Council mulls nixing commercial airplanes personal property tax exemption
The Nome Common Council heard hard pushback from the aviation industry last week as it discussed in a work session the possibility to lift the exemption of personal property tax on commercial aircraft. As the city is trying to balance its budget, it looks to find ways to increase its revenue stream. Currently, commercial airplanes are exempt from the city’s personal property taxation in Nome. The city’s assessor proposed a formula that takes into account the time of the plane on the ground, the frequency and the value of the plane. He gave as an example: a plane is on the ground for 45 minutes – or .0313 percent of the day – landing in Nome once a day and the value of the airplane being $21 million, would put the annual taxation value of the plane at a 10.5 mill rate at $6,690. City Manager Glenn Steckman this formula could result in a very rough estimate of $400,000 to $500,000 personal property tax income for the city.
None of the airline representatives who participated in the work session were happy about the short notice given to the airlines. The airlines were notified on Friday prior to the Monday meeting that aircraft taxation was to be discussed. This, the carriers said, didn’t leave them enough time to prepare properly for the meeting.
Representatives from Bering Air, Everts Air, Alaska Airlines and Ryan Air were either present in person or virtually. Russell Rowe, vice president of Bering Air, was the first to step to the podium and said that the family-run airline pays property taxes to the city, state and federal taxes on the planes, is a major employer with 135 employees and choses to do business out of Nome, although they could move their business easily to other hubs in the region. However, he said, that he as a born and raised Nomeite and the company are committed to Nome and the region. He said more taxation puts the burden on a small airline that is serving the people of the region, countering the argument that the tax formula is working for the Dillingham and Bristol Bay region. Rowe said that these airports serve a completely different clientele with high-end lodges attracting wealthy customers, arriving in charter planes and private jets. In contrast, he said, Bering Air serves the villages around Nome, where the only reasonable option to travel is via airplane. Boyuk Ryan submitted comments by attending virtually. He said that the city may gain more revenue, but the entire region would pay the price with higher fares and higher cargo fees. “The negative ramifications outweigh the benefit,” he said. Lee Ryan, also with Ryan Air, said that any taxation in an inflationary environment would make staying in business even more challenging.
A representative from Everts Airlines warned that if a time component is added to the equation for taxation, that it would rush ground personnel to properly take care of the airplane and that weather or mechanical holds would punish the airline with higher taxation. Plus, the airlines wanted to know: Who’s going to do all the math and properly calculate the taxes for each days’ planes on the ground in Nome?
The only proponent for the taxation in the audience was Rolland Trowbridge of TSR, who said he’d wish for a level playing field as he pays an enormous amount of taxes on tools and expensive equipment he uses in his automotive shop just to see airplanes being exempt from taxation.
Senator Donny Olson, also a former aviator with Olson Air, talked of the time when not so long ago, there were nine local airline carriers operating out of Nome. He agreed that further taxation would put the burden on the passengers and freight customers in the region.
Councilmember Scot Henderson challenged the aviation representatives in the room, saying that the “time is money” component is a reality of every business and asked them if they found it fair that an entire industry is exempt to pay personal property tax.
At the end of the session, the council asked the industry to come back with their own set of recommendations that could range from no taxation at all to other formulas or levels of taxation. A work session is scheduled for March 25 on the topic.
In its regular meeting last week, the council passed through first reading an ordinance that approved the new Port of Nome tariffs. In a special meeting on March 5, the council passed the tariff in its second reading.
The council also heard that the payroll balances don’t show any savings due to the fact that open positions at the police department and other departments are being filled. The council approved a resolution to approve a three-year contract with Daniel Grimmer as the new City Clerk.
The council also approved a resolution to replace the garage doors to the fire hall, it rejected all bids that were submitted for ADA and security upgrades for Nome Public Schools as they came in $450,000 higher than the estimated costs.
City Manager Glenn Steckman reported that the city now issues a third round of advertising for a new Port Director and for an assistant city manager. He said Joy Baker, who currently serves as a project manager for the Port of Nome expansion project, has extended her contract with the city that was to expire May 24 for 21 more days. Councilmember Mark Johnson inquired about the plans for the project management for the port. Steckman said the city has options that include to hand the job to a future port director, to “get” Joy Baker back or the hire an outside firm. Steckman also announced that this summer a cruise ship carrying 1,900 passengers will call on the port of Nome, meaning that the passengers will all get off the ship, visit Nome, get back on the ship and continue their journey. Steckman said he coordinates with Nome Discovery tours to manage this massive influx of visitors.
In other news, Steckman reported that he continues to meet with Norton Sound in regard to the transition of the Nome Volunteer Ambulance Department to an ambulance run by NSHC. He hopes the transition will be done by mid-April.