BEFORE THE UNITED STATES OF AMERICA 

DEPARTMENT OF TRANSPORTATION 

FEDERAL AVIATION ADMINISTRATION 

AIR TRANSPORT ASSOCIATION OF 

AMERICA, INC. d/b/a AIRLINES FOR 

AMERICA, et al., 

 

Complainants, 

v. Docket No. 16-16-04 

PORT OF PORTLAND, OREGON, 

Respondent. 

ANSWER OF THE PORT OF PORTLAND 

Designated for service of process: 

Daniel Blaufus, Esq. 

General Counsel 

Ian Whitlock, Esq. 

Deputy General Counsel 

Wendy Hain, Esq. 

Assistant General Counsel 

THE PORT OF PORTLAND

7200 NE Airport Way 

Portland, OR 97218 

Email: dan.blaufus@portofportland.com 

ian.whitlock@portofportland.com 

wendy.hain@portofportland.com 

Phone: 503-415-6062 

Fax: 503-944-7080 

Pablo O. Nüesch, Esq. 

SPIEGEL & MCDIARMID LLP 

1875 Eye Street, NW 

Suite 700 

Washington, DC 20006 

Email: pablo.nuesch@spiegelmcd.com 

Phone: 202-879-4000 

Fax: 202-393-2866 

April 15, 2016
BEFORE THE UNITED STATES OF AMERICA 

DEPARTMENT OF TRANSPORTATION 

FEDERAL AVIATION ADMINISTRATION 

AIR TRANSPORT ASSOCIATION OF 

AMERICA, INC. d/b/a AIRLINES FOR 

AMERICA, et al. 

 

Complainants, 

v. Docket No. 16-16-04 

PORT OF PORTLAND, OREGON, 

Respondent. 

ANSWER OF THE PORT OF PORTLAND 

Pursuant to 14 C.F.R. § 16.23(d), the February 25, 2016 Notice of Docketing issued by 

the Federal Aviation Administration (“FAA”), and the March 3, 2016 unopposed Motion of Port 

of Portland for an Extension of Time, Respondent, the Port of Portland, Oregon (“Port”), hereby 

files this Answer in response to the Complaint filed by the Air Transport Association of America, 

Inc. d/b/a Airlines for America (“A4A”), and Alaska Airlines, Inc., American Airlines, Inc., Atlas 

Air, Inc., Fedex Express Airlines, Hawaiian Airlines, Inc., JetBlue Airways, Inc., Southwest 

Airlines Co., United Airlines, Inc., United Parcel Service Co., and Air Canada (collectively, 

“Complainants”). 

I. BACKGROUND 

The Port is the owner and operator of the Portland International Airport (“Airport”), 

which is located within the City of Portland (“City”). The air carriers operating at the Airport 

disagree with having to pay certain stormwater management and environmental fees that the City 
 

2 

imposes on all ratepayers within its jurisdiction, including the Port. The stormwater fee in 

dispute (“Stormwater Charge”) goes to cover the City’s costs of managing the stormwater runoff 

from the City rights-of-way and other City property. The environmental fee relates to a 

Superfund investigation associated with City stormwater runoff and sewer overflow (“Superfund 

Charge” together with the Stormwater Charge, the “Water Charges”). Collectively, the fees are 

among various utility charges the Port incurs as a consequence of owning and operating the 

Airport. As such, the fees constitute operating and maintenance expenses of the Airport and the 

amounts paid are included in the air carriers’ rate base pursuant to their agreements with the Port. 

The Port understands Complainants’ concerns—the disputed utility fees increase the cost 

of operating at the Airport. The air carriers would rather not have to pay them. However, the 

Port cannot avoid the charges. The City is a third-party governmental entity with the legal 

authority to impose utility fees on all of its ratepayers, including the Port, as the owner of Airport 

property located within City limits. 

The City describes the disputed fees in the Declaration of B. Jonas Biery, who is the 

Business Services Manager for the City’s Bureau of Environmental Services. Answer Ex. 1. As 

the City explains, the Port is not being singled out for some form of special assessment. All City 

ratepayers are required to pay the disputed fees. The formula used by the City is uniform, 

transparent, and substantially similar to formulations used by municipalities throughout the 

country for those types of charges. The fees in questions are neither speculative nor imposed to 

mitigate new development, but are based on actual costs incurred by the City to manage its 

stormwater and sewer services. The Stormwater Charge is intended to address drainage of the 

rights-of-way throughout the City’s jurisdiction. These streets (and highways) are used by origin 

and destination passengers, as well as Airport and Airport tenant employees, for traveling to and 
 

3 

from the Airport. The Superfund Charge addresses an ongoing environmental investigation 

related, in part, to the City’s past stormwater and sewer drainage practices. 

The Port is very conscious of its Federal obligations, particularly the restrictions on the 

use of airport revenue as set out in Grant Assurance 25 and 49 U.S.C. § 47133, which require 

that airport revenue “not be expended for any purpose other than the capital and operating costs 

of . . . the airport.” The Port also takes seriously its corporate responsibilities and obligations 

towards the air carriers that operate at the Airport. For that reason, the Port has worked with 

Complainants, the City, and FAA in an attempt to address Complainants’ concerns. After 

reviewing all of the facts, the explanations put forth by the Port, and the arguments raised by 

Complainants, twice FAA concluded that the use of airport revenues to pay the disputed fees 

would not violate the Port’s Grant Assurances or the statutory revenue use restrictions. While 

the air carriers are clearly displeased with FAA’s advice, the Port has relied on FAA’s 

interpretation and guidance and continues to pay the fees out of airport revenues. 

Complainant A4A has also filed a complaint against the City in the U.S. District Court 

for the District of Oregon seeking declaratory and injunctive relief.1

 In that case, A4A argues 

that the fees in question violate the revenue use restrictions as set out in 49 U.S.C. § 47133 and 

asks that the court enjoin the City from continuing to impose the fee on the Airport. The Port is 

not a party to that case, but has appeared as an amicus asking that the court apply the doctrine of 

primary jurisdiction and defer to FAA during the pendency of this Part 16 investigation. 

Here, Complainants formally raise the same arguments that they presented to FAA 

earlier—that the Port is violating the airport revenue use restriction: (1) by collecting 

contributions to the disputed fees in the operating and maintenance component of the air carriers’ 

 

1 Air Transp. Ass’n of Am., Inc. v. Jordan, No. 3:16-cv-00230-SB (D. Or. filed Feb. 5, 2016). 
 

4 

rate base, and (2) by remitting these collections to the City. The Port remains in the middle—

defending its actions in this formal investigation against the framework of its obligation to pay 

its utility fees and its reliance on FAA’s two previous findings. 

As demonstrated by the extensive efforts to consult with FAA when this issue first arose, 

the Port is conscious of its Federal obligations. However, there is no sound reason for FAA to 

depart from its earlier decisions. The Complaint should be dismissed. 

II. PARAGRAPH-BY-PARAGRAPH ANSWER 

Pursuant to the requirements of 14 C.F.R. § 16.23(h), the Port hereby responds to each 

allegation made by Complainants. The paragraph numbers below correspond to the numbered 

paragraphs in the Complaint. To the extent that any allegation made by Complainants is not 

specifically admitted, such allegation is hereby denied. 

1. The Port is without sufficient knowledge as to the reasons that Complainants filed the 

Complaint. The remainder of the paragraph is denied. 

2. Paragraph 2 does not contain any statements that can be admitted or denied. To the extent 

a response is deemed required, it is denied. 

3. The Port admits, pursuant to the Signatory Passenger Airline Lease and Operating 

Agreement, that it includes in the airline rate base certain utility charges, including 

amounts towards the Stormwater Charge and Superfund Charge that are paid to the City, 

but it denies the characterization that there is any revenue diversion. The Port denies the 

remainder of Paragraph 3. 

4. The Port denies that Complainants will have to pay approximately $4 million/year to the 

Airport for remission to the City when the Stormwater Charge is fully implemented in 

2017; this is not an accurate statement of the payments. The Port is without sufficient 

knowledge as to the allegations in Paragraph 4 concerning the Superfund Charge. 
 

5 

5. The Port denies Paragraph 5. 

6. The Port denies the allegations in Paragraph 6. FAA’s Policy and Procedures 

Concerning the Use of Airport Revenue, 64 Fed. Reg. 7696 (Feb. 16, 1999), as amended 

by FAA Policy and Procedures Concerning the Use of Airport Revenue: Proceeds From 

Taxes on Aviation Fuel, 78 Fed. Reg. 69,789 (Nov. 21, 2013), (“Revenue Use Policy”), 

speaks for itself. 

7. The Port admits that A4A filed a complaint in U.S. District Court against the City. The 

rest of Paragraph 7 does not contain any statements that can be admitted or denied. To the 

extent a response is deemed required, it is denied. 

8. The Port admits that A4A is an airline trade association. The Port is without sufficient 

knowledge as to the remainder of the facts alleged in the paragraph. 

9. Paragraph 9 states a legal conclusion that does not require an answer. To the extent a 

response is deemed required, the Port denies Paragraph 9. 

10. The Port admits that Alaska Airlines, Inc. conducted aircraft operations at the Airport as 

of February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 10. 

11. The Port admits that American Airlines, Inc. conducted aircraft operations at the Airport 

as of February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 11. 

12. The Port admits that Atlas Air, Inc. conducted aircraft operations at the Airport as of 

February 10, 2016, but is without sufficient knowledge as to the remainder of Paragraph 

12. 
 

6 

13. The Port admits that Fedex Express Airlines conducted aircraft operations at the Airport 

as of February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 13. 

14. The Port admits that Hawaiian Airlines, Inc. conducted aircraft operations at the Airport 

as of February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 14. 

15. The Port admits that JetBlue Airways, Inc. conducted aircraft operations at the Airport as 

of February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 15. 

16. The Port admits that Southwest Airlines, Inc. conducted aircraft operations at the Airport 

as of February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 16. 

17. The Port admits that United Airlines, Inc. conducted aircraft operations at the Airport as 

of February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 17. 

18. The Port admits that United Parcel Service Co. conducted aircraft operations at the 

Airport as of February 10, 2016, but is without sufficient knowledge as to the remainder 

of Paragraph 18. 

19. The Port admits that Air Canada conducted aircraft operations at the Airport as of 

February 10, 2016, but is without sufficient knowledge as to the remainder of 

Paragraph 19. 

20. The Port admits Paragraph 20. 
 

7 

21. Paragraph 21 states a legal conclusion that does not require an answer, and the cited cases 

speak for themselves. To the extent a response is deemed required, the Port denies 

Paragraph 21. 

22. The Port admits that Complainants have sought informal resolution and that 

Complainants disagree with the results. The Port agreed to seek advice from FAA on the 

issues raised by Complainants, and FAA twice disagreed with Complainants, finding that 

the Port’s actions are appropriate under applicable federal law and policy. 

23. The Port generally admits Paragraph 23. 

24. The Port admits that pursuant to their respective lease and operating agreements 

Complainant Airlines contribute towards the Water Charges that the Port pays to the City, 

but it denies the characterization that there is any revenue diversion. The Port denies the 

remainder of Paragraph 24. 

25. The Port admits Paragraph 25. 

26. The Port admits Paragraph 26. 

27. The Port admits that it owns and operates certain stormwater infrastructure at the Airport, 

including a deicing stormwater collection and treatment system. 

28. The Port generally admits Paragraph 28, but denies that there is no Airport stormwater 

that runs into City-controlled stormwater infrastructure. 

29. The Port admits that the City adopted Ordinance No. 185610 on September 12, 2012. 

Ordinance No. 185610 speaks for itself. City ratepayers have been subject to off-site 

stormwater management fees since approximately 1979. 

30. The Port admits Paragraph 30. The City’s Stormwater Charge that all ratepayers must 

pay has an on-site and an off-site component. The on-site component, which comprises 
 

8 

35% of the charge, is intended to cover the City costs of managing stormwater discharge 

from private property. Land areas such as the Airport that are within a separate 

governmental drainage district receive a 35% discount of the total bill. The off-site 

component, which the Port is required to pay, is intended to cover the City costs of 

managing stormwater discharge from City streets, other City property, and portions of 

local highways. 

31. The Port generally admits Paragraph 31, but the Port denies that there is no Airport 

stormwater that runs into City-controlled stormwater infrastructure. 

32. The Port denies Paragraph 32. 

33. The Port admits Paragraph 33. 

34. The Port generally admits Paragraph 34. The Port receives a 35% discount for the 

Stormwater Charge at the Airport due to the Airport’s location in a drainage district. 

35. The Port admits Paragraph 35. 

36. The Port admits that counsel for A4A and Alaska Airlines made this assertion but denies 

that payment of the Stormwater Charge is an improper use of airport revenue. 

37. The Port admits that the Airport is near the Columbia River and that the Superfund 

Charge offsets the City’s portion of the cost connected to the Portland Harbor Superfund 

Site. The Port denies the remainder of Paragraph 37. 

38. The Port lacks sufficient knowledge and therefore neither admits nor denies Paragraph 

38. The cited authorities speak for themselves. 

39. The cited authorities speak for themselves. 
 

9 

40. The Port admits that it is a potentially responsible party and that Airport stormwater 

discharges either to the Columbia Slough or to the Columbia River. The Port denies the 

remainder of Paragraph 40. 

41. The cited authority speaks for itself. 

42. The cited authority speaks for itself. 

43. The cited authorities speak for themselves. 

44. The Port admits that the September 16 meeting took place. Paragraph 44 contains 

characterizations of and opinions about that meeting that do not require a response. 

45. The Port admits Paragraph 45. 

46. The ordinance speaks for itself. 

47. The Port admits that it includes Water Charges that it pays to the City in the airline rate 

base in accordance with the provisions of the Signatory Passenger Airline Lease and 

Operating Agreement, and that the airlines have voiced objections to including such fees 

in their rate base. The Port denies the remainder of Paragraph 47. 

48. The Port admits that the estimates in Paragraph 48 are as described, and the cited 

spreadsheet speaks for itself. 

49. The Port admits that the Superfund Charge may increase. The Port denies the remainder 

of Paragraph 49. 

50. Paragraph 50 contains legal conclusions and opinion that do not require a response. The 

authority cited in footnote 19 speaks for itself. 

51. Paragraph 51 contains legal conclusions and opinion that do not require a response, and 

the cited authorities speak for themselves. 
 

10 

52. Paragraph 52 contains legal conclusions and opinion that do not require a response, and 

the cited authorities speak for themselves. 

53. Paragraph 53 contains legal conclusions and opinion that do not require a response, and 

the cited authorities speak for themselves. 

54. Paragraph 54 contains legal conclusions and opinion that do not require a response, and 

the cited authorities speak for themselves. 

55. Paragraph 55 contains legal conclusions and opinion that do not require a response, and 

the cited authorities speak for themselves. 

56. Paragraph 56 contains legal conclusions and opinion that do not require a response. 

57. Grant Assurance 25 speaks for itself. 

58. Paragraph 58 contains legal conclusions and opinion that do not require a response. The 

authority cited in footnote 20 speaks for itself. 

59. Paragraph 59 contains legal conclusions and opinion that do not require a response, and 

the cited authorities speak for themselves. 

60. Paragraph 60 contains legal conclusions and opinion that do not require a response, and 

the cited authorities speak for themselves. 

61. Paragraph 61 contains legal conclusions and opinion that do not require a response, and 

the Revenue Use Policy speaks for itself. 

62. Paragraph 62 contains legal conclusions and opinion that do not require a response, and 

the Revenue Use Policy speaks for itself. 

63. Paragraph 63 contains legal conclusions and opinion that do not require a response. The 

cited authority speaks for itself. 
 

11 

64. Paragraph 64 contains legal conclusions and opinions that do not require a response. To 

the extent a response is deemed required, the Port denies Paragraph 64. 

65. The Port denies Paragraph 65. 

66. The Port admits that the City has taken the position that the offsite component of the 

Stormwater Charge is calculated to establish equity among ratepayers and that the City 

does not own or operate the Airport. The Port denies the remainder of Paragraph 66. 

67. The cited authorities speak for themselves. 

68. The Revenue Use Policy speaks for itself. 

69. The cited authorities speak for themselves. The Port denies the remainder of 

Paragraph 69. 

70. The cited authority speaks for itself. The Port denies the remainder of Paragraph 70. 

71. Paragraph 71 contains legal conclusions and opinions that do not require a response. 

72. The FAA Airport Compliance Manual, FAA Order No. 5190.6b (2009) (“Compliance 

Manual”), speaks for itself. 

73. The cited document speaks for itself. The Port denies the remainder of Paragraph 73. 

74. The cited document speaks for itself. 

75. Paragraph 75 contains legal conclusions and opinions that do not require a response. The 

cited authority speaks for itself. 

76. Paragraph 76 contains legal conclusions and opinions that do not require a response. 

77. Paragraph 77 contains legal conclusions and opinions that do not require a response. The 

cited authorities speak for themselves. 

78. The cited statute speaks for itself. 

79. The cited statute speaks for itself. 
 

12 

80. Paragraph 80 contains legal conclusions and opinions that do not require a response. The 

cited authorities speak for themselves. 

81. The Port admits that Complainant A4A sent a letter to City of Portland Mayor Sam 

Adams. The letter speaks for itself. 

82. The Port is without sufficient knowledge to admit or deny the first sentence of Paragraph 

82. The Port denies the second sentence of Paragraph 82. 

83. The Port is without sufficient knowledge to admit or deny Paragraph 83. 

84. The Port admits that the meeting referenced in Paragraph 84 took place. 

85. The cited position paper speaks for itself. 

86. The Port is without sufficient knowledge to admit or deny Paragraph 86. 

87. The cited letter speaks for itself. 

88. The cited letter and document speak for themselves. 

89. The cited document speaks for itself. 

90. The cited letter and document speak for themselves. 

91. The cited document speaks for itself. 

92. The cited letter speaks for itself. 

93. The Port admits that a meeting took place on September 16, 2014, with the attendees 

listed in Paragraph 93. 

94. The Port admits that the September 16 meeting took place. Paragraph 94 contains 

characterizations of and opinions about that meeting that do not require a response. 

95. The Port admits that the September 16 meeting took place. Paragraph 95 contains 

characterizations of and opinions about that meeting that do not require a response. 
 

13 

96. The Port admits that the September 16 meeting took place. Paragraph 96 contains 

characterizations of and opinions about that meeting that do not require a response. 

97. The Port admits that the September 16 meeting took place. Paragraph 97 contains 

characterizations of and opinions about that meeting that do not require a response. 

98. The Port admits that the September 16 meeting took place. Paragraph 98 contains 

characterizations of and opinions about that meeting that do not require a response. 

99. The Port admits that the September 16 meeting took place. Paragraph 99 contains 

characterizations of and opinions about that meeting that do not require a response. 

100. The Port admits that the September 16 meeting took place. Paragraph 100 contains 

characterizations of and opinions about that meeting that do not require a response. 

101. The Port admits that the September 16 meeting took place. Paragraph 101 contains 

characterizations of and opinions about that meeting that do not require a response. 

102. The Port admits that the September 16 meeting took place. Paragraph 102 contains 

characterizations of and opinions about that meeting that do not require a response. 

103. The Port admits that the September 16 meeting took place. Paragraph 103 contains 

characterizations of and opinions about that meeting that do not require a response. 

104. The Port admits that the September 16 meeting took place. Paragraph 104 contains 

characterizations of and opinions about that meeting that do not require a response. 

105. The Port admits that the September 16 meeting took place. Paragraph 105 contains 

characterizations of and opinions about that meeting that do not require a response. 

106. The Port admits that the September 16 meeting took place. Paragraph 106 contains 

characterizations of and opinions about that meeting that do not require a response. 

107. Paragraph 107 contains legal conclusions and opinions that do not require a response. 
 

14 

108. Paragraph 108 contains legal conclusions and opinions that do not require a response. 

109. The Port is without sufficient knowledge to admit or deny Paragraph 109. 

110. The Port is without sufficient knowledge to admit or deny Paragraph 110. 

111. The cited letter speaks for itself. 

112. The cited letter speaks for itself. 

113. The cited letter speaks for itself. 

114. The cited letter speaks for itself. 

115. The cited letter speaks for itself. 

116. Paragraph 116 contains legal conclusions and opinions that do not require a response. 

The cited letters speak for themselves. 

117. The cited letter speaks for itself. 

118. Paragraph 118 contains legal conclusions and opinions that require no response, and the 

cited authority speaks for itself. 

119. Paragraph 119 contains legal conclusions and opinions that require no response, and the 

cited letter speaks for itself. 

120. Paragraph 120 contains legal conclusions and opinions that require no response. The Port 

denies Complainants’ characterization of the contents of the letter. 

121. Paragraph 121 contains legal conclusions and opinions that require no response. The 

cited letter speaks for itself. The Port denies Complainants’ characterization of the 

contents of the letter. 

122. Paragraph 122 contains legal conclusions and opinions that require no response. 
 

15 

123. The Port admits that it operates a water treatment facility for airport stormwater and that 

it is a potentially responsible party of the Portland Harbor Superfund Site. The Port 

denies the remainder of Paragraph 123. 

124. The cited letter speaks for itself. The Port denies Complainants’ characterization of the 

contents of the letter. 

125. The cited letter speaks for itself. The Port notes that the letter does not say that a factual 

record developed in the context of a formal proceeding “might lead to a different result.” 

126. The cited article speaks for itself. The Port agrees that it is important that FAA enforce 

the restrictions on the use of airport revenues; FAA has previously considered the same 

allegations and evidence as Complainants offer here and determined that this is not a case 

of unlawful use of airport revenues. The remainder of Paragraph 126 contains legal 

conclusions and opinions that require no response. 

127. Paragraph 127 contains legal conclusions that do not require a response, and the cited 

article speaks for itself. 

III. ARGUMENT 

In addition to the specific answers above, the Port further and affirmatively answers as 

follows. 

A. Introduction 

The gravamen of the Complaint (¶ 64) is that the Port “has violated and continues to 

violate 49 U.S.C. § 47107(b) and § 47133, and Grant Assurance 25, by requiring the Airline 

Complainants to pay millions of dollars to the Port which the Port in turn remits to the City for 

Offsite Stormwater Management and Superfund Remediation Fees, which are not used for 

Airport operations.” The particular underlying basis for Complainants’ claim of unlawful use of 

airport revenue is that “PDX receives no services from the City in exchange for the Offsite 
 

16 

Stormwater Management and Superfund Remediation Fees.” Complaint ¶ 66. These allegations 

do not exist in a vacuum. Complainants have previously presented the same factual and legal 

matter to FAA, and FAA has twice found Complainants’ position unavailing: once orally and 

once in writing. Answer Ex. 2 ¶¶ 6-7, 9;2 Complaint Ex. 12 (August 5, 2015 Letter from Mr. 

Randall Fiertz, Director, FAA Office of Airport Compliance and Management Analysis, to Mr. 

David Berg) (“Director’s Letter”). There is no sound reason for the FAA to depart from that 

position in this proceeding. 

Cognizant of both its Federal obligations and its responsibilities to the air carriers serving 

the Airport, the Port has been working collaboratively with the City, Complainants, and FAA to 

resolve Complainants’ concerns related to the Stormwater Charge and Superfund Charge since 

this issue first arose. 

1. The Port is a ratepayer of the City’s sewer and stormwater utility. 

The Airport is located entirely within the jurisdictional boundaries of the City. Pursuant 

to its voter-approved charter, the City operates sewer and stormwater management utilities. 

Answer Ex. 1, Attachment B; see also Answer Ex. 1 ¶ 3. Although sewer service is provided by 

the Portland Water Bureau (“PWB”) and stormwater management service is provided by the 

Bureau of Environmental Services (“BES”), the City issues a combined sewer/stormwater/water 

bill to its ratepayers. See, e.g., Complaint Ex. 10 (representative Combined 

Sewer/Stormwater/Water Bill from City Bureau of Environmental Services to Port identifying 

separate utility line item charges for Stormwater Charge and Superfund Charge, dated June 4, 

2014 (“Representative City Bill”)). The City covers the costs of its stormwater utility through a 

 

2

 The Declaration of Ian Whitlock, the Port’s Deputy General Counsel, was filed in support of the Port’s Motion for 

Leave to Appear as amicus curiae in the Federal court proceeding Air Transp. Ass’n of Am., Inc. v. Jordan, No. 

3:16-cv-00230-SB (D. Or. filed Feb. 5, 2016). 
 

17 

combination of the fees paid by ratepayers (i.e., persons who own or occupy property in the 

City)3 and bonds, the debt service of which is also paid by the ratepayers. Answer Ex. 1 ¶ 7. By 

virtue of owning land within the City, including with respect to the Airport, the Port is a 

jurisdictional ratepayer of the City’s stormwater utility BES. The City, through its utility PWB, 

also provides the Airport with sewer service. 

The City imposes the disputed Water Charges as part of its sewer and stormwater fees. 

The Stormwater Charge is composed of two elements: an on-site component and an off-site 

component. Answer Ex. 3, Portland City Code (“PCC”) 17.36.050(F). The on-site component 

represents 35% of the total Stormwater Charge, while the off-site component represents the other 

65%. Id. The City explains that it uses the on-site component to “reimburse[] the City for the 

management of storm water discharging from or off non-City property” and the “off-site 

component” to “pay[] for the management of storm water discharging to the Storm Water 

System from City streets and non-City property.” Answer Ex. 1 ¶ 15. The City began assessing 

the on-site component of this charge in 1977 and the off-site component in 1979. Answer Ex. 1 

¶ 9.4

 The City has always calculated both components of the Stormwater Charge based on the 

estimated amount of “impervious surfaces such as driveways, parking lots, and roofs” on the 

user’s site. Answer Ex. 1 ¶ 9. 

