Wingtips Volume 3 - Number 1

Only a few feelings in aviation are as warm and fuzzy as knowing your airplane is locked in a sturdy T- hangar during foul weather. Not having to clean frost off the wings, not having to suffer faulty avionics which have been subject to the greenhouse effect while the airplane is parked outside and being able to plug into a nice warm engine heater for winter operations are just a few of the joys of T-hangar occupancy. While there is almost always a market for T-hangars, the grim reality for airport operators is that there is not a market at any price.

T-hangars are like any other property investment; they require an outlay of capital that is expected to produce an adequate return on investment.

One of the biggest problems in terms of developing an adequate return is the preexistence of older T- hangars that rent at unrealistic low monthly rates. This can have the net effect of essentially creating an artificially low market, and make it hard for aircraft owners to accept newer rental rates which are reflective of the cost of new construction.

In the current economic climate, it is very difficult to develop decent T-hangars and generate a competitive return and rent them for enough to amortize the investment. The best way to generate a reasonable rate of return if you are either a private developer or an airport operator, is to get pilots used to regular escalations in the rental rates. If these are applied consistently, and in a reasonable fashion, it is possible to keep the existing market in line with the costs of new construction.

If the T-hangar market at your airport is skewed by older units which are priced too low, a good way to bring the market into line is to build units and sell them to owners. This creates two benefits for the marketplace. The first is that the concept that the price paid for a unit represents costs of construction plus profit levels, seems to be more readily grasped by aircraft owners. The second is that if there are unit owners who lease their units to tenants, the rent charged will reflect their investment in the hangar, and will begin to establish a new baseline for the airport.

– Excerpted from NOTAMS, Win Perkins, Airport & Aviation Appraisal, Inc.

A new non-profit corporation, Women in Aviation, International (WAI) has been recently formed. The organization will provide assistance to women in aviation and encourage young women to consider pursuing a career in aviation. The newly-elected WAI Executive Director and President, Dr. Peggy Baty, stated that the idea behind this new corporation is “to include women in all facets of aviation general, corporate, commercial, and military. The organization is not just for pilots but intends to also serve controllers, engineers, airport managers, business owners, aviation mechanics, and others.”

WAI will provide education outreach programs to educators, aviation industry members and young people nationwide. The goals are to foster, promote and engage in aviation education, particularly as it relates to women in aviation; to cultivate, foster, and promote interest and understanding among the public in the accomplishments and contributions of women to the aviation industry; and to establish, acquire and maintain information and mate- rials, acting as a depository for historical and scientific interest which pertain in any way to the science of aviation, especially as it relates to women in aviation.

Palestine Aviation, Palestine Municipal Airport, received Honorable Mention in Private Pilot magazine’s nationwide service contest. The article appeared in the December 1994 issue of Private Pilot magazine. Private Pilot magazine started this contest five years ago to give their readers a chance to acknowledge the fixed-base operations they thought provided the best service during the past year. Congratulations!

An airport is an important part of the community as Judy Muzyczyn of Kleberg County describes in the following article:

Kleberg County Airport Is Vital To The Local Economy. Airport businesses contribute an estimated $1.2 million to the local Kingsville area economy in terms of annual economic impact. Economic impact is a measure of the benefits a business entity provides to a community. Every business impacts the economy, but to answer the question of our airport’s benefit to our economy, let us focus on one non-aviation industry that benefits from and depends on the local airport being able to safely land multi-million dollar aircraft loaded with guests-hunting.

Large hunting camps contribute substantially to the local economy. What does it take to build, operate, maintain and supply a camp? It takes lumber, employees, vehicles, groceries and more. These items are obtained locally. Businesses which benefit from camp guests include hotels, car rental companies, restaurants, gift shops, taxidermists, gun shops, veterinarians, banks, etc. Camps depend on the Kleberg County Airport. If your business depends on the camps and hunters, then you indirectly depend on the airport.

Kleberg County Airport is a valuable community resource for other reasons. Visiting dignitaries, like the Prince of Wales, Governor George Bush, and celebrities, like singer George Strait, football star Earl Campbell, and golfer Fuzzy Zoeller, depend upon Kleberg County Airport to facilitate their attendance at special community events.

Alert airport employees tipped off law enforcement personnel about unusual aircraft traffic which resulted in a million dollar reward for the Kleberg County Sheriff’s Department.

Angel Flight has made numerous landings to assist with local medical emergencies. The military uses the field to extend their training maneuvers. Private flight training complements local education processes and provides vocational training.

