Jan. 13--Lehigh Valley International Airport says it will stop paying more than $360,000 in annual property taxes because Pennsylvania's highest court ruled the airport is immune from the tax.
The state Supreme Court decision will hurt about a dozen local municipalities and school districts. The biggest loser will be the Catasauqua Area School District.
Also, the municipalities and districts will probably have to refund LVIA for property taxes collected over the past five years. The Catasauqua district, which had a 2005 budget of $19.5 million, figures its share alone will be more than $1 million.
This couldn't come at a worse time for the district, which is struggling to pay for a $30 million high school. It has raised taxes 20 percent over the past two years, used all of its fund balance in recent years to balance budgets, and cut programs and services by $450,000 this school year after discovering a deficit.
The airport does not pay taxes on most of its property, including the runways and air traffic control tower. But municipalities found some parcels they thought should be taxed, arguing the land did not directly benefit the public.
The state Supreme Court rejected the argument of a lower court judge, who said municipalities could tax those portions of LVIA's property not used for the public. The Supreme Court ruled that any land used by LVIA in its mission as an airport is immune from the tax.
Begun in 1999, the case pivoted on the airport's application for tax immunity for nine parcels totaling about 20 acres inside the security fence of the Hanover Township, Lehigh County, property. The parcels include three aircraft hangars, a training area for the airport's firefighters and an air cargo zone used by FedEx and other companies.
The airport owns additional parcels that have also been taxed. Airport officials interpret the ruling to mean virtually all of its 2,629 acres will be immune from property taxes, not just the nine parcels.
"We think it affects any land we use for aviation purposes," said the airport's lawyer, Chuck Fonzone. "We did not buy any land that we don't plan to use for aviation purposes."
Clashes over airport taxes have occurred for more than 10 years. In 1999, the Catasauqua district briefly set up its own toll booths at LVIA to collect parking fees. That led to an agreement by which the district collects $300,000 a year in parking fees from the airport.
George Doughty, executive director of the Lehigh-Northampton Airport Authority, which runs LVIA, said the Supreme Court ruling is the approach local taxing bodies should have taken all along. He blamed "looney-tune" decisions by lower courts that supported local municipalities.
"This make sense," Doughty said. "We are a public entity."
Doughty said the ruling puts LVIA on par with other airports in the state. Harrisburg International Airport, for example, does not pay any property tax. Nor does Wilkes-Barre/Scranton International Airport.
"Airports are unique. Some are run by authorities, some are run by the state, some are run by cities," said John Reedy, deputy director of properties and finance at the Harrisburg airport. "They are all different, but one thing they have in common is they are all considered government municipal properties and they are not taxed."
The court's ruling shifts the burden of proof. The taxing bodies now must prove that airport property is being used outside of the intended purpose, and thus is taxable.
Lehigh County Executive Don Cunningham said he views the Supreme Court ruling as final. But he can understand previous court rulings that supported the right to tax land based on whether it was used for a public purpose.
"A lot of smaller activity at the airport is not just for greater public transportation needs," he said. "It is for private travel. Some could argue there is a great economic development benefit by having private travel come into the airport. But from a purely public-use perspective, an argument can be made it should not be tax-exempt."
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