 

3

 The City Code defines “Ratepayer” to “mean[] a person who has the right to possession of a property and: (1) 

[w]ho causes or permits the discharge of sanitary sewage into the public sewer system, or (2) [w]hose use of the 

property directly or indirectly benefits from stormwater management services provided by the City.” Answer Ex. 3, 

PCC 17.36.020(Q). 

4

 Earlier versions of this ordinance exempted from paying the Stormwater Charge certain properties, including 

“[a]ny portion of a property which is on the Columbia or Willamette River or the Columbia Slough, and which 

discharges directly to said river or slough [and] [a]ny property within a drainage district formed under State law 

which provides storm drainage service.” Answer Ex. 4, PCC 17.36.010(2)(C)(i), (ii) (1986). Upon information and 

belief, this exemption was repealed around 1991. 
 

18 

In certain areas of the City, stormwater management service is also provided by drainage 

districts, which are independent governmental authorities. There are three drainage districts 

located within the City: the Multnomah County Drainage District # 1 (“Multnomah District”), 

Peninsula Drainage District #1, and Peninsula Drainage District #2 (collectively, the “Drainage 

Districts”). The Airport is located entirely within the Multnomah District and is also a 

jurisdictional ratepayer of that Drainage District.5

In 2000, the City and the Drainage Districts entered into an agreement through which the 

City would not directly bill ratepayers located in the Drainage Districts for the provision of 

stormwater management services. Complaint Ex. 1, § 1. Instead, those ratepayers would be 

billed by the Drainage Districts who would in turn reimburse the City for the City’s expenses 

related to stormwater management. That agreement expired in 2012. Id. § 3. 

Anticipating the expiration of the agreement with the Drainage Districts, the City 

determined that it needed to change its collection mechanism to recover the full costs of its 

stormwater management services. Complaint Ex. 4. On September 5, 2012 the City adopted 

Ordinance No. 185610. Complaint Ex. 1. Under Ordinance No. 185610, the City resumed 

direct-billing Drainage District ratepayers, such as the Port, for the Stormwater Charge’s off-site 

component, Complaint Ex. 1, § a, and discounted the on-site component for ratepayers that 

reside within one of the Drainage Districts. Id. § b. As a result, the Port pays only the off-site 

component, while receiving a full credit for the on-site component. 

The Superfund Charge is allocated through: (1) a sewer component equal to the 

ratepayer’s sanitary volume multiplied by Portland Harbor Superfund Sanitary Volume rate, and 

(2) a stormwater component equal to the Stormwater Charge multiplied by the Portland Harbor 

 

5

 The Airport also maintains its own system to manage and collect airfield stormwater, including deicing materials. 
 

19 

Superfund Impervious Area rate. Answer Ex. 3, PCC 17.36.050(G). According to BES and the 

PWB, ratepayers have been assessed Superfund Charges since 2001, but the charges were not 

itemized on the water and sewer bills until July 2007.6 With the passage of Ordinance No. 

185610, under which the City resumed directly billing Drainage District customers for the 

Stormwater Charge, the Airport became subject to the stormwater component of the Superfund 

Charge. 

The City assesses the Superfund Charge “against all Portland ratepayers, including both 

sanitary sewer customers and storm water customers.” Answer Ex. 1 ¶ 24. The City explains 

that “EPA [] named the City as a party ‘potentially responsible’ for some of the river’s 

contamination by virtue of the BES sewer and storm water system[, and that t]he City’s system 

conveys storm water (and used to convey sanitary sewage) into the Wilamette River.” Id. ¶¶ 23, 

24. The City furthers explains that “it [] determined that all ratepayers have a responsibility to 

help pay for the [Portland] Harbor investigation because ratepayers benefit from the sewer and 

storm water system.” Id. ¶ 24.

Because the combined Water Charges are part of the Airport’s sewer and stormwater 

utility bill, the Port budgets and treats them as Airport-related operating expenses and pays for 

them using airport revenue. See, e.g., Answer Ex. 5 at 72. In accordance with the air carriers’ 

respective lease and operating agreements with the Port, the Port generates a portion of this 

revenue from the rates and charges assessed on the air carriers. See, e.g., Answer Ex. 6, § 1 

(defining “O&M Expenses” as those expenses designated as “Costs of Operation and 

 

6

 City Bureau of Envtl. Servs. & City Water Bureau, Understanding Your Sewer, Stormwater and Water Bill (July 

2015), https://www.portlandoregon.gov/water/article/354985. 
 

20 

Maintenance” in Section 13 of Port Ordinance No. 155, which as discussed in Section B.1.c, 

infra, include utility costs).7 

2. The Port sought FAA guidance on the legality of paying the Water 

Charges with airport revenues. 

Before the City adopted Ordinance No. 185610, the Port conducted its own due diligence 

on the proposed rate changes to ensure that payment of the Water Charges would not run afoul of 

Federal airport revenue use restrictions. At that time, “the City was considering (a) eliminating a 

discount on an ‘off-site’ component of the stormwater charge that had previously been billed by 

the [Multnomah District] on behalf of the City, and (b) including a Superfund charge which 

previously [had] been imposed on ratepayers in other portions of the City . . . but not on those 

ratepayers within the [Multnomah District].” Answer Ex. 2 ¶ 3. 

The Port contacted the City to discuss the Ordinance and Federal law and policy 

restricting the use of airport revenues. Complaint Ex. 3. Contemporaneous with its discussions 

with the City, the Port also cooperated with Complainants in seeking guidance from FAA as to 

whether the Port’s payment of the charges with airport revenue would comply with the Revenue 

Use Policy. Answer Ex. 2 ¶¶ 5-6 (discussing Port’s provision of memoranda and 

correspondence to FAA, and exchange of emails and participation in telephone conferences with 

FAA regarding the proposed ordinance). 

By telephone conference on September 4, 2012, representatives of the Office of Airport 

Compliance in Washington, D.C. and the Western Mountain region compliance division: 

confirmed that [the] Port’s action would be appropriate. 

Specifically, the FAA representatives opined that they did not view 

the payment of the Disputed Charges as prohibited by the federal 

 

7

 The Amended and Restated Signatory Passenger Airline Lease and Operating Agreement included as Answer Ex. 

6 is substantially similar to the lease and operating agreements signed by all signatory passenger and cargo airlines 

operating at the Airport. 
 

21 

airport revenue-use rules because, as they understood the situation, 

(a) the charges are levied on all similarly-situated property owners 

in the City; (b) the charges do not impose a disproportionate 

burden on the Airport (because the charges are levied on all 

property owners on the same basis of impervious surface and water 

usage); and (c) there is no double-payment by the Airport (because 

the Port is exempted from paying the “on-site” portion of the 

charge since it has its own on-site system and the City’s allocation 

of costs between “on-site” and “off-site” components of the 

stormwater charge is based upon a reasonable cost allocation 

study). 

Id. ¶ 7. Shortly after, on September 12, 2012, the City adopted Ordinance No. 185610, which 

subjected the Port and all other City sewer, water, and stormwater ratepayers to the revised 

Water Charges. Id. ¶ 8. 

Subsequently, Complainants again asked DOT and FAA to address the legality of the 

Port’s payments of the Water Charges with airport revenues. Without crediting all of the 

particulars and conclusions therein, the Complaint details Complainants’ efforts, including 

providing the two agencies the same factual matter and legal arguments they raise again here. 

See Complaint ¶¶ 83-110; Complaint Ex. 10 (and attachments thereto). The Port participated in 

some of those discussions, including by attending meetings in Washington, D.C. and Portland. 

Complaint ¶¶ 84, 93. 

The result of these cooperative efforts was the August 5, 2015 Director’s Letter. 

Complaint Ex. 12. In rejecting the claims of unlawful revenue use, the Director’s Letter (id. at 1, 

2 n.1) found that: 1) the Stormwater and Superfund Charges are “ratepayer[]” charges; 2) which 

“arise[] as a legal obligation incident to the airport’s possessory interest in land necessary for the 

provision of aeronautical services;” and 3) are “allocated to all ratepayers within the jurisdiction, 

including the Port of Portland, based upon a transparent, uniform, and non-discriminatory ratesetting.” Accordingly, they are proper “operating cost[s],” within the meaning of 49 U.S.C. 
 

22 

§ 47133 consistent with “Generally Accepted Accounting Principles and Office of Management 

and Budget Circular A-87.” Id. at 1. 

The Port recognizes and appreciates the substantial effort and attention that FAA has 

already devoted to this matter. It likewise recognizes Complainants’ dissatisfaction with the 

Water Charges. They are however “a legal obligation” imposed on, and borne by, all City 

ratepayers. Consistent with and in reliance upon FAA’s guidance, including the Director’s 

Letter, the Port has been and is paying the Water Charges using airport revenue. As explained 

more fully below, FAA’s position in this matter to date is sound, and the Port’s payment of the 

charges with airport revenue comports with its Federal obligations. 

B. The Port did not engage in unlawful use of airport revenue when paying 

the Water Charges. 

1. The Water Charges are operating costs within the plain meaning of 

the statute. 

The express statutory prohibition against unlawful revenue use is 49 U.S.C. § 47133, and 

it is written in the negative: “revenues generated by an airport that is the subject of Federal 

assistance may not be expended for any purpose other than the capital or operating costs of . . . 

the airport.” 49 U.S.C. § 47133(a), (a)(1).8

 The necessary implication of this provision is that 

airport expenditures for “operating costs” do not constitute an improper use of airport revenue 

under the statute. And that is exactly how FAA has construed the statute. FAA’s Revenue Use 

Policy, which implements the requirements of the airport revenue use statutory provisions and 

the Grant Assurances, provides that “[a]irport revenue may be used for . . . [t]he capital and 

operating costs of the airport.” 64 Fed. Reg. at 7718 (Feb. 16, 1999). 

 

8

 49 U.S.C. § 47107(b), through Grant Assurance 25, applies a nearly identical prohibition to recipients of federal 

Airport Improvement Program grants. 
 

23 

While the statute does not define the term “operating costs,” it is a basic tenet of statutory 

construction that “[i]n the absence of [an express statutory] definition,” a “statutory term” should 

be “construe[d] . . . in accordance with its ordinary or natural meaning.” FDIC v. Meyer, 510 

U.S. 471, 476 (1994). The Water Charges at issue here were enacted and are billed as utility 

charges. Answer Ex. 3, PCC 17.36.050(F), (G); Complaint Ex. 10, Representative City Bill. See 

also Answer Ex. 1 ¶ 8 (explaining that the Bureau of Environmental Services is a public utility 

and charges ratepayers the Stormwater and Superfund Charges “based on generally-accepted 

accounting principles and on the cost of providing those services to its ratepayers”). 

As evidenced by colloquial and authoritative sources, utility charges constitute an 

enterprise’s operating costs within the plain and ordinary meaning of the term. For example, the 

Free Dictionary defines “operating cost” as “the expense of maintaining property (e.g., paying 

property taxes and utilities and insurance); it does not include depreciation or the cost of 

financing or income taxes.”9

 Investopedia similarly states that “[O]perating costs . . . include 

many components of operating a business including . . . [u]tility expenses.”10 

Utility charges are also recognized operating costs under the Office of Management and 

Budget Circular A-87, Generally Accepted Accounting Principles, and the Port’s own bond 

indentures. 

 

9

 The Free Dictionary, Operating Cost, http://www.thefreedictionary.com/operating+cost (last visited Apr. 12, 

2016). 

10 Investopedia, Operating Cost, http://www.investopedia.com/terms/o/operating-cost.asp (last visited Apr. 12, 

2016).
 

24 

a) OMB Circular A-87 clearly categorizes utility charges as operating 

costs. 

OMB Circular A-87 establishes federally recognized “Cost Principles for State, Local, 

and Indian Tribal Governments.” OMB Circular A-87 § A.1 (revised May 10, 2004).11 

Attachment A, the “General Principles for Determining Allowable Costs,” advises, in relevant 

part, that allowable costs must meet the following general criteria: 

Be authorized or not prohibited under State or local laws or 

regulations. . . . 

[B]e determined in accordance with generally accepted accounting 

principles. 

Id., Attachment A at 9. The Circular further provides that in determining the reasonableness of a 

given cost, consideration is given to whether: “the cost is of a type generally recognized as 

ordinary and necessary for the operation of the governmental unit.” Id.

Complainants do not allege that the Water Charges are unlawful charges under state or 

local laws. Nor do Complainants allege that Water Charges were not “determined in accordance 

with generally accepted accounting principles.” The undisputed record evidence is to the 

contrary. As the City explains, the Water Charges are set forth in the City Code and are based 

upon the City’s authority to operate sewer and stormwater utilities. Answer Ex. 3, PCC 

17.36.050(F), (G); Answer Ex. 1 ¶ 3. Like all BES utility charges, the Water Charges are “based 

on generally-accepted accounting principles and on the cost of providing those services to its 

ratepayers.” Answer Ex. 1 ¶ 8. 

Attachment B to OMB Circular A-87 (§ 25) speaks directly to “the cost of utilities” and 

finds such costs permissible in the circumstances here: “[u]nless prohibited by law, the cost of 

 

11 OMB Circular A-87 may be accessed at: 

https://www.whitehouse.gov/sites/default/files/omb/assets/agencyinformation_circulars_pdf/a87_2004.pdf. 
 

25 

utilities . . . are allowable to the extent that they: (1) keep property . . . in an efficient operating 

condition, (2) do not add to the permanent value of property or appreciably prolong its intended 

life, and (3) are not otherwise included in rental or other charges for space.” The City’s water, 

sewer, and stormwater services, and associated fees, keep the Airport “in an efficient operating 

condition.” While Complainants contest the alleged value of the Stormwater Charge to the 

Airport, the judgment and position of BES, the local utility, is that all ratepayers in the City 

benefit from the removal of stormwater from the City’s public rights-of-way, including the 

Airport. Answer Ex. 1 ¶ 20. Again, as the City explains, the Airport could not function 

“efficient[ly]” if the City streets were routinely underwater. Complainants provide no evidence 

to the contrary, nor could they reasonably do so. The Superfund Charge is in the nature of a 

utility assessment or fee which, in the judgement of the BES , the local utility, is equitably 

allocated to all City ratepayers and traceable to the prior provision of sewer and stormwater 

services and potentially polluting overflow and run-off from both sources. Id. ¶¶ 23-24. It is 

undisputed that EPA is investigating the City as a potentially responsible party in connection 

with the Portland Harbor Superfund site. 

b) Utility charges are operating expenses under Generally Accepted 

Accounting Principles (“GAAP”). 

Utility costs are also regarded as operating expenses under GAAP. See Complaint Ex. 12 

at 1 (with “reference to Generally Accepted Accounting Principles . . . the City of Portland’s 

storm water management charge is an operating cost of the airport”). Support for the treatment 

of utility costs under GAAP is found in the Federal Accounting Standard Advisory Board 

Handbook of Federal Accounting Standards and Other Pronouncements (June 30, 2015) 
 

26 

(“FASAB Handbook”).12 The FASAB Handbook contains the “body of accounting concepts and 

standards” for the Federal government. Id. at 1. It is the development and application of 

Generally Accepted Accounting Principles for Federal Government use. See, e.g., id. at 5 (“The 

AICPA Council has designated FASAB as the body that establishes accounting principles for 

federal entities”). Indeed, “[t]he GAAP hierarchy provides that statements of federal financial 

accounting standards constitute level A (the highest level) guidance.” Id. at 6. The fourth 

standard in the handbook relates to “managerial cost accounting concepts and standards” which 

are “aimed at providing reliable and timely information on the full cost of programs, their 

activities, and outputs.” Id. at SFFAS 4 at 1. 

Under the cost accounting standards section of this standard, the FASAB Handbook 

encourages entities to report the full costs of their “outputs.” Id. at SFFAS 4 at 26 (defining 

Outputs as the “products and services generated from the consumption of resources.”) As 

relevant here, the Port’s “outputs” are a functional airport and the provision of aeronautical 

services. The FASAB Handbook describes full costs as including both direct and indirect costs, 

and its description of each of these cost categories includes utility fees. Id. at SFFAS 4 at 16-27. 

As to direct costs, the FASAB Handbook states that “[d]irect costs are costs that can be 

specifically identified with an output . . . Typical direct costs in the production of an output 

include . . . [v]arious costs associated with . . . utilities that are used exclusively to produce the 

output.” Id. at SFFAS 4 at 26-27. In describing indirect costs, the FASAB Handbook provides 

that: 

Indirect costs are costs of resources that are jointly or commonly 

used to produce two or more types of outputs but are not 

specifically identifiable with any of the outputs. Typical examples 

 

12 The FASAB Handbook may be accessed at: http://files.fasab.gov/pdffiles/2015_fasab_handbook.pdf. 
 

27 

of indirect costs include costs of general administrative services, 

general research and technical support, security, rent, employee 

health and recreation facilities, and operating and maintenance 

costs for buildings, equipment, and utilities. 

Id. at SFFAS 4 at 27. Regardless of whether the sewer and stormwater fees are direct or indirect 

costs, just as other utility costs, they are properly categorized as operating expenses of the Port. 

c) The Port’s bond indentures provide that the Port should treat the 

Airport’s utility costs as operating expenses. 

Like many airport sponsors across the country, the Port uses general airport revenue 

bonds to finance major infrastructure development and equipment purchases. Bond financing is 

an important cornerstone to the Port’s financial portfolio for the Airport, but to exercise this 

option “an airport’s financial situation must be viewed positively enough to be able to borrow 

money at affordable rates in the bond market.” Answer Ex. 7 at 33. The Port’s bond ordinance, 

Port Ordinance No. 155 (“Bond Ordinance”) (Answer Ex. 8), is the foundational document that 

provides the Port with the legal authority to issue bonds and the legal stability necessary to make 

the bonds marketable. The Bond Ordinance expressly identifies airport revenues and expenses 

for purposes of bond compliance. As explained by a Transportation Research Board policy 

paper: 

[The] bond ordinance[] provides the legal basis for issuing airport 

revenue bonds and defines the terms under which additional bonds 

might be issued, including the need for revenue-generating 

projects. The bond indenture defines what may or may not be 

included in the definition and computation of airport revenues and 

expenses. The indenture establishes various funds and accounts 

for the payment of interest and principal on the bonds from airport 

revenues, establishes the priority of payments for all of the airport 

operator’s obligations, and sets forth various covenants between 

the issuing entity and the bondholders, including a rate covenant 

requiring the airport operator to set rates and charges to produce 

specified levels of revenues. 

Answer Ex. 9 at 6-7. 
 

28 

Initially enacted on November 10, 1971, and since then amended and restated, the Bond 

Ordinance directs the Port to create a fund to hold its Airport revenues (“Airport Fund”) and sets 

a hierarchy of uses for the contents of that fund. Answer Ex. 8, § 13. The Port must “first use[]” 

the revenues credited to the Airport Fund for the “payment of the Costs of Operation and 

Maintenance of the Airport.” Id. § 13-1. The Bond Ordinance defines the term “Costs of 

Operation and Maintenance” as “the reasonable and necessary current expenses of the Port 

included as a Cost of Operation and Maintenance in the annual Airport Budget.” Id. The Bond 

Ordinance further provides that “the term ‘Cost of Operation and Maintenance’ shall include . . . 

costs of utility services.” Id. § 13.1, 13.1(g). Only after paying Costs of Operation and 

Maintenance may the Airport pay the principal and interest of the bonds. Id. § 13.2. It is 

unlikely that the Port could have successfully marketed its bonds if investors did not regard “the 

costs of utility services” as proper airport operating expenses. The Port has a strong incentive to 

ensure that its Airport Operation and Maintenance expenses are appropriately categorized. 

In accordance with its Bond Ordinance, “[u]tilities” are listed as a cost under the 

operation and maintenance portion of the Port’s annual budget. See, e.g., Answer Ex. 5 at 72. 

For purposes of the budget, “[u]tilities” is defined as the “[c]ost of electricity, water, telephone, 

natural gas, sewer, etc.” Id. at 104. In short, under the terms of the Bond Ordinance, the Water 

Charges are properly categorized as operating expenses of the Airport. 

2. The Water Charges are operating costs within FAA’s Revenue Use 

Policy. 

FAA’s policies and guidance resolve any possible ambiguity (although there is none) 

with regard to whether utility fees are Airport-related cost. The Revenue Use Policy explains 

that “[e]xpenditures that are directly and substantially related to the operation of the airport 

qualify inherently as operating costs of the airport.” 64 Fed. Reg. at 7705. Further, with regard 
 

29 

to the allocation of indirect costs—which are allowable under 49 U.S.C. § 47107(b)—the 

Revenue Use Policy instructs that the cost allocation plans “must be consistent with Attachment 

A of OMB Circular A-87.” 64 Fed. Reg. at 7705-06. As shown above, and as the Director’s 

Letter concluded when considering Complainants’ allegations, the Water Charges are “operating 

cost[s] of the airport” consistent with “Generally Accepted Accounting Principles and Office of 

Management and Budget Circular A-87.” Complaint Ex. 12 at 1; see also Complaint Ex. 12 at 2 

n.1. 

In addition to the Revenue Use Policy, FAA’s Airport Compliance Manual—though not 

binding on airport sponsors—is further support that utility costs are Airport operating expenses 

for which airport sponsors may utilize airport revenues. Under the category of “Permitted Uses 

of Airport Revenue,” the Compliance Manual states that in general: 

Operating costs for an airport may be both direct and indirect and 

may include all of the expenses and costs that are recognized under 

the generally accepted accounting principles and practices that 

apply to the airport enterprise funds of state and local government 

entities. 

FAA Order 5190.6b at 15-4. These requirements are fully satisfied here as shown above and as 

set forth in the Director’s Letter. 

3. The City’s allocation methodologies for the Water Charges apply 

to all City ratepayers. 

As discussed above, the City calculates the Stormwater Charge based on the area of a 

ratepayer’s property that is covered by impervious surfaces such as driveways, parking lots, and 

roofs. Mr. Biery explains this has been the City’s long-standing cost allocation methodology for 

stormwater fees; it “was first adopted in 1977 for what is today considered the on-site 

stormwater component of the charge.” Answer Ex. 1 ¶ 9 (discussing Answer Ex. 1, 

Attachment C). 
 

30 

Mr. Biery continues on to explain (id. ¶ 11): 

The rate-making and funding methodologies that were adopted in 

1977 were chosen from among “many other alternatives . . . ,” 

[Answer Ex. 1, Attachment C at I-3], and “were approved by the 

Environmental Protection Agency as meeting federal regulations,” 

[Answer Ex. 1, Attachment D at 133]. The impervious area basis 

was chosen “as an equitable means of distributing costs associated 

with operations and capital construction of facilities which collect 

and dispose of storm water.” [Id. at 38]. 

A recent cost allocation study conducted by Black & Veatch Corporation affirms the 

reasonableness of the City’s previously chosen impervious surface methodology. Answer Ex. 1, 

Attachment E. Black & Veatch found that the approach of using impervious area as a basis for 

stormwater charges is consistent with the vast majority of stormwater management utilities 

nationwide. Id. at 12 (“Over 90% of the participants have indicated that they use actual and/or 

effective impervious area as the basis of charges.”). Ordinance No. 187415, which sets the 

annual rate used to calculate each ratepayer’s stormwater and sewer charges, is calculated by 

multiplying “the square footage of a property’s impervious area . . . by a dollar figure, which 

differs for residential and non-residential properties.” Answer 1 ¶ 14 (citing Answer Ex. 1, 

Attachment F at Ex. A, § B). “[I]mpervious surface is a reasonable proxy for such things as 

level of development, likelihood of runoff, and potential generation of traffic that uses the City’s 

streets for transportation purposes.” Answer Ex. 1 ¶ 16. 

As discussed above, the stormwater charge has both an on-site and off-site component. 

All owners of property located within Drainage Districts receive a full credit for their on-site 

Stormwater Charge component, whether or not those owners prevent any portion of the 

stormwater originating on their properties from reaching the City’s storm water system. Answer 

Ex. 3, PCC 17.36.050(F). The credit “is in recognition of the fact that those drainage districts 

manage much of that on-site storm water. The City and the [D]rainage [D]istricts cooperate in 
 

31 

the management of the storm water within the districts and reimburse each other as necessary for 

that shared work.” Answer Ex. 1 ¶ 17 (citing Answer Ex. 1, Attachment G). Because the 

Airport is located within the Multnomah District, the Port receives a full 35% discount of the 

Stormwater Charge associated with Airport property—the Port pays no on-site fee for Airport 

property. The Port, like every other ratepayer, gets no credit towards the off-site component. 

Like the Stormwater Charge, the Superfund Charge is assessed on all City ratepayers 

under a transparent and, on its face, non-discriminatory methodology. Answer Ex. 1 ¶ 24; 

Answer Ex. 3, PCC 17.36.050(F). Ratepayers are assessed part of the Superfund Charge based 

on their sewage volume and part based on their impervious surface area. Answer Ex. 3, PCC 

17.36.050(F). All charges are set by City ordinance and are publicly available. See Answer 

Ex. 1, Attachment F. 

When the facts of the charges are viewed in light of FAA’s guidance, it is clear that the 

Water Charges are allowable airport operating costs. As such, federal law does not prohibit the 

Port from utilizing airport revenues to pay the costs. 

4. Complainants’ contention that the Water Charges are not operating 

costs is unavailing. 

