Aviation exemptions could be on state chopping block

‘Tightening noose' on MIA could spill down to community ‘It's a look at all exemptions and determines which are essential to attracting business.' Sen. Evelyn J. Lynn ‘I absolutely believe there is going to be less work coming into Miami to have heavy maintenance done.' Derry Huff ‘That definitely affects the expansion of our economy, and aviation is such an integral part.'

--Dan Sullivan

BY RISA POLANSKY

A proposed state bill that would eliminate a handful of aviation-related sales and use tax exemptions has sent the local industry into a tailspin.

"Miami [International] Airport is the most significant economic engine in Dade County, hands down, and there's a reason that these exemptions were put into place," said Derry Huff, director of strategic initiatives for Amerijet International, which has a cargo hub here. "If they tighten the noose on that economic engine, it's only going to trickle out into the entire community." Aviation-related breaks on the chopping block, set to be repealed in 2012 if the bill passes, include tax exemptions for:

• Aircraft modification services.
• Aircraft repair and maintenance labor charges for qualified aircraft.
• Equipment used in aircraft repair and maintenance for qualified aircraft.
• Some aircraft sales and leases.
• Leasing airport property used for loading and unloading passengers or cargo.
  
  Without the now-threatened exemptions, Amerijet would have paid $1.5 million more in taxes last year, Mr. Huff said.

The exemptions apply to traditional sales taxes as well as use taxes, which are due on out-of-state purchases brought into Florida within six months of purchase.

And if the exemptions, which Mr. Huff says draw outside companies to MiamiDade, are axed, "I absolutely believe there is going to be less work coming into Miami to have heavy maintenance done." Dan Sullivan, president of the Greater Miami Aviation Association, said the same in a recent interview, though he added Monday that it appears the bill could die in the House.

"If it's going to cost more to do business here, you can go to Louisiana, you can go to Alabama – the cost of living, the cost of doing business is cheaper," he said. "That definitely affects the expansion of our economy, and aviation is such an integral part." Mr. Sullivan predicts a "trickledown effect" – as aviation companies incur more costs, so eventually will customers, he said.

"Most of the expenses and costs and taxes and things are usually passed on to the customers… Customers will see an increase in the bottom line." And smaller local repair shops may be forced to close, Mr. Sullivan said.

"There are many small little mom-and-pop repair stations… They probably just get by, get through. And if the cost is passed on down to them… you're going to see businesses go out of business, move or relocate." Stephen Beatus, associate executive vice president of expansion/retention/recruitment and urban initiatives for the Beacon Council, said re-instating taxes companies don't pay now "certainly is something that could have a negative effect on business," though it's difficult to predict the exact extent.

No one can say for certain whether it would drive businesses away, but "it's certainly one of the elements that make the state of Florida, and specifically Miami-Dade County, attractive to aviation companies," he said. "Tax exemption is tantamount to incentive, and if that incentive were repealed, it could have negative impact on the growth of existing companies or the entry of new aviation companies into Miami-Dade County." He noted also that the twin bills winding through the House and Senate – now under committee review – call for repealing other tax breaks outside the aviation industry.

Fields such as boating and research and development could also be affected.

Though it does specify repealing certain tax breaks, the crux of the measure calls for reviewing all state sales and use tax exemptions, said Senate sponsor Evelyn J. Lynn of Daytona Beach.

It specifically calls for repeal of a handful and mandates a review of the rest.

"It's a look at all exemptions and determines which are essential to attracting business or maintaining exemptions to charities… but also then evaluates those that are inappropriate and/or unnecessary during challenging times," Sen. Lynn said.

Mr. Beatus of the Beacon Council said locals have focused on the proposed aviation repeals because they "hit a nerve early on" in a county that's felt the benefits of the exemptions.

Aviation is part of MiamiDade's identity, Mr. Sullivan of the local aviation association said.

"The history of aviation is mostly in Miami… It is a major historical avenue down here that should be preserved not just for history's sake, but for the economic stake of it all."