June 27, 2016 Assembly Speaker Vincent Prieto Senate President Stephen M. Sweeney 1 Harmon Plaza, Suite 205 935 Kings Highway, Suite 400 Secaucus, NJ 07094 West Deptford, NJ 08086 Dear Speaker Prieto and President Sweeney: On behalf of the International Air Transport Association (IATA) and its 264 member airlines, many of which operate out of airports in the State of New Jersey, I am writing to express our strong opposition to two pending legislative proposals (A11/S2411) which seek to increase dramatically the state’s aviation fuel tax rate. The stated purpose of this increase is to replenish the state’s Transportation Trust Fund in order to pay for non-aviation-related infrastructure items such as roads, bridges, and tunnels. An increase of the tax on aviation fuel of the magnitude proposed can only damage New Jersey’s airports and the communities they serve in the competition for increased connectivity. Commercial air transport to and from New Jersey generates $22 billion annually in economic activity and supports more than 150,000 jobs. In addition to direct spending, jobs, and tax revenue, international aviation is an infrastructure asset that helps to enable foreign direct investment, business clusters, specialization, and other spill-over impacts on the economy. Increasing so significantly the cost of airline operations to and from New Jersey would clearly put this success story at risk. Moreover, because amounts collected through the increased levies would be allocated to purposes unrelated to aviation, the proposed legislation would violate federal law. 1 For fuel taxes attributable to aviation operations at any airport that has been the recipient of federal assistance, the statute prohibits the use of tax proceeds for any purpose other than the capital or operating costs of (1) the airport, (2) the local airport system, or (3) any other local facility that is owned or operated by the person or entity that owns or operates the airport that is directly and substantially related to the air transportation of passengers or property. The law is enforced by the Federal Aviation Administration, which reaffirmed and clarified federal policy in this regard in 2014. 2 In other words, the proposed legislation would likely subject New Jersey’s airports to federal sanctions. Finally, the United States has entered into “open skies” air services agreements with a great many countries, including an agreement with the European Union. These agreements contain mutual commitments to forgo taxing fuel used in 1 49 U.S.C. §47133. 2 79 Fed. Reg. 66282 (2014). International Air Transport Association 1201 F Street, NW, Suite 650 Washington, DC 20004 Tel: +1 202 628 9292 www.iata.org Fax: +1 202 628 9448 international aviation at the national level. The US-EU agreement contains a further obligation on the part of national governments to seek from state, provincial, and local governments within their respective territories a similar exemption from taxes on aviation fuel used in international aviation. To the extent the proposed legislation would impose a tax on fuel used for the conduct of international flights, therefore, it would immediately call into question U.S. international obligations and would undoubtedly trigger an adverse reaction from the federal government. In sum, the proposed legislation would compromise New Jersey’s airports and the communities they serve in their quest for increased services, would violate federal law, and would contravene the spirit of international aviation agreements entered into by the federal government for the benefit of communities throughout the United States. We urge you and your colleagues in the Assembly and Senate to reject these bills. We appreciate your consideration of our views in this matter. Please do not hesitate to contact me should you have any questions. Sincerely, Douglas E. Lavin Vice President, Member and External Relations – North America International Air Transport Association [email protected] cc: Assemblyman Jon Bramnick Assemblyman John Burzichelli Assemblyman Louis Greenwald Assemblyman Gordon Johnson Assemblyman Gary Schaer Assemblyman John Wisniewski Senator Jennifer Beck Senator Tom Kean, Jr. Senator Steven Oroho Senator Ron Rice Senator Nicholas Sacco Senator Paul Sarlo Senator Loretta Weinberg .