Complainants argue that the Water Charges are not an “operating cost.” Complaint 

¶¶ 122-124. However, Complainants do not address whether utility charges are operating costs 

within the plain meaning of 49 U.S.C. § 47133(a)(1), Grant Assurance 25, or the requirements of 

the Revenue Use Policy. Instead, Complainants misconstrue FAA’s prior conclusion, 

summarizing it as “because the City demands that the airport pay the fee, it is therefore an 

‘operating cost’ of the airport. FAA applies the same reasoning (such as it is or is not) to the 

Superfund charge.” Complaint ¶ 121 (emphasis in original). Complainants’ argument begs the 

question. 
 

32 

There is no demand about it. The City is independent of the Port: it cannot arbitrarily 

impose demands upon ratepayers, including the Airport. This is not like Los Angeles where the 

city owns LAX and could, as an initial matter, charge LAX such city costs as the city deemed 

appropriate as a matter of internal accounting. The City is charging the Port utility charges as a 

common ratepayer. As the Director’s Letter states, those charges arise “as a legal obligation 

incident to the airport’s possessory interest in land.” Complaint Ex. 12 at 1. It bears repeating 

that nowhere do Complainants contend that either the Stormwater Charge or Superfund Charge 

are unlawful charges as beyond the City’s authority or otherwise prohibited under State or local 

law. Complainants’ position distills down to the contention that the Port can pick and choose 

what portions of a utility bill to pay based upon their own assessment as to whether the Airport is 

receiving adequate benefit for the utility service provided. This argument permeates throughout 

the Complaint and appears in their “not an operating cost” argument (¶ 123): 

The Airport operates independently of offsite storm water 

management and Superfund cleanup. The City is demanding that 

the Airport pay for things other than what is needed to operate the 

Airport and the City is claiming that it has the legal right to do so 

and therefore the Airport must agree. 

The Port, like all City-ratepayers, has a legal obligation to pay its utility bills. Those bills 

are a cost of doing business. There is no evidence (or claim) that the City is double-billing the 

Port or charging the Port in a discriminatory manner. The Directors’ Letter found to the 

contrary, and, as shown above, the Water Charges were developed and are allocated in a 

transparent manner and charged to all City ratepayers—the Airport is charged at the same rate as 

all similarly situated customers. The City explains that it has made substantial capital 

expenditures to manage right-of-way stormwater and ameliorate sewer run-off; that it provides 

all ratepayers within the City the utility of managing stormwater on the City’s rights-of-way, and 

indeed to some extent on local portions of the interstate highways; and that “it is essentially 
 

33 

impossible for anyone within Portland’s boundaries to reach PDX without travelling on City 

streets.” Answer Ex. 1 ¶¶ 6, 20. And as regards those travelling from outside the City “the City 

is also responsible for managing some of the run-off and storm water from I-5 and I-205.” Id. ¶ 

20. Complainants fail to show how the Airport could operate efficiently if the City failed to 

manage stormwater on the City’s rights-of-way. It is not that Complainants want the off-site 

stormwater management service discontinued, they simply believe that they should not have to 

pay for it.13 

What Complainants are in effect arguing is that Congress intended to pre-empt thirdparty (i.e., non-sponsor) local government utility charges to airports based upon a federal secondguessing as to the value and benefit of the service provided. But “[w]here . . . the field that 

Congress is said to have pre-empted has been traditionally occupied by the States ‘[the Supreme 

Court] start[s] with the assumption that the historic police powers of the States were not to be 

superseded by the Federal Act unless that was the clear and manifest purpose of the Congress.” 

Hillsborough Cty. v. Automated Medical Labs., Inc., 471 U.S. 707, 715 (1985) (citations 

omitted). Congress spoke to and limited the authority of local taxing authorities on aviation fuel. 

49 U.S.C. § 47133. It did not do so with respect to non-sponsor utility charges. FAA should 

reject Complainants’ suggestion to engage in a second-guessing of a non-sponsor utility charge 

“based upon a transparent, uniform, and non-discriminatory rate-setting methodology.” 

Complaint Ex. 12 at 1. 

Complainants’ reading of the statute would open a Pandora’s box and subject all airport 

non-sponsor utility bills to second-guessing, contrary to local law, whether particular charges are 

 

13 Or the Superfund investigation, which is apparently traceable to past overflows and discharges relating to City 

management of sewer and stormwater services. 
 

34 

properly allocated to a particular airport. This would impose an untenable compliance burden on 

airports, undermine local utility law and ratemaking, and task the FAA with undue and untoward 

regulatory burdens. By way of example, FAA should not put itself in the position of having to 

determine, e.g., what electrical facilities should be directly assigned to an airport ratepayer (or 

not) or whether they should instead be rolled-in into a network charge, or whether the airport 

should bear the cost responsibility for a particular regulatory asset, or any of the other countless 

issues attendant to the development and imposition of non-sponsor utility charges. Those issues 

should be matters of local law, subject to local jurisdiction and control. See id. at 2. 

Whatever the merits of a case concerning the use of airport revenues to pay for a “sports 

arena” (Complaint ¶ 71), that is not the situation here. The City is providing a vital city service 

in keeping stormwater off the streets and rendering the streets useable. It likewise is charging 

ratepayers for Superfund investigation costs traceable to prior potentially polluting stormwater 

runoffs and sewer overflows. 

FAA is free to depart from its prior findings based upon a reasoned, considered, and 

supported basis. The Director’s Letter suggests this possibility based upon “a more robust 

factual record developed in the context of a formal proceeding.” Complaint Ex. 12 at 2. But 

Complainants’ have not developed a “more robust record.” They simply introduce the same 

factual and legal matter previously presented to FAA, and merely assert that the Directors’ Letter 

is wrong. That should not be a good and sufficient basis for FAA to now change course and 

reverse its prior guidance. The facts and law support the core findings of the Director’s Letter in 

full: “the City of Portland’s storm water management charge is an operating cost of the airport, 

because it arises as a legal obligation incident to the airport’s possessory interest in land 

necessary for the provision of aeronautical services.” Complaint Ex. 12 at 1. For the same 
 

35 

reasons, FAA would “not . . . say . . . that the airport’s payment of the Superfund fee violates the 

grant assurances or the Revenue Use Policy.” Id. at 2 n.1. 

C. The Water Charges are not “impact fees,” but even if they were, airport 

revenue can lawfully be used to pay them. 

Complainants characterize the imposition of the Water Charges as improper impact fees. 

Complaint ¶ 69. Impact fees can be prohibited uses of airport revenue when they “exceed the 

value of services or facilities provided to the airport.” Revenue Use Policy, 64 Fed. Reg. at 

7720. The Director’s Letter noted that there was no “indication that the airport has been 

disproportionately targeted by the city . . . or that the airport has otherwise been overcharged for 

these services.” Complaint Ex. 12 at 1. 

1. The Water Charges are not impact fees. 

Complainants claim that the Water Charges are impact fees because the Airport allegedly 

“receives no services from the City in exchange for the Offsite Stormwater Management and 

Superfund Remediation Fees.” Complaint ¶¶ 66, 69-70. This is a mischaracterization of the 

nature of these charges. The Water Charges are not impact fees; rather they are components of 

the Airport’s sewer/stormwater utility fee, the payment of which is ordinary and necessary for 

the operation of the Airport. 

FAA policy does not define the term “impact fee.” Revenue Use Policy, 64 Fed. Reg. at 

7708. But like the phrase “operating costs,” the term “impact fee” has an ordinary and wellaccepted meaning. An impact fee is “[a] fee imposed on property developers by municipalities 

for the new infrastructure that must be built or increased due to new property development. 

These fees are designed to offset the impact of additional development and residents on the 

municipality's infrastructure and services, which include the city's water and sewer network, 
 

36 

police and fire protection services, schools and libraries.”14 “Impact fees are payments required 

by local governments of new development for the purpose of providing new or expanded public 

capital facilities required to serve that development.”15 See also Wellington River Hollow, L.L.C. 

v. King Cty., 113 Wash. App. 574, 578 (Wa. Ct. App. 2002) (“The statutes and ordinances at 

issue in this case give jurisdictions within a school district the discretion to impose school impact 

fees on new developments.”). The Revenue Use Policy treats impact fees consistent with their 

common meaning: i.e., impact fees are used to compensate governmental bodies for mitigating 

the impact of specific airport activities such as “airport development.” 64 Fed. Reg. at 7708. 

See also FAA Office of Airport Safety & Standards, Opinion Letter (June 30, 1997) (discussing 

the propriety of impact fees for an airport expansion project). 

Complainants fail to show how the Water Charges are impact fees within the plain 

meaning of the term or FAA’s Revenue Use Policy. The Water Charges are not levied by the 

City to mitigate a specific airport activity. Rather, they are components of the Airport’s sewer 

and stormwater utility fee and are levied by the City on all jurisdictional ratepayers in a nondiscriminatory manner to pay for costs associated with the sewer and stormwater systems. 

Answer Ex. 1 ¶¶ 8, 24; see also Complaint Ex. 10. 

It bears repeating that the City’s sewer and stormwater utilities are operated pursuant to 

the City’s voter-approved charter. See Answer Ex. 1 ¶ 3 (citing Answer Ex. 1, Attachment B). 

Just as electric and gas utilities impose customer fees on the basis of transparent, nondiscriminatory rate methodologies in order to recoup their costs for providing energy service, the 

City states that it charges all jurisdictional ratepayers fees based on a transparent rate 

 

14 Investopedia, Impact Fee, http://www.investopedia.com/terms/i/impact_fees.asp (last visited on Apr. 13, 2016). 

15 Am. Planning Ass’n, APA Policy Guide on Impact Fees, 

https://www.planning.org/policy/guides/adopted/impactfees.htm (last visited on Apr. 13, 2016). 
 

37 

methodology so that the City can recoup its costs for providing stormwater and sewer 

management services. See Answer Ex. 1 ¶ 20.16 The Port is a City-jurisdictional ratepayer, and 

it is responsible for payment of its sewer and stormwater fees, including the Water Charges. See 

Complaint Ex. 12 at 1 (finding that the charge “arises as a legal obligation incident to the 

airport’s possessory interest in land necessary for the provision of aeronautical services”). 

2. Complainants have presented no evidence that the Water Charges 

are not proportionate to the value of services received. 

Even if the Water Charges were properly categorized as “impact fees,” the City has 

explained its view that the charges are proportionate to the value of services received by the 

Airport, thus constituting permissible uses of airport revenue. The Complainants have 

introduced no evidence to contradict the City’s position. 

The City maintains that the benefit associated with the Water Charges includes: 

“1) access to properties unimpeded by stormwater-related flooding of rights of way; 2) general 

use of the right of way unimpeded by stormwater-related flooding; 3) protection from hazardous 

materials spills in the right of way; and 4) protection from off-site flows.” Answer Ex. 1 ¶ 19 

(citing Answer Ex. 1, Attachment G at 19). The City has also determined that it is equitable to 

 

16 See also Answer Ex. 1 ¶ 6-7: 

Today, the Storm Water System’s most basic task remains the elimination of 

storm water from the right-of-way, but it also enables the City to comply with 

current federal and state requirements found in the Clean Water Act, the City’s 

National Pollutant Discharge Elimination System and Municipal Separated 

Storm Sewer System permits, and elsewhere. The Storm Water System includes 

elements such as the “Big Pipes” that were constructed to comply with a 

regulatory order to reduce the number of yearly combined sewer overflows into 

the Willamette River. The Big Pipes and their associated infrastructure alone 

cost $1.4 billion, the debt service of which the City’s ratepayers continue to pay. 

The City pays approximately $110 million annually to construct, maintain, and 

operate the Storm Water System. . . . The Storm Water System is funded almost 

entirely by the proceeds of (a) fees paid by ratepayers, that is, persons who own 

or occupy property in the City; and (b) sewer bonds, the debt service of which is 

also paid by the ratepayers. 
 

38 

charge ratepayers for the Superfund investigation costs because ratepayers benefit from the 

sewer and stormwater system and it is discharge from those facilities that gives rise to the City’s 

identification as a potential responsible party. Id. ¶ 24. While ratemaking is not an exact 

science, the City has allocated these costs based on impervious surface area as a proxy for level 

of development, likelihood of run-off, and traffic generation (Answer Ex. 1 ¶ 16), and also in 

part, as concerns the Superfund Charge, based on volume of sewer usage as regards potential 

pollutant run-off. Answer Ex. 3, PCC 17.36.050(F), (G). The City explains that its approach is 

consistent with the majority of stormwater management utilities nationwide. Complaint Ex. 1 

¶ 13. The Port also understands that the City’s inclusion of these fees in the rates it charges to all 

City ratepayers is equitable and consistent with standard cost-of-service ratemaking. Id. ¶ 24. 

The cost allocation methodology is used consistently for other ratepayers and subject to updates 

and consideration of the appropriateness of the methodology. See, e.g., Answer Ex. 1, 

Attachment H. 

 The two examples cited by Complainants do not bolster the allegation that the Water 

Charges are impermissible impact fees. First, in both the LAX example (Complaint ¶ 75; 

Complaint Ex. 11) and the MIA case (Complaint ¶ 70), the airport sponsor imposed the fees in 

question, whereas here the City, a non-sponsor, is imposing the Water Charges on the Port, the 

airport sponsor. This is a relevant distinction in considering the propriety of the Port’s payment 

of the charges rather than the appropriateness of the charges themselves. Because it is the City, 

not the Port, that has imposed the Water Charges, this is not an instance of potential self-dealing. 

The airport sponsor is not drawing money by fiat from the Airport coffers for use in other areas 
 

39 

within the sponsor’s control. The Port pays these charges as a legal obligation17 and in 

accordance with a cost allocation methodology that is a recognized way to align the value of the 

services with how much each entity is charged. The City charges the Port on an equal basis with 

all other City ratepayers, obviating the common concern that local officials will raise airport fees 

rather than local taxes to generate revenue for non-airport projects. See Complaint ¶¶ 59, 126. 

This is not a targeted surcharge on business at the Airport in the way that Complainants 

characterize it. 

 Second, the City has provided documentation and substantiation for the Water Charges 

here. In the LAX case, charges for police overhead rates were “based on outdated cost allocation 

plan calculations instead of annually updated actual rates.” Complaint Ex. 11 at 6. The DOT 

Inspector General found that the Los Angeles World Airports, the airport sponsor and a 

department of the City of Los Angeles, was unable to show that the funds were expended for the 

benefit of the airport. Id. The police fees were not properly recorded in some cases, and actually 

improperly allocated in others. Here, the Water Charges are linked to services provided to the 

Airport, not misallocated charges for phantom services. The Airport in this case is subject to 

charges that are, according to the evidence in record, transparent and based on a widely-used, 

frequently-updated cost allocation methodology for services received. 

In the MIA audit, the impact fees at issue included a roadway impact fee on all 

development activity in Dade County and were “before-the-fact”—i.e., a prerequisite for 

 

17 Likely, it is for this reason that the Revenue Use Policy states that: 

[i]n determining appropriate corrective action for an impact fee payment that is not 

consistent with this policy, the FAA will consider whether the impact fee was imposed by 

a non-sponsoring governmental entity and the sponsor’s ability under local law to avoid 

paying the fee. 

 64 Fed. Reg. at 7720; see also Compliance Manual, FAA Order No. 5190.6b at 15-9. 
 

40 

obtaining a building permit—and therefore speculative. Office of Inspector General, Report No. 

R4-FA-7-035, Diversion of Airport Revenue: Dade County Aviation Department at 6 (June 25, 

1997). The permitting fees were found to be inappropriate as adding little or no value to the 

projects. Id. at 9, 11. In contrast, FAA’s Revenue Use Policy specifically contemplates that 

airport revenues may be used related to airport development and “equal to the prorated share of 

the cost.”18 Id. The Port’s payment of the Water Charges is in line with this permissible use of 

airport revenue for infrastructure development and is not speculative, as the City maintains that 

the charges are based on the City’s actual expenditures for the services.19 

Even if FAA were to conclude that the Water Charges are in fact impact fees (contrary to 

all accepted understandings of the term), they are not comparable to the impact fees found in 

prior cases that were determined to be inappropriate uses of airport revenue. The Director’s 

Letter found that the cost allocation methodology is transparent, uniform, and nondiscriminatory, and there is no evidence that the Airport is overcharged for the services. 

Complaint Ex. 12 at 1. Complainants have not introduced any evidence to the contrary. The 

charges are imposed by a non-sponsor, and the Airport is charged the same as any other City 

 

18 While some such infrastructure development is expected to be in the vicinity of the airport, the Revenue Use 

Policy recognizes that some mitigation measures, especially environmental mitigation measures, may not be in the 

vicinity of the airport. 64 Fed. Reg. at 7708. 

19 The City pays approximately $110 million annually to construct, maintain, and operate the Storm Water System, 

funded almost entirely by ratepayer fees and sewer bonds. Answer Ex. 1 ¶¶ 6-7. 
 

41 

ratepayer, and is not singled out for different or excessive payments. Based on the facts here, the 

Port’s payment of the Water Charges with Airport revenue is lawful.20 

D. There is no evidentiary support to warrant altering FAA’s earlier 

conclusions. 

As addressed more fully above, the Director’s Letter correctly concludes that the Port’s 

use of airport revenue to pay the Water Charges is not a violation of Federal law. And there is 

no new documentary support in the record here to alter FAA’s original conclusions. 

 

20 Similarly, and contrary to the Complainants’ contentions, (Complaint ¶¶ 78-80), to the extent the Water Charges 

are deemed to be a tax for purposes of Federal law, they would be outside the prohibition of the Anti-Head Tax Act, 

49 U.S.C. § 40116. Complainants erroneously state that Water Charges “cannot be justified as a ‘tax’ because 

Oregon state law prohibits the City from imposing a tax at the Airport.” Complaint ¶ 77. Oregon law, however, 

only prohibits the City from imposing a property tax on the Airport, not all taxes. See Or. Rev. Stat. § 307.090(1) 

(“Except as provided by law, . . . all public or corporate property used or intended for corporate purposes of . . . 

ports . . . is exempt from taxation.”). Because the Water Charges are imposed not on a property’s owner, but on its 

occupant—the person “who has the right to possession of a property,” Answer Ex. 3, PCC 17.36.020(Q), the Water 

Charges necessarily are not property taxes under Oregon law. See Knapp v. City of Jacksonville, 342 Or. 268, 275-

76 (2007) (“[P]roperty taxes in Oregon are assessed . . . in the name of the owner of the whole. . . . [O]ccupants are 

not owners of property for tax purposes.”). Complainants may be making this argument in order to preclude 

analysis under or application of the Anti-Head Tax Act. However, whether or not a charge is a fee or tax for the 

purposes of the Anti-Head Tax Act is a question of federal law, not state law. See W. Air Lines, Inc. v. Bd. of 

Equalization, 480 U.S. 123, 129-30 (1987) (“The general principle that, absent a clear indication to the contrary, the 

meaning of words in a federal statute is a question of federal law has especial force when the purpose of the federal 

statute is to eliminate discriminatory state treatment of interstate commerce.”). Further, the Port notes that 

Complainants mischaracterize the Anti-Head Tax Act safe harbor provision, Section 40116(e). Complaint ¶ 80. 

The list of types of taxes permitted by this safe harbor provision is illustrative, not exhaustive. See Fed. Land Bank 

of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 100 (1941) (“[T]he term ‘including’ is not one of all-embracing 

definition, but connotes simply an illustrative application of the general principle.”); In re Tower Park Props., LLC, 

803 F.3d 450, 457 (9th Cir. 2015) (citations omitted) (“Because the list of parties is preceded by the word 

‘including,’ the list is illustrative, and not exhaustive.”); Fabi Constr. Co. v. Sec’y of Labor, 508 F.3d 1077, 1086 

(D.C. Cir. 2007) (citations omitted) (“It is hornbook law that the use of the word ‘including’ indicates that the 

specified . . . list that follows is illustrative, not exclusive.”); Black’s Law Dictionary at 777 (8th ed. 2005) (“The 

participle including typically indicates a partial list . . . .”). 

 In fact, the Water Charges in dispute here bear indications of being a tax for purposes of Federal law analysis. 

They are imposed by a legislative body on all property occupants. San Juan Cellular Tel. Co. v. Pub. Serv. Comm’n 

of P.R., 967 F.2d 683 (1st Cir. 1992). They are “imposed by the legislature upon a large segment of society, and 

[are] spent to benefit the community at large.” Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130, 134 (4th Cir. 

2000). They are imposed to address or remediate transportation and environmental issues that impact a broad 

segment of the population. See Valero Terrestrial Corp., 205 F.3d at 134-35 (“[I]t is the environmental safety of 

West Virginia’s groundwater that is the paramount purpose of the . . . charge and it cannot be said that such purpose 

serves a small section of society.”); Brittingham 62, LLC v. Somerset Cnty. Sanitary Dist., Inc., 2013 U.S. Dist. 

LEXIS 14579, at *13 (D. Md. Jan. 31, 2013) (finding charges assessed to repay a loan used to fund water and 

sewage system improvements were a tax); McCleod v. Columbia Cnty., 254 F. Supp. 2d 1340, 1348 (D. Ga. 2003) 

(noting that “every member of the public benefits from storm water management”). 
 

42 

The substantive factual evidence introduced into the administrative record here is the 

same as the evidence Complainants presented to FAA and DOT in earlier letters and at the 

September 2014 Meeting. Namely, Complainants presented copies of: City Ordinance No. 

185610, the 2000 Black & Veatch study, the Airport Cooperative Research Program (“ARCP”) 

Article Theory and Law of Airport Revenue Diversion,

21 and a chart outlining the impacts of the 

Stormwater Charge on the Airport “CPE and Landing Fees.” Compare Complaint Ex. 10 with 

Complaint Exs. 1; 2; 7; 16, Attachment B. 

On the basis of that information, the Director’s Letter concludes that the Water Charges 

are an operating cost of the Airport, arising from the Port’s possessory interest in the Airport 

property located within the City limits, and that “such operating costs are a presumptively 

permissible expense, unless they . . . exceed the value of services and facilities provided to the 

airport.” Complaint Ex. 12 at 1. The Director’s Letter further explains that because the 

Stormwater Charge “is allocated to all ratepayers within the jurisdiction, including the Port of 

Portland, based upon a transparent, uniform, and non-discriminatory rate-setting methodology” 

FAA is not prepared to find that the charge exceeds the value of the services provided to the 

Airport. Id. (also finding that the Superfund Charge is allocated on the same non-discriminatory 

basis). 

Complainants claim that the Director’s Letter conclusions are “illogical,” “erroneous[]” 

and “circular.” Complaint ¶¶ 122, 124. But Complainants introduce no new evidentiary support 

that would lead to a contrary finding that the charges are not operating expenses or that the 

charges exceed the value of services provided to the Airport. Rather, Complainants seem to 

 

21 The ACRP article, on which Complainants rely heavily (see, e.g., Complaint ¶¶ 73-74, 88-89), is inapposite to 

this case. The article does not confront the propriety of paying utility charges that are assessed by a non-sponsor, 

nor does it provide analysis on what constitutes a valid airport operating expense. 
 

43 

conclude that an “actual factual record” in the context of a formal “agency proceeding”—as the 

Director’s Letter invited them to pursue—should be enough, in and of itself, to change the 

outcome. Complaint ¶ 116. But Complainants have not presented a new and different factual 

record that would warrant such a different result. As explained above, Complainants have failed 

to show that the Water Charges are not operating costs within the meaning of the statute and 

FAA’s Revenue Use policy, and their attempt to characterize them as impact fees is unavailing. 

The Director’s Letter explains that “[i]n the absence of any indication that the airport has 

been disproportionately targeted by the city, a non-sponsor of the airport, or that the airport has 

otherwise been overcharged for these services (e.g., double-billed), we are not prepared to find 

that the charge exceeds the value of the services provided to the airport.” Complaint Ex. 12 at 1. 

Nothing in the record supports a finding that those conditions are present.22 As is evident from 

the City Code, the City assesses the Water Charges against all ratepayers on the same schedule 

based on the amount of impervious area on the property (and, for the Superfund Charge, based in 

part on the sanitary sewage volume). Answer Ex. 3, PCC 17.36.050(F), (G); see also Answer 

Ex. 1, Attachment F. The Airport is not being targeted by the City nor is it being double-billed. 

The Director’s Letter’s conclusion is valid and correct: the Port’s payments of these charges 

comply with the Grant Assurances and FAA’s Revenue Use Policy. 

E. The Port has taken reasonable efforts to determine the legality of using airport 

revenue to pay the Water Charges and has relied on FAA’s earlier advice. 

Concerned about its Federal obligations and responsive to its airline users, the Port 

sought guidance from and was advised by FAA that using airport revenue to pay the Water 

Charges would not violate the Port’s Grant Assurances. In previous Part 16 investigations, FAA 

 

22 Complainants bear the burden of proof “to show noncompliance with an Act or any regulation, order, agreement 

or document of conveyance.” 14 C.F.R. § 16.23(k)(1). 
 

44 

determined that “[w]hen evaluating if a sponsor is in compliance with its grant assurances, the 

Director considers the reasonableness of a sponsor’s actions and its obligation to exercise due 

diligence in assessing its compliant status and posture.” Keyes v. McMinn Cty., FAA Docket No. 

16-08-12, Director's Determination at 31 (Dec. 12, 2009), aff’d, Final Decision and Order (July 

26, 2010) (sponsor found not to be in violation of its Grant Assurances where sponsor had 

received approval from state department of transportation, and FAA “cannot equate the 

[sponsor]’s decision to take the expert advice it was given by its approving authority . . . to a 

violation of [its] Grant Assurance[s]”). In Paskar v. City of New York, FAA dismissed the 

complaint and found that it “was reasonable [for the airport sponsor] to rely upon the expertise 

and guidance of FAA and [U.S. Department of Agriculture]; [and that] it should not be penalized 

for such reliance.” FAA Docket No. 16-11-04, Director's Determination at 52 (Sept. 27, 2012). 

