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### 'J; a.

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, • DEPARTMENT

OF'

EDMUND

G

. BROWN

JR

•

• GOVERNOR **041** 

### '-'Pc~tt4'"r



# I NAN

C E--B-TA_T_E_C_AP-,

T -c-L-.-R-cc-M-11_4_s_•_a_A_c_RA_M_&:N-:r-c-c-A-.-9-

s -a-1-4·-4-9-9B-.-ww-w-.-oc-F"-.CA-.-Gc-v CF'F'ICE
OF' THE DIRECTOR November

25, 2015 Randall

S. Fiertz Director, Airport Compliance
and Management Analysis Federal Aviation Administration 800 Independence
Ave., SW Washington,

DC 20591 

### Re

: The State of California

' s Action Plan
in Response

to FAA Policy Change 79 FR 66282-01

; Docket FAA-2013-0988 Dear Mr. Fiertz

: The State
of California responds

to the FAA's amendment

of its Policy and Procedures Concerning

the Use of Airport Revenue with the following action plan. The FAA interprets 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 state general sales tax revenue derived from aviation fuel
in addition

to local aviation fuel excise taxes

. The policy change says that states should submit
an action plan by December

8, 2015 providing
for the expenditure

of such general sales tax revenues derived from aviation fuel on airport capital and operating costs, and implement
the action plan by December

8, 2017. Because California

' s tax system

is extensive, wide-ranging

, and extremely complicated

, determining compliance
with the policy change

is inherently difficult. Sales taxes are levied by the state

, 58 counties

, 482 cities, and 205 special districts

. The state has enacted three general sales tax rates-two

of which are restricted

to specific expenditures-since December

30

, 1987 that will be in effect on December

8

, 2017: • 0.5% rate enacted

by state voters

in 1993 and constitutionally restricted

to local public safety services (Cal. Canst., art. XIII,



### § 35 [Proposition 172]) • 0.5% rate enacted

in 1991 and restricted

to health, mental health, and social services programs that the state realigned

to counties (Cal. Rev.

& Tax Code


### §§ 6051

. 2, 6201.2) • 0.25% rate enacted

in 1991 (Cal

. Rev.



### & Tax. Code 

### §§ 6051.3, 6201

. 3) The state does not segregate general sales tax revenue derived from aviation and jet fuel from other taxable sales.

A reliable estimate

of the portion

of general

sa

l es tax revenues derived from aviation fuel
is not easily determined

, as it is, among other challenges, difficult

to track necessary information
due to confidentiality protections

for taxpayer data and determine
the amount

of military and international flight tax exemptions

. In addition

, any estimate

is subject

to volatility based on the fluctuating price of aviation fuel and other calculations. That said, the most recent rough estimate

of state general sales tax revenues potentially affected

by the FAA

' s policy change

is approximately

$25 million annually based on current fuel prices

.However,Californiadevotessignificantresourcesinsupportofaviationprogramsandcapitalandoperatingcostsforits244publicuseairports,whichrangefromglobalhubssuchasLosAngelesInternationalAirportandtheSanFranciscoInternationalAirporttosmallmunicipalairports.Stateexpendituresonairportcapitalandoperatingcostsinclude,butarenotlimitedto:•Fireprotectionservices•Publicsafetyservices•Nationalsecurityandemergencyresponseservices•Accesstoandfromtheairports,includingroads,highways,andpublictransportation•Infrastructure,includingwater,electricity,andsewer•Communitycollegeanduniversityaviationandaviation-relatedskilledtradeprograms•Statehealthandsafetyoversight,includingfoodhandlinganddisposal•Environmentalandnoisemitigation•Weatherservices•TaxcreditsandsubsidiesrelatedtotheactivitiesaboveThestatebelievesthesestateexpendituresexceedtheaboveestimateofstategeneralsalestaxrevenuesderivedfromaviationfuelandthestateisincompliancewithfederallaw.Overthenexttwoyears,thestatewillcontinuetoworkwithtaxingauthorities,localjurisdictionsandotherentitiestocoordinatethecollectionofdatatorefine(1)estimatesofstategeneralsalestaxrevenuesderivedfromaviationfueland(2)estimatesofstateexpendituresonandinvestmentinlocalpublicuseairports,toconfirmCaliforniacomplieswithfederallaw.If,contrarytocurrentestimates,thestatedeterminesthatitsexpendituresonairportcapitalandoperatingcostsdonotexceedgeneralsalestaxrevenuesderivedfromaviationfuel,itwillactaccordingly,includingconsideringlegislativesolutions,tocomplywithapplicablefederallaw.Sincerely,...._r?MICHAELCOHENDirector