Revamped Arizona tax law benefits state aviation fund

 - May 21, 2008, 11:10 AM

Business aviation operations in Arizona stand to benefit from new legislation that returns certain aviation tax revenues to the state’s airport improvement programs. Arizona governor Jane Dee Hull signed SB1251 into law on May 2, authorizing the deposit of 100 percent of flight property tax revenues into the state aviation fund starting in fiscal year 2004.

This action effectively repeals a 1997 law that diverted 50 percent of the flight property tax collected to the state’s general fund. According to Gary Adams of the Arizona Department of Transportation (ADOT), the flight property taxes paid to the state in fiscal year 1999 to 2000 totaled $13.4 million, with $6.7 million each deposited in the state general fund and the state aviation fund. The tax revenues will continue to be split between the two funds until July 1, 2003.

The flight property tax is levied on all scheduled airline aircraft used in the state of Arizona, and is calculated using a complicated formula that takes into account the ground time and mileage the aircraft incurs yearly within the state of Arizona. The new law does not affect the deposit of general aviation taxes, including aircraft registrations and fuel taxes, which have always been deposited in the aviation fund. The state aviation fund also receives money from sales of abandoned or seized aircraft, the operations of the Grand Canyon National Park Airport and bond investment interest.

The new law does immediately change the distribution of funds from the state aviation fund, which are used in the development and upgrade of publicly owned and operated airports within Arizona. Funds are now restricted to “no more than 10 percent of the total aviation fund” awarded to any one airport in any fiscal year.

Two years ago governor Hull had vetoed an earlier attempt to change the distribution of the flight property tax to 43.9 percent to the general fund and 56.1 percent to the aviation fund beginning in fiscal year 1999 to 2000, citing concerns about the fund’s distribution mechanism. She expressed similar concerns while signing the latest bill, indicating that she would still like to ensure that aviation fund money is dedicated to projects that will enhance economic development, meaning reform may still be required in the ADOT airport prioritization process used for funding decisions.