A bill to raise state tax on aviation fuel – though not by as much as originally proposed — is on its way to the desk of Gov. Steve Bullock, though whether Bullock will sign it remains to be seen.
House Bill 661 carried by Rep. Geraldine Custer, R-Forsyth, calls for an increase of the state aviation fuel tax from 4 cents per gallon to 5 cents. The proposed rate fell twice after the bill’s introduction, from the original 14 cents to 6.5 cents to the 5-cent rate voted on April 24.
Bullock spokeswoman Marissa Perry wrote in a Thursday email that the governor will “take a close look” at the bill before coming to a decision, adding that Custer’s is one of about 300 bills under review.
With the adjusted increase, forecast revenue in the bill’s fiscal note now stands at $1.6 million in fiscal 2020. That number is well down from the $4.9 million expected before the House Transportation committee amended the bill in March.
Custer’s bill also eliminates a 2-cent-per-gallon refund to scheduled airlines, redirecting that money to grants for local airports. The House Transportation committee cut a special revenue account for aeronautics education from the bill, but a new aeronautics operations account would receive the whole of aircraft registration fees. Those fees also saw increases, and 90% of their revenue is reserved for the state general fund.
Also gone is the state’s pavement preservation grant program, which took in 25 percent of aviation fuel tax revenue from passenger airlines.
Custer told the House Transportation committee on March 20 that she carried the bill at the request of Montana pilots. Two engineering firms working on Montana airport projects found needs of $44 million, she said, which requires a local match of $4.4 million to accompany federal funding.
Custer told the committee her bill, still proposing a 10-cent-per-gallon increase, might add less than $1 to airline ticket prices.
“I think you guys all know that it is important,” Miles City pilot and airport board member Doug Phair told the committee. “For many of these small communities, just finding this local match is more than a significant challenge.”
Phair added that Miles City Airport needs $300,000, a sum “simply not available” in the town of 8,600, to finish a second phase of a project he estimated was engineered a decade ago.
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Testimony on the bill showed a clear split between rural and urban Montana airports, with the latter joined by commercial airlines in opposition.
Sean Williams, vice president of state and local government affairs for trade group Airlines for America, told House Transportation that airports are able to self-sustain because of financial support from airlines and passengers.
“Something has to give when there’s a proposal like this that so drastically proposes to increase fuel taxes,” Williams said. “Either fares will go up or service levels with go down, but there’s an equal but opposite reaction for every action and we’re concerned that this could have a very negative impact on travel and tourism in Montana.”
Airport Director Jeff Wadekamper of the Helena Regional Airport Authority, who testified against Custer’s bill, said he sees the potential loss as two-pronged: the end of pavement preservation grants — which especially help Helena Regional, where only one of three paved runways is eligible for FAA funding — and difficulties in finding additional airline service.
Wadekamper anticipates that replacing grant funding to keep the airport’s 5.5 million square feet of airfield pavement in shape will require more revenue from non-aeronautical sources, which he said already provide about 42 percent of the airport’s revenue. The airport leases to several tenants beyond airlines and rental car counters, among them the Last Chance Tennis Center, Costco and the Independent Record.
The amount of internal revenue the airport generates against federal revenue varies; Wadekamper said this year’s $8 million budget, with $1.3 million in FAA entitlement funds, is about average. Establishment of the Airport Authority in 1993 removed local tax burden.
Wadekamper said Thursday he believes there is plenty of land for new tenants to occupy — about 35 acres — but finding brick-and-mortar retailers eyeing a move to Helena could be a challenge.
Shopko announced in March that its Helena store, along with 10 others in Montana and 119 nationwide, would close by mid-June. Kmart’s lone Helena location closed last April after more than four decades, though U-Haul has since moved into its Cedar Street property.
Wadekamper said the impact on ticket prices could very well be as slight as Custer forecast, but that any financial disincentive would make attracting new airline service “that much more difficult.”
“Don’t get me wrong, the small rural airports are important, as well. They really are, and they really need some assistance,” Wadekamper said. “I guess the most frustrating about the whole thing is we understand that, we just hate to see the commercial airports completely get cut out of it, as well.”