Aviation Fuel Taxation
In Michigan
Matt Brinker
Bureau of Aeronautics & Freight Services
Aviation in Michigan
• 488 landing facilities
• 18,610 active pilots
• 7,800 registered aircraft
• 30 scheduled airlines
• 6 aircraft manufacturers
• 131 aircraft/component repair stations
• 6 military aviation facilities
Background
• Aviation fuel taxation first implemented in 1929 at
3¢ per gallon
• State Aeronautics Fund (SAF) created by PA 327
MCL 259.203 of 1945
• PA 327 also provided a 1.5¢ per gallon rebate to
scheduled, interstate airlines
• Approximately 80% of SAF funding derived from
aviation fuel tax
• The balance from a variety of sources including
fees for aircraft registration, tall structure
permits, and flight school licensing
BAFS- Statutory Responsibilities
–Airport Improvement Program (State & Federal)
–Aircraft Registration
–Tall Structures Act
–Aircraft Dealer Licensing
–Airport Manager Licensing
–Airport Inspection & Licensing
–Airport Loan Program
–Enforcement of Aeronautics Code
–Maintenance of State Aeronautics Fund
–Aviation Safety
–Airport System Plan
–Airport Planning & Zoning
Michigan Fuel Tax Rates
$0.195
$0.180 Auto Gasoline
$0.165 Diesel
$0.150 Aviation
Rate per Gallon
$0.135 Aviation w/Refund
$0.120
$0.105
$0.090
$0.075
$0.060
$0.045
$0.030
$0.015
$0.000
25
29
33
37
41
45
49
53
57
61
65
69
73
77
81
85
89
93
97
01
05
08
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
Year
Issues
• Revenue to the SAF no longer supports
operations
• The Airport Safety & Protection Program (ASAP),
funded by the issuance of $60M bond revenues,
has been fully implemented yet additional
infrastructure needs have been documented
• Debt service on ASAP bonds totals nearly
$5M/year for 30 years
• If revenue is not enhanced for capital &
operations, Bureau may eventually need to
reconfigure staff & programs
Budget
• Despite containment measures, the
authorized bureau operations budget
for FY2008 exceeds anticipated
revenue by 14%
• Actual FY2008 year to date revenue
is 9% lower than anticipated
Capital
• Documented needs for infrastructure
improvements exceed $1.3 billion over the
next five years
• Anticipate only $575 million in federal
funds
• Result is a shortfall of $725 million which
is further exacerbated by new, unfunded
federal mandates
Millions
$0
$2
$4
$6
$8
1996 $10
1997
1998
1999
2000
2001
Year
2002
2003
2004
2005
Aviation Fuel Tax Revenue FY1996-2007
2006
2007
Industry Trends
• Airlines
– Crude oil prices and supply uncertainty
– Fleet and schedule restructuring
– Mergers & Bankruptcies
– Northwest Airlines
Industry Trends
• General aviation
– Alternative fuels (auto gas, diesel, etc.)
– Insurance costs
– Light Sport aircraft
Foreign Trade Zones
• Greater Detroit Foreign Trade Zone (FTZ)
• Tax-free fuel for international flights
• Annual loss of $4 Million for the SAF
• FTZ popularity increasing
Sales Tax
• Currently, 100% of sales tax on aviation-
related purchases goes to General Fund
• If sales tax benefited the SAF in the
same manner as automotive-related
purchases benefit the Comprehensive
Transportation Fund (CTF), SAF would
receive an additional $1.45 Million in
annual tax revenue on aviation-related
purchases
Solutions?
• Modify fuel tax rate
• Eliminate refund with a higher base rate
• Institute percentile based tax rate with or
without a refund
Potential Fee Proposals
• Increase fees for aircraft registration,
aircraft dealer registration, and penalty for
failure to register
• Amend Tall Structure Act to more
accurately describe permit process and to
establish an application fee
• Eliminated licensing of flight schools and
hospital heliports
Questions & Discussion