By Joanne Haas
The longer a lawsuit challenging the constitutionality of an airline property tax exemption for two Wisconsin-based airlines sits in the Court of Appeals, the longer a bill seeking to secure more than $18 million in tax breaks for two state-based airlines stalls.
As one Republican put it, the legislation to benefit Midwest Airlines and Air Wisconsin "is spinning its wheels into the mud," while Minnesota-based Northwest Airlines keeps close tabs on the situation.
Meanwhile, everyone — notably Assembly Speaker John Gard — is watching and waiting for the court to rule on whether the 2001 subsidies granted the two state airlines violated the U.S. Constitution’s commerce clause. That’s the stand of Northwest Airlines, which won its challenge in a Dane County Circuit Court. It is the state’s appeal of that decision that is pending in the Court of Appeals, which is under no deadline to rule. And the general consensus from key leaders as of mid-May appears to be that it doesn’t make sense to move on something until the ruling is in.
Assembly Bill 933/Senate Bill 533 was introduced late in the recently completed regular session and had a public hearing before Joint Finance on March 10. That hearing revealed more than a few questions about how to proceed. Committee action was delayed as private negotiations and talks ensued. However, the bills were never brought up for a vote in Joint Finance before the regular session was adjourned. Those specific bills died with the regular session, but could be revived in extraordinary session measures if the scenario changes — meaning the Court of Appeals rules.
The purpose of the legislation is to create a legal way to replace the 2001 subsidies for the two airlines. And if that would happen, there’s nothing to stop Northwest Airlines from launching yet another legal challenge.
"We want to be treated fairly," Northwest’s spokesman Kurt Ebenhoch told WisPolitics this week. "And as the state’s largest serving airline, we believe it would be fair for us to be included."
One of the issues is the definition of a hub. The legislation seeks to give the tax breaks to those two airlines operating hubs in Wisconsin. Northwest says while Midwest has its hub in Milwaukee, Air Wisconsin (a United Express carrier) does not have a hub according to the industry definition. "The hub is the center … where there is a large wave of arrivals and passenger departures," Ebenhoch says.
However, according to a bill analysis completed by the Legislative Fiscal Bureau, Air Wisconsin fits the definition of a "terminal hub facility."
LFB’s analysis defines a terminal hub facility as either one of the following: "A facility from which an airline operated at least 45 common carrier departing flights each weekday in the prior year and from which it transported passengers to at least 15 nonstop destinations or transported cargo to nonstop destinations; or, an airport or any combination of airports in Wisconsin from which an air carrier company cumulatively operated at least 20 common carrier departing flights each weekday in the prior year, if the air carrier company’s headquarters is in Wisconsin.
"Currently," the analysis says, "Midwest Airlines and Air Wisconsin qualify for the exemption."
Commercial airlines with a terminal hub facility are exempt from paying the ad valorem tax on their property, and non-exempt airlines pay the state ad valorem tax instead of local property taxes. The taxes are placed in the transportation fund.
At the hearing in March, representatives from the two state-based airlines said not having to pay the ad valorem tax translated into equipment purchases, more customer services and employment gains.
In 2001, Northwest challenged the exemption in Dane County Circuit Court and won. The court ruled the tax break violated the U.S. Constitution’s commerce clause, which says states cannot discriminate against interstate commerce. Northwest, meanwhile, has contended the simple approach would be to expand the 2001 property tax exemption to all airlines.
Last month, Northwest said it was adding seven daily nonstop flights from Milwaukee’s General Mitchell International Airport to places including Baltimore/Washington International Airport, Kansas City International Airport and Lambert-St. Louis International Airport.
When asked if this was a move to take on Midwest, Ebenhoch rejected the suggestion and said NWA was taking advantage of a strong following in the Midwest market.