Developers recently used the airport as a base to obtain aerial photos of land to be used for a prospective new business. Kleberg County Airport plays a crucial role in community efforts to stimulate growth for businesses, growth which translates into jobs. While not directly used by everyone, the entire community benefits from the airport.

– Judy Muzyczyn, Kleberg Aviation, Inc.

Grants issued:

• Brownwood – was offered a federal grant for runway rehabilitation and marking, installation of fencing and other miscellaneous items.
• Franklin County – has been awarded a federal grant for a runway extension.
• Georgetown – federal grant was awarded, and conditional awards have been issued for medium intensity runway lighting installation as well as runway and taxiway reconstruction.
• Navasota and Minerals Wells – advertising for construction bids is underway.
• New Braunfels – a federal grant was offered in February, and a conditional award has been issued for runway and taxiway reconstruction.
• Van Horn, Culberson County – notice to proceed for runway and taxiway reconstruction has been given.

Airport Action Plans are underway at:

• Alpine
• Gladewater
• Hondo
• Mexia
• Bowie
• Hallettsville
• Lampasas
• Palacios

Consultants have been selected for the following projects:

• Alpine – terminal design
• Caddo Mills – design to repair runway, clean & seal runway joints, and replace low intensity runway lights with medium intensity runway lights.
• Clifton – needs assessment, site selection, Airport Master Plan, and environmental assessment.
• Crane – design of the rehabilitation of runway and apron
• Crosbyton – design of hangar access, taxiways, reconstruction of taxiway, and rehabilitation of turnaround
• Goldthwaite – feasibility study, site selection, environ- mental assessment, and master plan for a new airport
• Refugio County – Airport Master Plan
• San Saba – design services for runway rehabilitation, reconstruction of aprons and replacement of low intensity runway lights with medium intensity runway lights.

The Aviation Division has received numerous phone calls from individuals requesting clarification about the requirement for flight schools to collect and pay sales tax.

As we advised in a recent WINGTIPS, “since there has been some confusion and possible misinformation provided regarding this matter in the past, Mr. John Sharp, Texas Comptroller of Public Accounts, agreed to forgive taxes due prior to July 22, 1994. However, FAR Part 61 schools will be responsible for paying future taxes…”.

The draft of the sales/use tax guidelines for flight training schools issued by the Texas Comptroller of Public Accounts, makes a distinction between Part 141 flight schools and Part 61 flight schools. In general, and with only a few exceptions, training at a FAR Part 141 flight school is tax exempt; training at a FAR Part 61 flight school is not.

What is the difference between a Part 141 flight school and a Part 61 flight school? Part 141 flight schools are those which hold an FAA issued “certificate” indicating FAA program approval. A Part 61 flight school has no FAA oversight of its training program.

Since each of these programs lead to a pilot’s license, why is one subject to paying sales tax, while the other is not? The law exempts “licensed” schools from paying sales tax. While there is no such thing as an FAA “licensed” flight training school, the Comptroller determined that schools that have an FAA “approved” program would be exempt. His determination is that the wording is different, but the law applies as though they were the same.

We have been advised that the final version of the sales/use tax guidelines for flight training schools will be distributed soon by the Comptroller’s Office in a publication called Taxpayer Policy News. The “draft” reads as follows:

I. Part 141 flight schools

A “Part 141 flight school” is a flight school holding an FAA issued certificate under FAR Part 141.

1. a. The school may acquire aircraft to be used in student training tax free by issuing an exemption certificate, whether acquired by purchase, lease, or rental from others.

b. Rentals of such aircraft to flight training students enrolled in an FAA approved Part 141 curriculum/program are exempt. Rentals of such aircraft to other persons engaged in flight training shall be in accordance with other rules under “Part 61 flight schools.”

2. Parts and equipment needed for operation, maintenance, and/or upgrade of such aircraft may be purchased tax free. Supplies needed for maintenance/ operation of such aircraft, including motor oil, hydraulic fluids, windshield cleaners, paint, et cetera may also be purchased and used tax free.

3. The rentals of aircraft owned by third parties and rented to students on behalf of the third parties for flight training are not subject to sales tax at either a flight school or aircraft owner level.

4. The rental of aircraft for purposes other than flight training are subject to sales tax.

5. If the flight school uses such aircraft for a purpose other than training, aircraft maintenance, or checkout of flight school students or flight school instructors, the flight school must report and remit to Comptroller use tax based on fair market rental of that aircraft.

6. If aircraft rented from third parties are rented for non-training use, tax must be collected. If the aircraft is used by the school for a non-training use, the school must remit tax on the amount paid the owner. It is the responsibility of the owner of the aircraft to remit the sales tax to the state.

7. Engine/aircraft time and/or flights associated with routine and/or extraordinary maintenance of aircraft are not taxable.