Likewise. FAA dismissed a complaint where sponsor’s actions “me[t] the standards of 

reasonableness and due diligence” where it consulted with similarly-situated entities about their 

operations and relied upon a letter from the regional FAA Airport District Office. Truman 

Arnold Cos. d/b/a TAC Air v. Chattanooga Metro. Airport Auth., FAA Docket No. 16-11-08, 

Director's Determination at 43-49 (Oct. 7, 2013). 

Here, the Port sought and relied on the expertise and guidance provided by FAA that 

payment of the Water Charges is a permissible use of airport revenue. As the Port noted in its 

letter to Complainant A4A on January 14, 2016: 

We have cooperated with the air carriers in seeking a 

determination from the FAA and DOT as to whether the payment 

of [the stormwater and superfund] fees complies with the FAA’s 

Policy Concerning the Use of Airport Revenue. On September 4, 

2012, the FAA’s Office of Airport Compliance informed us (by 

telephone conference) that they found the charges to be 

appropriate. . . . Randy Fiertz confirmed his earlier conclusion in a 

letter of July 30, 2015 . . . Specifically, Mr. Fiertz concluded that 
the fees are an operating cost of PDX and a permissible expense 

under the revenue use policy. We therefore plan to continue 

collecting and remitting the fees until directed otherwise by 

appropriate authorities. 

Complaint Ex. 14. In assessing the Port's compliance with its Grant Assurances, FAA should 

give due consideration to the Port's extensive efforts thus far to determine the legality of the 

charge and reliance on FAA's earlier advice. 

IV. CONCLUSION 

Complainants have failed to meet their burden of proof that the Port's use of airport 

revenue to pay for the Water Charges violates Federal airport revenue use restrictions. For the 

foregoing reasons, Complainants' claims should be dismissed. 

April 15, 2016 

~ctfully su\ed, ;~/ 

~oO.~e~ Pablo 0. Ntiesch ~ 

Peter J. Hopkins 

Anjali G. Patel 

Jessica R. Bell 

SPIEGEL & MCDIARMID LLP 

1875 Eye St., N.W. 

Suite 700 

Washington, DC 20006 

Email: pablo.nuesch@ spiegelmcd.com 

Phone: 202-879-4000 

Fax: 202-393-2866 

Attorneys for the Port of Portland 

45 
EXHIBITS
ANSWER EXHIBIT LIST 

 

Answer Ex. 1 Declaration of B. Jonas Biery (Apr. 14, 2016). 

Attachment A Or. Const. art. IV, § 1. 

Attachment B Portland City Charter §§ 2-105, 9-102, 11-301, 11-302, 

11-303. 

Attachment C City of Portland, Sewage Disposal Fund Rate Study (Jan. 25, 

1977) (excerpt). 

Attachment D City of Portland, Sewage Disposal Fund Rate Study (Feb. 28, 

1977) (excerpt). 

Attachment E Black & Veatch, 2014 Stomwater Utility Survey (Sept. 2014). 

Attachment F City of Portland Ordinance No. 187145 (May 27, 2015). 

Attachment G Intergovernmental Agreement for Stormwater Management 

Services (June 12, 2014). 

Attachment H City of Portland Bureau of Envtl. Servs., FY 2016 Sewer 

System Rate Study (June 2015). 

Answer Ex. 2 Air Transp. Ass’n of Am. v. Jordan, Declaration of Ian 

Whitlock in Support of Port of Portland’s Motion for Leave to 

Appear as Amicus Curiae, No. 3:16-cv-00230-S (D. Or. 

filed Mar. 17, 2016). 

Answer Ex. 3 Portland City Code 17.36.020, 17.36.050. 

Answer Ex. 4 City of Portland Ordinance No. 159085 (Oct. 9, 1986) 

(excerpt). 

Answer Ex. 5 Port of Portland, 2015-16 Adopted Annual Budget (June 25, 

2015) (excerpt). 

Answer Ex. 6 Amended and Restated Signatory Passenger Airline Lease and 

Operating Agreement between the Port of Portland and Alaska 

Airlines, Inc. (unexecuted) (excerpt). 

Answer Ex. 7 U.S. Gov’t Accountability Office, GAO-15-306, Airport 

Finance: Information on Funding Sources and Planned 

Capital Development (Apr. 2015) (excerpt). 

Answer Ex. 8 Port of Portland Ordinance No. 155 (Mar. 8, 2006) (excerpt). 

Answer Ex. 9 Transp. Research Bd., Airport Coop. Research Program 

Synthesis 1, Innovative Finance and Alternative Sources of 

Revenue for Airports: A Synthesis of Airport Practice (2007) 

(excerpt). 
EXHIBIT 1
UNITED STATES DEPARTMENT OF TRANSPORTATION 

FEDERAL AVIATION ADMINISTRATION 

WASHINGTON, D.C. 

AIR TRANSPORT ASSOCIATION OF FAA Docket No. 16-16-04 

AMERICA, INC. d/b/a AIRLINES FOR 

AMERICA, ALASKA AIRLINES, INC., 

AMERICAN AIRLINES, INC., ATLAS AIR, 

INC., FEDERAL EXPRESS CORPORATION, 

HAW AllAN AIRLINES, INC., JETBLUE DECLARATION OF B. JONAS 

AIRWAYS INC., SOUTHWEST AIRLINES CO., BIERY 

UNITED AIRLINES, INC., UNITED PARCEL 

SERVICE CO., and AIR CANADA, 

Complainants, 

v. 

PORT OF PORTLAND, OREGON, 

Respondent. 

I, B. Jonas Biery, declare as follows: 

1. I am the Business Services Manager for the Bureau of Environmental Services 

("BES") of the City of Portland ("the City"), a position I have held for approximately seven 

months. I report directly to the BES Director. Previously, I held the position of Debt Manager 

for the City for approximately five years. 

2. Among my responsibilities as Business Services Manager, I oversee the annual 

BES budget and rate-setting processes, the billing and fee-collection systems, and the work 

related to financial management and accounting. Based on my work at BES and as the Debt 

Manager for the City, I am knowledgeable about the City's sewer and water charges, including 

the storm water and Superfund charges. This declaration is based on personal knowledge and 

my review of City records kept in the course of regularly conducted activity of the City. 

Page 1 - DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
The City's Storm Water Management Authority 

3. Based upon my experience, I understand that the City of Portland is a selfgoverning Home Rule municipality organized under the Oregon Constitution and its own voterapproved Charter. OR. CONST., art. 4, § 1(5), Attachment A. Among other things, the Charter 

authorizes the City to construct and operate a sewer and storm water system, broadly defined. 

PORTLAND, OR. CHARTER§§ 2-105(a)(30), 9-102, 11-301 to 11-303, Attachment B. 

The City's Storm Water Management Fee 

4. BES is the City's public utility for, among other things, storm water management 

and treatment (collectively, "the Storm Water System"). 

5. The Storm Water System collects, conveys, and ultimately treats storm water 

from private and public property throughout the entire city, including the storm water that falls 

on 4,834 "lane miles" of paved streets (equal to about 1,991 "centerline miles" or more than 306 

million square feet of impervious surface). The City has managed storm water discharging from 

rights-of-way in one fashion or another since hard-packed dirt, gravel, or paved streets were first 

constructed in the city. As with almost all other municipalities, right-of-way storm water 

mc:tnagement is among the City's fundamental services to its citizens and the traveling public. 

6. Today, the Storm Water System's most basic task remains the elimination of 

storm water from the right-of-way, but it also enables the City to comply with current federal and 

state requirements found in the Clean Water Act, the City's National Pollutant Discharge 

Elimination System and Municipal Separated Storm Sewer System permits, and elsewhere. The 

Storm Water System includes elements such as the "Big Pipes" that were constructed to comply 

with a regulatory order to reduce the number of yearly combined sewer overflows into the 

Willamette River. The Big Pipes and their associated infrastructure alone cost $1.4 billion, the 

debt service of which the City's ratepayers continue to pay. The City pays approximately $110 

million annually to construct, maintain, and operate the Storm Water System. 

Page 2 - DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
7. The Storm Water System is funded almost entirely by the proceeds of (a) fees 

paid by ratepayers, that is, persons who own or occupy property in the City; and (b) sewer bonds, 

the debt service of which is also paid by the ratepayers. 

8. BES establishes fees for its services based on generally-accepted accounting 

principles and on the cost of providing those services to its ratepayers. Those services include 

the conveyance and treatment of storm water originating on public rights-of-way, publiclyowned property, and privately-owned property. As I describe in some more detail below, current 

storm water charges are separated into two components, an "on-site" charge and an "off-site" 

charge. The on-site charge collects fees sufficient for the City to manage storm water draining 

into the City's system from private property. The off-site charge collects funds sufficient to 

provide the City revenue to manage the run-off from the City's extensive system of paved roads 

(rights-of-way) and drainage from City-owned property. 

9. BES calculates the storm water fees assessed against its ratepayers by estimating 

or measuring the area of a particular ratepayer's property that is covered by impervious surfaces 

such as driveways, parking lots, and roofs. That basis was first adopted in 1977 for what is today 

considered the on-site storm water component of the charge. Sewage Disposal Fund Study at H31- H-34 (Jan. 1977) [hereinafter "1977 Study"], Attachment C. The off-site component, which 

funded the construction and maintenance of what was then known as "street drainage facilities," 

was, in 1977, still paid from the City's general fund. !d. at 5. 

10. The selection of impervious area as the basis of calculating storm water fees 

satisfied the City's then-nascent rate philosophy, which included the following statements: 

Page 3 -

A. All persons benefiting from Portland's sanitary and storm 

wastewater disposal system should contribute toward its support 

approximately in proportion to the costs of providing those benefits. 

B. To ensure equity and uniformity throughout the City, sewer users 

within a class receiving the same benefit will receive the same 

charge .... 

DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
Id. at H-3- H-5. A number of policy statements were adopted as well, including the following: 

"Solutions to storm drainage problems that are of general concern shall be supported by the 

Sewage Disposal Fund." Id. at H-8. 

11. The rate-making and funding methodologies that were adopted in 1977 were 

chosen from among "many other alternatives ... ," id. at I-3, and "were approved by the 

Environmental Protection Agency as meeting federal regulations," Sewage Disposal Fund Rate 

Study at 133 (Feb. 1979) [hereinafter "1979 Study"], Attachment D. The impervious area basis 

was chosen "as an equitable means of distributing costs associated with operations and capital 

construction of facilities which collect and dispose ofstorm water." 1979 Study at 38. 

12. In 1979, funding for "street drainage facilities"-those facilities that are currently 

supported by the off-site component of the storm water charge-was moved from the City's 

general fund to the Sewage Disposal Fund. In the view of the authors of that year's rate study, 

"Consolidation of all drainage maintenance costs under the Sewage Disposal Fund will place all 

responsibility of storm drainage under one funding source and facilitate a comprehensive 

approach to the many problems associated with urban drainage." 1979 Study at 104. After 

1979, both the City's on-site and off-site storm water fees were calculated based on the 

impervious area owned or operated by each ratepayer. 

13. The approach of using impervious area as a basis for storm water charges is 

consistent with the vast majority of storm water management utilities nationwide. Black & 

Veatch, 2014 Storm water Utility Survey at 12 (20 14 ), Attachment E. ("Over 90% of the 

participants have indicated that they use actual and/or effective impervious area as the basis of 

charges."). 

14. To calculate each ratepayer's charge, the square footage of a property's 

impervious area is multiplied by a dollar figure, which differs for residential and non-residential 

properties. Ordinance No. 187145, Attachment F. Those figures are established in theBES 

Page 4 - DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
annual Sewer and Drainage Rates and Charges ordinance, which is adopted by the City 

Council. Id 

15. As mentioned above, the BES storm water fee has two components: an on-site 

component, which reimburses the City for the management of storm water discharging from or 

off non-City property, and an off-site component, which pays for the management of storm water 

discharging to the Storm Water System from City streets and non-City property. The on-site 

component equals 35% of the total storm water fee and the off-site component comprises the 

remainder. Since 1979, the City's ratepayers have been responsible for both components as part 

of their combined sewer/ storm water bills. 

16. Although the process of calculating rates based on impervious surface may not 

render results that exactly mirror individual properties'· use of the Storm Water System, it is used 

by almost all storm water utilities for both on-site and off-site storm water fees because 

impervious surface is a reasonable proxy for such things as level of development, likelihood of 

run-off, and potential generation of traffic that uses the City's streets for transportation purposes. 

No rate model is perfectly accurate and, in ratemaking, utilities must always balance the benefits 

of administrative feasibility against the desire for more closely-tailored rates. Most utilities have 

decided that the use of impervious surface for storm water ratemaking strikes the right balance. 

1 7. By inter-governmental agreement, owners of property located within the 

boundaries of several special government districts along the Columbia River known as drainage 

districts receive automatic, full discounts of the on-site storm water fee component, whether or 

not those owners prevent any portion of the storm water originating on their properties from 

reaching the Storm Water System. This is in recognition of the fact that those drainage districts 

manage much of that on-site storm water. The City and the drainage districts cooperate in the 

management of the storm water within the districts and reimburse each other as necessary for 

that shared work. Intergovernmental Agreement for Stormwater Management Services (June 12, 

2014), Attachment G. 

Page 5 - DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
18. The Port of Portland ("the Port"), the airlines' landlord for purposes of this case, 

operates the Portland International Airport ("PDX") within one of those drainage districts and 

therefore receives a full, 35% discount of the storm water fee for that property; that is, it pays no 

on-site fee. 

19. The City does not, however, offer a similar reduction in the off-site component of 

the storm water management fee because, as explained in the current rate study, 

Even a development discharging no water directly to public 

facilities uses and benefits from facilities handling off-site flows 

in one or more of the following ways: 1) access to properties 

unimpeded by storm water-related flooding of rights of way; 2) 

general use of the right of way unimpeded by storm water-related 

flooding; 3) protection from hazardous materjals spills in the right 

of way; and 4) protection from off-site flows. 

FY 2016 Sewer System Rate Study at 19 (June 2015), Attachment H. 

20. The City charges the Port at PDX for off-site storm water management just as it 

does every other of the City's 180,000 ratepayers. PDX and the traffic it generates use and 

benefit from the off-site system just as do other ratepayers. For instance, it is essentially 

impossible for anyone within Portland's boundaries to reach PDX without travelling on City 

streets. The storm water management for those roads is paid for by the off-site fee and the fee is 

designed, in part, so that property owners who generate substantial road traffic, such as the Port, 

will pay their fair share of the costs of street storm water drainage. A person travelling from 

outside the City boundaries may be able to reach PDX without travelling on City streets, for 

instance by travelling on interstate highways, such I-5 and I-205. But even then, the City also is 

responsible for managing some of the run-off and storm water from I-5 and I-205, even though 

the Oregon Department of Transportation has its own drainage system. 

21. The Port has provided the City with data showing the number of vehicles that 

approach the main PDX terminal building. For 2015, over eight million three hundred thousand 

(8,300,000) vehicles were counted approaching the terminal building. (The Port did not provide 

the City counts for vehicles that travelled to or from PDX but did not approach the terminal 

Page 6 - DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
building.) In addition, of course, employees and patrons ofPDX can travel there using Tri-Met 

buses or the MAX light rail system, both of which use City streets. 

22. At the direction and with the assistance of the Port of Portland, the City directly 

bills several entities at PDX for sanitary, storm water, and Portland Harbor charges. These are 

Federal Express, Skywest Airlines, and Horizon Air. Those entities regularly pay their bills and, 

to my knowledge, have voiced no separate objections to the fees assessed. 

The City's Portland Harbor Charge 

23. The Environmental Protection Agency ("EPA") has designated about 11 miles of 

the Willamette River (known as Portland Harbor) as a federal Superfund site. EPA also named 

the City as a party ''potentially responsible" for some of the river's contamination by virtue of 

theBES sewer and storm water system. The City's system conveys storm water (and used to 

convey sanitary sewage) into the Willamette River. In a consent order among several potentially 

responsible parties and the EPA, the City committed itself to produce a remedial investigation 

and feasibility study for the Portland Harbor site. That work is on-going. 

24. Because the City was named as a potentially responsible party due to its 

ownership and operation of the sewer and storm water conveyance system, it assesses a Portland 

Harbor Superfund Charge against all Portland ratepayers, including both sanitary sewer 

customers and storm water customers. This was a reasonable rate allocation decision under 

standard cost-of-service analysis because it was determined that all ratepayers have a 

responsibility to help pay for the Harbor investigation because ratepayers benefit from the sewer 

and storm water system. 

25. For a commercial customer, the sanitary portion of the charge is about one half a 

percent of the normal sanitary charge and a little over one percent of the standard storm water 

charge. The City then uses the funds from the Portland Harbor Superfund Charge, among other 

sources, to pay for Portland Harbor expenses. 

Page 7 - DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
26. Whether the Portland Harbor fee will rise or fall in the future depends on several 

factors. Three of importance are (1) the nature of the final remedial decision from EPA; (2) the 

degree to which the City is liable for some remedial costs; and (3) the decisions of the City 

Council on how best to pay for the City's obligations. 

27. To my knowledge, no one has ever challenged the City's ability under state or 

local law to assess storm water management fees or a Superfund clean-up charge to the City's 

ratepayers. 

I hereby declare that the above statements are true and correct to the best of my 

knowledge and belief, and that I understand they are made for use as evidence before the 

Federal Aviation Administrative and are subject to penalty for perjury. 

Page 8 -

Dated: April14, 2016 

DECLARATION OF B. JONAS BIERY 

PORTLAND CITY ATTORNEY'S OFFICE 

1221 SW 4TH AVENUE, RM 430 

PORTLAND, OREGON 97204 

(503) 823-4047 
ATTACHMENT A
Ore. Const. Art. IV, § 1

Current through results of the November 2014 election.

LexisNexis® Oregon Annotated Statutes > Constitution of the State of Oregon > Article IV Legislative

Department

Notice

This section has more than one version with varying effective dates.

Section 1. Legislative power; initiative and referendum.

(1) The legislative power of the state, except for the initiative and referendum powers reserved to the people, is vested

in a Legislative Assembly, consisting of a Senate and a House of Representatives.

(2)

(a) The people reserve to themselves the initiative power, which is to propose laws and amendments to the

Constitution and enact or reject them at an election independently of the Legislative Assembly.

(b) An initiative law may be proposed only by a petition signed by a number of qualified voters equal to six

percent of the total number of votes cast for all candidates for Governor at the election at which a Governor

was elected for a term of four years next preceding the filing of the petition.

(c) An initiative amendment to the Constitution may be proposed only by a petition signed by a number of

qualified voters equal to eight percent of the total number of votes cast for all candidates for Governor at the

election at which a Governor was elected for a term of four years next preceding the filing of the petition.

(d) An initiative petition shall include the full text of the proposed law or amendment to the Constitution. A

proposed law or amendment to the Constitution shall embrace one subject only and matters properly

connected therewith.

(e) An initiative petition shall be filed not less than four months before the election at which the proposed law

or amendment to the Constitution is to be voted upon.

(3)

(a) The people reserve to themselves the referendum power, which is to approve or reject at an election any Act,

or part thereof, of the Legislative Assembly that does not become effective earlier than 90 days after the end

of the session at which the Act is passed.

(b) A referendum on an Act or part thereof may be ordered by a petition signed by a number of qualified voters

equal to four percent of the total number of votes cast for all candidates for Governor at the election at which

a Governor was elected for a term of four years next preceding the filing of the petition. A referendum petition

shall be filed not more than 90 days after the end of the session at which the Act is passed.

(c) A referendum on an Act may be ordered by the Legislative Assembly by law. Notwithstanding section 15b,

Article V of this Constitution, bills ordering a referendum and bills on which a referendum is ordered are not

subject to veto by the Governor.

(4)

(a) Petitions or orders for the initiative or referendum shall be filed with the Secretary of State. The Legislative

Assembly shall provide by law for the manner in which the Secretary of State shall determine whether a

petition contains the required number of signatures of qualified voters. The Secretary of State shall complete

the verification process within the 30-day period after the last day on which the petition may be filed as

provided in paragraph (e) of subsection (2) or paragraph (b) of subsection (3) of this section.
(b) Initiative and referendum measures shall be submitted to the people as provided in this section and by law

not inconsistent therewith.

(c) All elections on initiative and referendum measures shall be held at the regular general elections, unless

otherwise ordered by the Legislative Assembly.

(d) Notwithstanding section 1, Article XVII of this Constitution, an initiative or referendum measure becomes

effective 30 days after the day on which it is enacted or approved by a majority of the votes cast thereon. A

referendum ordered by petition on a part of an Act does not delay the remainder of the Act from becoming

effective.

(5) The initiative and referendum powers reserved to the people by subsections (2) and (3) of this section are further

reserved to the qualified voters of each municipality and district as to all local, special and municipal legislation

of every character in or for their municipality or district. The manner of exercising those powers shall be provided

by general laws, but cities may provide the manner of exercising those powers as to their municipal legislation. In

a city, not more than 15 percent of the qualified voters may be required to propose legislation by the initiative, and

not more than 10 percent of the qualified voters may be required to order a referendum on legislation.

History

Created through H.J.R. 16, 1967, and adopted by the people May 28, 1968 (this section adopted in lieu of former

sections 1 and 1a of this Article); Amendment proposed by S.J.R. 27, 1985, and adopted by the people May 20, 1986;

Amendment proposed by S.J.R. 3, 1999, and adopted by the people May 16, 2000.

LexisNexis® Oregon Annotated Statutes

Copyright © 2016 All rights reserved.

Ore. Const. Art. IV, § 1

Page 2 of 2
ATTACHMENT B
4/7/2016 Section 2­105. Continuation of Specific Powers. | Article 1 The Council | The City of Portland, Oregon

https://www.portlandoregon.gov/citycode/article/403285 1/5

GENERAL INFORMATION: 503­823­4000 EMAIL: cityinfo@portlandoregon.gov

More Contact Info (http://www.portlandoregon.gov//citycode/article/15472)

Charter, Code and Policies

City of Portland

Section 2­105. Continuation of Specific Powers.

The City of Portland by its Council has power and authority, subject to the provisions, limitations and restrictions contained in this Charter or

in statute, to exercise any power or authority granted to the City by statute, general or special, or by this Charter, and may do any other act

necessary or appropriate to carry out such authority, or exercise any other power implied by the specific power granted. [Ch.1903, sec. 73;

May 3, 1913, new sec. 34; rev. 1914, sec. 34; 1928 pub., sec. 34; 1942 recod., sec. 2­105; am. Nov. 6, 1962; Nov. 8, 1977, new sec. 65;

am. Nov. 4, 1980; amended May 15, 2012, effective June 13, 2012.]

(a) Among such specific powers, the City has power and authority:

1. To exercise within the City and City‐owned property, all the powers commonly known as the police power to the same extent

as the State of Oregon has or could exercise said power within said areas, and to make and enforce within said areas all

necessary or appropriate water, local, police, sanitary and safety laws and regulations.

2. To secure the protection of persons and property and to provide for the health, cleanliness, ornament, peace, safety and good

order of the City.

3. To provide for entering into contracts by the City for a period not exceeding five (5) years and the extension or renewal thereof

by option or otherwise, for not to exceed an additional five (5) years, except as to property contracts which may extend for more

than five (5) years, or as otherwise permitted by this Charter or by statute.

4. To enter into agreements without limitation as to term, as the Council finds appropriate, for cooperation, consolidation of

services, joint acquisition or ownership and maintenance of facilities or services, with any other public corporation or unit of

government.

5. To establish, construct, maintain, equip and alter buildings and facilities found necessary or appropriate for administration of

government or for use by or for the public.

6. To purchase, or acquire by condemnation or otherwise, or to lease, for such term as the Council may find appropriate, which

need not be limited to five (5) years, such property, real and personal, as may be needed for public use; in purchasing property, to

enter into lease‐purchase agreements or other contracts of purchase which may extend for more than a five (5) year period; to

obtain options; and to mortgage for the term of the purchase as security for the purchase price the property being purchased. In

exercising this power and authority, only the payments to be made during the year in which the purchase, condemnation, lease,

lease‐purchase, option, or purchase price mortgage is entered into shall be considered for purposes of applying Section 7‐102

thereto. [Am. Nov. 4, 1980.]

7. To provide for the purchase of property levied upon under execution in favor of the City.

8. To purchase, take and hold real or personal property when sold for a delinquent tax or assessment levied or imposed under the

authority of the City ofPortland, and to sell and convey the same. But the sum bid by the City on or for any such property so sold

for a delinquent tax or assessment, shall not exceed the amount of all taxes and assessments plus interest and penalties, and the

necessary costs and expenses.

9. To sell by bid or public auction abandoned or impounded and unclaimed property, and property for which storage charges and

removal charges, if any, have not been paid.

10. To provide a seal for the City and seals for the several boards and officers thereof.

11. To establish and regulate the fees and compensation of all officers of the City, and for all official services not otherwise

provided for in this Charter.

12. To fix by ordinance the hours during which all offices and departments of the City shall be kept open for business.
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13. To appropriate money to pay the debts, liabilities and expenditures of the City or any part or item thereof.

14. To appropriate annually to the Mayor two thousand dollars ($2,000) as and for a discretionary Fund and such appropriation

shall be made.

