CITY OF MERCED 

"Gateway to Yosemite" 

Merced Regional Airport Telephone (209) 385-6873 

December 4, 2015 

Mr. James T. Brown (Email: James.T.Brown@faa.gov) 

Finance Management 

Federal Aviation Administration 

800 Independence Avenue SW 

Washington, DC 20591 

Fax (209) 388-8994 

Subject: Action Plan Submission Pursuant to FAA Policy and Procedures Concerning 

the Use of Airport Revenue (79 Fed. Reg. 66282-01, November 7, 2014). 

Dear Mr. Brown: 

This letter is in response to the request for an action plan for the City of Merced to convey 

its intent to comply with the FAA ruling related to sales tax revenues derived from aviation 

fuel sales to the extent that ruling complies with federal law. This includes the process 

likely necessary to amend any non-compliant local ordinances to achieve compliance and 

the development of reporting requirements and tracking systems for specific information 

on aviation fuel tax revenues which in California means "jet fuel" as other types of aviation 

fuels are exempt from sales tax in this state. It is our understanding that the State of 

California will be submitting an Action Plan pertaining only to the state's portion of the tax. 

California's state and local governments already provide extensive services to airports 

including infrastructure maintenance, fire protection, public safety, environmental 

protection, and noise abatement. These services and improvements are funded with 

general sales taxes, and other taxes and the City of Merced believes these local 

expenditures exceed the sales tax revenues derived from the sale of aviation fuel. 

Applicable Law that May Require Amendments for Compliance 

The City of Merced owns and operates the Merced Regional Airport (MCE). The Jet A 

fuel sold at the airport is subject to the 8.0o/o sales tax and a state excise tax $0.02 per 

gallon. 

The City of Merced receives revenues derived from the state sales tax rate which support 

many critical and essential city services which include health and human services, 

criminal justice, transportation, and others. These statewide voter-approved tax rates 

have been designated for specific purposes and it is our understanding that the state will 
Mr. Brown 

Page 2 

December 4, 2015 

provide an action plan response as it relates to necessary steps for assuring compliance 

related to these revenues. 

Reporting Requirement and Tracking System 

The City of Merced in conjunction with its advisors has begun to identify the required data 

and steps necessary to comply. The internal process to undertake this effort, including 

developing a tracking system for discrete information on aviation fuel tax revenues, is 

complex and extensive. For example, the State Board of Equalization, the tax collection 

agency with which the City of Merced has a contract for sales tax collections, does not 

require jet fuel sellers to segregate sales tax revenue derived from the sale of jet fuel from 

other types of taxable sales made by the same vendor. Therefore, it is presently 

impossible for the City of Merced to determine the exact amount of sales tax derived from 

sales of jet fuel. Local agencies would need the state to change its tax reporting standards 

to require fuel sellers to quantify the amount of tax derived from the sale of aviation fuel 

to achieve compliance. Segregating and reporting the correct amount of tax revenue will 

further complicate California's already complex sales tax system and increase 

administrative costs. 

Transition Period 

If, contrary to current expectations, the City of Merced determines that its expenditures 

on airport capital and operating costs do not exceed sales tax revenues derived from 

aviation fuel, it will consider legislative solutions. It is the intent of the City of Merced to 

attempt to comply with the requirements set forth by the FAA ruling, to the extent it 

complies with federal law. The City of Merced will notify the FAA of specific actions, if any, 

to be completed during the transition period and work with the state to ensure compliance 

before the December 8, 2017, deadline. 

Sincerely, 

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John M. Bramble 

City Manager 

cc: Bradley Grant, Finance Officer 

Ken Elwin, City Engineer, Interim Director of Public Works 

Janet E. Young, Airport Manager 

Jay Chamberlain, Department of Finance (Jay.Chamberlain@dof.ca.gov)