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

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.

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.

But the beginnings of the fight started with e-mails sent by a representative of Delta Air Lines to the Federal Aviation Administration in 2012, according to documents obtained by The Atlanta Journal-Constitution.

In March 2012, an attorney representing Delta e-mailed an official at the FAA asking for a meeting with him and Delta’s then-chief legal officer Ben Hirst on “an issue concerning revenue diversion at airports in Georgia, arising out of state and local taxes on aviation fuel.”

A memo outlining Delta’s position sent to the FAA in advance of the meeting said Clayton has imposed sales taxes that capture aviation fuel sales at Hartsfield-Jackson, but because the money does not go to Hartsfield-Jackson, it violates federal statutes against revenue diversion.

Unlawful revenue diversion, according to the FAA, is the use of airport revenue for purposes other than airport capital or operating costs of the airport and related to air transportation.

In November 2013, the FAA started the process to clarify the policy.

The FAA said in a written statement that Delta’s inquiry was one of a number of inquiries it received on the issue, and the agency said it decided a general clarification was needed.

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.

In Clayton County, Hartsfield-Jackson is a dominating force that in effect brings millions of people into and out of the county every week — and thousands of planes that fill up with jet fuel.

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.”

That complicates compliance with the new FAA policy that was finalized in 2014 to take effect in December 2017, because enforcing it would violate the terms of the ESPLOST, which earmarks the funding for educational capital improvement projects.

“Every corporation has to do what they deem is in their best interest and that of their shareholders,” superintendent Beasley said. “But I would just ask that Delta work with us as a community, given that they are based right here in Clayton County.”

Delta said it “supports the agency’s interpretation of a 1987 law that regulates the application of local taxes on aviation fuel for aviation-related purposes.”

Turner said he is “kind of bewildered as to why [Delta] really wanted to do that.”

“They have posted a more than $1 billion profit,” Turner said. “I don’t think it’s their intention to really destroy us or really cause us a hardship. I think they’re a business… I think there should be a better spirit of cooperation.”

A coalition called the Clayton County Entities has been working on a solution that could involve the airport getting the revenue from sales taxes on jet fuel, then making payments to those local governments. They would act as payments in lieu of taxes, made to help offset local governments’ losses in property taxes due to non-taxable federal land in their boundaries. However, such payments could be subject to FAA scrutiny.

Delta said it has met with county officials and “is committed to minimizing disruption to county projects as a result of any reallocation of jet fuel tax revenues.”

Plans are to introduce legislation for the measure in the next session of the General Assembly, said Dan Lee, a consultant to the Clayton County Entities.

Most of Hartsfield-Jackson sits in Clayton County, but Clayton doesn’t collect property tax from the airport.

Still, the county incurs costs stemming from the airport, Turner said, including Board of Health training for the possibility of handling a quarantine of passengers and the Clayton jail system handling arrests at Hartsfield-Jackson. Those arrested at the airport are “housed and paid for by the Clayton County citizens,” he said.

“We are literally benefiting least from having the world’s busiest airport in our backyards,” Turner said.


AJC Business reporter Kelly Yamanouchi keeps you updated on the latest news about Hartsfield-Jackson International Airport, Delta Air Lines and the airline industry in metro Atlanta and beyond. You'll find more on, including these stories:

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