Great expectations Plains disappointment
Several legislators claim confusion on airline votes
Daily Oklahoman, June 20, 2004
By Adam Wilmoth, Business Writer
Some state legislators who approved two rounds of tax credits totaling $27 million for
Great Plains Airlines now say they either misunderstood the legislation they were voting for
or were intentionally misled.
Ed note: Fair enough, our legislators shouldn't be expected to know what they are voting for.
Others, however, say the assistance plan was a good idea that just didnt work out.
Regardless of why the credits were approved, legal experts say the state likely cannot try to recover the tax credit money because, according to the legislation, Great Plains met its requirements by showing its intent to fly nonstop to either the east or west coast. Actually reaching the coasts was not required, the experts say.
Rep. Fred Perry, R-Tulsa, coauthored one of the tax credit bills. He said he did not realize at the time that Great Plains would be allowed to sell $27 million in tax credits for nearly $23 million in cash.
The airline filed for Chapter 11 bankruptcy protection in January, citing "heavy debt" and a lengthy repair schedule for its aircraft.
"When I voted for the bill, my understanding was there wouldnt be any assistance until Great Plains made a profit," Perry said. "The whole idea of an income tax credit is when you have a profit and are in a position to pay income tax, then you get a credit for that from the state. Thats what I thought I was voting for."
Lobbyist Margaret Erling, who represented Great Plains to the legislators, however, said the language in the tax bills was clear.
"The purpose of tax credits like this is for them to be resold. The state has issued tax credits for a lot of entities, including Goodyear and others, through the years," Erling said. "I do not feel there was any deception. These tax credits were overwhelming approved by the legislature in two sessions and were both signed by Gov. Keating."
Ed note: The man that supposed coauthored the bill is corrected by the lobbyist, leaving little doubt who writes our bills.
Great Plains representatives and their attorney did not return repeated phone calls from The Oklahoman.
Rep. Darrell Gilbert, D-Tulsa, coauthored the second round of state assistance, which gave the company $9 million in tax credits. Great Plains sold the credits to Bank of Oklahoma for $7.7 million in cash.
Gilbert said he was clear on how Great Plains would use the money.
"I dont know of any illegal or unethical activity," Gilbert said. "Everything was done in the open and above board in public meetings. As far as I know, everything was done in the light of day."
The representative said he still supports the attempt to help Great Plains even though the effort appears to have failed.
"I thought it was good for Tulsa. We certainly needed direct flights to the major cities, which you couldnt get from anyone else," Gilbert said. "I think at the onset it was a good idea, but that was also before 9/11 happened," Gilbert said. "Nine/11 has had a significant impact on financing all airlines."
Rep. Kevin Calvey, R-Del City, voted for the first round of tax credits, but led the fight against the second round, saying the company had already misled legislators and did not deserve further incentives.
"They said initially they wanted the tax credits because they were going to have direct flights to New York and Washington," he said. "But the planes they ended up buying with the tax credits were planes that physically cannot make it to New York or Washington, D.C. Thats when I got upset."
Calvey did say, though, he was aware the company planned to sell the credits for cash to get the airline started.
"I understood it was a subsidy," he said. "Common sense would tell you a startup company is not going to have that much tax liability."
Ed note: Wrong on the common sense thing. Both historical use and common sense tells us that limiting the benefit of tax credits to the tax liabilites that result from profits is the motivating factor and only reason for using tax credits. Otherwise simply appropriate a grant which cost the state the same, and gives the recepient more. Saves the receipent the discount lost in selling tax credits.
While the representative did not take issue with the tax credit idea, he did disagree with the amount Great Plains received.
"In perspective, the $27 million they got, thats half a percent of the whole state budget," he said. "Thats a huge figure. There are many state agencies that dont get that much money."
Some state and local leaders have suggested the state should sue Great Plains because it accepted the tax credits and did not follow through on its commitment to fly nonstop to either the east or west coast. The Oklahoma Tax Commission, however, said the state has no legal recourse because Great Plains met all the requirements spelled out in the legislation.
"We have all the things the legislature required, including commitments from not fewer than 20 companies doing business in the state to use the airline," said Paula Ross, director of communications for the tax commission. "One thing the law doesnt say they have to complete is actually flying to the coasts."