ATL is the tip of a very large Revenue Diversion Iceberg—Constitutional Conflict?

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  1. The Tip of the Iceberg:

Clayton fights loss of Hartsfield-Jackson jet fuel sales tax revenue


TL Hartsfield-Jackson-Atlanta-International-AirporExcerpts from The Atlanta Journal Constitution–

A fight over who gets to keep Clayton County sales tax revenue from jet fuel at the world’s busiest airport started with Delta Air Lines arguing that the airport should by law get the money, and led to a clarification of a federal policy affecting airports across the nation.

[JJ NOTE: the clarification was made in 2014 of an 1987 federal law and the FAA made the compliance date December, 2017]

But Clayton has filed a federal appeal and is arguing that losing the nearly $20 million in revenue from sales taxes on jet fuel that goes to the county, its seven cities and the school district would create a burden.

“The impact that it’s going to have on our county and our citizens and resources and services to me is problematic,” said Clayton County chairman Jeff Turner. “You’re talking about it having an impact on the services we provide [to] seniors and children.”

The federal rule took effect Dec. 8, but the Federal Aviation Administration has granted extensions on a case-by-case basis. Clayton is awaiting movement on its appeal with the 11th circuit court, tentatively scheduled for March 2018

As Delta had argued, the FAA said airports getting federal airport improvement grants must use proceeds from state and local government taxes on aviation fuel for aviation-related purposes. Airlines and airports supported the move, while the state of Georgia objected to several elements of the policy.

The FAA said the purpose of requirements of how airport revenue can be used is to “prevent a ‘hidden tax’ on air transportation,” and to ensure that federal airport grants are used to support airport projects and not simply substituting funds diverted from the airport to other uses.

Such measures to prevent revenue diversion essentially keep local governments from using airports as “cash cows” and funneling money away from them to use for other purposes.


For Clayton and its municipal governments, the revenue from jet fuel sales tax has been a key part of the operating budget. Jet fuel sales tax revenue makes up more than 4 percent of Clayton’s budget of nearly $200 million.

And for Clayton County Public Schools, its $9 million in ESPLOST sales tax from jet fuel a year helps to pay for school capital improvement projects, such as for Jonesboro High School.

“The current interpretation would hurt our school system, specifically our children,” said Clayton County Public Schools superintendent Morcease Beasley. He said it “violates the desires of our taxpayers to use those taxes to help with capital projects as they voted on in the referendum.”

atl fuel farm

  1. A Look below the Water Line:Pew Charitable Trust

In February 2016, the Pew Charitable Trusts , an independent non-profit, non-governmental organization (its mission is to serve the public interest by “improving public policy, informing the public, and stimulating civic life”) took a broader look at the FAA’s revenue diversion interpretation. It quantified the needs of impacted states other than Georgia and calculated over $200,000,000 lost revenues per year:







As of the date of the Pew article, only the ATL issue had been appealed to a US Court of Appeals.

Pew contacted Airports Council International-North America, to see what that trade association’s view was. ACI somewhat hedged its bets by pointing out its members’ needs for massive capital funds for expansion and improvements. The association’s General Counsel took credit for persuading the FAA to modify at least one part of their regulation (its members are not obligated to try to get states and localities to comply with the FAA’s ruling. The author noted that the industry group that the FAA’s revenue diversion hard rule “impermissibly interferes with fundamental state taxing and spending powers.”

$200,000,000 is a Big Iceberg!

  1. The Constitutional Conflict

As noted above, the FAA gave airports three years to file a compliance program: deadline December 12, 2017.On the date of the mandate, the FAA reminded the non-complying airports that:

The 3-year transition period for state and local governments to come into compliance with the FAA’s Policy Concerning the Use of Airport Revenues; Proceeds from Taxes on Aviation Fuel; expires on December 8, 2017.

The FAA will consider extension of the compliance date on a case by case basis for good cause

It repeated its prior position:

State or local taxes on aviation fuel (except taxes in effect on December 30, 1987) are considered to be airport revenue and subject to the revenue-use requirement. Airport revenues can only be expended for the capital or operating costs of the airport; the local airport system; or other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property. State taxes on aviation fuel can also be used to support state aviation programs.

The web page included a scoreboard of submissions by states and local governments. The count indicates that there is considerable defiance among those other sovereigns:

Although most of the plans were submitted in 2015, only California’s plan has been “qualified”. Though nine Georgia airports submitted plans, Hartsfield-Jackson has not. Though the District of Columbia has an interest in the Metropolitan Washington Airports Authority, no submission was recorded.[1]


Nine states not even deigning to submit a plan may signal a Constitutional conflict. The debate may expand as the FAA pass judgment on the “pending review” plans; a high number of rejections may expand the Defiant 9 to a larger number.

The policy dimensions of this debate are deeper than described by the Pew article. The airlines have drawn a hard line against increasing PFCs. If ATL wins its appeal and/or Congress rewrites the statute to permit these taxes, the battle between the landlords/airports and tenants/airlines will intensify. If localities are able to extract taxes from the airports, the landlords will have to increase rents and the tenants will pass that added cost onto their passengers. Higher fares are not a great result, but education and essential services need funding.

[NOTE: The Clayton County’s representative’s quote {“violates the desires of our taxpayers to use those taxes to help with capital projects as they voted on in the referendum.”} is a bit disingenuous. The county vote by the local citizens was to impose a tax on the ATL passengers’ aircraft fuel. The costs thereof are passed on largely onto interstate travelers, on Clayton’s residents to a much lesser degree. Having taxed interstate transportation, the County pays for local needs.]

The litigation between Clayton and the FAA is but a small part of this conundrum; the Pew article adds the financial dimensions; but the nine defiant states’ refusal to comply, the possible expansion of opponents upon FAA disqualification of the pending plans and an adverse decision by the courts suggest that this is huge iceberg.

It is not the first nor the last time when the Federal Government, inside the Beltway, has a major dispute with the states & counties & cities. It will be interesting to see which policy argument will win, but a better consequence will be for some statesperson to find a win/win solution.


[1] It is fair to assume that the plans as applied by VA and MD for the two airports also applies to DC. It may also be that since both DCA and IAD are on federal enclaves, no state tax can be applied,


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