Pennsylvania working to grow its aviation economy

When Pennsylvania adopted AOPA-supported legislation that eliminated a 6-percent tax on the sale or use of fixed-wing aircraft parts and services in 2013, the commonwealth hoped the action would send a message to its aviation community that there was no longer a reason to fly out of state for aircraft maintenance or repairs.

Then state officials went a step further, to make sure the message gets through.

Other states, eager to keep aviation revenue and jobs at home, have passed similar legislation. But Pennsylvania has taken its bid to keep aviation dollars from flying away to a new level. Officials are reaching out with fact sheets, an online presentation, and through a variety of communications channels to build awareness of the benefits of the tax exemption, which complements an exemption previously enacted for helicopters. State economic development officials are also delivering the news in person at major aviation events and industry gatherings.

"I think it’s a natural next step," said R. Michael Cortez, a senior advisor to Pennsylvania Secretary of Community and Economic Development C. Alan Walker.

Before Pennsylvania moved to seize a competitive edge, this is what its aviation businesses had for a playing field: Pennsylvania—with 17,000 pilots and 6,000 general aviation aircraft—was the only remaining northeastern state that imposed a sales-and-use tax on the aircraft maintenance, repair, and overhaul industry. Pennsylvania has more based aircraft than any surrounding state except New York, but employment in the so-called MRO business, at 2,900 workers, lagged far behind New York’s 9,400 MRO jobs, and Ohio’s 8,300. 

With the tax exemption in effect, economic development officials are now striving to establish deeper ties with aircraft owners, pilots, the organizations that represent them, and the businesses at the state’s 131 airports. 

They are coordinating the effort with Pennsylvania’s Department of Transportation with such measures as adding "airport micro-site information" to PENNDOT’s interactive map of public-use airports.  

The interactive map "will also be added to the (Team Pennsylvania Foundation’s site) PASiteSearch.com in the near future for economic development opportunities surrounding airports," said Debra Bowman, executive director of marketing for the Department of Community and Economic Development. Bowman and Cortez discussed the state’s outreach campaign in a recent phone interview with AOPA.

The online presentation on the exemption includes a Pennsylvania Airport Data Survey that will help official create Department of Community and Economic Development sites for individual airports. 

Officials also make the point that that the lowered cost and convenience of using in-state MRO services should fuel demand and create hubs of economic activity around airports—thereby overcoming any loss of sales and use tax revenue. 

"It could be a boon," said Cortez, adding. "We didn’t want an exemption that was a revenue drain."

If one objective of the education effort is to make Pennsylvania’s MRO industry members and clients aware of new opportunities, "there is a learning curve for us as well" as officials work to become fully versed in the scope, structure, and needs of the state’s aviation sector, said Bowman.

For example, it was when officials took a look at the annual cost of maintenance for owners of various aircraft that they realized "what the sales tax exemption means to them in terms of real dollars," said Cortez. 

In this two-page publication to promote the aviation fixed wing tax exemption, the Department of Community and Economic Development estimated tax savings ranging from $960 for a piston single-engine aircraft with a $16,000 maintenance budget, to $28,920 for a large jet with a $482,000 maintenance budget. 

"It’s a real cost savings," he said.

AOPA has worked with other industry advocates to bring about a sales tax exemption in Pennsylvania, and was pleased to see the provisions pass last year within an omnibus budget bill, said Greg Pecoraro, AOPA vice president of airports and state advocacy. 

Pecoraro welcomed the commonwealth’s unusual follow-up effort—a proactive approach he could see taking hold elsewhere.

"I thought that was kind of exciting," he said. "The state got on board with this thing that the aviation community asked for. We've never seen this before."

Cortez said he believes that Pennsylvania is on its way to making the sales and use tax exemption a “net positive” for the state and its aviation sector, now that—as the promotional piece distributed to aviation media by Philadelphia-based Tierney Communications puts it—"overhauls and repairs can all be performed tax-free in a state with prime access to six of the 10 largest markets in the U.S., six international airports and a strategic location in the Northeast U.S. corridor."

"There’s a reason Pennsylvania is called the Keystone State," Cortez said. "This unprecedented access puts us on an equal footing. The geography and climate in Pennsylvania takes care of the rest."