Roger Zalneraitis on Airport Ballot 1B – Guest Opinion
Guest Opinion: Roger Zalneraitis, Executive Director La Plata County Economic Development Alliance – Airport Ballot 1B Guest Opinion
As the director of the Economic Development Alliance, we have been strong advocates for a new terminal at DRO. Being on the front lines of the debate has also exposed me and our volunteers to a lot of questions from people all over La Plata County. Melissa has done a magnificent job of addressing almost all those questions.
There are two I’d like to discuss in more detail. The first is the changes coming to the airline industry itself, the second is the ongoing discussion of “why aren’t we funding this with a sales tax”.
Changes to Airplanes and Why this Matters
Many people have noted that there seem to be fewer problems at the DRO terminal this year than in years past. That’s because we have lost seats flying here.
In 2014, Frontier was flying in an Airbus 319, which held about 130 passengers. United was flying Q-400 twin-engine aircraft, that held between 76 and 90 passengers. American was flying in smaller jets, but at our peak times we were trying to offload and onload 300 or more passengers at once. This volume was well beyond our terminal’s capacity, and resulted in numerous breakdowns both for passengers and the employees.
Flash forward to 2016. Frontier is gone, and we now have at peak times two 50 seat aircraft from United, and two 50-70 seat aircraft from American. Peak traffic is rarely more than 200 passengers getting on and off the planes at once. It can still get crowded, but it is relatively manageable.
The problem is this: the 50 seat aircraft are going away. From 2013 to 2015, the airline industry reduced the number of 50 seat aircraft by 25%, while increasing its 70+ seat aircraft by 31%. And these trends are continuing. Delta, for example, recently announced that it was getting rid of all their 50 seat aircraft. Skywest, which flies for both United and American, has more than 400 aircraft on order that are 76 seats or larger, and none on order in the 50 seat range. And starting at the end of this month- October 2016- United will begin flying 76 seat planes back into our market.
When we get to four 76 seat aircraft, our terminal will be back to the conditions we were in back in 2014. At 90 seats or more (the next class up for regional service), our terminal will fail. At 110 seats or more, we have to start parking planes sideways because of the ramp size and that risks reducing our service from four flights to three, or three flights to two. That means less competition and likely higher fares for all of us.
You may ask if this trend to move to larger aircraft will continue? It will, because it is being driven by three factors. First, the larger aircraft are more profitable. Second, they are more efficient- they lower costs and reduce delays. Third, there is a national pilot shortage being driven by federal regulations that is requiring airlines to put more passengers on fewer flights. None of these conditions are going to change in the foreseeable future.
The airlines have told us that they value the flexibility to fly in the size of aircraft they think is right for the market. They cannot do that here. As they shift their fleets to larger aircraft and reduce the number of planes they are flying, Durango will become less and less desirable to fly into. At some point, reductions in service are very likely… if we don’t fix our terminal.
Sales Tax vs. Property Tax
A lot of people have told me that they would be in favor of the terminal if only a sales tax was being used instead of a property tax. I heard three reasons for this: 1) the people who use the airport should pay for it, 2) they wanted to pay as little as possible, and 3) they didn’t want people who were struggling economically to be hurt by the tax increase. The perception is that a property tax violates these values, and a sales tax doesn’t.
When I started working on this issue I largely agreed with this perception. But I changed my mind for three reasons.
First, about a year ago I analyzed the numbers to find out how much more expensive the terminal expansion would be for the average household in La Plata County if a property tax was used instead of a sales tax. I was very surprised to learn the average household in La Plata County would pay more for the terminal if this was a sales tax increase instead of a property tax increase. In fact, the tax increase would be 50% higher!
Why is that you ask? The reason is, households pay about one-third of all property taxes in La Plata County (the rest is paid by second homeowners- tourists- and businesses). But, households in La Plata County pay half of all taxable sales. That means residents are more affected when sales taxes go up, than property taxes.
Second, when we commissioned a study by Colorado State University (CSU) on the airport, they looked at the impact of a property tax vs. a sales tax. Again, to my surprise, they found a property tax would have a smaller economic impact than a sales tax. They also found that a sales tax would hit low income households harder than a property tax.
Finally, when you consider that property taxes are primarily paid for by second homes and businesses, it becomes apparent that a property tax lines up closer to the value of “those who benefit should pay” than a sales tax does.
So does a sales tax or a property tax more closely meet our values? Our perception is that a sales tax meets our values, but in reality, a property tax does.
Bringing the Two Issues Together
The average household will pay $50 per year if this terminal expansion passes. The CSU study found that about $119 million in wages are generated annually in La Plata County as a result of good air service. That works out to about $4,500 for each household in La Plata County (90 times more than the average household will pay in taxes). And visitor spending from people who fly here generates almost $5 million in local taxes each year – taxes that benefit our roads, schools, fire districts, and more.
The income we gain, and taxes we receive from visitor spending, is at risk if we flight service falls or goes away at our airport. The property tax is small and more closely aligned with our values than a sales tax is.
Are we willing to risk our income and public services over a tax increase that is 90 times smaller than our benefits? I think that’s being “penny wise and pound foolish.” I don’t think it’s a risk we should take, I hope you agree, and I hope you will join me in voting YES on Ballot Item 1B this November for a new terminal for our community.
Thank you for your time,
Executive Director, La Plata Economic Development Alliance