Runway Project Could Begin Soon At Airport; Power Line Lowering Faces Tax Question
September 9, 2020 at 2:33 a.m.
By David [email protected]
A news release last week from the U.S. Department of Transportation announced the $1,927,524 grant. The feds are covering all but $90,800, which the Indiana Department of Transportation – Aviation is picking up so the project won’t require a local match from the city.
During Tuesday’s Board meeting, Mary Kerstein – project manager with CHA, the city’s contracted aviation engineering company – said they held a preconstruction meeting Aug. 25 with the contractor.
The contract was awarded to Phend & Brown. A change order was approved in August reducing the contracted amount to $1,729,311.76 due to the project receiving less grant funding than anticipated.
“They are wanting to try to do this project this fall still. They are available to do the work this fall. Really, the main thing that we are waiting on is the federal grant from the FAA. It was announced last week by FAA headquarters that you all received the runway grant, but we just haven’t physically received that copy in the mail yet,” Kerstein said Tuesday.
She told Board President Jay Rigdon that would be sent to the airport and it would need his signature “right away” so it can be mailed back to the FAA right way.
Rigdon asked if once the grant was signed, if that’s when Phend & Brown got the “go ahead” or was there anything else that they had to wait for.
“No, we can go ahead once you receive it really, start working with them; we just don’t want to have them start working and not receive it for another two weeks. It’s going to be a tight, tight push right now, but we were told by the FAA, I think it was on Friday, that they told us we would be expecting it this week. So if do we receive this week, then we would be able to get everything done this year. That’s what we’re pushing toward,” Kerstein said.
The last thing that has to be done is the paint on the runway, which requires warmer weather, she noted.
Moving on to the power line lowering project with American Electric Power (AEP), Kerstein said they had “quite a bit of discussion” on the Contributions in Aid of Construction (CIAC) gross-up tax. They met Aug. 25 with “all the outfits” that are involved with taxes in Indiana.
“The good news is that we found out that that CIAC gross-up tax is not applicable for the state of Indiana. They decoupled ... that section a couple years ago. So that does reduce that tax from 11.9% to 8.76%,” Kerstein said, which will save the project about $155,000.
She said the portion they are still trying to determine if the project can be taxed on is the federal portion.
“We have spoken with the FAA and they are working with the region and the headquarters to try and find the language from FAA that says they are basically (tax exempt) because they are a federal agency,” she said. “But we are still waiting on that terminology from them.” She said they expected to hear something from them this week. Hopefully, she said, that will reduce the tax on the project from 8.6% to zero.
Rigdon asked, “Why is this not a settled question one way or another? It seems to me that we can’t be the only folks doing projects with federal money. And why is this tax still a question, one way or another?”
Nathan Lienhart, also with CHA, said it’s a specific tax to a utility project, not just a blanket tax for every project. He said they’re looking for a tax exemption clause somewhere but haven’t been able to find it with the FAA yet.
Dan Robinson, Board of Aviation Commissioners, said there was a similar project two to three years ago with AEP in Auburn.
Airport Manager Nick King read a paragraph from the Indiana Regulatory Commission tax code, which AEP references in regards to the nearly $766,000 tax on the project being disputed.
“For purposes of this subsection, the term contribution to the capital of taxpayer does not include any contribution by a governmental entity or civic group, other than a contribution made by a shareholder as such,” King said. “They are claiming that that language means that because we are paying AEP to do this project, they want us to claim that money as income to their company because the way that they read the tax code and the way they read this project, is they are getting compensated to do this project. We are contending that that is not the case, that this is a project required by the airport and we are paying for direct cost of labor and product to lower those lines.”
He said AEP “basically needs letter head stating that this project does not count toward that” because if AEP has to pay the now $600,000 tax, that’s substantial.
He was not aware if Auburn had to worry about that tax.
