Rick Cole City Manager Office of the City Manager 1685 Main Street PO Box2200 Cit yof Santa !Uouicu
®Santa Monica, CA 90407-2200 December

7, 2015 Mr. James T. Brown (Ema

il :James

.T
.Brown@faa.gov

) Finance Management Federal Aviation Admin

i stration 800 Independence Avenue SW Washington,
DC 20591 Subject: Action Plan Submission Pursuant toFAA Policy and Procedures Concerning the Use of Airport Revenue {79 Fed

.Reg. 66282-01

,November

7 ,2014). Dear Mr. Brown: This letter is in responsetothe request for anaction plan for the City of Santa Monica to conveyits intent to comply with the FAA ruling related tosales tax revenuesderived

f romaviation fuel sales tothe extent that ruling complies with federal law. This includes the process likely necessaryto amend anynoncomp

li antloca

l ordinances
to achieve compliance and the deve

l opment of report

i ng requirements and tracking systems for specific information
onaviation fuel tax revenueswhich in California means "jet fuel" asother typesof aviation fuels are exempt from sales taxin this state

.It is our understanding that the State of California will be submitting anaction plan pertaining only tothe state

' s portion of the tax. Ca

l ifornia's state and

l ocal governments

a
l ready provide extensive services to airports including infrastructure maintenance, fire protection, public safety, environmental protection and noise abatement. These services and improvements arefunded with general sales taxes and other taxes and the City of Santa Monica believes these local expenditures related tothe Santa Monica Airport exceed the affected sales tax revenuesderived from the sa

l eof av

i ation fuel. Applicablelaw that May Requ

i reAmendments for Compliance •A transactions and usetax

,adopted by the City's votersonNovember

2, 2010 is imposed uponall retailers
in the incorporated territory of the City atthe rateof one

-half of one percent of the gross receipts of anyreta
il erfrom

th esale of all tangib

l e personal prope

r tyso

l d atretail within the territory of the City, perSanta Monica Municipal Code 6.62

. In addition tothe locally imposed transaction and usetax rate,the City of Santa Monica receives

ashare of revenuesderived from statewide voter-approved

sa

l estaxes and Los Ange

l es County vote

r -approved sales taxes that are designated for specific purposes.

It is our understanding that the State and County will provide anaction plan responseasit relates to necessary stepsfor assuring compliance related to these revenues

. tel: 310 458-8301

•fax

:310 917-6640Jame s T. Brown Federal Aviation Administration December

7, 2015 Page 2 Reporting Requirement and Tracking System The City of Santa Monica,
in conjunction with it s advisors, has begun to identify

t h e required data and steps necessary to comply. The internal process to undertake this effort, including developing

a tracking system for discrete
in forma tion on aviation fuel tax revenues,

is complex and extensive. For example, the California State Board of Equalization, the tax collectio

n agency which Santa Moni ca cont racts with for sales tax collections, does not require jet fuel sellers to segregate
sa les tax revenue de ri ved from the sale of jet fue

l from other types of taxable sales made by the same vendor

.Therefore,

it is presently impos
s ibl e for Santa Mon

i ca 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. Segrega ting and reporting the correct amount of tax revenue will further complicate California's already comp lex sales

t ax s ystem and increase administrative costs. Transition Period If, contrary to c u rrent expectations, Santa Monica determines that its expendit ure s on airport capital and operating costs do not exceed sales tax revenues derived from aviation fuel, it will consider legi s lative solutions.

It is the intent of Santa Monica to attempt to comply with the requirements set forth by the FAA ruling

,to the extent
it comp lies with federal law. Santa Moni ca will notify the FAA of specific actions, if any, to be com pleted during the transition period and work with the state to ensure compl iance before the De cember 8, 2017 deadl ine. 7iJ G! Rick Cole City Manager cc: Gigi Decavalles-Hughes, Director of Finance Martin Pastucha

,Director of Public Works Marsha Moutrie, City Attorney Josep
h Lawrenc e, Assistant City Attorney Ivan Campbell, Deputy City Attorney Nelson Hernandez, Senior Advisor for Airport Affairs Jay Chamberlain, Department
of Finan ce (Jay

.Chamberlain@dof.ca.gov)