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 the 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” on aviation and jet fuels. The policy change 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 of aviation and jet fuels and provide 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 facility. 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 Equalization (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 require 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 implement a methodology that will 

enable the BOE and the City to provide 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 current 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 reviewing 
City 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 City 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 established and maintains a separate 

fund 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 addon tax revenues from aviation and jet fuel, the approved aviation related expenditures, and the 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 through 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