Kerstein said the hold up for the power line lowering project is the question on the tax. She said they can get the grant from the FAA for it up to April 2021 and there’s no delays there.
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A news release last week from the U.S. Department of Transportation announced the $1,927,524 grant. The feds are covering all but $90,800, which the Indiana Department of Transportation – Aviation is picking up so the project won’t require a local match from the city.
During Tuesday’s Board meeting, Mary Kerstein – project manager with CHA, the city’s contracted aviation engineering company – said they held a preconstruction meeting Aug. 25 with the contractor.
The contract was awarded to Phend & Brown. A change order was approved in August reducing the contracted amount to $1,729,311.76 due to the project receiving less grant funding than anticipated.
“They are wanting to try to do this project this fall still. They are available to do the work this fall. Really, the main thing that we are waiting on is the federal grant from the FAA. It was announced last week by FAA headquarters that you all received the runway grant, but we just haven’t physically received that copy in the mail yet,” Kerstein said Tuesday.
She told Board President Jay Rigdon that would be sent to the airport and it would need his signature “right away” so it can be mailed back to the FAA right way.
Rigdon asked if once the grant was signed, if that’s when Phend & Brown got the “go ahead” or was there anything else that they had to wait for.
“No, we can go ahead once you receive it really, start working with them; we just don’t want to have them start working and not receive it for another two weeks. It’s going to be a tight, tight push right now, but we were told by the FAA, I think it was on Friday, that they told us we would be expecting it this week. So if do we receive this week, then we would be able to get everything done this year. That’s what we’re pushing toward,” Kerstein said.
The last thing that has to be done is the paint on the runway, which requires warmer weather, she noted.
Moving on to the power line lowering project with American Electric Power (AEP), Kerstein said they had “quite a bit of discussion” on the Contributions in Aid of Construction (CIAC) gross-up tax. They met Aug. 25 with “all the outfits” that are involved with taxes in Indiana.
“The good news is that we found out that that CIAC gross-up tax is not applicable for the state of Indiana. They decoupled ... that section a couple years ago. So that does reduce that tax from 11.9% to 8.76%,” Kerstein said, which will save the project about $155,000.
She said the portion they are still trying to determine if the project can be taxed on is the federal portion.
“We have spoken with the FAA and they are working with the region and the headquarters to try and find the language from FAA that says they are basically (tax exempt) because they are a federal agency,” she said. “But we are still waiting on that terminology from them.” She said they expected to hear something from them this week. Hopefully, she said, that will reduce the tax on the project from 8.6% to zero.
Rigdon asked, “Why is this not a settled question one way or another? It seems to me that we can’t be the only folks doing projects with federal money. And why is this tax still a question, one way or another?”
Nathan Lienhart, also with CHA, said it’s a specific tax to a utility project, not just a blanket tax for every project. He said they’re looking for a tax exemption clause somewhere but haven’t been able to find it with the FAA yet.
Dan Robinson, Board of Aviation Commissioners, said there was a similar project two to three years ago with AEP in Auburn.
Airport Manager Nick King read a paragraph from the Indiana Regulatory Commission tax code, which AEP references in regards to the nearly $766,000 tax on the project being disputed.
“For purposes of this subsection, the term contribution to the capital of taxpayer does not include any contribution by a governmental entity or civic group, other than a contribution made by a shareholder as such,” King said. “They are claiming that that language means that because we are paying AEP to do this project, they want us to claim that money as income to their company because the way that they read the tax code and the way they read this project, is they are getting compensated to do this project. We are contending that that is not the case, that this is a project required by the airport and we are paying for direct cost of labor and product to lower those lines.”
He said AEP “basically needs letter head stating that this project does not count toward that” because if AEP has to pay the now $600,000 tax, that’s substantial.
He was not aware if Auburn had to worry about that tax.
Kerstein said the hold up for the power line lowering project is the question on the tax. She said they can get the grant from the FAA for it up to April 2021 and there’s no delays there.
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