March 6, 2014 Updated: March 6, 2014 at 9:25 am
Market forces, not just sellers, determine prices. Try selling a Big Mac at $10 bucks and few will buy it. This simple concept seems obvious, but had been lost on city officials for the past seven years as they watched the Colorado Springs Airport free-fall to the lowest number of outgoing flights in 22 years. If the airport isn't a good value, airlines and travelers won't use it.
Finally, we're seeing progress in the right direction. City Council President Keith King, in cooperation with the mayor and airport administration, plans to introduce an ordinance Monday that would lower prices for businesses that locate at airports to repair, maintain, lease and/or sell aircraft. King wants a Commercial Aeronautical Zone around the airport, relieving businesses from the sales tax burden.
Airport-dependent businesses provide jobs and boost an airport's bottom line by paying for fuel and avionics services. By paying taxes on fuel, the businesses also help airports receive state grants that are based on fuel tax receipts. We obviously want more of these businesses in Colorado Springs.
The airport has a dearth of on-site businesses because city government priced them out. Back in 2007, the city began charging airport-based businesses a 2.5 percent sales tax on the value of planes and helicopters. It taxed aircraft and associated equipment even when a sale had not been made in Colorado Springs. Any business that located at the airport with valuable equipment had to pay. On a $10 million aircraft, the sales-tax bill was a whopping $250,000.
"We had tenants who had been here a long time and the city was coming out saying 'hey, you never paid us sales tax for that jet.' Business owners were saying 'what?' They couldn't believe it," said interim airport director Dan Gallagher.
Immediately, before the year ended, 20 percent of businesses fled because of the tax. Over the course of the next year, an additional 10 percent left and no businesses have chosen the airport as a new home. It makes more sense to do business at any number of other Front Range airports that do not charge the tax.
"We've been dying on the vine because of that tax," Gallagher said.
The loss of businesses has placed nearly all airport overhead squarely on airlines, which favor offering flights in cities with the lowest leases and fees. The airport consists of 7,000 acres, yet 90 percent of revenues are generated by the 5-acre terminal and 200 acres of parking. In essence, the tax that forced businesses to leave the airport has also kept airlines from offering routes.
"We're trying to create a diversified airport economy so all the costs don't fall on the airlines," Gallagher said. "To do that, we need to create the most business-friendly climate possible."
It's not that businesses want to avoid Colorado Springs. They just can't afford it. Example: Rampart Aviation in North Carolina. King says the company wants to relocate to the Springs but will not do so if the 2.5 percent sales tax doesn't go away. The company would bring 40 high-paying jobs.
King's cost-lowering maneuver will put Colorado Springs on an even playing field with competing airports, at least in terms of price.
"But, because we have a work force that consists of a lot of retired military, and because we have a low cost of living and an enviable quality of life, we believe we're at a natural advantage by merely getting ourselves on par in terms of cost," Gallagher said.
King's plan is a common sense, pro-business idea that deserves support.