15. To issue City bonds authorized by this Charter or statute or expressly authorized by vote of the City electors, certificates,

warrants, checks and other evidences of indebtedness, but otherwise the City shall not have the power to issue its bonds for any

indebtedness or for any purpose, or to increase the bonded indebtedness of the City in any amount or for any purpose

whatsoever.

16. To fix fees for establishing street grades, surveying and marking the boundaries of streets, lots or blocks, granting permits for

the opening or temporary use of street surfaces, planning of improvements, laying sidewalks, vacating street area, processing of

all types of applications, erection and inspection of buildings or facilities, and any special services or functions performed by the

City or bureaus thereof.

17. To grant licenses with the object of raising revenue or of regulation, or both, for any and all lawful acts, things or purposes,

and to fix by ordinance the amount to be paid therefor, and to provide for the revoking of the same. No license shall be granted to

continue for a longer period than one year from the date thereof.

18. To provide for the opening, laying out, establishing, altering, extending, widening, enlarging, vacating and closing, or for

establishing and changing the grades, of streets, squares, parks or public places, and to provide for the improving and repairing of

streets, squares, parks and public places or of any land over which any right of way has been obtained or granted for any purpose

of public travel or use, by means of any kind of work, improvement or repair which the Council finds necessary or appropriate.

19. To provide for lighting the streets, public grounds, buildings and places, and furnishing the City with light, heat and power, by

contract or by means of its own plant.

20. To provide for surveying the blocks and streets of the City and for marking the boundary lines of such blocks and streets; to

change by ordinance the number, letter or designation of any lot, block or tract of land within the City which may be conflicting or

otherwise unsuitable and to give by ordinance a designation to any tract of land within the City not numbered, lettered or

designated. A certified copy of such ordinance shall be transmitted by the Auditor to the recording officer of the County, who shall

record the same in the record of plats of said County and shall make a reference to the record of such ordinance upon the

recorded plat on file. No charge shall be made by the recording officer.

21. To set apart as a boulevard or boulevards any street or streets, or portion thereof.

22. To regulate the numbering of houses and lots on the streets, boulevards and avenues and the naming of streets, boulevards

and avenues.

23. To regulate and control for any and every purpose the use of streets, highways, alleys, sidewalks, public thoroughfares, and

public places within the City and City parks and properties within or without the City, and to regulate the use of streets, roads,

highways and public places for transportation or use of every description, and for installation of any kind.

24. To provide or require conduits under the streets, lanes, alleys and public places of the City or any part or parts thereof for the

use of telephone, telegraph, electric light and other wires, or for other purposes, either by constructing said conduits itself or

authorizing or requiring their construction by others upon such terms and conditions as the Council may impose, and to regulate

and control the use of such conduits, and to prescribe and establish reasonable rentals to be paid by any person or company

using any of said conduits by whomsoever the same may be constructed for the use thereof, and to provide for the collection of

such rentals, in addition to the ordinary processes, by such summary methods as it may deem proper. If any such grant be made

to any person, firm or corporation, such grantee shall not have power to sublet the same or the use of the same to any person,

firm or corporation engaged in selling, hiring, leasing or otherwise receiving any income from the business or purpose for which it

desires to use such conduits, without such person, firm or corporation first obtaining, as provided in this Charter, a franchise for

such business, purpose or use.

25. To regulate, restrain and prevent obstructions within the public streets, sidewalks and places and to make all needful

regulations to keep and maintain the public streets, sidewalks and places in a clean, open and safe condition for public use; to

provide for the removal, impounding and sale or other disposition of such obstructions, and to make the cost of removal a lien

upon any property from which such obstruction originated or to which such obstruction was attached, to be placed upon the lien

docket and collected as the Council may direct.
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26. To control and limit traffic and classes thereof, and vehicles and classes thereof on the streets, avenues and elsewhere.

27. To prevent and prohibit planting of trees or shrubbery which may be detrimental to sewers, streets, sidewalks, utilities lines,

fire hydrants, or use thereof, or which may interfere with safe travel or vision or may constitute a nuisance, and to cause such

trees or shrubbery to be cut down or removed and to make the cost of such cutting or removal a lien upon the property, to be

placed upon the lien docket and collected as the Council may direct.

28. To prescribe rates to be charged for transportation of passengers or property within the City and area outside the City over

which City jurisdiction is authorized or recognized by statute, by means of vehicles of every description.

29. To provide for the establishment of market houses and places, and transportation terminals, and to regulate the location and

management thereof.

30. To provide for the location, construction, repair and maintenance in or outside the City, of any ditch, canal, pipe or other

facility for the impoundment, storage or conduct of water, and any drain, sewer or culvert or other facility in or outside the City for

conduct, storage or treatment of storm or sanitary drainage or both, as it may deem necessary or convenient; for such purpose to

enter upon any land for the purpose of examining, locating and surveying the line or location of such water or sewer facility, doing

no unnecessary damage thereby; to appropriate said land or so much thereof as may be necessary for the construction or

installation of said facility in any manner permitted by the laws of this State; to appropriate and divert from its natural course or

channel temporarily or permanently, any spring or stream of water; and to compel the extension of utility connections from the

main line or pipe to the curb line, property line or the sidewalks of all public streets, as the Council may determine.

31. To provide for furnishing the City and its residents with water, and to sell water to or for nonresidents.

32. To regulate the plumbing, drainage and sewerage of buildings and structures and the installation and use of appliances or

facilities for heat, light, cooling and energy; to provide for the registration and qualification of specialists in trades or in installation

or use of appliances and facilities; to provide inspection for such installation or use.

33. To compel all persons erecting or maintaining privies, water closets or other toilets or cesspools, septic tanks or private

sanitary sewerage systems within one hundred (100) feet or one‐half block, whichever is greater, of any street in which a public

sewer has or may hereafter be constructed, to connect the same therewith; and where a public sewer is not available, to prescribe

disposal so as to protect the public, property, health and welfare.

34. To regulate, restrain and prohibit use of public sewers for any substance which may be harmful or detrimental to the sewers,

to sewage disposal and treatment, or hazardous to workers, to property or to the public.

35. To regulate the construction, care, use and management of buildings and structures in the City for the better protection of the

lives and health of persons dwelling in or using the same or of the public, and for the public welfare.

36. To regulate, restrain and to provide for the exclusion from the City, or any part thereof, of trades, occupations or businesses

which are offensive or may in the opinion of the Council create or constitute a nuisance, and to regulate uses of land and

structures within the City.

37. To prevent the erection or cause the removal, demolition or repair of buildings or structures wherever situated, found to be

unsafe or dangerous to the occupants, to passers‐by or to other property, or which are found to obstruct a street, and to make the

cost of such removal, tearing down or repair a lien upon the property, which liens may upon the order of the Council be entered

into the docket of City liens and thereafter collected in such manner as the Council may direct.

38. To regulate or prevent the moving of buildings or structures over City streets and limit the locations to which such buildings or

structures may be moved.

39. To define and classify the fire limits and to prohibit the erection or repair of buildings constructed of particular materials within

all or any such fire limits.

40. To regulate or limit the height, construction, size, materials, setbacks, yards, inspection and repair of all private and public

buildings, structures, and fences within the City and to provide City inspection thereof.

41. To require adequate fire escapes, apparatus and appliances for protection against fire, to be provided in buildings and

structures, or in connection with specific uses.

42. To make regulations to prevent the introduction of contagious diseases into the City, and to remove persons afflicted with
4/7/2016 Section 2­105. Continuation of Specific Powers. | Article 1 The Council | The City of Portland, Oregon

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such diseases to suitable hospitals which the City may designate or provide for that purpose either within or without said City;

and to regulate such hospitals.

43. To provide a standard of weights and measures and to authorize inspection of weights, measures, food, beverages, and fuel;

to regulate the commodity, size, weight and ingredients of food or beverage products and fuel, and to prevent the sale of

adulterated, unhealthful or unwholesome food and beverages, and to provide for the seizure and forfeiture of food or food products,

beverages and fuel offered for sale or sold contrary to said regulations.

44. To prevent and remove nuisances, to declare what shall constitute the same, to punish persons committing or suffering

nuisances, to provide the manner of removal of nuisances, and to make the cost of such removal a lien upon the property where

such nuisance existed; and to fill up or drain any lots, blocks or parcels of land subject to flood or where any stagnant water

stands, to declare the same a nuisance, and to make the cost of filling up or draining the same a lien upon the property so filled or

drained. Liens for abatement of nuisances may upon the order of the Council be entered in the docket of City liens and thereafter

collected in such manner as the Council may direct.

45. To regulate or prevent the storage, manufacture, sale, use and transportation of dangerous, explosive, radioactive or

combustible materials or weapons, and to provide for the inspection of the same, and to prevent by all proper means risks of injury

or damage therefrom.

46. To regulate, prevent and prohibit loud or unnecessary noise.

47. To prevent trespassing and punish trespassers upon real and personal property.

48. To restrain and punish intoxication, fighting and quarreling in the City, and any disturbance, riot or riotous assemblage or

participation therein, or any unlawful or indecent practice, and to define what shall constitute the same.

49. To prevent and suppress gaming and gambling houses, lotteries or places where any game in which chance predominates is

played for anything of value, and to punish any person who engages in such game, or keeps or frequents such houses or sets up

or promotes lotteries or sells lottery tickets; to prevent and suppress bawdy houses or places where fornication is practiced, and

to punish any inmate, keeper or frequenter thereof; to prevent and suppress use of narcotics and dangerous drugs and houses and

places kept therefor, and to punish any keeper of such house or place, or person who frequents the same.

50. To prohibit persons from roaming the streets at unseasonable hours.

51. To prohibit and prevent cruelty to children and animals; to appropriate such sums as may be paid into the treasury from fines

collected on conviction of persons charged with cruelty to animals or children, and to authorize the payment of the same or any

part thereof to any person or society that shall have officially aided in such conviction.

52. To provide for the punishment by fine of not less than twenty‐five dollars ($25) nor more than one thousand dollars ($1,000), or

by imprisonment not exceeding two (2) years, or both, of any person or persons who may injure, deface, interfere with or destroy

any property belonging to the City or in which the City has any interest, right or estate, and to provide that the district court or the

circuit court of the State of Oregon for the County of Multnomah shall have jurisdiction to enforce such punishment or

punishments.

53. To establish, change, discontinue, or re‐establish City jails, prisons, police stations, workhouses and houses of detention,

punishment, confinement or rehabilitation, within or without the City.

54. To regulate and restrain the keeping of all pets, birds, fowl, reptiles, and animals of any kind, and to prevent any and all

animals from running at large within the City or any part thereof, and to punish persons who allow animals to run at large or to be

unlicensed; to provide for impounding, sale and disposition when found at large, or when kept against City regulations or when no

license has been obtained or tax paid as provided by the Council.

55. To regulate, prevent and prohibit the erection, maintenance or display of signboards, billboards, signs, posters and

advertisements designed to attract the attention of persons on sidewalks, streets or public places.

56. To regulate and prohibit the exhibition and hanging of material in or across the street or from houses or other buildings or

structures.

57. To regulate and control water‐borne commerce and recreational uses within the City, and uses of and activities in or upon

bodies of water within the City.
4/7/2016 Section 2­105. Continuation of Specific Powers. | Article 1 The Council | The City of Portland, Oregon

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58. To provide for the removal of obstructions, debris and deleterious matter from waters within the City limits and to prohibit

putting or negligently or willfully suffering the same to be put therein.

59. To regulate the building of wharves, and the driving of piles in any body of water or watercourse within the limits of the City

and to establish lines beyond which wharves shall not be built nor piles be driven.

60. To provide for the construction and regulation of public facilities and landings at the foot of the streets terminating at a

watercourse or body of water within the City.

61. To appropriate money for the deepening, widening, docking, covering, walling, altering or changing channels, water, or

watercourses within the City, and to provide for the construction and maintenance of canals, slips, public landing places, wharves,

docks and levees, and all such other work as may be required for the accommodation of commerce or recreation; to control and

regulate the use thereof and to provide for the acquisition by condemnation or otherwise of all such work or works by the City, and

for the construction, maintenance and ownership of the same by the City.

62. To provide for entering into contracts by the City with publicly or privately owned utilities or other governmental agencies for a

period not exceeding forty (40) years for the transmission, sale or exchange of the capacity of and electric power generated by

hydroelectric power generating facilities owned by the City and for operation and maintenance of the facilities.
4/7/2016 Section 9­102 Definition, "Sewer." | Article 1 General Provisions | The City of Portland, Oregon

https://www.portlandoregon.gov/citycode/article/21543 1/1

GENERAL INFORMATION: 503­823­4000 EMAIL: cityinfo@portlandoregon.gov

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Charter, Code and Policies

City of Portland

Section 9­102 Definition, "Sewer."

As used in this Charter, "sewer" includes all trunks, mains and extensions thereof, pipes, ducts, laterals, branches, manholes, lampholes,

catch­basins, pumping stations and appurtenances, ditches, canals, ducts, aqueducts, gates and all other apparatus, structures and devices

which the council finds reasonably necessary or proper for the disposal of sanitary sewage, or for drainage including storm water drainage,

and also the relaying, repairing, reconstruction or renewal thereof. The term includes widening, deepening, straightening and diverting

channels of streams, improving water fronts, filling or grading lakes, ponds or other waters and increasing or diminishing the flow of waters

in natural or artificial channels, and other acts and things found necessary or appropriate for sewerage, drainage and proper disposal thereof.

Use of the term "sewer" shall not require that all purposes set forth above be handled by a single facility, and construction and use of a

sewer may be limited to any one or any combination of said purposes. [June 4, 1917, new sec. 275c; 1928 pub., sec. 275c; 1942 recod.,

sec. 9­503; rev. Nov. 8, 1966.]
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Charter, Code and Policies

City of Portland

Section 11­301 Sewage Disposal or Purification System.

The Council may construct, reconstruct, enlarge, alter, modify, equip, operate and maintain a sewage disposal or sewage purification

system within or without the corporate limits or both, including but not limited to: all methods of storm drainage, intercepting sewers,

diversion sewers, relieving or interconnection sewers, sewers to separate storm and sanitary sewage, pump or ejector stations and

equipment, and plants for the treatment and disposal of sewage. For that purpose the City may acquire by any lawful means property, real or

personal, interests in property, equipment, and related facilities and may make all expenditures which the Council finds necessary or

appropriate to carry out such purposes, either within or without the corporate limits. The City may sell or otherwise dispose of any or all byproducts or salvage products from this operation. The City also may contract with any other person, public or private, to further purification

of public waters or protection of the public health. [Nov. 8, 1938, new sec. 347; 1942 recod., sec. 9­604; rev. Nov. 8, 1966.]
4/7/2016 Section 11­302 Service Charges. | Article 3 Sewage Disposal or Purification | The City of Portland, Oregon

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Charter, Code and Policies

City of Portland

Section 11­302 Service Charges.

For all purposes relating to design, construction, acquisition, operation, maintenance and contract requirements of sewage treatment or

purification facilities and related facilities, the City may fix fees and charges for connection or use or both of sewers and sewage purification

or disposal systems to be paid by property which is served or is capable of being served for use of the sewage disposal system. Sewer user

service charges may be collected by the Water Bureau which shall be compensated for such service as determined by the Council. The

City may establish procedures for collection and may provide for penalties, interest and costs. The City may establish requirements and

impose regulations as it finds appropriate. Sewer user service charges shall be paid for all premises connected with City sewers, directly or

indirectly, notwithstanding that such premises may have been assessed or may in the future be assessed for construction of sewers under

local improvement assessment procedures or may have otherwise paid for sewers.

The City may enter into contracts relating to sewage disposal, treatment or purification or all such functions. The City may impose charges

for sewage transportation, disposal, treatment or purification or any or all such functions, on property outside the City served through City

facilities, at rates no less than those imposed for similar service inside the City to similar classifications.

Proceeds of such charges shall be placed in the Sewage Disposal Fund, and may be expended for any matter connected with the sewer or

sewage disposal or treatment system of the City, and bonded debt and debt service related thereto. [Added Nov. 8, 1938, sec. 347; 1942

recod., sec. 9­604; Nov. 8, 1960, new sec. 9­606; rev. Nov. 8, 1966 as sec. 11­302; am. May 26, 1970.]
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Charter, Code and Policies

City of Portland

Section 11­303 Use of Sewers.

The Council may require any property located within one hundred (100) feet of a right of way in which there is a City sewer to connect to

that sewer.

The Council may prohibit discharge of sewage or harmful matter or impurities into any stream or river within the City. This prohibition may

extend to any source whatever, including ships, houseboats and water craft of all kinds. These sources may be required to connect to the

City's sewer system when physically possible, or otherwise to construct and use a prescribed sewage or waste disposal system.

To facilitate sewage treatment and protect the City's sewage facilities, the City may limit the classes or kinds of sewage that may be

discharged or may continue to be discharged into public sewers, may prohibit discharge of wastes other than domestic sanitary sewage into

public sewers or facilities, and may require private pretreatment before discharge, upon terms fixed by the City Engineer. [New sec. Nov. 8,

1966.]
ATTACHMENT C
... . 

SE~!AGE DISPOSAL FUND 

RATE STUDY 

CITY oF PoRTLAND 

PoRTLAND J ORE Goo l 

t· JANUARY J 1977 

80 

EXCERPT
OREGON 

DEPARTMENT OF 

PUBLIC WORKS 

CONNIE McCREADY 

COMMISSIONER 

OFFICE OF 

PUBLIC WORKS 

ADMINISTRATOR 

400 S.W. SIXTH AVE. 

PORTLAND, OR. 97204 

January 25, 1977 

Mayor Neil Goldschmidt 

Commissioner Frank Ivancie 

Commissioner Charles Jordan 

Commissioner Connie McCready 

Commissioner Mildred Schwab 

Re: Sewage Disposal Fund Rate Study 

Members of the City Council: 

Attached for your consideration is a rate study of Portland's 

Sewage Disposal Fund. 

The report is based on a comprehensive review of our operating 

and capital programs and an analysis of the rate structure. It 

includes a long-range financial and system development plan as 

well as specific rate recommendations. The study was conducted 

by the staff of the Bureau of Sanitary Engineering with assistance 

from the Bureaus of Wastewater Treatment and Maintenance. 

If you have questions concerning the report or wish additional 

information, please call Bob Rieck (4102) or me (4114). We 

will be pleased to arrange briefings for you, your staff, or 

any interested person or group. 

Respectfully submitted, 

City Engineer 

CM:jd 

'· 
SEWAGE DISPOSAL Flf~ 

RA1E S1UDY 

CITY oF PoRTLAND 

PoRTLAND,., OREGON 

JANUARY,., 1977 
SEWAGE DISPOSAL FUND RATE STUDY 

Purpose 

During budget preparation 1n January 1976 it became apparent that 

additional Sewage Disposal Fund revenues would be required for the fiscal 

year beginning July 1, 1977. The sewer fund rates have not increased 

since February 1, 1971. This report is the result of a series of studies 

begun in 1976 to assure that the rate adjustment would be: 

1) the minimum necessary to support a justified service program, 

2) done in an equitable manner, and 

3) based on a long-range financial and system development plan. 

Scope 

These goals could not be accomplished by projecting present expenses into 

the future and merely adding a percent increase to the current user charges. 

A comprehensive review of all programs and expenditures was required. The 

study included the implementation of a productivity program, the development 

of a computerized financial model, analysis of various possible rate philo- , 

sophies and methodologies, preparation of a stormwater management program, 

review of all capital and operating expenses and revenues, and the updating 

of our five-year capital improvement program. These efforts resulted in the 

development of a five-year financial and system development plan which was 

used as the basis for rate recommendations. 

Financial Mode 1 

A computerized financial model of the Sewage Disposal Fund was developed to 

-1-
assist in system development decisions and financial planning. The model 

allows comparison of various rate-making alternatives. It also provides a 

means of determining the effect of different capital improvement programs 

on the rate structure. Several alternatives are contained in· this report 

and additional specific alternatives can be developed eased on suggestions 

made during the rate decision process. We .hope that the availability of 

this tool will .assist the City Council in its deliberation on the sewer 

rates. 

In addition, the Sewage Disposal Fund financial model will become an ongoing 

financial management and project control tool. It will enable managers to 

evaluate the effect of capital projects and operating service levels on cash 

and manpower requirements. 

Current Financial tondition 

A condition of sale of outstanding bonds requires that annual operating 

revenues exceed operating expenses in an amount equal to 1.3 times the annual 

debt service. Without a rate increase thi~ bond coverage would be only 0.9 

in FY 78 and 0.3 in FY 79. 

}he projected balance at the end of the current fiscal year is $9,600,000. 

Without a rate increase there will be revenue deficits of approximately 

$6,300,000 in FY 78 and $9,100,000 in FY 79. The ending cash balance in 

FY 79 would be a deficit of $5,800,000. Appendix A projects the financial 

condition of the Sewage Disposal Fund if current rates were held constant 

over the next five years. 

-2-
/ 

An additional factor is the requirement of the Federal Environmental Protection 

Agency that user charges must fairly distribute operating and maintenance 

costs to all user classes. In the spring of 1976 the City was notified that 

our rates did not meet federal guidelines~ Failure to comply with EPA 

requirements will result in the loss of grant funds for capital projects. 

Recommended Financial Plan and Rate 

The recommended rates and charges for a two-year period beginning July 1, 1977 

are shown in Appendix B. The accompanying financial plan is outlined for 

five years and a rate is estimated for each of those years~ However, we 

suggest that the rates for future years not be established at this time but 

rather be reviewed after we have gained two additional years of operating 

experience. 

The proposed rates contain several major policy suggestions and more accurately 

assign the various costs of operating the sewerage system. 

1) The rates include both an operating and system development charge based on impervious area to help offset the cost of handling 

storrnNater. 

2) Volume discounts for larger users are discontinued. 

3) Charges for treating extra-strength sewage are substantially increased to reflect actual cost~ 

4) Rates for senior citizens are kept as low as possible, 

5) Cooling water rates are substantially increased to reflect actual 

costs. 

6) Sanitary Direct Connection Charges are increased to reflect ·increased 

average improvement district charges. 

The rates are based a set of guiding philosophies as outlined in Appendix H. 

These philosophies, and the methodology used to implement them, were designed 

-3-
to satisfy the federal requirement that each user class pay its fair share 

of the costs. 

The federal government also requires that the City recover grant funds used 

to build facilities that benefit industries. These costs are recovered from 

inaustries over a 30-year period. The rates do not contain a recommendation 

for this Industrial Cost Recovery Charge, However, the revenue projections 

in the financial plan assume that such a charge will be put 1nto effect on 

July 1, 1977. The Industrial Cost Recovery Charge is estimated to produce 

$1,700 in FY 78 and $57,000 in FY 82 .. A reconmended rate will be developed 

and submitted to the City Council prior to May 1st, 

~he recommended monthly rate for a single family residence increases from 

$3.00 to $3.50 for the two-year period. This compares with $5.00 1n the 

Unified Sewerage Agency, $3.75 in Vancouver, $4.50 in Clackamas County 

and $3.00 in Milwaukie. Other comparative rates are listed in Appendix J. 

The last page in Append~x B shows typical monthly charges for various types 

of users. 

Productivity Program 

A summary of the sewage fund productivity program is included in Appendix c. 

A more detailed r.eport is available for review. 1he program lists projects 

which have already been implemented resulting in annual savings and product ... 

ivity improvements of $139,765. In addition, management decisions have been 

made to implement projects with annual savings of $30,364. Additional 

-4-
projects are currently under review. The program includes a continuing 

productivity effort in all areas supported by the Sewage Disposal Fund. 

Impact on General Fund 

The net result of the recommendations and cost accounting procedures 

contained in this report is a savings to the City•s General Fund of 

approximately $263,000. This is a result of the identification and 

subsequent transfer to the Sewage Disposal Fund of indirect costs associated with the maintenance of collection and transportation sewer facilities. 

Retained as a General Fund expense is the cost of maintaining street drainage 

facilities. These services were originally a gas tax expenditure. In 

FY 78 the maintenance of street drainage facilities will cost approximately 

$235,000. 

Inflation Assumptions 

Inflation assumptions used in the report are outlined in Appendix D. This 

appendix also includes a financial plan and projected rates assuming no 

inflation. Service levels are identical to the recommended financial plan. 

It is interesting to note that without inflation the basic residential rate 

would not increase until FY 81. 

Expenses and Revenues 

All costs associated with providing sewer services to the community have 

been identified during the study and are presented in Appendices E and F. 

Appendix E details the capital expense and related revenue projections for 

the five years covered in the financial plan. Information is provided on 

-5-
current and proposed capital improvement projects, equipment expenditures, 

existing capital debt and projected bond sales, grant revenue, industrial 

cost recovery revenue and grant repayment expenses, engineering fee 

schedules, and depreciation of capital facilities. 

Capital expense projections contained in the recommended financial plan 

show continued emphasis on the correction of basement flooding which affect 

many of the City•s older combined sewer collection systems. Total capital 

expenses projected for construction of facilities to correct basement 

flooding exceed $16 million over the next five years. Another major area 

of capital construction projected over the coming five years will provide 

sewage faci~ities for continued community growth and correction of water 

pollution problems. Projected construction costs for facilities in this 

area exceed $43 million with offsetting federal grant revenues near 

$30 million. 

Appendix F details projected operating expenses and related revenues for the 

five y,ears covered by the financial plan. Information is provided on the 

operating organizations, service levels, General Fund support for street 

drainage maintenance, governmental service agreements, and miscellaneous 

revenues. Costs are shown for each operating objective. 

