 1 to close French Road for .9 million in 2017.
Phase 2 close French Road for $500,000 in 2018.
Phase 3 close French Road for $500,000 in 2019.
■Grosse Ile: $6.72 million for 2015-19.
Rehabilitate runway 17/35 for $3.7 million in 2015.
Rehabilitate taxiway lighting and drainage for $950,000 in 2017.
Rehabilitate taxiway-design for $166,667 in 2018.
Rehabilitate taxiway for $1.9 million in 2019.
■Howell: $1.26 million for 2015-19:
Rehabilitate access roads and parking for $376,500 in 2015.
Design snow removal equipment building and seal cracks for $65,000 in 2016.
Build snow removal equipment building for $280,000 in 2017.
Build south connector taxiway for $375,000 in 2018.
Phase 1 master plan for $166,667 in 2019.
■New Hudson: $3.04 million for 2015-19
Wetlands mitigation for $690,000 in 2015.
Rehabilitate runway for $2.08 million in 2016.
Fencing for $166,667 in 2017.
Engineering studies for $60,000 in 2018.
Design for rehabilitating taxiways and apron for $60,000 in 2019.
■Plymouth: $970,000 for 2015-19
Build terminal, crack sealing & paint marking for $520,000 in 2015.
Build hanger for $450,000 in 2019.
■Pontiac: $1.5 million for 2015-19.
Design to rebuild taxiway for $40,000 in 2015.
Rebuild taxiway for $600,000 in 2016.
Survey consultant coordination for $20,000 in 2017.
Rehabilitate runway lighting, $740,000, 2018.
Rehabilitate taxiway lighting, $100,000, 2019.
■Romeo: $1.5 million for 2015-19.
Build hanger, $477,895, 2015.
Crack sealing, painting, marking runway, $20,000, 2016.
Remove old runway, $170,000, 2017.
Buy land for approaches, $830,000, 2019.
■Troy: $2.3 million for 2015-19
Rehabilitate terminal apron and terminal building, $341,000, 2015.
Install fencing, remedy detention basin, $200,000, 2016-2017.
Rehabilitate taxiway (hanger area) and lighting, $568,000, 2018.
Rehabilitate runway lighting, $250,000, 2019.
Source: Michigan Department of Transportation
From The Detroit News: http://www.detroitnews.com
Mick Osborne, of Tulip City Air services, looks over a Citation that is due to fly in a couple of hours at the West Michigan Regional Airport in Holland, Mich., on April 9, 2014. The airport offices are due for replacement. Michigan airport executives are asking for the first aviation fuel tax increase in 85 years to make improvements and repairs at the state's 235 public airports.
