Pittsburgh airport operators in tax imbroglio with county

Nation's Restaurant News, March 1, 1999 by Paul King

The measure of just how vital restaurants are to an airport's operations is the subject of a heated debate between Allegheny County, the Pittsburgh Airport Authority and the West Allegheny School District.

At stake are hundreds of thousands of dollars in property taxes the school district's attorney claims some 30 fast-food and casual restaurants operating in the main terminal of the Pittsburgh International Airport owe the district.

Meanwhile, the airport authority, food concessionaire BAA Pittsburgh Inc. and several restaurateurs believe the restaurants in question, which include T.G.I. Friday's, Au Bon Pain, Bain's Deli, The Steak Escape and the local Louis' Bistro, are essential to the smooth operation of the airport. As such, they are exempt from property taxes under state law.

The school board disagrees and has taken its case to the Allegheny County Board of Property Assessment.

The Pittsburgh International Airport, which spans some 13,000 acres, is located in Northwestern Allegheny County. A portion of the airport is sited in Moon township. The terminal, which houses the restaurants, however, sits in Findlay Township, part of the West Allegheny School District.

Until now, BAA and the airport restaurateurs have operated under a Pennsylvania law that states that government-owned property, such as an airport, being used by the government for a public purpose cannot be taxed by any government entity. The tax-exempt status extends to any privately owned business that is "reasonably necessary" to the safe and efficient operation of the property.

The state Supreme Court previously has upheld the law as it applies to airport businesses.

But round one of the battle went to the West Allegheny School District. The assessment board sided with the school district at a hearing held Jan. 26.

Ira Weiss, a lawyer for the school board, maintained West Allegheny's challenge was well-founded.

"What makes the shops in the Air Mall essential to the airport?" questioned Weiss, who noted that some of the restaurants are marketed to customers who aren't travelers. "Some of these facilities serve alcohol. A facility serving alcohol shouldn't be exempt."

Not true, said Jay Kruisselbrink, vice president of operations for BAA. "We believe the eating establishments are essential," Kruisselbrink said. "We are a hub airport. With most hubs, layovers can be as long as three hours. People have to eat."

It's not surprising that airport restaurateurs are not happy with the ruling, especially since operations in the Air Mall, opened as part of the airport's new terminal in 1992, are required to keep menu prices in line with similar restaurants outside the airport.

Several restaurateurs, represented by attorney Stan Parker, appealed the ruling to the Property Assessment Appeals Board, and as of Feb. 19, the appellate decision still was pending.

"When you go in with one set of economic assumptions and something is thrown in to alter those assumptions, running the business becomes more difficult," said James Cox, president of The Bistro Group, the franchise that operates three T.G.I. Friday's units in the terminal. "Obviously, the ruling could have a substantial impact on the desirability of this airport location. The property tax is something we would have to pass on to customers."

However, Cox acknowledged that price increases would be difficult to enact and still maintain "street pricing."

The question of whether they are essential to an airport notwithstanding, airport restaurants can be lucrative.

Cox said his main restaurant in the terminal -- Bistro Group also runs a T.G.I. Friday's Pub and a T.G.I. Friday's Boardroom, for private parties -- is the highest-grossing restaurant in the T.G.I. Friday's domestic franchise system.

Ironically, according to a recent article in the Pittsburgh Post-Gazette, if the case ends up in court, the county could be battling itself. The article quoted County Solicitor Kerry Fraas as saying the county's Law Department would support the businesses in any court appeal.