Assessing User Fees: Judging What Is Fair
July 30, 2009
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  • Thomas J. Smith


    RENO – The debate over how to pay for the next generation of improvements to the air traffic control systems boils down to a sense of fairness.

    The major airlines, as represented by the Air Transport Association (ATA), want a user fee based on the notion that “a blip is a blip is a blip” on the radar screen. A fully loaded Boeing 737 taxes the air traffic control (ATC) system just as much as a corporate jet, said James May, the ATA president. An airliner would pay $1,202 in user fees and a Challenger 604 would pay $88 in fuel taxes on the same route between the same cities.

    While the airlines currently pay the bulk of the fees to support the system and all Federal Aviation Administration (FAA) programs, May noted that the carriers only use 68 percent of the air traffic control system capacity. “I am happy to pay for 68 percent of ATC,” May said. “All I am asking is that the others pay their share.”

    May was joined in the discussion Wednesday morning at the annual Airports Council International-North America meeting by Edward Bolen, president of the National Business Aviation Association (NBAA), and Robert W. Poole Jr., director of transportation studies at the Reason Foundation.

    The last time the FAA did a cost analysis – in the late 1990s – all of general aviation used about 6 percent of the ATC, Bolen said. Before any effort is made to pass on more of the costs to general aviation, he said, a new study is needed.

    NBAA continues to support a fuel tax as the simplest and most direct way for general aviation pilots – including those whose planes are defined as corporate jets – to pay their share of the system’s costs. The amount of the fuel tax remains the open question, he said.

    Acknowledging that the fuel tax is a user fee, May said, ATA does not object to NBAA members paying via the fuel tax. “They should pay an equal fee whether they pay as a user fee or a fuel tax,” May said. Bolen said that the industry should not back off efforts to get the general tax fund to pay an even greater percentage of the FAA’s total budget. Taxpayers now fund about 20 percent of the FAA budget to cover the military use of the airspace and public policy functions. Bolen said the taxpayers should pay 25 percent of the tab to cover improvements to the ATC that are used by all.

    Some groups have been trying to structure the FAA reauthorization in a manner that curtails Congress in the annual budget process and limits its role in future. Bolen opposes this move because the more Congress is removed from the process, the less inclined it may be to maintain support for the FAA from the general fund.

    Bolen’s estimate of new improvements needed for the ATC is dramatically smaller than the others. NBAA sees a need for $335 million over the next 10 years for new technology.

    ATA and others estimate the costs from as little as $15 billion to as much as $25 billion.

    To fund the tab, ATA does want continued support from the general fund, a user-based payment system and creative financing. May suggested that Congress give the FAA the ability to sell long-term bonds to pay for the improvements.

    Bolen objected to selling 20-year bonds to buy software that would become obsolete long before the bonds are paid off. Leasing, as the military does it, he said would be the more appropriate route.

    Poole pointed out that the fuel tax paid by a corporate jet depends upon its ownership structure. A plane that belongs to a corporation pays less than one owned in a fractional ownership program. An aircraft owned by a charter company pays more than the others because its passengers pay the ticket tax.

    If the rate structure used by NavCanada, the 10-year-old privatized ATC provider in Canada, were applied to these same corporate jets, Poole said only the corporate-owned aircraft would pay more. Those planes owned by fractional plans and charters would end up paying less.

    Only Poole called for a radical restructuring of the ATC into a private company modeled after NavCanada and 40 other similar corporations around the world. The commercialization of the air traffic control operation would provide a revenue stream that could support bond sales. The stakeholders in the new firm would form the oversight board creating accountability to ensure an efficient, customer-service oriented system.

    Poole’s plan would also eliminate congressional oversight as well as the power of the purse. Congress would be limited to creating the new entity and then have no future role.

    With Congress out of the picture, old FAA installations could be closed, offices consolidated and efficiencies implemented without regards to politics. The power of the controller’s union would be limited, since they would not be able to influence Congress.

    In the end, Poole advised the NBAA to accept the user fee concept but hold out for representations on the stakeholders’ board.

    During the discussion, May went to great lengths to stress the common links between the ATA and ACI-NA on the reauthorization effort. However, there are two points of possible difference: the use of user fees to support non-commercial airports and the possibility of raising the ceiling on passenger facility fees.

    May said that the airlines oppose the use of “their dollars” in the Airport Improvement Fund to assist non-commercial airports, which they don’t enjoy the benefit of the investment.

    Concerned what impact a higher PFC will have on ticket prices, May said his group will have further discussion with ACI-NA about a new ceiling and new rules for the charges before taking a position.

    Date: 2007-06-20