Aviation business group argues for lower aircraft tax in Minnesota

Neil Brackin spends his days in the skies as a Twin Cities-based corporate jet pilot.

But on Tuesday, Brackin's feet were planted firmly at the state Capitol as he told a new legislative panel about problems with Minnesota's aircraft taxes.

Brackin, who spoke on behalf of the Minnesota Business Aviation Association (MBAA), said in an interview that it's likely that hundreds of private jets are registered out of state because Minnesota's registration tax on non-airline aircraft is costly for corporate jets.

The registration tax is 1 percent of a plane's value, which is a steep cost on multimillion-dollar jets, he said.

Brackin and the MBAA's 350 members, both organizations and individuals, hope state lawmakers on the newly formed Airport Funding Advisory Task Force will come up with new ways to fund aviation in Minnesota.

"We believe that when they look at everything, the registration fees are a bit of a blatant deterrent" for companies to register their planes in Minnesota, Brackin said.

Not everyone agrees, however, including those who run airports in outstate Minnesota.

Still, supporters of changing the aviation funding formula say changes could be revenue neutral because bringing more planes into Minnesota will allow the state to qualify for more federal aviation funding.

In addition, even if the registration tax is lowered, there likely will be more planes paying taxes in Minnesota, which would even things out.

The funding at stake fuels the State Airports Fund, which is supported by the registration tax, a five-cent per gallon aviation fuel tax and an airline flight property tax.

The State Airports Fund pays for improvements at the 134 greater Minnesota airports that are not under the jurisdiction of the Metropolitan Airports Commission. In 2006, the three funding sources brought in $13.4 million to the fund, according to data from the nonpartisan House Research office.

But to airport managers who use the funds to repave runways and make other capital improvements, any sort of change to the funding mechanism raises serious concerns.

Brian Ryks, executive director of the Duluth Airport Authority, told the task force that airports receive federal funding, but the federal money often pays for security improvements. The State Airports Fund is an important source for repairing wear and tear.

"This fund is critical to all airports of all sizes," Ryks said.

In his testimony, Brackin sought to alleviate concerns that his group is trying to reduce the amount of money available for aviation in Minnesota.

"The MBAA does not support any proposal or discussion which reduces the funding of the State Airports Fund. In direct contrast, we feel an updated funding model is necessary ... in order to support growth in aviation that is coming from within and from outside the state," Brackin told the committee.

Lawmakers on the task force say they will sift through the issue to find a compromise.

During the 2007 legislative session, lawmakers approved $200,000 for the six-member task force that met for the first time Tuesday. Sen. Michael Jungbauer, R-East Bethel, and Rep. David Dill, DFL-Crane Lake, who both have extensive flying experience, were chosen as co-chairmen. The task force has a Feb. 15 deadline to report its findings to legislators.

It's unclear whether proposed legislation will emerge from the efforts of the task force.

Dill said change might be warranted, especially since funding sources like the aviation fuel tax date back to the 1940s. He noted that the airplane gas tax declines from 5 cents based on the amount of fuel that is consumed; jets that use a lot of fuel pay as little as 1 cent per gallon.

The task force might consider lowering the registration tax and readjusting the fuel tax to make Minnesota more competitive with other states, Dill said.

"That way we encourage companies to base [jets] here, and yet our gas tax would be competitive with other states because they don't have that discount," Dill said.

Task force member Sen. Ann Rest, DFL-New Hope, said the group will gather information about airport funding. The findings will determine if changes are necessary.

"I don't think we should presume that we necessarily are going to recommend a change in policy," Rest said.