BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 747 (McGuire) - Airports: financial assistance.
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|Version: May 6, 2015 |Policy Vote: T. & H. 9 - 0, |
| | GOV. & F. 6 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 18, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 747 would require that the sales and use tax (SUT)
revenue derived from aviation fuel be transferred to the
Aeronautics Account, as specified.
Fiscal
Impact: Because this bill would transfer funds from the General
Fund to the Aeronautics Account, the Board of Equalization (BOE)
estimates the General Fund revenue loss in 2018-19 to be $140
million. With respect to only this bill's specific requirements,
BOE could incur administrative costs in the hundreds of
thousands of dollars annually to revise jet fuel retailers'
returns and associated programming, and identify and track
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revenue (see staff comment).
The original Federal Aviation Administration (FAA) policy
discusses permitted use of airport revenue, and allows certain
government costs to be deducted from those revenues. It is
unclear whether the BOE's administrative costs would be included
within the allowable deductions.
The Department of Transportation (Caltrans) indicates that,
because the bill would create an entirely new state grant
program, additional staff would be needed to provide
administration. The amount would be dependent on the size of the
annual General Fund transfer, but would likely reach the
hundreds of thousands of dollars annually.
Background: Current law imposes a state, local, and district SUT on
retailers' gross receipts derived from tangible personal
property sold at retail, unless the sale is specifically
exempted from the tax. Sales tax generally applies to sales of
aviation fuel to air common carriers. However, current law
provides an exemption from tax for the sale of fuel and
petroleum products to air common carriers for immediate
consumption or shipment in the conduct of its business as an air
common carrier on an international flight. The average statewide
SUT rate is 8.42 percent; the current-law General Fund SUT rate
will be 3.94 percent in 2018-19.
Current law establishes the Aeronautics Account within the State
Transportation Fund. This account is funded by revenues from
fuel excise taxes of 18 cents per gallon on general aviation
fuel and 2 cents per gallon on jet fuel. These rates were set
in 1994 and 1969, respectively.
The Airport Improvement Program (AIP), administered by the FAA,
provides grants to public agencies for the planning and
development of public-use airports. In general, the federal
grant covers 75 percent of eligible costs for large and medium
primary hub airports, and 90-95 percent of eligible costs for
small primary, reliever, and general aviation airports.
Eligible projects include capital improvements related to
safety, capacity, security, and environment. Operational and
maintenance costs are generally not eligible for AIP assistance.
To supplement AIP, Caltrans administers a State AIP Matching
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Grant Program. This program, which provides a state matching
grant equal to 5 percent of the federal grant, is funded from
the Aeronautics Account.
In November 2014, the FAA issued a directive (Docket No.
FAA-2013-0988) to confirm its longstanding policy, based on
federal law, that aviation fuel taxes be used for airport
purposes and state aviation programs. The directive provides
states one year to submit an action plan to the FAA; this plan
should detail the process of amending any non-compliant state
laws and local ordinances as necessary for compliance, as well
as detailing the process to develop reporting requirements and
tracking systems for aviation fuel tax revenues. The plan must
be implemented within three years of the FAA directive, which
took effect December 8, 2014. Failure to comply with the FAA
mandate could result in ineligibility for AIP grants and
possible civil penalties.
Proposed Law:
This bill would require General Fund SUT revenues, less refunds,
derived aviation fuel be transferred to the Aeronautics Account
beginning December 8, 2017. The bill would require Caltrans'
Division of Aeronautics to annually allocate these funds to
eligible recipients, for airports and aviation-related purposes,
as specified. The bill would become effective January 1, 2016,
but be operative December 8, 2017.
Staff
Comments: BOE currently lacks the data infrastructure to make
the necessary calculations to transfer the correct amount of
revenue to the Aeronautics Account. BOE notes that there are
roughly 225 jet fuel dealers operating in the State. Jet fuel
dealers' SUT returns currently capture taxable gross receipts
for all products sold. Thus, BOE currently cannot precisely
determine the amount of SUT revenue resulting from the sale of
jet fuel, and consequently cannot calculate how much revenue to
transfer.
The BOE revenue estimate is instead based on U.S. Energy
Information Administration data, which indicate that annual
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sales of jet fuel to end users amounted to 2.4 billion gallons
in 2014. BOE then used average historical growth rates to
project annual sales through 2018-19, the first full year that
the bill would be in effect. Next, BOE assumes that 46 percent
of the total fuel is consumed by the military or international
carriers, and thus would be exempt from the tax. The BOE revenue
estimate is largely dependent on the price of jet fuel (assumed
to be $2.54/gallon), which is volatile and generally tracks
world crude oil prices. The aggregate impact of these
assumptions is a General Fund revenue loss of $295 million. Of
this amount, $140 million would be General Fund.
Caltrans notes that the number of staff it would require to
administer the bill cannot be accurately estimated without
knowing the amount of grant funding to be distributed, the
number of grant applications coming in, and the complexity of
the grants.
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