The Red Sox & the Yankees; American East – Aviation – Division

As I sit typing this blog on the day of the Red Sox season opener against the Baltimore Orioles—Eastern Region HQ (me) Vs AOPA HQ (colleagues)—I am reminded that competition is indeed a celebrated characteristic of American culture. By the very nature of our nation’s humble beginnings competition is, like in sports, ever present in business and in life.

New York’s aviation industry is credited with an annual economic impact of $4.5 Billion in state and local revenue and the source of 500,000 direct and indirect jobs (or 4.7% of the state’s workforce).  While these numbers are certainly eye catching, as an athlete and competitor, success is less about what is achieved and more about the relationship between ones achievements relative to one’s potential for an interval of time.

There’s an old adage that reigns particularly so for aviation industries in the Northeast where competition between states is compounded by our relatively small geography. That is, “If you are not taking steps to move forward, you are moving backwards.”  In other words, to simply maintain the status quo one must change and adapt.

I recently participated in a phone interview with an NBC news affiliate out of Buffalo regarding the New York Aviation Jobs Act (AJA – A.3677-B/S.273-B)—which is the industry’s sound bite to create jobs and boost revenues through the targeted elimination of a significant financial barrier to the purchase and operation of aircraft in New York.  A respected journalist in his region, I was unable to determine if he harbors personal angst with the legislation or if he is in fact an exceptionally talented devil’s advocate.  I would prefer the latter and of course offer him the benefit of any doubt.    One of his arguments opposing the AJA was a question of Northeastern state’s efforts to repeal targeted sales & use taxes as “a race to the bottom.”  If by bottom he meant the elimination of the associated tax, then I would issue an emphatic “YES!”  His angle (as I understood it) offers the cushy scenario in which the elimination of these exemptions would place states on an even keel and ultimately generate a guaranteed revenue stream for a state.  Within this conjured world I would again reply with an emphatic “YES”, followed by an even more emphatic BUT that world doesn’t exist..”  As some might view this parallel universe a stroke of genius in which big corporations continue to pay government large sums of money with no loopholes to line their deep pockets with additional dollar-signs, reality knows not all things are created equal.  The list of examples is endless so I’ll spare you my own interpretation and point to the first and most obvious of them; differing tax rates.

For fear it isn’t obvious, I’ll jump back to the blog’s title for a moment as I infused a historic Major League Baseball rivalry as a metaphor for competition among the states.  While my intent is always crystal clear in my mind, I am aware that the rhythmic ramble with which I preach results in an uncanny knack for skewing even the most focused minds.  I thank my Nanna for that talent! ;)

Not long after accepting this position I realized politics boils down to a matter of perception.  In New York, our plight has less to do with the economic importance of General Aviation as much as it does its economic potential.  With the annual economic figures as I previously tossed out, no one really disputes GA’s importance to New York—but—with any tax legislation there is a financial value attributed to revenue generated from a given proposal.  We tend to think of this value in terms of a “price tag”, and the value associated with the AJA is $13.4 Million.  Legislators must then weigh the value of these presumed guaranteed revenues against the economic potential, or opportunity for increased (or decreased) revenues.  In other words, an exemption like this one is really an investment and so becomes a case of getting legislators to “see the forest through the trees.”  AND while we have plenty of anecdotal evidence to support our case, the dynamics from upstate to downstate make for a unique challenge gaining support from the Assembly.

Basis for Change: Since 2002, NY has lost approximately 700 income generating aircraft.  Courtesy of our friends at the National Business Aviation Association (NBAA), we know the average business aircraft generates $1 Million in annual economic activity and 5 jobs.  So where did they all go? I should first point out for those of us who grew up in parts of New England outside of Massachusetts; the Boston Red Sox is considered New England’s baseball team; hence the fan-handle Red Sox Nation.  With the advance of targeted sales tax exemptions throughout Red Sox Nation, many of New York’s aircraft popped-out to airports just over the border.  Why you ask?  It is the generally accepted notion that corporations (as well as individuals) are in business to make money and so the competition of a free market society presents opportunity in the form of reduced expenses.  GA is by its very nature a mobile industry.  Given the simple reality that owner/operators can save hundreds of thousands of dollars (or more) basing their aircraft in neighboring states, they did just that.

