MURFREESBORO – Construction began last week on Murfreesboro Municipal Airport's runway extension, but projects like this may be in jeopardy if a proposed change in the amount businesses are required to pay for improvements becomes state law, airport officials say.
The nearly $5.1 million project is most funded through the state's aviation tax fund, but a proposed change to the fund could cut it in half, explained Chad Gerke, director of the Murfreesboro airport.
The Haslam administration wants to cap the amount a single person or business will pay into the Tennessee Equity Fund, which is funded by aviation fuel taxes. The Equity Fund is distributed in the form of grants for improvements at large and small airports across the state, like those at Murfreesboro Municipal Airport.
"It will basically take money airports use for maintenance and improvements and cut it in half," Gerke said.
The city's total grant includes more than $4.4 million from the Tennessee Equity Fund, $328,000 from the federal government and $295,090 from airport debt and interest payments covered by airport revenues from fuel sales and leases.
The legislation would reduce the size of the funding pool that general aviation airports can pull from for maintenance projects and upgrades. It is currently making its way through the committee process in Nashville with nods from the Transportation and Ways & Means committees in both the state House and Senate.
Senate Transportation Committee Chairman Jim Tracy, R-Shelbyville, said the state was stuck between a rock and a hard place with how the fund is funded.
On one side, he sees the value of local airports to economic development, but, on the other hand, one of the state's largest employers was threatening to fill up its plane's gas tanks in other states.
"It put us in a tough spot," Tracy said.
According to an Associated Press report, the cap will benefit Memphis-based FedEx that on average pays annually up to three-quarters of the $48 million fund.
According to testimony in committees this week, no other taxpayer exceeds the proposed cap. Southwest Airlines comes closest at $6 million per year.
Cash in the fund results from a 4.5-cent-per-gallon tax on aviation fuel collected by the state each year.
Of the surrounding states, North Carolina's fund comes closest at $20 million with a $0.053 effective tax rate and $2.5 million cap. Indiana has the smallest fund with a $1.2 million estimated annual revenue with a $0.10 a gallon rate and exemptions for airlines and FedEx, according to data from Tracy's office.
Under Haslam's proposal, FedEx's aviation fuel tax liability would be capped at $10.5 million — down from the $32 million the company paid last year. The cap would begin July 1 and be phased in over four years.
Smyrna/Rutherford County Airport Authority Executive Director John Black said he thinks the cap will have a detrimental effects on the state's network of airports.
"While we value our existing business, we also must balance the maintenance and growth of all of our airports through the mechanism (Tennessee Equity Fund) that has worked so well since 1988," Black said.
"Airports are much more than runways and taxiways, they are the front door and economic engines of our communities," he continued.
Tracy said he spent time talking to airports from across the state and was pleased when his committee amended the bill to create a task force to oversee the changes to the fund.
While airport administrators say there's no plan to replace the money, Tracy said he has hope the task force will find a way to keep fuel tax money flowing to general aviation airports.
"The Equity Fund has worked very well for us and the taskforce needs to develop a long-term plan to continue it," Tracy said, adding general aviation airports are important to economic development.
Both Black and Gerke said they fear that economic development opportunities may be damaged if airports have less funding for upkeep.
Gerke said getting the runway project is important, but the Murfreesboro airport terminal, which dates back to the 1950s, needs an overhaul. But that may not happen anytime soon if the Equity Fund is reduced.
"We may never have a jet based here, but we do have corporate executive who come here," he said.
He said now the airport will have to reassess its future plans.