JohnR.Kasich, Governor

December 7, 2015 TimothyS. Keen, Ditector

Federal Aviation Administration John R. Kasich, Governor

Attention: Director, Airport Compliance and Management Analysis 800 Independence Ave

., SW Washington, DC20591 JcrryWra y, Dire ct

or

RE: Response to FAA Final Policy Amendment to Revenue Use Policy
On November 21,2013 the Federal Aviation Administration (FAA) issued a "Notice ofProposed Clarification ofPolicy; Requestfor Comments" (78 Fed. Reg. 69789) regardingits existing Policy and Procedures Concerning the Use ofAirport Revenue ("Revenue Use Policy") (64 Fed. Reg. 7696)

. The proposed clarification sought to explain how and why revenue generated from nonsponsor state taxes were**subj~ct** to the existing Revenue Use Policy. Following the comp1ents receivedinresponse to t)le proposedpolicyclarification, a Final PolicyAmendmentwas**publish~d** on November 7, 2014 (79 Fed. Reg. 66282). The Final Pobcy Amendment added a subpart to Section IV of the original 1999 Policy that specifies what non-sponsor state taxes are subject to the Revenue Use Policy, as well as what are the allowed uses for such revenue under the policy. Additionally, the Final Policy Amendment provided that states are able to submit an action plan demonstrating**the proce~s**  the state

.wilt'take to come in to compliance with the amended Revenue Use Policy (79 Fed. Reg. 66282, 66286-04).

..**Oh~o** is confident, as will be demonstrated below, that it currently complies with the amended Revenue Use Policy. However, in accordance with the FAA suggestion that non-sponsor states provide reliable reporting and tracking systems for proceeds from taxes on aviation fuel, Ohio is dedicated to implementing a state action plan to provide for such a system. But, regardless ofthe action plan, it is important to emphasize Ohio's record of compliance with the FAA's current policy.
The State ofOhio has levied a general sales tax (GST) since January 1, 1935. On December 30, 1987, the rate ofthe GST was 5 pe rcent (Attachment A). As a general tax, this rate applied to the sale ofaviation fuel. The State currently levies the GST at a rate of5.75percent (Attachment B). Accordingly, and pursuant to the grandfathering provision ofthe FAA's Revenue Use Policy, the revenue generated by 0.75 percent of the GST levied on aviation fuel is subject to the Revenue Use Policy. Additionally, the State ofOhio currently leviesan**exc~se** tax known as the Petroleum Activity Tax (PAT). The PAT is levied at a rate of0.65 percent on each supplier ofmotor fuel, including aviation fuel, and is measured by the supplier's calculated gross receipts derived.froin

. ' Page 1 of3the fust sale (Attachment C). This tax was not enacted until July 1, 2014, and is therefore not subject to the Revenue Use Policy grandfathering provision. Because both the GST and the PAT are taxes ofgeneral applicability, Ohio does not currently collect tax return data that enables the clear identification ofrevenues specifically derived from the sale ofaviation fuel. Nevertheless, Ohio 

### is able to provide estimates that indicate compliance with the amended FAA Revenue Use Policy. These estimates are based upon secondary source data from the FAA, the U.S. Energy Information Administration, and AirNav, LLC. This estimate equals approximately $7.6 million for the 2016

-2017 biennial budget period, and encompasses all revenue from taxes levied on aviation fuel generated by the non-grandfathered 0.75 percent GST and 0.65 percent PAT.
In addition to the state taxes described above, Ohio allows its 88 counties and its eight transit authorities to levy a piggyback sales tax. This tax is levied in addition to the GST, at a rate ofup to 3.0 percent (up to 1.5 percent for a county, and up to an additional 1.5 percent for a transit authority). As of December 30, 1987, 77 of Ohio's 88 counties, and six of Ohio's eight transit authorities levied such a piggyback sales tax. These taxes, while administered, collected, and distributedbythe Ohio Department ofTaxation, result from the independent political authority of the political subdivisions imposing them. In other words, the state is not responsible for the decision to levy suchtaxes northeuse oftherevenuegeneratedthereunder. Relyinguponthe same secondary sourcedata referenced above, revenue generated from the non-grandfatheredportion of these local piggyback taxes is estimated to be approximately $2.6 million for the same biennial budgetperiod.
All told, revenue generated from taxes on aviation fuel subject tothe amended FAA Revenue Use Policy will total approximately $10.2 million over the 2016-2017 biennial budget period

. Interms ofthe type ofspending required by the Final Policy Amendment, the State ofOhio appropriated $12 million in its 2016-2017 biennial budget to be used by the State's Department of Transportation (Attachment D). These appropriated dollars allow for the continuation ofthe Ohio Airport Grant Program, which s
. upports capital improvements, maintaining infrastructure, and ensuring safety atpubliclyowned, public use airports in the state, provided thatthe airports receive neither Federal Aviation Administration Air Carrier Enplanement Funds nor Air Cargo Entitlements. Given the funds appropriated for spending specifically approved by the FAA' s Revenue Use Policy, and the estimates ofrevenue generated by aviation fuel taxes subject to the Final Policy Amendment, Ohio's compliance is clear. Although the figures presented above document compliance with the FAA's Final Policy Amendment, Ohio does intend to take actions regarding the tracking of aviation fuel revenue within the next two years, as suggested in the FAA's response in Comment 4 ofthe Final Policy Amendment. These actions will clearly account for the amount ofrevenue generated by taxes on aviation fuel, and subsequently allow for the tracking of the expenditure of such revenue. For relevant tax returns filed on or afterJuly 1, 2017, which is the day on which the State's 2018

-2019 biennial budget period is to commence, the Ohio Department of Taxation intends to require taxpayers to report data enabling the State to track state and local revenues from sales of aviation fuel by state fiscal year. Additionally, the State intends to pursue statutory language in its 2018- 2019 budget bill requiring local counties to report any local spending in the state's fiscal year for

Page 2 of3the capital or operating costs of local airports, local airport systems, and any other local facility that is owned oroperated by the person orentity that owns or operates the airport that is directly and substantially related to the air transportation ofpassengers orproperty.
Ohio is confident this letter resolves any concerns regarding the State's compliance with the Final Policy Amendment. It does not constitute, and should not be considered, a waiver of any right to challenge the policy or any underlying federal law upon which federal enforcement action could be predicated. The following person has been designated as the contact person to speak for the State ofOhio regarding this matter: Matt McAuliffe, Chief of Staff for the Ohio Department of Transportation. Any questions or concerns may be directed to the designated contact person. Thank you.
Sincerely,

Jerry Wray Director Ohio Department ofTransportation Central Office- 1980 West Broad St Columbus OH43223

Page 3 of3 Timothy S. Keen Director Ohio Office ofBudget and Management 30EastBroad St, 341h Fl Columbus OH43215