8. Check-out flights of flight school instructors are not taxable.

II. Part 61 flight schools

A “Part 61 flight school” is a flight school not holding an FAA issued certificate under FAR Part 141.

1. The school may either pay tax on the purchase, lease, or rental of the aircraft at the time of purchase or give a resale certificate to the seller.

a. If the flight school pays sales tax at time of purchase, it is the responsibility of the seller to collect sales tax and remit it to the state.

b. If the flight school does not pay sales tax at the time of purchase, lease or rental, the school must provide the seller/lessor/renter with a resale certificate or tax exemption certificate. The school will then be subject to use taxes as described more in detail as follows.

2. If tax is paid by the school at the time of purchase, the school must collect sales tax on all rentals of the aircraft to students flying solo and to non-students, but no additional tax is owed by the school when it uses the aircraft for dual training or other non-rental purposes.

3. If a resale certificate is given for the aircraft (and sales tax is not paid at the time of purchase/lease/ rental), the flight school must

a. Collect and remit to the Comptroller sales tax on all rentals of the aircraft to students flying solo and to non-students, and

b. Remit use tax to the Comptroller on its use of the aircraft for dual training and other business and personal uses based on the fair market rental value.

4. Parts and equipment needed for operation, maintenance, and/or upgrade of such aircraft may be purchased tax free. Supplies needed for maintenance/ operation of such aircraft, including motor oil, hydraulic fluids, windshield cleaners, paint, et cetera may also be purchased and used tax free.

5. When aircraft owned by parties other than flight school operators are rented to students for flight training (either solo or dual), flight schools shall collect sales tax and account to aircraft owners thereof.

6. Engine/aircraft time and/or flights associated with routine and/or extraordinary maintenance of aircraft are not taxable.

7. Flight time for a flight school’s instructors in the flight school’s own aircraft are taxable if tax was not paid on the airplane when it was purchased. If the aircraft being used is owned by someone other than the flight school operator, that use is taxable.

III. Purchases by third parties for purposes of allowing flight schools to rent the aircraft

1. The purchaser of an aircraft that intends to place the aircraft with a flight school operator for flight training purposes may avoid sales tax at time of purchase if the purchaser holds a sales tax permit and provides a resale certificate to the seller.

2. If the purchaser makes any personal use of the aircraft, use tax must be remitted based on the fair market rental value.

3. Parts and equipment needed for operation, maintenance, and/or upgrade of such aircraft may be purchased tax free. Supplies needed for maintenance/ operation of such aircraft, including motor oil, hydraulic fluids, windshield cleaners, paint, et cetera may also be purchased and used tax free.

IV. Miscellaneous sales

1. Sales tax must be collected on sales of books, equipment and similar consumable supplies by both types of schools.

2. In those situations where the owner of an aircraft is responsible for remitting sales or use tax to the Comptroller, the flight school may remit the tax on the transaction. However, shall the flight school fail to remit the proper amount of tax, the owner of the aircraft remains liable for all unremitted tax.

Watch for these sales/use tax guidelines to be published soon by John Sharp, Texas Comptroller of Public Accounts, in the Taxpayer Policy News.

The U.S. Department of Agriculture’s Rural Development Administration (RDA) has various programs available to aid in the development of rural areas, including airports. Since the RDA does not have a field structure in place, Farmers Home Administration (FmHA) continues to administer the program at the local level. FmHA is authorized to make loans to develop community facilities for public use in rural areas and towns of not more than 20,000 people.

Who May Receive Assistance?

Loans are available for public entities such as municipalities, counties, special purpose districts, Indian tribes, and nonprofit corporations.

How May Funds Be Used?

FmHA loan funds may be used to construct, enlarge, or improve community facilities for public services, public safety, and health care.

Public service facilities include community buildings, courthouse, public maintenance buildings, libraries, schools, industrial parks, roads, bridges, airports, fairgrounds, utilities, and other improvements or to acquire interest in lands, leases, and rights-of-way necessary to develop the facilities. Loan funds may also be used for necessary equipment for the operation of these facilities.

Public safety facilities include fire stations and buildings to house fire and/or rescue equipment. Funds may also be used to purchase fire trucks, ambulances, or emergency communications equipment; to buy or build fire and rescue multiservice centers, police stations, and jails, and to pay necessary costs connected with these facilities.

Health care facilities include hospitals, nursing homes, and dental or medical clinics or medical rehabilitation centers. Funds may also be used for necessary equipment for the operation of these facilities; and to pay other necessary costs connected with them.