The net result:If you build it, he will come” – Field of Dreams

Red Sox Nation realized that by creating a competitive financial atmosphere for aircraft, we would not only maintain those aircraft currently based here but pick up additional aircraft, each of which needs to bed-down (hangar/tie-down), purchase fuel, and requires various other services all of which—and most importantly—employs people.  These people earn salaries, their income is taxed and then whatever remains is spent on homes, groceries, entertainment, and so forth.  Over any interval of time, the potential for revenue generating transactions increases exponentially, which is all made possible (in this scenario) because of the economic engines that are state airport systems.

Comparison of Success:  Without breaking into the weeds, New York’s GA industry generates its $4.5billion & 500,000 jobs from its system of 130 public use airports.  Comparatively, the seat of Red Sox nation (Massachusetts) is credited with $4.3billion and 400,000 jobs from only 40 public use airports.  Now while the direct comparison of these states treads on apples and oranges, I am required to remind you that not all aircraft were created equal.  Instead let us consider another viewpoint.  According to the FAA, New York is currently host to 7,455 (based) aircraft at its airports.  Massachusetts, with one-third as many airports, is host to 3,664 aircraft.  The simple law of averages indicates the Red Sox’s have a batting average almost twice that (based on raw numbers alone) of its longtime rival.  So again, it is fair to conclude there is a correlation between the number of based aircraft and the associated success of a state’s aviation industry.

The Yankees are and continue to be a historically successful team, however, (as some fans like to gripe about an unlimited payroll) two-times as many airports offer considerably more economic potential than the neighboring system.  As such, my Red Sox continue to dominate the American East—Aviation—Division.  As we say in sports, there’s always tomorrow so fear not my Yankee friends and colleagues.  The Aviation Jobs Act is alive and well despite the final budget resolution released today (Monday, March 31st).  As the AJA awaits consideration in the Assembly Ways & Means Committee, your industry representatives (AOPA, NBAA, & NYAMA) are hard at work educating lawmakers and changing perceptions.  The opportunity to turn the tide is  ever only one-swing away and no fans know this better than those tuned into the fourth game of the 2004 ALCS between none other than the Red Sox and the Yankees.

Keep GA’s voice strong and join or renew today: http://www.aopa.org/Membership.aspx

Small cuts account for big gains

Two months after Maine’s legislature cements a sales tax exemption on aircraft, parts, and services, the quaint New England state is already seeing expansive growth from its modest aviation industry.  From the production of jobs and boost in revenues to increased spending on airport infrastructure, Maine’s aviation industry finds success at all levels.    

For aviation advocates like me, I often reflect on how fortunate I am to represent an industry that clearly speaks for itself as these targeted and proven tax exemptions are the envy of state aviation industries everywhere.  I am delighted to report that Maine now joins five other New England states that offer similar industry exemptions, leveling a playing field that has historically seen a—slow climb through rising terrain—for the region’s largest and most northern state.

As Regional Managers, my colleagues and I focus on engaging any alternatively focused entities who prefer to turn a deaf ear to a growing industry’s chimes.  We seek those who seek to paint yellow X’s on our legislative runways and who are quick to harangue these industry exemptions as corporate tax breaks that serve only to boost a bottom line and return nothing for public benefit.  To use the words of a character from a popular television series, “While I accept your premise (tax breaks improve revenues), I reject your conclusion (serve no public benefit).”  I simply need to point to the families in Maine of the more than 100 new jobs created since 2011, offering both good-wages and benefits. 

As demand increases, so does the cost of doing business: new workers, capital investments, and material consumption—each producing exponential values of direct and indirect economic benefit.  Capital investments in airport infrastructure generate demand for consulting and construction crews, while the accelerated use of materials generates revenue for wholesalers and other service providers.  In this example one action, facility investment, carries the potential to spur a series of additional (taxable) actions—a picture perfect illustration of how airports can serve communities as economic engines. 

For an industry that clearly speaks for itself, the real challenge is getting policymakers to listen—this is where you and I come in.  As a citizen in a democracy and resident of your state, you have a voice.  The truth is your elected-officials would much rather hear from you, Joe Constituent Smith, than me—alphabet group.  The difference is your membership in our organization lends me your voice.  With this in mind, special thanks is owed to the nearly 400,000 members across our nation—so THANK YOU to each of you for lending your voice as your Regional Managers carry your message into the 2014 legislative sessions.  Keep our voice strong and JOIN  or  RENEW online today! Use priority Code: M13XXFSCE