December 8 , 2015

Randall S. Fiertz Director, Airport Compliance and Management Analysis

Federal Aviation Administration 800 Independence Avenue SW Washington, DC 20591

Re: Action Plan by the City of Palm Springs, California, in Response to FAA Policy Change 79 FR 66282

- 01;

Docket FAA

- 2013

- 0988 ; Regarding Use of Add

- On Sales Taxes Generated by Airport Fuel Purchases to be Expended on Airport Capital Projects

Dear Mr. Fiertz :

This letter is to notify you that the City of Palm Springs intends to comply with the FAA’s amendment of its Policy and Procedures Concerning the Use of Airport Revenue . Please consider this letter the City’s initial action plan to attain compliance.

It is our understanding t he FAA has adopted a policy change that expands certain restrictions on the use of “local

taxes on aviation fuel ” (except taxes in effect on December 30, 1987) in 49 U.S.C. § 47107(b) and 49 U.S.C. § 47133(a) to include “ add

- on taxes ” o n aviation and jet fuels . The policy ch ange includes a requirement that municipalities should submit an action plan by December 8, 2015 that will outline how the City will attempt to identify the amount of such “add

- on taxes” are derived from the sales o f aviation and jet fuels and provid e a method to ensure the expenditure of such add

- on sales tax revenues derived from aviation and jet fuel will be
spent on airport capital and operating costs . The City understands that the action plan is required to be implemented by December 8, 2017.

The City of Palm Springs owns and operates the Palm Springs International Airport, a commercial and general

aviation f acility. The City adopted a voter

- approved 1% add

- on sales tax beginning on April 1, 2011 prior to the

FAA rule described above and before the effective date of the compliance requirement provided in the FAA regulations

.

Because the State of California’s system of collecting and distributing add

- on sales taxes is administered by the State’s Board of Equa lization (BOE), the City’s ability to track and identify add

- on sales taxes is limited by the system of data collection and information distribution system available through the BOE. To our knowledge, the

BOE at this time does not have the ability to requ ire retailers and operators to segregate sales tax revenues derived from aviation and jet fuel from other taxable sales. The City will work with our sales tax consulting firm, MuniFinancial Services, to coordinate our efforts with the BOE to develop and i mplement a methodology that will enable the BOE and the City to provid e reasonably accurate add

- on sales tax data , consistent with the laws of the State of California and the City, on a routine and regular basis . We note that quarterly reports is our curr ent norm for receiving all other sales tax information from the BOE.

Once we have a methodology that is acceptable to the FAA, BOE, and the City that accurately reflects actual revenues payable to the City derived solely from the City’s “add

- on sales taxes” derived from aviation and jet fuel sales, our Finance Department staff will segregate such add

- on sales tax revenues in a separate account in a special Sales Tax Capital Projects Fund for use on approved airport related project expenditures. We will institute a system whereby the Airport staff submits requests for the expenditure of funds to the appropriate reviewingCity of Palm Springs Action Plan in Response to FAA Policy Change 79 FR 66282

- 01; Docket FAA

- 2013

- 0988 Regarding Use of Add

- On Sales Taxes Generated by Airport Fuel Purchases to be Expended on Airport Projects

December 8 , 2015 Page 2

entities, including the Cit y Council for final approval. Each expenditure will only be processed after City Council review and approval.

As part of our current CAFR preparation and approval process, the City establis h ed and maintains a separate

f und report dedicated to the City’s “add

- on taxes” that is audited by both our regular independent auditors and by a special audit firm that reviewes this separate fund . We will add detail to these existing reports to track the add

on tax revenues from aviation and jet fuel

, the approved aviation related expenditures, and th e corresponding unexpended funds balances each fiscal year.

Over the next two years, the City will continue to work with the BOE to make sure the City is in compliance with FAA’s requirements thr ough continued coordination of the collection of data by the BOE to refine the estimates of

add

- on sales taxes derived from aviation and jet fuel sales in Palm Springs.

Sincerely,

Geoffrey S. Kiehl

Director of Finance and Treasurer City of Palm Springs

c: Douglas C. Holland, City Attorney David Ready, City Manager Thomas P. Nolan, Executive Director of the Palm Springs International Airport City of Palm Springs Measure J Sales Tax Commission Julia Erdkamp, MuniServices, Inc. Michael Coleman, League of California Cities / California Society of Municipal Finance Officers