For more information or to receive a “Community Facility Loans” Program Aid Brochure #1100, contact FmHA’s Texas State Office in Temple, TX, 817/774- 1306.

FmHA has 18 District Office locations in Texas. Their Texas State Office in Temple can advise you which district handles your county. Or, you may write to “Farmers Home Administration, USDA, 101 S. Main, Suite 102, Temple, TX 76501.”

NO! Diversion of airport revenue is against both state and federal law. This means that the airport cannot be viewed as an additional source of funds to support general city or county needs. Congress recently reinforced its intentions in this area by including a provision prohibiting diversion of airport revenues in Public Law 103-305, August 23, 1994. Diversion of airport revenue also violates Federal Grant Assurances (Section 47107 (b) of Title 49, United States Code). TxDOT has been advised that the Office of Inspector General is conducting audits to ensure compliance with this law. This prohibition cannot be waived or circumvented due to local needs or desires. Please be sure you are in compliance with the imposed constraints on the use of airport funds.

The City of Paris has been fortunate to receive funding over the years for Cox Field Airport. This funding has allowed the City of Paris to make great strides in improving our airport facility, which is a very important part of our community. As more improvements are made, it seems more local interest is aroused. Over the past five years, the City of Paris has raised approximately $185,000 in local funds to complete projects that were not able to be funded through federal or state funding. Those funds came from either the general operating budget or through Certificates of Obligation.

We all know airport improvement funding is a must to ensure Texas airports are continually improved and are as safe as possible for the flying public. We all appreciate the funding that is available for Texas airports. Many times I feel this funding is taken for granted. We cannot rely solely on federal and state funds to upgrade airport facilities. Once funding is received, the city’s governing body should become even more active in their airport development. I believe this is the key to the success of an airport. When federal and state agencies are putting dollars in our local airport, the local governing body is more apt to approve local funds for airport improvements.

Things are happening at Cox Field. Our airport is safer. More planes are being hangared and more private hangars are being built. A 16,000 square foot private hangar presently under construction will house a Beechcraft 35, 200 King Air, Citation II and a Gulfstream II. An increase in aviation activity has occurred, thus providing increased revenues both for the City of Paris and the fixed base operator.

The local governing unit must take a very active role in promoting the local airport. When you combine this with federal and state funding and a local flying public with a genuine interest in their airport, you have the ingredients for an airport that entities involved are very proud of.

 – Dick Boots, Director of Community Facilities, City of Paris

With the Texas Legislature being well into its 74th Session, I thought I would pass on to you several aviation related bills which may be of interest:

(1) House Bill 2116 filed by Representative Allen Place and companion Senate Bill 1023 filed by Senator Frank Madla:

These bills relate to the use of tax revenues for publicly-owned airports. The proceeds from the collection of the taxes currently being levied on the sale of aviation services, aircraft, and aviation parts, would be deposited into a special public aviation account in the state highway fund. The money from the account could be appropriated only for the benefit of publicly-owned airports. If this bill becomes law, the Texas Department of Transportation would use the funds for grants to communities for airport improvement.

(2) House Bill 2180 filed by Representative Jim Horn:

Current law requires that the Texas Transportation Commission must hold a public hearing prior to approving any request for financial assistance for airport improvement grants or loans. This bill would allow the Executive Director of the Texas Department of Transportation, or his or her designee, in the case of an emergency where an unsafe condition on an airport required immediate attention, to award a loan or grant without holding a public hearing. An unsafe condition would be of sufficient concern to require the filing of a Notice to Airmen with the FAA.

(3) House Bill 1807 filed by Representative Ciro Rodriguez and companion Senate Bill 833 filed by Senator Frank Madla:

Provides for an exemption from sales and use tax on aircraft designated to be used in flight instruction designed to lead to a pilot certificate or rating issued by the FAA. Current law exempts FAR Part 141 schools but does not exempt FAR Part 61 schools.

(4) House Bill 278 filed by Representative Fred Bosse:

This bill would require that a products liability suit be filed against a seller of general aviation aircraft no later than before the end of 25 years after the date the aircraft was delivered to its first purchaser.

(5) Senate Bill 853 filed by Senator Florence Shapiro:

This bill establishes the penalty for an offense involving the operation of a motor vehicle, aircraft, or watercraft while intoxicated and while a person younger than 17 years of age is present, as a Class A misdemeanor, with a minimum term of confinement of not less than 15 days, A second offense would become a state jail felony. A third or greater offense would become a felony of the second degree.

The Texas Airport Operators Conference celebrating 50 Years of state service to aviation is just weeks away!!! If you have not made your plans to attend, please do so, as it looks to be our best conference ever. Call our office at 1-800-68-PILOT for more details.