Appendix K contains a guide to assist the reader in locating pertinent 

information within all appendices. It also defines accounting object codes 

used throughout the Study, 

Stonmwater Management Proposal 

As outlined to the City Council in their review of the proposed FY 78 

Capital Improvement Program, a comprehensive stormwater management program is 

~6-
included in the recommended financial plan. See Appendix G. The report 

emphasizes a systems approach to the solution of Portland's stormwater 

problems with maximum utilization of non-structural alternatives. We believe 

it will allow for the orderly development of drainage system, stimulate storm 

Local Improvement Districts, and be far less expensive than total reliance 

on the traditional piping systems. 

Alternative Financial Plan and Rates 

For the purpose of comparison we have included several alternate financial 

plans and rate structures in Appendix I. The plans include three alternative 

rates using the same financial plan and the same general rate philosophy. 

By assigning various cost elements to different parameters, such as area, 

impervious area, and volume, the distribution of charges to user classes 

changes. A pay-as-you-go alternative, with no bond financing, is also 

included and shows a substantially higher rate increase. The final alternative shows the effe~t of not providing Sewage Disposal Fund support for 

stormwater projects. The projects would either not be accomplished or 

supported by the General Fund. This alternative lowers the projected 

residential rate to $3.25 per month. 

-7-
Pages Intentionally Omitted
APPENDIX H 

RECOMMENDED 

RATE PHILOSOPHY AND METHODOLOGY 

H-1 
Section 1 

GENERAL PHILOSOPHY 

CITY OF PORTLAND, OREGON 

SEWER USER RATES AND CHARGES 

The following statements of philosophy have been developed and are 

proposed as the basic guide to all future sewage rate structures. The 

underlying principle used to choose between these statements and other 

possible philosophies was equity, modified only as necessary for practicality and as required by mandatory policies dictated by Federal, State 

or local requirements. 

A. All persons benefiting from Portland's sanitary and storm wastewater 

disposal system should contribute toward its support approximately 

in proportion to the costs of providing those benefits. 

Under this philosophy, each factor of cost should be identified and 

assigned to some parameter of benefited property, Many benefits 

may be generated by the same set of costs and, therefore, assigning 

those costs may be arbitrary. Then the total cost of serving each 

customer (or customer class) can be determined. For practicality, 

many simplifying assumptions can be made. However, as each simplification is made, the degree of equity sacrificed for practicality 

should be recognized. For instance, the costs of maintaining a storm 

sewer could be assigned to property. The parameter of property used 

to recover that cost might be the impervious area of each property. 

To implement this charge would require determining the amount of 

impervious area for each property in the City, which would be a major 

project. A simplifying assumption could be that all residential 

H-3 
properties have about the same impervious area, therefore, only 

the commercial areas would need to be measured. Mandatory requirements such as Industrial Cost Recovery (see F below) may add to the 

charge for any particular property. 

Some factors that may influence costs are: 

Flow (amount of water used), Peak Sewage Discharge 

Strength of sewage 

Volume of stormwater runoff, peak stormwater runoff, property 

slope or grade 

Length of sewer 

Infiltration 

Sewer connections 

Customer Service 

Billing 

Some of the benefits derived from operation of the City's sewage 

disposal system are: 

Individual User Need 

Disposal of sanitary (domestic) wastes (residential, 

commercial and industrial) 

Disposal of industrial wastes 

Disposal of stormwater runoff from properties 

Readiness to serve for sewered properties not yet connected 

Unused capacity allowing expansion of service to entire service 

area 

Promotion of Well-Being 

Improvements to and maintenance of: 

a. Recreational values in rivers 

H-4 
b. Health of community 

c. Aesthetic values 

Community Advantages 

Economic benefits to community: 

a. Preservation of receiving water quality 

b. Preservation of ground water quality 

B. To ensure equity and uniforndty throughout the City, sewer users 

within a class receiving the same benefit will receive the same charge. 

Under the 11 cost of service 11 concept, this would mean that all industrial properties, for instance, discharging the same volume and 

strength of sewage, and having the same area (or front footage) would 

be billed the same, regardless of where the industries were located and 

which sewage treatment facilities were used. 

There are differences in the costs of providing sewerage services 

throughout the City. In the southwest, a portion of the City is 

served by the Tryon Creek Wastewater Treatment Plant. The capacity of 

this plant is now only 5 MGD, while the Columbia Boulevard Wastewater 

Treatment Plant has a capacity of 100 MGD. Therefore, the costs at Tryon 

associated with volume are much higher per gallon that those at Columbia. 

Other parts of the City are served by other agencies, sometimes at 

greater cost to the City and sometimes at a lesser cost. Also, many 

areas of the City are too low for gravity service and therefore have to 

be pumped. These areas are more expensive to serve than many gravity 

feed areas. Without a philosophy as above, there could be literally 

hundreds of rates charged for sewerage service, 

H-5 
C. Inasmuch as the Senior Citizens, generally, have played a great part 

in building the sewage disposal system to its present state, and will 

have relatively little use of the system in the future, they shall 

be exempted from payments for debt service and current or future capital 

improvement programs. However, connection charges (including the 

MFEC) which relate to the property and not the occupant, must be paid 

in full. 

PL 92-500 and federal regulations do not allow recognition of the 

ability to pay to influence the distribution of the costs of operation 

and maintenance to all users in proportion to their use of the system. 

However, the City can recognize the contribution that the Senior 

Citizen, as a class, has made to the present development of the sewerage system, and the relatively short time he will have to enjoy the 

benefits of the system in the future. By this policy, the Senior 

Citizen could be excused from payments for past debt service and 

future capital construction, reducing his bill to just the costs of 

Operation and Maintenance. 

D. The costs of building and maintaining unused capacity shall be 

charged to future users. 

All sewerage facilities are designed for the flows anticipated 

several years in the future. When the facility is first completed 

and for several years, there is excess capacity. Costs associated 

with this excess capacity include the capital costs of construction 

plus debt service and the cost of operation and maintenance of the 

facility. The bigger the facility, the greater the total dollar 

H-6 
cost of 0 & M, regardless of the level of usage. This capacity 

will be used by current users as they grow, and by future users 

when they connect to the system. Some method is needed to 

charge these two groups for the costs of providing unused 

capacity until such time as they need it. The "Readiness to 

Serve" concept, where properties not connected to a sewer are 

charged anyway, would be part of this philosophy. 

Inasmuch as the growth of the City is about 1% per year, revenues 

from charges to "new" customers cannot be considered a major 

source of revenue. However, to ensure equity, new users must pay 

for their share of facilities built in the past. This philosophy 

would be the primary justification for the Major Facilities Equalization Charge. 

E. As required by the Federal government, the cost of operation and 

maintenance of the treatment works shall be distributed to each 

user (or user class) in proportion to such user's contribution to 

the total wastewater loading of the treatment works. 

This statement is a minimum requirement of EPA and is not an 

optional philosophy, since we have already accepted grants from EPA 

with this statement specified as part of the grant conditions.. However, EPA has acknowledged that all 0 & M costs do not have to be 

distributed on a gallonage basis, Some costs can appropriately be 

assigned to property or accounts or to some other parameter of the user. 

H-7 
F. As required by the Federal EPA, municipalities receiving grants for 

treatment works must collect from industry, each industry ~'s share 

of the grant in proportion to that industry's use of the treatment 

works. 

Federal grants are not to be used to directly benefit industry, and 

therefore, when an industry uses a treatment works partly financed by 

an EPA grant, it must repay that portion of the grant represented by the 

industry's share of the treatment works. This is not a philosophy 

but a mandatory requirement of the Federal government. 

It should be pointed out that EPA has so narrowly defined industry 

that only a fraction of the total industrial wastes discharged will 

be subject to this charge. 

In addition to the above statements of philosophy, the following statements of policy, if adopted, would help to define the use and handling of 

the Sewage Disposal Fund. 

A. Solutions to storm drainage problems that are of general concern 

shall be supported by the Sewage Disposal Fund. 

There are many reasons for recognizing that storm drainage problems 

come under the province of the Sewage Disposal Fund. When the SDF 

was first formed, all sewers were combined sewers discharging into the 

river or Columbia Slough. When responsibility for financing operation 

and maintenance of the collection system was transferred to the SDF, 

that fund was actually being used for storm related problems, Recently 

this was extended to financing solutions to drainage problems associated 

with basement flooding caused by combined sewer backup. 

H-8 
In addition, in some areas, solutions to sanitary sewage problems 

are actually dependent on providing storm sewers. In many areas of 

the City, large amounts of inflow from illegal rain drain connections 

to the sanitary sewer are overloading the system. The City Attorney•s 

Office has ruled that the property cannot be required to remove these 

illegal connections until there is a storm sewer available to dispose 

of the rainwater. 

The above statement, in itself, does not suggest how to collect funds 

needed to finance those projects, however, it does offer the backing 

of the SDF and the large cash flows available to the fund, so that 

projects can be initiated without being restricted by the amount of 

collections already made for storm projects. Revenue bond sales would 

be supported by all revenue to the SDF not just storm charge revenue, 

making the bonds more acceptable to investors. This statement is 

purposely not specific as to what type of projects can be financed, 

wholly or in part, out of the SDF. The City must be allowed to 

determine which projects need help and to what extent that help should 

be given. 

B. The sewage disposal system shall be self-supporting and shall not be 

dependent on the General Fund to cover the costs of acquiring, constructing, operating and maintaining the system. However, maintenance of 

facilities designed for street drainage shall continue to be financed 

by street funds (gas tax or General Fund). 

This is the present policy of the City. Prior to 1970, maintenance 

costs for the lateral sewer system were paid out of the General Fund. 

H-9 
Although the above is a general policy statement, a consequence is 

that use of ad valorem taxes as part of a system of charges would be 

ruled out (however, in specific cases as for certain storm drainage 

projects, sewerage needs might be identified which could be financed 

by a special levy collected by ad valorem taxes). Legitimate 

charges to bureaus supported by the General Fund would continue to 

be made. Methods of financing will not be specified at this stage, 

however, it should be noted that selling General Obligation Bonds 

to be paid by the SDF would not be contrary to this philosophy. 

C. Major new facilities should be paid for by the users of those facilities 

rather than by reserves accumulated at the expense of past users. 

This policy requires that bonding should be the principle source of 

the City's share of construction funds needed for major SDF projects. 

Facilites to be constructed in the future are for the benefit of 

future users of the system. Since the life of most sewage disposal 

projects is 20 years or more, savings from past and current users 

should not be used to finance projects that will primarily benefit 

future users. With bonding, as new customers (and existing customers) 

use the facility, their connection charges and user charges would be 

used to retire the debt. Also, as long as inflation continues at the 

present high rates, 11 buy now-pay later 11 is the most economical method 

of financing major projects. This philosophy would preclude setting 

up a Sinking or Reserve Fund to finance such projects. Debt service 

for all bonds, whether General Obligation or Revenue, should be paid 

out of the Sewage Disposal Fund (see statement B above). 

H-10 
Section 2 

RATE DEVELOPMENT 

Having developed a set of guiding philosophies and policies in Section 1, 

the next step taken was to arrive at a system of rate generation that would 

comply with federal requirements, and meet the needs of the City and the 

Sewage Disposal Fund. 

The basic assumptions used in the Rate Study are as follows: 

1. Rates are to be based on costs. 

2. Each class of customer must pay its fair share of all costs (except 

that the Senior Citizen class is forgiven the costs of Capital 

Construction). 

3. Bonding shall be the principle source of the City•s share of Capital 

project costs. 

4. Customer classes, or groups, will be identified based on similarity 

of sewage discharged. 

5. Customers with above normal strength sewage will be billed a surcharge 

based on the costs of treating Bio-Chemical Oxygen Demand (BOD) and 

Suspended Solids (SS). 

6. Residential accounts will be billed on the basis of the average sewage 

discharged by that class. 

7. Metered water consumption with adjustments for irrigation and other 

specific uses will be the basis for billing non-residential customers. 

To provide a method for reviewing the effect of various rate methodologies on 

the sewer user who must pay the bill, a computer model was built. This Rate 

H-11 
Model is based on the sewage disposal system physical properties and Sewage 

Disposal Fund accounting information, As a necessary first step, Expense 

Categories were identified and used to collect all costs (and other revenues) 

that will be used to develop rates. Each Expense Category represents a 

major feature (or activity) whose construction, replacement, operation and/or 

maintenance would be financed by the Sewage Disposal Fund. 

EXPENSE CATEGORIES 

SANITARY SEWAGE SYSTEM 

Collector sewer system costs 

Transport sewer costs 

Pump station costs 

Treatment costs 

Primary treatment 

Secondary treatment 

Sludge handling and disposal 

Pollution control program and studies cost 

Extra-strength monitoring and handling costs 

Combined sewer reconstruction costs 

STORMWATER MANAGEMENT SYSTH1 

Collector sewer system costs 

Trunk and pump station costs 

Stream management and other non-structural stormwater management costs 

GENERAL COSTS 

Billing costs 

Customer service costs 

H-12 
Pages Intentionally Omitted
Section 3 

RECOMMENDED RATE METHODOLOGY 

The rate methodology recommended here is based on the policies and 

philosophies developed in Section 1. This system of rates and charges 

will meet the requirements of the federal Environmental Protection Agency 

and Public Law 92-500. 

Under this methodology, most costs of the sanitary sewage system are charged 

to the VOLUME of sewage discharged by the users. The costs related to 

treatment and disposal of BOD and SS are charged to those parameters. 

For normal or average strength sewage these costs are translated into a 

rate per hundred cubic feet of sewage and added to the VOLUME rate. 

The Billing Parameters used for the recommended plan and the Expense 

Category distribution to those parameters are as follows: 

VOLUME OF SEWAGE (SANITARY SYSTEM) 

Collector sewer costs 

Transport sewer costs 

Pump station costs 

Primary treatment costs 

Secondary treatment costs 

Sludge processing and disposal costs 

Pollution control costs 

Combined sewer reconstruction costs (capital) 

H-31 

100% 

100% 

100% 

77% 

49% 

10% 

40% 

60% 
STRENGTH OF SEWAGE -- BIO-CHEMICAL OXYGEN DEMAND (BOD) 

Secondary treatment costs 

Sludge processing and disposal costs 

Pollution control costs 

STRENGTH OF SEWAGE -- SUSPENDED SOLIDS (SS) 

Primary treatment costs 

Sludge processing costs 

Pollution control costs 

EXTRA-STRENGTH: BOD AND SS 

Extra-strength handling and monitoring costs 

IMPERVIOUS AREA (STORMWATER SYSTEM) 

57% 

42% 

15% 

23% 

48% 

15% 

80% 

Collector sewer costs 100% 

Trunk sewer and pump station costs 100% 

Stream management/stormwater management costs 100% 

Combined sewer reconstruction costs 40% 

BILLS 

Billing costs 

ACCOUNTS - CUSTOMER SERVICE 

Customer service costs 

Pollution control costs 

COMMERCIAL/INDUSTRIAL ACCOUNTS 

Extra-strength monitoring costs 

H-32 

100% 

100% 

30% 

20% 
~1ost of the assignments of Expense Category costs to Billing Parameters 

is straight forward and needs little or no explanation. The assumptions 

and/or theory behind some of the less obvious assignments follow. 

IMPERVIOUS AREA 

The costs of handling stormwater range from construction or repair of a 

huge outfall trunk sewer to removing leaves from a trash rack. None of 

these costs is due to the amount of tap water used by a customer, nor are 

they directly related to the costs of operating and maintaining a sanitary 

sewer system and treatment plant. Therefore, some means of charging the 

customer should be used that is related to the costs of taking care of 

stormwater. 

For sanitary costs, the volume of sewage is easily seen as being related 

to the costs of handling sewage and the volume is easily determined by 

using a meter. For stormwater, then, if a method of determining the volume 

contributed by each customer could be found, the volume of stormwater 

could be charged for the costs of handling stormwater, However, many 

factors influence the amount of storJTMater leaving a property. Some of those 

factors are: a) the size of the property, b) the impervious area (paved? 

roofed or other unnatural condition that prevents water from percolating 

into the ground), c) the slope, d) natural or manmade features that retain 

water on the property (impoundments, dry wells, etc.), e) the type of 

foliage, f) the condition of the soil, etc .. The most significant single 

factor contributing to stormwater runoff is the Impervious Area of the 

H-33 
property. Advantages to its use are: 1) it can be easily measured. 

2) as a relative measurement of the volume of stormwater discharged 

from each property, Impervious Area should be more sellable to the 

public than most other parameters. Everyone can readily see that a 

large paved parking lot would discharge more stormwater than the 

same sized property with mostly trees, bushes, and grass, 

The Impervious Area for each residential customer is assumed to be the 

average for that class. Therefore. as wtth the sanitary charge, any single 

family home will pay the same stormwater charge as any other single 

family home. For the Commercial/Industrial class, the Impervious Area 

for each commercial account would have to be determined. To implement this 

charge, all commercial/industrial accounts could be assumed to have the 

same Impervious Area, until such time as the area for all properties has 

been determined. The time needed for implementation of this charge 

has been estimated at from four to eight months. 

The costs of operating and maintaining, as well as reconstructing the 

combined sewer system have been divided between sanitary sewer costs 

and storm sewer costs in the ratio of 90/10 for 0 & M and 60/40 for 

Capital Costs. These divisions are somewhat arbitrary but are based on 

a judgment of the relative use of the system for 0 & M with more weight 

given to pollution problems (sanitary) for reconstruction. At the present 

time, State law prohibits construction of new combined sewers. 

H-34 
Pages Intentionally Omitted
APPENDIX I 

ALTERNATIVE METHODOLOGIES 

I-1 
Section 1 

INTRODUCTION 

To arrive at the recommended philosophy and methodology outlined in Appendix H, 

many other alternatives were considered. Several alternatives are discussed 

in this Appendix. The three alternatives discussed in Section 2 are based 

on the same philosophy as developed for the recommended plan. 

Another altrenative offered in Section 3 is a financial plan that is based on 

a pay-as-you-go policy, but still using the recommended methodology as 

developed in Appendix H. 

The final alternative shown in Section 4 is a financial plan based on 

the contingency that the recommendation for a stormwater management plan is 

not accepted by the City Council. 

I-3 
Pages Intentionally Omitted
ATTACHMENT D 
EXCERPT 

SEWJ.iGE DISPOSAL FUf\ID 

RATE STIJDY 

CITY OF PORTLAND 

PORTLAND) OREGON 

FEBRUARY) 1979 
C I T Y 0 F 0 R T L A N D 

DEPARTMENT OF PUBLIC WORKS 

Cowles Mallory, Admi strator 

BUREAU OF SANITARY ENGINEERING 

Joe Niehuser, Chief Engineer 

BUREAU OF vJASTEVJATER TREATMENT 

Howard Harris, Superintendent 

BUREAU OF MAINTENANCE 

Dick Schmidt, Chief Engineer 

PROJECT STAFF 

Eng i nee ring 

Bob Rieck 

Ron Houston 

John Kaye 

Report Production 

Jim Utberg 

Jean Talley 

Gene Bamford 

Pacific Professional Services, Inc. 

Public Works - neering Computer Services 

Pages Intentionally Omitted 
btl 

ment 

rei'l 

ous rea as an le s discosts associ ons nd capita 1 cons 

lect a storn water ous 

"' " lass user was es 1 i on 

i i cu t a to all customers 

c ass. I measurement i ou s a 

is consi y i I 

ac nts va customer's 

vi 1 a c on a is 

ng storm ter. II imis tter po on is 

No in cus r i i ous area was assumed to 

77. The y increase bu to current measureto i ; ous area thin riod, is result of an inn cons on new si units 

'h'PP ious area per 1 ing unit i ious area a gned to 

a cu classes are in e 7. 

e 7 

R ious 

ly 

ly 

zen 

Resi IA 

1 

50,375 

1 
all 

IAL/INDUSTRIAL CUSTOMERS 

current 

di 

of 

ume and i 

/commerci 

ious rea are indivi 

cu 

A majority of commercial/industrial customers are assumed disc 

ss at 1 s on 1 to domes c 

r, a l imi cu BOD 

1 eve 1 s c are measa c on an indivi basis so on an i ndi vi dua 1 

basis are those customers which discharge 1 volumes of wa utili in 

cooling and air conditioning. Current inforrna on does not permit a 

on of commercial/industrial customers into classes with similar 

strength discharge characteristics. The sibility and evaluation 

increased equity of further class 

future rate adjustments. 

on will be considered for 

T fo 11 owing on of this chapter assumes continuation of the 

method measuring and charging individual customers and ides 

inforrna on concerning general class of Commercial/industri customers 

i subclasses ng to extra strength and cooling water discharge. 

Volume rge com me rc i a 1 and i ndu al users has decreased 1 

since 1 3. this group of cu rs over ha 1 f of the volume of 

sanitary discharged to the City's sewerage system, the loss from this 

group of users represents a volume decrease from 1973 of 12,158,402 ccf to a 

curre measured 10,523,193 ccf. 

- 39 -
Pages Intentionally Omitted 
The ir Division of the Bureau Maintenance, through inspection, repair eaning, maintains over 1400 miles of combined, separated, 

and i tor sewers thin the City of Portland. The Division currently 

has 87 authorized empl ee positions incl ing construction equipment 

operators, utili workers, laborers, truck drivers and supervisors. 

0 niza ly, Division is compri of a sewer c1 ng sec on and 

a sewer ir section. An organization chart showing Division, its 

sections activities is shown in Figure 

Maintenance services provided by the Division are essential in prolonging the useful li of the sewer system as as maintaining continued 

operation of the system through cleaning and removal of debris accumulated 

as a result of normal operations. Maintenance services provided by the 

Division include: 

1) This includes visual inspection of the 

sewer system to identify wear, deteriorated portions, and blockages 

cau by pipe failure or accumulation of debris. During FY 79-80 

maintenance crews will visually inspect and record condition of 

approximately 145 miles of sewer system through scanning with 

television cameras (114 miles) and onsite inspection by Divi on 

personnel (31 miles). 

2) Sewer Repair and Replacement. Approximately 75% of rtland's sewer 

system was constructed between 1875 and 1925. Because of age, 

natural deterioration and higher than anticipated internal and 

external loading placed on the system, many portions of the sewer 

- 101 -
8UC i'',LJC 

3UC S5J02J2 

GUC 55:JJ242 sue 

6500241 ,_... BUC 

euc 

BUC 

BUC 

16500402 

16500526 

16500071 

16500348 

16500127 

- - - - - - - - -- - --- "l 

l BUREAU OF :-:AI :~TENANCE ; 

i_ --- --------- - - l I 

Gureau of M~intcnance 

GUC l660J016 I 

L_---------- ---1. 

16500448 

BUC 16500593 
s are to 

are near 

near compl 

ilure, in 

lure. 

on 

ons the 

stem th 

sta reau of ta , are sc 

3) 

ir or 

a total of 9,800 

1 ow ow 

tual bl 

stem is 

nee crews 

of ve .1 

flow c 

ly ir or 

main sewer. 

sewer 

In 

sties, c 

ace 

, wa 

ons 

evenof the red. During FY 79-80 rna i ntenance crews wi 11 

clean clear accumulations of debris in over 320 miles of sewer 

4) 

by various 

drainage system to 

maintenance personnel 

Proper operation of the 1 s storm 

flooding and damage property requires 

annually clean and clear 7,200 street 

drains and 210 storm i tures. In addition, approximately 

900 in and 250 drains are annually 

replaced or i 

Projected ng expenditures for the Repair Division 

and rtive se i nee Bureau Divisions 79-80 

y or .6 mi 11 ion 

th remaining cos in 

9 mi 11 ion 

the tota 1 proj ec 

purchase of necessa 

equipment rental. 

construction materials, operating supplies and 

Included within the 

beyond re costs associa 

for division expenditures for FY 79-80 and 

with street drainage maintenance totaling 

103 -
i y 

to i 

D 

Di 

di 

storm 

No increase 

i nfl on and 

within peri 

Both direct 

r 

a c: 

Division 

5 are c 

c 

Capi 

ive 

,000 a ly i main e, 

F 

wa 

in 

FY 

are 

and 

a s 

i on all i costs 

11 place re storm un 

a i1 i tate a ve ma 

n tion, Di sal 

rvious a 1 ' can more 

of storm ; es ich 

and should the cos di 

Divi on expendi other than those associated with 

conso1i on inage ' are 

FY 

ng and indirect se forecasts for the r 

shown in Table 5-5. Included within the fo on 

associ with capita 1i 

as 1 i ne i terns titl 

so 

ni onal 

- 1 

within 

nanci ng 

foreca 

e repair services pro vi 

CIP. Those costs associprojects incl in 

in e 5 to 
Pages Intentionally Omitted 
CHAPTER 6 

RATE DEVELOPMENT AND FINANCIAL PLAN 

For this rate study, no attempt has been made to discuss alternate 

philosophies and methodologies that could be used in developing rates. The 

rate study completed in 1977, explored various rate philosophies and proposed a set of consistent statements that were to be used to guide future 

rate development. Also several methods of charging sewer users were investigated and a methodology adopted that allows most customers to be charged 

on the same basis as all others. The rates, and the method of determining 

rates, established by the last rate study, were approved by the Environmental Protection Agency as meeting federal regulations. 

In the following sections are: 

1) The Proposed Financial P1 an and Recommended Rates. 

2) A brief outline of the philosophy adopted in 1977. 

3) A discussion of the methodology used to develop rates, including 

classes of customers. 

4) A discussion of the feasibility of charging residential customers 

based on the metered water consumption from each individual home. 

