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The Daily Journal

 

May 11, 2006

 

By Michelle Durand

 

 

County to take huge cut in tax

 

 

A tax assessment settlement two years in the making between nearly two dozen airlines and assessors statewide will pull about $12 million from local agencies funded by property tax over the next eight years.

 

Basic aid schools and the county will take the brunt of the hit because they receive the bulk of property tax. Specific figures will be unveiled to affected agencies in a series of meetings next Tuesday and Wednesday, said Terry Flynn of the County Assessor’s Office.

 

By that point, the 23 airlines in 24 counties should have signed the settlement agreement based on how much the aircraft in each fleet is worth.

 

In 2002, the airlines claimed an allocated taxable value of $2.6 billion. By the next year, they claimed a $14 million difference.

 

The aircraft are valued based on the amount of time spent at individual airports. San Francisco International Airport and Los Angeles International Airport net the most significant amount of tax, largely in part because the planes sit on the tarmac overnight.

 

The county receives between $65 million and $70 million, said County Counsel Tom Casey.

 

The settlement will cost the county about $900,000, Casey said.

 

The amount will be given in two pieces over a period of years, including refunds and credits, Casey said.

 

The financial tug-of-war between airlines and assessors date back dozens of years, Casey said.

 

Prior to Sept. 11, the dot-com collapse pressured airlines but the terrorist attacks really devastated the industry. Many declared bankruptcy and nearly two dozen contended their fleets were assessed too high.

 

“It’s a difficult thing to assess because it’s not tied to how they are doing as a business,” Casey said.

 

Instead, the tax is based on each aircraft’s value — a figure, according to Casey and Flynn, that is difficult to gauge.

 

Planes are not typically sold enough to generate reliable market data and other approaches are similarly flawed, Casey said.

 

Earlier assessment appeals were settled with legislation but the latest expired shortly after the attacks. In October, new legislation was put into place to ease the new settlement and, after two years of negotiations and multi-year appeals, the two sides reached an agreement, according to County Assessor Warren Slocum’s office.

 

Slocum concedes the settlement is “not a perfect outcome” but calls the terms fair.

 

“This agreement will stabilize airline assessment, revenue collection and revenue distribution for the next eight years ... and stabilize the airline industry which is vital to the economic health of our county,” Slocum stated in his letter.

 

The scheduled meetings next week are aimed not only at answering questions but also providing affected agencies ample opportunity to absorb the costs as part of their upcoming budget processes.

 

Michelle Durand can be reached by e-mail: michelle@smdailyjournal.com or by phone: (650) 344-5200 ext. 102. What do you think of this story? Send a letter to the editor: letters@smdailyjournal.com.