Letter from Marcy Drescher & Response from Gordon Hoff

Dave:

Just started reading the April/May (2014) issue of Midwest Flyer Magazine. In your editorial you congratulate Gordon Hoff for recognition he received at the MBAA Conference. Then you comment on his hard work to reduce aircraft registration fees in the state of Minnesota. He did a great job for owners of many very expensive airplanes, and I’m sure they are very grateful. They probably are being taxed much more fairly than before.

However, I own a 1975 Cessna Skyhawk. I bought it used in 1984 for $16,000. Now it is insured for $35,000. It never was worth $50,000. All these years that I owned it, I have paid a $50 registration fee. Now, under the new fee program, my airplane is, of course, worth less than $499,999, so I have to pay a $100 registration fee, according to the chart published in the Minnesota Aeronautics Bulletin column in your October/November 2013 issue.

I’m pretty sure I’m not the only small airplane owner who is going to see their registration fee doubled. In fact, there are probably enough of us who own older, smaller aircraft, that our double fee will fill in a lot of the gap caused by lowering the high-end aircraft fees.

I don’t think it is doing most of us airplane owners a favor by changing the fees the way they did, and then claiming that they are “lowering” the fees.

Marcy Drescher
MG Enterprises
Alden, Minnesota

Dear Ms. Drescher:

Minnesota is nationally recognized as having one of the best systems of airports and navigational aids in the country. To maintain and modernize this system requires the entire Minnesota aviation community to work together. I would like to give you a broader picture of what last year’s legislation will accomplish.

The aviation statutes regulating general aviation have mostly remained unchanged since 1945. Last year, after 68 years, a number of key statutes – those that generate a large portion of the revenue – were modified or repealed. These included (1) eliminating sales tax on aircraft parts and installation, and (2) depositing aircraft sales tax revenue directly into the State Airports Fund, rather than into the State’s General Fund, as was the case in the past. These changes became effective on June 30, 2013.

On July 1, 2014, the aircraft registration fee will change from a percentage to a flat rate; the jet fuel tax for general aviation will also increase from 5 cents to 15 cents a gallon on every gallon purchased in Minnesota. The legislation did not change the tax on jet fuel purchased by the airlines, or to AvGas (e.g. 100LL). The AvGas fuel tax has not been changed since 1951, when it was increased from 4 cents to 5 cents per gallon.

The goal of these changes is to continue to adequately fund the State Airports Fund and to make Minnesota a more competitive state to own and operate aircraft. These changes have already generated positive results for both aircraft owners and maintenance facilities. However, those who have been paying $50 a year to register their airplanes will have a $50 increase, or approximately $ .97 a week more than what they paid in the past. The savings in not being taxed for parts and installation may very well offset this increase. While no one is happy about a fee increase, the minimum aircraft registration fee was last raised in 1987 from $10 to $50.

Historically, MnDOT Aeronautics’ revenue from fees and taxes is $18 million to $19 million a year, which is deposited into the State Airports Fund. Approximately 1,040 aircraft owners paid the $50 registration fee in fiscal year 2014, generating $52,000. In fiscal year 2015, it will be $100, generating $104,000. The revenue from the AvGas fuel tax purchased in Minnesota by all piston aircraft for fiscal year 2014 is estimated to be $152,000. Together, this results in total estimated revenue of approximately $256,000. Using $18.5 million collected from fees and taxes, this is just under 1.4 percent of the State Airports Fund. Approximately 470 aircraft registered in Minnesota are currently valued at $200,000 or higher. These aircraft owners and the taxes paid by the airlines will provide the remainder of the revenue for the State Airports Fund.

I hope this helps clarify the changes to the statutes that will be fully in force by July 1, 2014, and which will keep Minnesota’s aviation system well maintained and available for all to enjoy.

Gordon Hoff
Executive Director
Minnesota Business Aviation Association (MBAA)

Editor’s Note: This response has been reviewed and endorsed by the Minnesota Business Aviation Association (MBAA), Minnesota Aviation Trades Association (MATA), and the Minnesota Council of Airports (MCOA).

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