PROPOSED FINANCIAL PLAN AND RECOMMENDED RATES AND CHARGES 

The financial plan shown in Table 6-1 is the product of the computerized financial model developed in conjunction with the 1977 rate study. All 

of the costs shown in previous chapters, as well as the revenue resulting 

from rate development demonstrated in this chapter, is included to give a 

- 133 -
comprehensive picture of the projected financial condition of the Sewage 

Disposal Fund. Table 6-2 lists the rates recommended for the next two 

years. 

Because of debt service requirements, and a rapid escalation in costs, 

the rates in FY 1980/81 must be higher than for FY 1979-80. Therefore, 

the proposal is for a two-phase rate increase, with each phase effective on 

July 1st of each fiscal year. 

No changes in minimum charges based on meter size nor in sewer connection charges are recommended for the next two fiscal years. The major 

facilities equalization charge will continue to increase by $25.00 a year. 

- 134 -
Pages Intentionally Omitted 
ATTACHMENT E
2014 

STORMWATER UTILITY SURVEY

A BLACK & VEATCH REPORT

TABLE OF CONTENTS

INTRODUCTION 3 

SURVEY HIGHLIGHTS 4 

SURVEY OVERVIEW 5 

ORGANIZATIONAL INFORMATION 6 

PLANNING 8

FINANCING AND ACCOUNTING 10 

STORMWATER USER FEES 

AND BILLING 12 

STORMWATER CREDITS 

AND INCENTIVES 17 

PUBLIC INFORMATION/ 

EDUCATION 20

Cover photo courtesy Wes Peck
2 | 2014 STORMWATER UTILIT Y SURVEY
BLACK & VEATCH | 3

INTRODUCTION 

Welcome to the 2014 Black & Veatch 

Stormwater Utility Survey. We initiated 

the bi-annual survey in 1991 to assess 

and share insights on stormwater 

management, financing, governance 

and other evolving trends. We have 

continued that tradition, and this 

year we are proud to share our tenth 

stormwater utility survey. 

This survey reports on the continuing trends in stormwater 

utility organization, planning, and financing; the persistent 

funding challenges; the issues that utility managers perceive 

to be the most important; and the priorities that drive capital 

investment decisions.

In stormwater industry parlance, the phrase “Stormwater 

Utility” refers to three primary elements, namely, a Program 

that defines stormwater operations and management, 

an Organization that is responsible for governance, and a 

Funding approach that provides dedicated financing. 

Stormwater is increasingly beginning to be perceived as a 

resource to be protected and managed similar to drinking 

water resources. To do so effectively, the Program, 

Organization, and Funding aspects have to be aligned 

and holistically addressed, as it is done in the water and 

wastewater sectors of the utility industry.

To assess the current trends in all these three elements, 

and especially the funding aspect, this survey was only 

administered to those municipalities and/or entities that 

already have established stormwater user charge programs. 

A “stormwater user charge” is similar to a water or sewer 

user charge in that the user fee or charges have some key 

characteristics including the following:

Q The charges are assessed for stormwater service that is 

provided, and hence has a reasonable nexus to the costs 

incurred in providing that service;

Q The revenues from stormwater charges are dedicated to 

stormwater management, in other words to the purpose 

for which it is assessed;

Q The charges assessed are proportional to the property’s 

contribution and impact of stormwater runoff;

Q The charges assessed are “voluntary” in that the user 

has the opportunity to limit the use of the service; and

Q The fee or charge is non-discriminatory.
4 | 2014 STORMWATER UTILIT Y SURVEY

SURVEY HIGHLIGHTS 

The survey results again affirm the following key facts about the state of the 

stormwater utility industry:

Prevalence of Stormwater Utilities:

There continues to be a prevalence of individual 

municipally governed stormwater utilities rather 

than regional stormwater authorities. Consequently, 

even though stormwater issues such as surface water 

quality and habitat degradation typically do not follow 

jurisdictional boundaries, municipalities are limited to 

focusing on and managing stormwater issues only within 

their geographical jurisdictional authority.

Stormwater Industry Priorities:

In this year’s survey, we added a new question on industry 

priorities to garner perspectives on what utility managers 

perceive to be the issues of importance in the stormwater 

industry. We asked, and utility managers responded! The 

three (3) issues that respondents ranked in the order of 

importance are: (i) availability of adequate funding, (ii) 

enhancing public awareness and support for stormwater 

management, and (iii) management of the expanding 

regulatory requirements.

A highlight of this response is that this is the first time 

since the inception of this bi-annual survey, that “public 

awareness and support” has been cited as the second most 

important issue. These stormwater issues of importance 

that respondents cited are closely aligned with those from 

the water industry, which we recently published in our “2014 

Strategic Directions: U.S. Water Industry”. 

Infrastructure Investment Drivers: 

In response to our new question on what drives 

infrastructure investment planning and decisions, 

utility managers responded by selecting Regulatory 

Compliance; Flood Control; and Safety and Reliability as 

the top three drivers in the order listed.

Proactive Planning: 

Balancing the competing goals of achieving regulatory 

compliance, providing the level of service that the 

community desires, and maintaining affordable rates 

requires effective planning and innovative approaches. 

This balancing act applies not only to stormwater utilities 

but also to wastewater utilities, and especially to those 

communities that have combined sewer systems. 

Therefore, in this survey, we continued to assess the 

type of integrated planning that utilities engage in. The 

survey indicates that while a majority of the participants 

has developed individual planning documents such as 

stormwater master plans and stormwater management 

plans, only 12% of the respondents have developed 

integrated wet weather management plans to address water 

resources issues more comprehensively. 

Funding Adequacy: 

Lack of adequate funding continues to plague even those 

municipalities that have a dedicated stormwater user 

fee. Out of a total of 78 respondents that participated in 

this survey and indicated having a stormwater user fee, 

62% did not have adequate funding to meet most of their 

utility needs. The survey continues to highlight a growing 

funding gap. Despite funding inadequacy, 31% of the 

respondents indicated not having any rate increases since 

2004, which can further exacerbate the funding gap.

The interdependencies among service level needs, 

regulatory requirements, asset management, innovation, 

and financing significantly increase the complexity of 

stormwater utility management. To effectively address 

multiple needs and challenges, utilities have to engage in 

more holistic solutions that include integrated planning, 

green infrastructure solutions, a strong public awareness 

and education campaign, public-private partnerships, and 

regional collaborations to achieve cost efficiencies and 

regional solutions. 
BLACK & VEATCH | 5

SURVEY OVERVIEW 

The 2014 Stormwater Utility Survey reports the results of six functional areas:

Section 1: Organization and Operations 

Provides a profile of the respondents including population 

served, size of service areas, the characteristics of the 

service area, and type of utility governance.

Section 2: Planning 

Provides insights in to what utility managers perceive to 

be most important industry issues and the infrastructure 

investment drivers. This section also highlights the types 

of permit requirements that utilities have to comply with 

and the types of planning utilities have engaged in to 

address stormwater management.

Section 3: Finance and Accounting 

Reviews stormwater utility revenues, expenditures, 

sources of capital improvement and O&M financing, and 

the adequacy of stormwater utility funding to meet utility 

obligations.

Section 4: Stormwater Rate Structure and Billing 

Evaluates the types of costs recovered through user 

fees, the fee methodology used in setting rates, the rate 

structures, and the average monthly residential rate of 

each utility that participated in the survey. Information 

on the billing frequency and types of exemptions 

and discounts that utilities offer, and insights on legal 

challenges are also provided.

Section 5: Stormwater Credits and Incentives 

Offers insights in to the types of credits, criteria used in 

offering credits, credits for “green initiatives”, and any 

innovative programs such as credits trading and banking. 

Section 6: Public Information/Education 

Assesses the level of importance respondents attribute 

to public information/education and the methods of 

education and multi-media sources used in educating and 

in disseminating information. 

PROFILE OF RESPONDENTS 

This year’s nationwide survey was conducted online during 

March and April 2014. A total of 78 participants completed 

the online questionnaire. 

Q The participants spanned 25 states. All of these 

participants fund stormwater management in whole or 

in part through stormwater user fees. 

Q This year’s participants reflect a much different mix of 

utilities with a larger participation from smaller utilities, 

and 25 first time participants and 53 repeat participants. 

Q Eighty seven percent of the respondents serve a city, 

rather than a county or region.

Q The population served by the respondents ranges 

from 9,785 (Cottage Grove, OR) to 1.5 million people 

(Philadelphia, PA); the areas served varies from 3 to 

1,020 square miles.

Q For those utilities that base charges on gross property 

area, an Equivalent Residential Unit (ERU) ranged from 

2,105 square feet to 22,500 square feet of total parcel 

area, with a median of 8,000 square feet. 

Q For those utilities that base charges on impervious area, 

an ERU ranged from 794 square feet to 7,500 square 

feet of impervious area, with a median of 2,368 square 

feet.

COMPARATIVE RESULTS 

Black & Veatch has been assessing stormwater utility 

financing and management trends since 1991 through 

the use of this bi-annual, nationwide survey. Comparisons 

of current and prior survey results provide insights into 

possible industry changes. Please note, however, that 

these comparisons are not necessarily indicative of 

trends, because the survey respondents may be different 

between the current and prior surveys. 

It is our hope that the information provided in this 

report will be a valuable resource to those involved in 

the stormwater industry. We welcome your questions 

and comments regarding this survey report and/

or Black & Veatch services. You can reach us at 

Stormwater@bv.com.
6 | 2014 STORMWATER UTILIT Y SURVEY

ORGANIZATIONAL INFORMATION 

Nationwide, stormwater management responsibility resides with individual 

municipal entities rather than with a multi-jurisdictional stormwater authority. 

The traditional approach of each municipality managing its own stormwater 

system and obligations affords greater asset ownership, budget control, and 

program flexibility to meet service level needs. However, such an approach 

also impacts economies of scale, creating operational inefficiencies, funding 

challenges, and significant disparities in stormwater management standards, 

even within a small geographic region or within a watershed.

This survey affirms the continuing trend of stormwater 

user fee programs (“utility”) being more prevalent in cities 

rather in counties or special districts. Eighty seven percent 

of the participants reported serving a city jurisdictional 

area, with three participants representing a regional 

authority. These trends have remained fairly consistent 

since 2007. 

FIGURE 1 

FOR MS4 PERMITTING PURPOSES ARE YOU 

CLASSIFIED AS: (Select one)

This year’s survey participants included a greater 

participation from smaller stormwater utilities when 

compared with our previous 2012 survey. While the 

median number of stormwater customers at the 

participating utilities is 36,000, which is fairly consistent 

with the previous stormwater surveys, the percentage of 

participants that identified themselves as stand-alone 

utilities has increased from 46% to 55%.

FIGURE 2 

WHAT JURISDICTIONAL AREA IS YOUR STORMWATER 

UTILITY RESPONSIBLE FOR? (Select one)

Phase 1

(100,000 population and over)

Phase 2

(under 100,000 population)

45% 55%

4%

Multiple municipalities 

(Regional authority)

1%

Other

City 

only

County 87 8 % %
BLACK & VEATCH | 7

FIGURE 3 

WHAT IS THE CHARACTERISTIC OF YOUR SERVICE AREA? (Select one)

0%

Combined sewer 

system

Separate storm 

sewer system

Mix of combined 

sewer and separate 

storm sewer 

systems

83%

17%

FIGURE 4 

IF YOU SELECTED “MIX OF COMBINED SEWER AND SEPARATE STORM SEWER SYSTEMS” IN THE PREVIOUS 

QUESTION, INDICATE THE PERCENTAGE OF COMBINED SEWER VERSUS SEPARATE STORM SEWER SERVICES.

Combined sewer Over 75% 50% – 75% 25% – 50% Less than 25%

Separate storm sewer Less than 25% 25% – 50% 50% – 75% Over 75%

Number of utilities 0454

Percentage* 0% 31% 38% 31%

*Based on number of utilities that selected “Mix of Combined Sewer and Separate Storm Sewer Systems” in the previous question.

No

Yes

10%

90%

FIGURE 5 

IS YOUR UTILITY UNDER CONSENT ORDER FOR COMBINED SEWER OVERFLOW ISSUES?

FIGURE 6 

PLEASE INDICATE HOW YOUR CURRENT STORMWATER OPERATIONS ARE GOVERNED. (Select one)

2014 2012

Stand-alone stormwater utility 55% 46%

Combined with Department of Public Works (Nonwater/wastewater utility) 25% 28%

Combined with water and/or wastewater utility 19% 21%

Other (Multiple city departments) 1% 5%
8 | 2014 STORMWATER UTILIT Y SURVEY

PLANNING 

Utilities currently face the challenge of complying with multiple discharge 

permits including the National Pollutant Discharge Elimination System (NPDES) 

and the Municipal Separate Storm Sewer System (MS4) permits to meet the 

Clean Water Act (CWA) obligations. The survey indicates the continuing trend of 

municipalities generally focusing on individual permit requirements, rather than 

comprehensively planning for multiple permit obligations, even though many of 

these permits have overlapping requirements. Integrated strategic and tactical 

planning enables municipalities to effectively leverage available resources to 

fulfill multiple regulatory requirements and public needs concurrently. 

This survey finds that while 73% of the respondents 

have to comply with both NPDES and MS4 permit 

requirements, only 12% of respondents have 

developed any type of integrated wet weather or water 

resources plan. 

Especially with a growing funding gap where utilities need 

to consistently do more with less resources, utilities need 

to proactively develop and deploy integrated planning and 

foster the idea of “one water”. Such an approach would 

better position the utility to achieve the triple bottom line - 

economic, environmental, and community benefits. 

With respect to stormwater rate setting, in the case of 

combined sewer systems, utilities continue to grapple 

with the policy issue of whether to allocate a portion of 

the combined sewer system and CSO mitigation O&M and 

capital costs to the stormwater utility. The survey indicates 

that while some CSO communities, such as Philadelphia, 

allocate a portion of the combined sewer system costs to 

stormwater utility, many others do not. Such differences 

in methodology directly impact the magnitude of 

stormwater rates that utilities define.

FIGURE 7 

WHAT REGULATORY PERMIT REQUIREMENTS DO YOU 

CURRENTLY HAVE TO COMPLY WITH? 

MS4 permit 91%

NPDES permit 79%

Total maximum daily load (TMDL) 50%

CSO program 14%

Other 4%

Percentage based on number of utilities that responded to the question.

FIGURE 8 

WHAT TYPES OF PLANS HAS YOUR UTILITY DEVELOPED? 

(Select all that apply)

Stormwater/watershed management plan 73%

Stormwater master plan 72%

Long-term control plan (LTCP) 17%

Integrated wet weather management plan (to support wastewater 

and stormwater requirements) 12%

Integrated water resources plan 9%

Other 1%

Percentage based on number of utilities that responded to the question.
BLACK & VEATCH | 9

FIGURE 9 

PLEASE RANK ON A SCALE OF 1 TO 5, THE IMPORTANCE OF EACH OF THE ISSUES LISTED BELOW 

TO THE STORMWATER INDUSTRY. (1: Least important; 5 = Most important)

4.4

4.2

3.8

3.5

3.5

3.3

3.3

2.7

2.7

2.5

2.0

01 2 3 4 5

 Funding or availability of capital

 Public awareness and support 

 for stormwater management

 Increasing or expanding regulations

 Aging combined sewer

 and stormwater infrastructure

 Nutrient/TMDL requirements

 Green infrastructure needs

 Information technology

 Integrated water supply planning 

 that includes stormwater capture

 Integrated wet weather planning

 Aging workforce

Coastal resiliency

FIGURE 10 

PLEASE RANK ON A SALE OF 1 TO 5, HOW THE FOLLOWING ISSUES DRIVE INFRASTRUCTURE INVESTMENT PLANNING 

AND DECISIONS WITHIN YOUR STORMWATER UTILITY. (1: Very weak; 5 = Very strong)

4.3

4.1

3.9

3.8

3.5

3.2

3.1

0 1 2 3 4 5

 Regulatory compliance

 Flood control

 Safety and reliability 

 Community expectations

 Critical emergency resilience

 Grants and incentives 

 Waterways/habitat restoration
10 | 2014 STORMWATER UTILIT Y SURVEY

FINANCING AND ACCOUNTING 

A user fee funding mechanism typically provides revenue stability, certainty, 

and a dedicated funding stream. However, even in a user fee funded program, 

diligent annual financial planning and rate adjustments are necessary to maintain 

revenue sufficiency, build financial resiliency to meet changing needs, and provide 

for long term financial viability. In the current environment, utilities are under 

pressure to keep rates low while maintaining or enhancing the level of service. 

Stormwater utilities continue to fund capital program primarily 

through cash financing as opposed to debt financing. As 

Figure 13a indicates, 85% of the participants indicate cash 

financing as the primary source of capital funding, and the 

trend of funding capital program through user fee generated 

cash revenues seems to continue. In the absence of a 

balanced funding mix of debt and cash financing, utilities 

that rely solely on cash financing of capital program, face 

capital funding challenges if they are unable to raise the rates. 

Consistent with the last survey, only 32 % of the participants 

indicate funding is adequate for meeting most needs. In this 

survey that 17% of the participants indicate that funding is not 

sufficient to meet even the “most urgent” needs indicating 

a growing funding adequacy gap at a time when regulatory 

requirements and asset management needs are increasing..

Utilities need to engage in more robust and continuous public 

education to enhance understanding of the stormwater 

management needs and financial issues in conjunction with 

integrated planning. These measures will likely help utilities 

chart a more financially viable path and enhance equity in cost 

recovery. Ninety six percent of the utilities reported having a 

user fee that is supported by a State enabling legislation.

FIGURE 11 

PLEASE INDICATE THE PERCENTAGE OF YOUR STORMWATER BUDGET THAT IS ATTRIBUTABLE 

TO CSO MITIGATION ISSUES. (Select one)

0%, stormwater budget does not include expenditures 

related to combined sewer overflow (CSO) issues 46%

1% – 10% 23%

11% – 20% 16%

21% – 30% 0%

31% – 50% 0%

Over 50% 15%

FIGURE 12 

WHAT IS THE ESTIMATED 2014 ANNUAL STORMWATER 

CAPITAL IMPROVEMENT PROGRAM BUDGET?

Minimum $30,000

Maximum $72,000,000

Average $7,082,127

FIGURE 13 

PLEASE PROVIDE AN APPROXIMATE PERCENTAGE OF 

FUNDING FROM EACH SOURCE.

Majority debt financed

Majority cash financed

15% 85%
BLACK & VEATCH | 11

FIGURE 13A 

PLEASE PROVIDE AN APPROXIMATE PERCENTAGE OF FUNDING FROM ONE OR MORE OF THE FOLLOWING SOURCES 

THAT ARE USED TO FINANCE YOUR UTILITY’S STORMWATER CAPITAL IMPROVEMENT PROGRAM (CIP). 

Debt financed 15%

Stormwater revenue bonds 17%

General obligation (tax) bonds 8%

Sales tax bonds 1%

Combined stormwater/other bonds 1%

Benefit district bonds 0%

Other debt 5%

Cash financed 85%

Stormwater user fees 92%

Grants 27%

Ad valorem taxes 4%

Permitting and other taxes 18%

Sales taxes 5%

Special tax districts 8%

New development impact fees 8%

Other cash 12%

FIGURE 14 

PLEASE PROVIDE AN APPROXIMATE PERCENTAGE OF REVENUE FROM ONE OR MORE OF THE FOLLOWING SOURCES. 

Over 75% 50% – 75% 25% – 50% Less than 25%

Stormwater user fees 87% 5% 5% 3%

Taxes 0% 13% 13% 74%

Grants 28% 0% 43% 29%

Other 5% 5% 0% 90%

FIGURE 15 

PLEASE INDICATE THE LEVEL OF ADEQUACY OF AVAILABLE STORMWATER FUNDING. 

2014 2012 2010 2007

Adequate to meet all needs 6% 18% 7% 8%

Adequate to meet most needs 32% 31% 36% 39%

Adequate to meet most urgent needs 45% 40% 47% 40%

Not adequate to meet urgent needs 17% 11% 10% 13%

No Yes 4% 96%

FIGURE 16 

DOES YOUR STATE HAVE ENABLING LEGISLATION THAT AUTHORIZES MUNICIPALITIES TO CHARGE 

A STORMWATER USER FEE?

Percentage based on number of utilities that responded to the question.
12 | 2014 STORMWATER UTILIT Y SURVEY

FIGURE 18 

WHAT WAS THE MAGNITUDE OF YOUR UTILITY’S LAST 

CHANGE IN FEES?

Percentage based on number of utilities that responded to the question.

STORMWATER USER FEES AND BILLING 

A user fee needs to reflect a reasonable nexus between the costs incurred in 

providing services and the magnitude of charges that are defined for the rate 

payer. As it is not practical to measure stormwater runoff, stormwater charges 

are established based on surrogate measures such as a property’s pervious and/

or impervious areas. Over 90% of the participants have indicated that they use 

actual and/or effective impervious area as the basis of charges. 

As service levels may differ among the various 

geographical areas, utilities often have to contend with 

the policy issue of whether to set rates that reflect service 

level differences. While zone-based rates may provide for 

equity in cost recovery, they can be administratively more 

burdensome and have the potential to create economic 

disparities among zones. 

With respect to rate setting, affordability is key to enabling 

stakeholder buy-in. The survey indicates that a majority of 

the participants (78%) do not offer any type of discounts, 

and only 11% offer low income discount. The survey also 

indicates that 30% of the participants had not adjusted 

the rates in over 10 years. Instead of having a long hiatus 

from implementing requisite rate adjustments, utilities 

should consider the feasibility of implementing consistent 

rate adjustments to maintain financial viability while 

concurrently exploring mechanisms such as low income 

assistance programs to help with affordability.

The risk of legal challenges could be a potential barrier to 

establishing stormwater user fees. Seventy-eight percent 

of the utilities that responded in this survey had not faced 

any legal challenges to their fees. Of those that faced a 

legal challenge, the challenge primarily seems to have 

been either due to lack of authority to assess fees or on 

the grounds of constitutionality.

15%

Increase 

between 25% 

and 50%

2%

Decrease less 

than 25%

Increase of less 

than 25%

8%

Increase greater 

than 50%

75%

FIGURE 17 

PLEASE INDICATE THE YEAR WHEN YOUR UTILITY’S 

CURRENT STORMWATER USER RATE SCHEDULE 

BECAME EFFECTIVE. 

2005-2009

Prior to 2005

2010-2014

43%

27%

30%
BLACK & VEATCH | 13

FIGURE 20 

WHAT IS THE BASIS FOR CALCULATING YOUR PARCEL 

AREA BASED STORMWATER USER FEES? 

(Select all that apply) 

84% of respondents use only one method. 

No Yes 10 90 % %

FIGURE 19 

IS YOUR STORMWATER USER FEE BASED ON SOME 

FORM OF PARCEL AREA SUCH AS GROSS AND/OR 

IMPERVIOUS AREA? 

FIGURE21 

WHAT IS YOUR UTILITY’S AVERAGE SINGLE FAMILY 

RESIDENTIAL PARCEL SQUARE FOOTAGE? (Include 

attached residential up to four dwelling units) 

Average Gross Area Square feet

Minimum 2,105

Maximum 22,500

Median 8,000

 Average Impervious Area 91

Minimum 794

Maximum 7,500

Median 2,368

FIGURE 22 

WHAT TYPE OF RATE STRUCTURE DOES YOUR UTILITY 

HAVE FOR THE SINGLE FAMILY RESIDENTIAL PARCELS? 

(Select all that apply)

Uniform flat fee 67%

Tiered rates 28%

Individually calculated 6%

FIGURE 23 

IF YOU HAVE A TIERED RESIDENTIAL RATE STRUCTURE, 

PLEASE INDICATE THE TOTAL NUMBER OF TIERS. 

Percentage based on number of utilities that indicated they had 

tiered rates. 

FIGURE 24 

IF YOU HAVE A TIERED RESIDENTIAL RATE STRUCTURE, 

WHAT IS THE BASIS OF THE TIERS? (Select one)

Impervious area tiers only 59%

Gross area tiers only 32%

Tiers for impervious area and gross area 9%

FIGURE 25 

DOES YOUR STORMWATER RATE STRUCTURE INCLUDE A 

SEPARATE BILLING/COLLECTION OR SERVICE CHARGE? 

