Small Car Rental Firms Rap LAX Bid to Impose Fees

Nick Doolin calls himself the last of the small-time operators.

The owner of Rocket Rent A Car near Los Angeles International Airport, he says he has labored hard to stay in business for 26 years while other independent companies like his have folded in the face of competition from the large rental chains.

“I do it strictly by the sweat of my brow,” said the 66-year-old Doolin, who has a 100-car rental fleet. “I’m a momma-and-papa shop.”

But now, Doolin said, he may go under, too. He and the operators of other car rental companies on the outskirts of LAX are furious about a proposal by the Department of Airports to charge them 7.5% to 8% of their gross receipts for the privilege of using shuttle buses to pick up and deliver customers at the airport.

The city’s Department of Airports says a fee is justified because the companies make extensive use of the airport, a public facility, to get business.

But the companies say the proposal would drive up consumer prices and severely hamper them in competing with the handful of larger companies that have traditionally operated on airport property under expensive concession agreements. One consumer group has estimated that if such fees became common across the country, car rental customers would have to shell out $100 million more each year.

The companies also argue that other businesses--such as limousine firms, tour bus operators and hotels with shuttle buses--also pick up business at LAX and that the airport is not trying to tax their revenue.

Right to Tax Upheld

“What they have said is, ‘Hey, we want to single you guys out alone and charge you a tax,’ ” said Ted Anderson, who owns the Thrifty Car Rental franchise near LAX. “Our feeling is that it is totally unfair. It is a tax to allow us to come on a public roadway.”

But recent court decisions have upheld the right of airports to impose such fees, and at least 20 airports--including John Wayne Airport in Orange County, Palm Springs Regional Airport and Long Beach Municipal Airport--have already done so, according to airport officials. And at least 20 other airports have announced plans to impose a fee, the officials said.

“We would have done it 10 years ago if we could, but we were advised we maybe could not do it legally,” said Donald Miller, the department’s deputy executive director.

Under the Los Angeles proposal, which could be voted on by the Board of Airport Commissioners within 90 days, an estimated 15 car rental companies that operate near LAX or Ontario International Airport, which is also owned by the city Department of Airports, would pay the department the fee. The exact size of the levy has not been decided, but the proposal asks for 7.5% to 8% of gross receipts.

Companies with annual gross receipts of $500,000 or less would be exempt, but Doolin and other operators say they know of no car rental company that small.

Although department officials say they are not sure how much the department could earn from the fee, one report has estimated that the amount could reach $8 million annually. That would be on top of $21.2 million that the department earns from the car rental companies that operate on the airports’ premises.

Miller said the money is needed to meet growth demands at the airports. Next to parking lot revenue, the money the department collects from car rental companies is its largest source of non-aviation income, he said. All airport income is used to run and expand the facility; the airport does not provide any revenue to the city.

‘Question of Equity’

The department also believes that it is unfair to charge the total of nine companies that operate inside the terminals at LAX, Ontario or both--the number is limited by lack of space--a percentage of their gross receipts and not charge the other companies. The companies on airport property pay a 9% gross receipts fee.

Miller maintained that counter space is the only benefit the companies at the airport receive. They still must shuttle their customers to remote parking lots to pick up vehicles, he said.

“There is a question of equity,” Miller said. “Why should a segment of the industry pay and the other not?”

That position has been echoed by Hertz. In a speech last year to the American Assn. of Airport Executives, Frank A. Olson, the company’s chairman, told his audience that airports should make off-airport operators “shoulder their fair share of the cost” or limit their access to airport customers.

“It is about time, in our view, the free ride of taking business away from the airport ends,” Paul Tschirhart, Hertz’s general counsel, said in an interview.

Off-airport car companies dispute the notion that companies such as Hertz get few benefits from operating at the airports.

“The whole point of being an on-airport concessionaire is the perceived convenience on the part of the consumers,” said Liz Clark, spokeswoman for Alamo Rent A Car. Alamo operates within the terminals at 13 airports around the country, but off airport property at LAX.

Guarantee Income

Companies that submit bids for the right to operate at the two Los Angeles-owned airports must guarantee the department a certain amount of money each year. Hence, the smallest car rental companies are, in effect, barred from competing against the larger companies for a spot, the off-airport companies say.

Of the five companies that operate at LAX, Hertz guarantees the department $3.3 million annually, while Dollar Rent A Car guarantees the lowest amount--$1.1 million.

What Dollar pays the airport, however, is far more than the $750,000 that Doolin’s company grosses in a year, he says. “I don’t even make $750,000 a year,” said Doolin, who has nine employees.

Off-airport operators maintain that they are not against paying a fee for the wear and tear that their vehicles cause to the airports’ roadways. The companies, as well as the hotel shuttle buses, limousine drivers and other ground transportation companies, pay the department a per-trip fee of less than 50 cents.

“We are perfectly willing to pay our fair share,” said Thrifty’s Anderson.

But the companies say a gross receipts tax is discriminatory. Alamo has filed lawsuits against the John Wayne and Palm Springs airports, challenging their authority to impose such a tax. Alamo also helped form a group called Americans Against Unfair Airport Fees.

The 476-member coalition, whose membership consists primarily of car rental companies, is working to get federal legislation to prohibit airports from imposing what it considers excessive fees on off-airport companies.

A study prepared by the Consumer Federation of America, an advocacy group, estimated that if gross receipts fees on off-airport rental companies become widespread, most of the burden would fall on cost-conscious tourists who are most likely to search for a bargain from an off-airport operator.

May Not Pass Along Fees

“(The airports) have found a sucker,” said Mark Cooper, who prepared the study and came up with the $100-million estimate of annual cost to consumers. “It is basically the out-of-town traveler who doesn’t vote in Los Angeles.”

However, Paul London, an economic consultant hired by Hertz to review the federation’s report, said intense competition in the car rental business could prevent companies from passing the fees directly to consumers.

“In my view, it is not altogether clear that the . . . fee will be paid by the people who rent cars,” London said.

Nevertheless, some car rental companies say they are indeed sticking customers with the higher cost of doing business.

In Sarasota, Fla., Ray Stepnowski, who runs a Thrifty Car Rental franchise, said he simply passed it on to his customers when the airport there imposed a 10% gross-receipts fee on off-airport companies--the same fee it charges on-airport operators.

And Alamo’s Clark said her company has done the same in cities where airports have imposed the fee. “We are tabbing it right on to consumers,” she said.

Local car rental companies said they will have no choice but to do likewise if the department imposes the fee. And that, they fear, could translate into lost customers.

“Let’s face it,” Doolin said. “If I have to raise my prices to the same price Hertz is getting, why should you go off the airport to rent a car?”