Yes 12%

No 88%

3%

Other

Gross 

area with 

runoff 

factor

Gross area with 

intensity of 

development 

factor

10%

Gross area 

only

Impervious 

area

79% 14%

13%

41%

14%

4%

More than 6 Tiers

5 Tiers

2 Tiers

32%

4 Tiers 3 Tiers

9%
14 | 2014 STORMWATER UTILIT Y SURVEY

FIGURE 26 

AVERAGE MONTHLY SINGLE-FAMILY RATE 

City/County State

2014 Average 

Monthly Residential 

Charge

Seattle WA 26.58 

Fort Collins CO 14.26 

Philadelphia PA 13.45 

Everett WA 13.19 

Longmont CO 13.05 

Appleton WI 12.92

Naples FL 12.80 

Lubbock TX 12.00 

Palo Alto CA 11.99 

Orlando FL 11.00 

Gresham OR 9.84 

Bremerton WA 9.83

Austin TX 9.20 

Loveland CO 9.10 

Hamilton County TN 9.00

Pierce County WA 8.83

Gainesville FL 8.56 

Aurora CO 8.16 

Edgewater FL 8.00 

Charlotte NC 7.89

Cottage Grove OR 7.47

Denver CO 7.38 

Hampton VA 6.99

St. Paul MN 6.83 

Titusville FL 6.62

Duluth MN 6.08 

Charleston SC 6.00

Lakeland FL 6.00

Cocoa Beach FL 6.00

Oakland Park FL 6.00

Cocoa FL 5.75

Wooster OH 5.75 

Bloomington MN 5.72 

Dubuque IA 5.60 

Olathe KS 5.55 

Tulsa OK 5.43 

Dayton OH 5.42 

Fort Worth TX 5.40 

Satelite Beach FL 5.33 

City/County State

2014 Average 

Monthly Residential 

Charge

Roseburg OR 5.00 

San Clemente CA 5.00

Cedar Rapids IA 4.90

Northen Kentucky 

Sanitation District No. 1 KY 4.80

Griffin GA 4.79 

Niceville FL 4.51 

Haines City FL 4.50 

Topeka KS 4.25 

Summerville SC 4.00 

Lawrence KS 4.00 

Raleigh NC 4.00 

Richmond VA 3.75 

Ellicott City MD 3.75 

Wichita Falls TX 3.55 

Cincinnati OH 3.54 

Mesquite TX 3.50 

Billings MT 3.01 

Arnold MO 3.00 

Forest Park OH 3.00 

Fayetteville NC 3.00 

McKinny TX 2.75 

Clark County WA 2.75 

Modesto CA 2.73 

Littleton CO 2.50 

Contra Costa County CA 2.50 

Ashville NC 2.34 

Overland Park KS 2.00 

Frisco TX 2.00 

Lakewood CO 1.98 

Moline IL 1.94 

Santa Clarita CA 1.87 

Santa Cruz CA 1.75 

Shelby County TN 1.50 

Springfield OH 1.30 

Elkhart IN 1.25

Columbia MO 1.15

Hillsborough County FL 1.00 

Omaha NE 0.64

St. Louis MO 0.24
BLACK & VEATCH | 15

FIGURE 27 

IN YOUR STORMWATER RATE STRUCTURE, DO YOU 

HAVE RATES THAT DIFFER BY SERVICE AREAS/ZONE OR 

WATERSHEDS? 

FIGURE 28 

ARE ONE-TIME IMPACT/CAPITAL RECOVERY FEES 

APPLIED TO NEW STORMWATER UTILITY CUSTOMERS 

OR NEW DEVELOPMENTS? 

FIGURE 29 

HOW FREQUENTLY DOES YOUR UTILITY UPDATE 

CUSTOMER PARCEL INFORMATION, SUCH AS 

CUSTOMER CLASSES AND GROSS AND IMPERVIOUS 

AREAS SPECIFIC TO STORMWATER BILLING? (Select One) 

No specified frequency/as needed 70%

Annually 14%

Monthly 9%

Quarterly 4%

Other 3%

FIGURE 30 

HOW ARE STORMWATER USER FEES BILLED? (Select One) 

Included with Other Utility Bill 

(Water/Sewer/Electric/Gas)

71%

Included with tax bills 24%

Separate stormwater bill 5%

FIGURE 31 

DOES YOUR UTILITY OFFER ANY OF THE FOLLOWING 

STORMWATER DISCOUNTS? (Select all that apply) 

No discounts offered 78%

Low-income discount 11%

Other 8%

Elderly/senior citizen discount 7%

Educational institutions discount 5%

Disabled discount 1%

FIGURE 32 

WHAT OF THE FOLLOWING CLASSES OF PROPERTIES 

ARE CURRENTLY EXEMPT FROM STORMWATER USER 

FEES? (Select all that apply) 

Public streets/roads/median 

/public-right-of-way 63%

Undeveloped land 54%

Rail rights-of-way 41%

Public parks 27%

Government 24%

Agricultural land 21%

School districts 19%

Cemeteries 13%

Colleges/universities 12%

No properties are exempt 12%

Other 10%

Airports 9%

Religious organizations 5%

Direct discharge to water body 3%

No

94%

6%

Yes

Yes

No

85%

15%
16 | 2014 STORMWATER UTILIT Y SURVEY

FIGURE 33 

WHO IS RESPONSIBLE FOR PAYMENT OF STORMWATER 

USER FEES? (Select One) 

FIGURE 34 

HOW IS PAYMENT ENFORCED? (Select all that apply) 

Water/electric service shutoff 51%

Lien on property 47%

Collection agency 27%

Other 10%

Sheriff’s sale 4%

FIGURE 35 

HAVE YOUR STORMWATER USER FEES EVER FACED A 

LEGAL CHALLENGE?

FIGURE 36 

PLEASE INDICATE THE CUSTOMER/CLASS THAT 

CHALLENGED YOUR STORMWATER USER FEE. 

(Select all that apply)

FIGURE 37 

WHAT WAS THE BASIS OF THE CHALLENGE? 

(Select all that apply.) 

Tax and not a user fee 59%

Constitutionality 35%

Lack of authority to assess stormwater fees 29%

Equity and fairness 12%

Rate methodology 12%

Other 6%

Yes

No

78%

22%

Residential 

customer/class

Non-residential 

customer/class

82%

47%

Resident/tenant

Other 

Property owner

73%

21% 6%
BLACK & VEATCH | 17

STORMWATER CREDITS AND INCENTIVES 

Stormwater incentives can be defined as one-time monetary assistance or other 

rewards that municipalities offer to encourage property owners to support 

community goals such as engaging in sustainable development practices or 

protecting water quality. Incentives can be used as a mechanism to foster publicprivate partnerships in stormwater management. 

Stormwater credits are ongoing reductions to a property’s 

calculated stormwater charges that are given to properties 

that either reduce demand on the stormwater system and/

or reduce the utility’s cost of service through functional 

stormwater management practices and Best Management 

Practices (BMPs). Stormwater credit serves a key role in 

enhancing the perception of “user fees” by affording the 

customers opportunities to reduce the magnitude of the 

user fees commensurate with extent of onsite stormwater 

management.

As Figure 38 indicates, 44% of the respondents offer 

some type of credits and only 15% to 18% percent offer 

some type of incentives. The most common criteria 

for offering credits are volume reduction and peak flow 

reduction. Even in utilities that offer credits, the actual 

number of parcels that seek credits is relatively low at four 

percent. This is to some extent due to the fact that onsite 

stormwater management is capital intensive yielding low 

return on investment, which in turn impacts the economics 

of engaging in onsite stormwater management.
18 | 2014 STORMWATER UTILIT Y SURVEY

FIGURE 38 

DOES YOUR UTILITY HAVE A STORMWATER CREDIT PROGRAM? 

FIGURE 39 

PLEASE INDICATE THE CLASSES OF PARCELS THAT ARE OFFERED STORMWATER CREDITS. (Select one) 

Nonresidential only (includes multifamily and condos) 53%

Both residential and nonresidential 47%

FIGURE 40 

DO YOU OFFER CREDITS FOR ANY OF THE FOLLOWING STORMWATER MANAGEMENT ACTIONS? (Select all that apply) 

Volume reduction 65%

Peak flow reduction 59%

Water quality control 50%

Direct discharge to a surface water body (without using a municipal stormwater system) 41%

Good housekeeping practices (sweeping, oil separation, etc.) 21%

Education 18%

NPDES permit compliance 15%

Other 3%

FIGURE 40A

PLEASE INDICATE THE MAXIMUM ALLOWABLE CREDIT FOR EACH ACTION SELECTED.

Maximum allowance credit

Over 75% 50% – 75% 25% – 50% Less than 25%

Volume reduction 37% 38% 25% 0%

Peak flow reduction 26% 20% 27% 27%

Water quality control 14% 22% 43% 21%

NPDES Permit Compliance 0% 0% 0% 100%

Education 0% 50% 17% 33%

Direct discharge to a surface water 

body (without using a municipal 

stormwater system

50% 10% 10% 30%

Good housekeeping practices 

(sweeping, oil separation, etc.) 20% 0% 20% 60%

Other 0% 0% 0% 100%

Yes

No

56%

44%
BLACK & VEATCH | 19

FIGURE 41 

IS THERE A CAP FOR THE TOTAL AMOUNT OF CREDITS 

THAT ARE OFFERED? 

FIGURE 41A 

IF YES, WHAT IS THE MAXIMUM STORMWATER FEE 

REDUCTION? 

Maximum stormwater fee reduction

>75% 50 – 75% 25 – 50%

32% 40% 28%

FIGURE 42 

DO YOU OFFER CREDITS FOR ANY OF THE FOLLOWING 

TO ENCOURAGE “GREEN” OR LOW IMPACT 

DEVELOPMENT (LID) STORMWATER MANAGEMENT 

PRACTICES? (Select all that apply.) 

None of the above 61%

Porous/permeable 

surfaces 36%

Rain gardens 27%

Green roofs 21%

Rain barrels 9%

Other 6%

Percentage based on number of responses

FIGURE 43 

DOES YOUR UTILITY OFFER ANY TYPE OF STORMWATER 

CREDITS TRADING/BANKING PROGRAM? 

FIGURE 44 

DO YOU OFFER ANY OF THE FOLLOWING INCENTIVE 

PROGRAMS? (Select all that apply) 

Site assessment/BMP design assistance 18%

Stormwater grants 15%

Cost sharing 15%

BMP installation cost rebates 6%

No

6%

Yes

94%

Yes

No

24%

76%
PUBLIC INFORMATION/EDUCATION 

Majority of the participants consider educating the public and the policy makers 

on stormwater management and engaging them in developing integrated 

solutions as essential outreach tasks to sustaining stormwater utilities. Public 

education and outreach is also one of the MS4 permit requirements which with 

utilities have to comply. As indicated in Figure 45, 96% of the respondents view 

ongoing public education as either “helpful” or “essential” to the success of their 

use fee-funded stormwater utility. 

To better understand how utilities are engaging 

stakeholders, respondents were asked to rate the 

effectiveness of various stakeholder engagement activities 

that they have conducted. Consistent with the previous 

survey, direct and targeted interface with the customers 

through community events/presentations continues to 

rank the highest and interestingly social media had the 

lowest ranking. Utilities continue to view leveraging 

schools, to educate on stormwater management, as 

important a channel as print/TV media. 

And, with all large-scale public information and 

educational campaign, the key to effective communication 

is the use of multiple communications channels 

frequently and consistently to ensure stakeholders see 

and remember the education campaign.

FIGURE 45 

HOW IMPORTANT IS AN ORGANIZED, ONGOING PUBLIC 

INFORMATION/EDUCATION EFFORT TO CONTINUED 

SUCCESS OF USER FEE-FUNDED STORMWATER 

UTILITY? (Select one)

FIGURE 46

PLEASE RANK ON A SCALE OF 1 TO 5, THE 

EFFECTIVENESS OF THE SPECIFIC ACTIVITIES YOU HAVE 

UNDERTAKEN TO SECURE STAKEHOLDER APPROVAL 

AND SUPPORT FOR STORMWATER USER FEES. (1: Least 

Effective, 5: Most Effective)

Essential

4%

Not necessary

Helpful

64%

32%

20 | 2014 STORMWATER UTILIT Y SURVEY

3.62

3.25

3.23

3.23

3.22

3.15

3.12

2.95

2.70

 Community event

/ /presentations

 Public

 meetings

 Schools

 Print/TV media

 releases

 Newsletters/fliers

 /brochures

 Periodic workshops for

 elected officials/boards

 /commissions

 Stormwater utility 

 website

 Citizens advisory

 committee

Social media

01 2 3 4 5
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Please be advised, this Survey was compiled primarily based on information Black & Veatch received from third-parties and Black & Veatch was not 

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ATTACHMENT F
OIIDINANCE No. 18 714 5 

Revise Sewer and stonnwater rates, charges and fees in accordance with the FY 201 5-2016 Sewer User Rate 

Study (Ordinance) 

The City of Portland ordains: 

Section I. 

1. 

2. 

3. 

4. 

The Council finds: 

The Mayor's Proposed Budget for the Bureau ofEnvironmental Services for Fiscal Year 2015-

2016 requires adjustments to sewer and drainage rates, charges and fees for the 12-month period 

beginning July 1, 2015. 

Sewer and drainage rates, charges and fees need to be adjusted to pay the operating, 

maintenance, and capital costs, including debt service, of the City's sanitary sewer and 

stormwater drainage system. 

In accordance with policies adopted by City Council, the propo~ed adjustments to sewer and 

drainage rates, charges and fees are based upon cost of service p1inciples, ensuring equity by 

charging ratepayers according to the amount of sewer and drainage service they use. 

The proposed sewer and drainage rates, charges and fees are consolidated into a comprehensive 

schedule as set forth in Exhibit A ofthis Ordinance. The consolidated schedule does not 

preclude the establishment and/or continuation of charges and fees by resolution, ordinance, 

Code provision or administrative rule, not otherwise specified in this Ordinance. 

NOW, THEREFORE, the Council directs: 

a. The Council adopts sewer and drainage rates, charges and fees in accordance with the Fiscal 

Y car 2015-2016 Sewer User Rate Study, as set forth in the attached Exhibit A; and 

b. Exhibit A of this Ordinance is binding city policy. 

Passed by the Council, 

Commissioner Nick Fish 

Sam Murray 

May 11 , 2015 

Cost object - ord 

MAY 2 7 2015 

Mary Hull Caballero 

Auditor of the City of Portland 

By / ,,y' 

/ t&V'/- tvc-.._ (a,.~ vtLt--.. /-

,. 

Deputy 
51 5 53 6 

Agenda No. 

ORDINANCE NO. 187145 

Title 

Revise sewer and stormwater rates, charges and fees in accordance with the E.iseafY.ear 2015-

2016 Sewer User Rate Study (Ordinance) 

INTRODUCED BY CLERK USE: DATE FILED MAY 15 2015 

Commissioner/Auditor: 

Nick Fish 

COMMISSIONER APPROVAL Mary Hull Caballero 

Mayor-Finance and Administration - Hales . Auditor of the City of Portland 

Position 1/Utilities- Fritz ~l Jr I/ 

. 

Position 

Position 

Position 

4/SafeiY 

3/Affairs 

2fflorl<.s 

BUREAU 

-

-

-

Saltzmal" 

Fish 

Novick 

APPROVAL 

~ 

v 

~' 

J . 

I 

I 

ACTION 

tsy.-

TAKEN: 

~ 

MAY 2 1 2015 A~~m TO SECOND READING MAY 2 7 2015 Bureau: Environmental Services 

Bure mes Hagerman 

9:30A.M. 

Pr;p;;ed rsamuel M1:1rray 

Date Prepared: May 11, 2015 

FinanciallmP.act & Public 

Involvement Statement 

Completed ~ Amends Budget 0 

Portland Policd; Document 

!f "Yr~~ires ity Policy paragraph stated 

- <7Ye rn 9~ t. No ~ 

( CityrAuditor Office Approval: 

required for Code Ordinances 

required 

City Attorney for contract, Approval: code, easement, ~ 

franchise como plan charter 

Council Meeting Date 

2015 May 21, 

AGENDA FOUR-FIFTHS AGENDA COMMISSIONERS VOTED 

~ AS FOLLOWS: 

TIME CERTAIN 

Start time: YEAS NAYS --

Total amount of time needed: 15 minutes 1. Fritz 1. Fritz v 

(for presentation, testimony and discussion) 

2. Fish 2 Fish / 

CONSENTD 3. Saltzman 3. Saltzman v 

REGULAR D 

Total amount of time needed: 

4. Novick 4. Novick v 

(for presentation, testimony and discussion) 

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187145
ATTACHMENT G
CITY OF PORTLAND, PENINSULA DRAINAGE DISTRICT NO. I, PENINSULA 

DRAINAGE DISTRICT NO.2, AND MULTNOMAH COUNTY DRAINAGE DISTRICT NO.1 

INTERGOVERNMENTAL AGREEMENT FOR STORMWATER MANAGEMENT 

SERVICES 

Pl-1402-018-IGA 

P2-1402-023-IGA 

MC-1402-063-IGA 

City #30003999 

This Agreement is entered into between the City of Portland ("the City"), a municipal 

corporation ofthe State ofOregon as represented by its I3ureau of Environmental Services ("BES"). 

and Multnomah County Drainage District No. 1 (portion within City of Portland boundaries) 

("MCDD"), Peninsula Drainage District No. 1 and Peninsula Drainage District No. 2 (individually, a 

"District;" collectively, "the Districts"), special purpose local governments organized under ORS 

Chapter 547, under the charters and laws applicable to the City and the Districts for the purposes set 

forth below. 

RECITALS 

1. WHEREAS, the City and the Districts have the authority to enter into intergovernmental 

agreements in accordance with ORS 190.010 and ORS Chapter 547. 

2. WHEREAS, the Districts and the City agree that the Districts manage storm water from City 

rights-of-way within the Districts and in some cases from areas of the City outside the Districts. 

3. WHEREAS, the Districts and the City conducted joint stonnwater modeling to quantify the 

amount of stonnwater being managed by the Districts that originates in the City. 

TERMS 

I. PURPOSE AND INTENT OF AGREEMENT 

The purpose and intent ofthis Agreement is: 

A. To recognize the rrtission and functions of the City and the Districts and to coordinate the 

delivery of services. 

1. The Districts provide flood control and stormwatcr management services within their 

jurisdictional boundaries in North and Northeast Portland, including management of 

storm water runoff from City streets inside and outside District boundaries. These services 

benefit the City as a whole as well as landowners within the Districts. 

City of Portland and Peninsula Drainage District Na 1, Peninsula Drainage District No. 2, 

and Multnomah County Drainage District No. 1, Intergovernmental Agreement 

Page 1 ot9 

PDXDOCS:2020687 .1 
2. The City, represented by BES, provides stormwater management, including compliance 

with water quality regulations and management of storm water runoff from City streets 

inside and outside of District boundaries. These services benefit landowners within the 

Districts as well as the City as a whole. 

3. These functions complement one another and in some instances may overlap. They provide 

critical services to the public. 

B. To provide a mechanism for payments between the City and the Districts for stormwater 

management services and to provide a mechanism for reimbursement for the costs of specific 

tasks performed by one party at the request of the other. 

C. To provide a framework for coordination of service delivery and projects between the Districts 

and the City. The City and the Districts have each designated a Project Manager to serve as the 

primary coordinators of this agreement; however, liaison at all organizational levels is 

encouraged to foster effective working relationships and project efficiency. 

1. The Districts' Project Manager is the MCDD Natural Resources Project Manager. 

2. The City's Project Manager is theBES Columbia Slough Watershed Manager. 

3. A party may change its designated Project Manager by notifying the other party in writing 

of the change. Each party agrees to consult with the other party prior to changing its 

designated Project Manager. 

II. SERVICES 

A. The charges assessed to the City under this Agreement are in addition to, and not in lieu of, the 

Districts' assessments under ORS Chapter 547 for stonnwater and levee operations and 

maintenance assessed to all landowners in the Districts. 

B. The City will pay the Districts for stormwater management services according to the following 

methodology: 

1. Each District will calculate the stormwater operations and maintenance costs of that District 

("Stormwater O&M Costs") and will bill the City for the City's share thereof, as defined by 

section 11.8.2. Stonnwater O&M Costs incl.ude, but are not limited to, those related to 

engineering, operations, ditch improvements, ditch maintenance, pump station maintenance, 

capital renewal and replacement, administrative costs, and associated indirect costs 

including debt service. Charges assessed to the City under this agreement will not include 

costs associated with levee reconstruction or maintenance. 

2. The City's share of each District's Stormwater O&M Costs will be calculated according to 

the following: 

a. The City's share of each District's Stormwater O&M Costs attributable to the City's 

rights-of-way within that District ("Participant Share"), which will be calculated according 

to the current assessment methodology used in the relevant District that pertains to 

Stonnwater O&M Costs; and 

b. Th~ quantity of storm water entering each District from property within the City limits but 

outside of any District's boundaries ("Influent Share"). The Influent Share is intended to 

City of Portland and Peninsula Drainage District No. 1, Peninsula Drainage District No. 2, 

and Multnomah County Drainage District No. 1, Intergovernmental Agreement 

Page 2 of9 

PDXDOCS:2020687 .1 
address the portion of the Districts' annual Stormwater O&M Costs attributable to property 

outside the Districts but within the City. Calculation of the amount will be based on a 

hydrologic stormwater model developed by MCDD ("MCDD Hydro Model") to determine 

stormwater flows in each District, which has been made available for City review. Upon 

approval of this agreement, the City and each District will jointly estimate the following, based 

on the MCDD Hydro Model and each District's budgeted Stormwater O&M Costs for the 

applicable fiscal year: 

The amount of stonnwater that each District manages on an annual basis ("Total 

Annual Stonnwater"); 

The amoW1t of stormwater arriving from outside each District's boundaries but within 

the City limits that would enter the District on an annual basis ("Annual Influent City 

Stonnwater"); and 

Each District's total Stormwater O&M Costs for the year. 

C. The Influent Share of each District's annual Stormwater O&M Costs to be paid by the City will 

be calculated as follows: 

(Annual Influent City Storm water I Total Annual Stonnwater) x 100 

D. The rate calculations will separate the costs associated with the City's Influent Share and 

Participant Share such that the costs will not be double-counted in the calculations. If it is 

discovered that the costs for Influent and Participant Shares overlap (doubly counting the same 

costs), the amount will be adjusted to remove the overlap. 

E. The payment from the City to each District will be the Participant Share plus the Influent Share. 

F. Not later than December of each year, the City's Project Manager and the Districts' Project 

Manager will share updated five-year forecast information on stonnwater revenue requirements 

and reductions or increases in impervious area and City influent stonnwater affecting City and 

District storm water billing calculations. The parties will update the MCDD Hydro Model at least 

once every five years unless all parties agree in writing that an update is not necessary. The third 

party receipted costs associated with updating the MCDD Hydro Model will be split evenly 

between the Districts and the City. The groundwater portion of the Hydro Model and associated 

costs to the City will be revisited by the Parties by December 31, 2014. Any revisions to 

groundwater calculations affecting the City's payments shall be incorporated into this Agreement 

by amendment. 

G. The Districts' management will provide an estimate ofthe following fiscal year's charges to the 

City by January P1

• Final charges will be detennined upon adoption by the Districts' boards of 

the following fiscal year's budget. Ifthe final charges based on an adopted budget increase more 

than 10 percent (10%) from the original estimate described in the preceding sentence, the City 

will have the option of incorporating the difference between the estimated charges plus 10% and 

the final charges into the subsequent year's payment, with appropriate carrying charges. 

City of Portland and Peninsula Drainage District No. 1, Peninsula Drainage District No. 2. 

and Multnomah County Drainage District No. 1, Intergovernmental Agreement 

Page 3of9 

PDXDOC$:2020687 .1 
H. The Districts will invoice the City quarterly for one-fourth of the fiscal year's storm water charges. 

The City will pay the Districts within 30 days following receipt of the Districts' invoices. 

I. Notwithstanding ILB.2.H above, for FY 2013-2014, the City agrees to pay that fiscal year's full 

charges. MCDD may bill the City for the full amount in one invoice. 

J. The Districts acknowledge that the City has the authority to assess and collect stormwater 

management fees within the City limits, including those portions of the City also located within 

the Districts. The City will directly bill its customers located within the Districts for City 

stormwater services at a percentage of the established off-site City stormwater management rate, 

beginning on July 1, 2013, and updated on July 1 each year thereafter. The percentages will be 

as follows: 

Date 

July 1, 2013 

July 1, 2014 

July 1, 2015 

July 1, 2016 and thereafter 

Percentage 

25% 

50% 

75% 

100% 

K. Task Orders. Either the Districts or the City may obtain a service from the other on a 

reimbursable task order basis. The service must support the mission of the requesting party, in 

the judgment of the requesting party, and be outside the scope of services billed for in subsections A and B above. A scope of services and cost must be agreed upon in advance_ for each 

such order. The Districts' Project Manager and the City's Project Manager will oversee the 

preparation and completion of such task orders. Any such task order estimated to exceed 

$50,000 in cost requires approval of the governing bodies. 

III. l 00-YEAR STORM EVENT UPGRADES 

A. This section III is to address the Districts' capacity to convey stormwater from outside the 

Districts during a 1 00-year-flood event. Unless otherwise agreed in writing: 

By May 1, 2014, and every five years thereafter, the City and each District will jointly estimate 

the following, based on the MCDD Hydro Mode! and the capacity of each District's system in 

existence as of the date the modeling is complete: 

I. The amount of stormwater from areas outside each District that would enter that District 

during a I 00-year storm event ("Influent Flood Stonnwater"); 

2. The amount of stormwater arriving from outside each District's boundaries but within the 

City limits that would enter the District during a 1 00-year storm event ("Influent City Flood 

Stonnwater"); and 

3. Any additional pumping capacity required in order for each District to accommodate 

Influent Flood Storm water ("the Flood Capacity Shortfall"). 

City of Portland and Peninsula Drainage District No. 1, Peninsula Drainage District No. 2, 

and Muftnomah County Drainage District No. 1, fntergovemmental Agreement 

Page 4 ol9 

PDXDOCS:2020687 .1 
4. The City's percentage share of the Flood Capacity Shortfall ("the City's Flood Share") will 

be calculated as follows: 

(Influent City Flood Storrnwater I Influent Flood Storrnwater) x 100 

The City's Flood Share will then be applied to the total cost of remedying the Flood Capacity 

Shortfall, if any, according to the methods described in section 111.8. 

B. Unless otherwise agreed in writing, within two years of a detennination that a Flood Capacity 

Shortfall exists, the City and the Districts will jointly determine the most objectively and 

reasonably cost-effective method(s) for addressing the Flood Capacity Shortfall. The City will 

then implement the selected method(s) within an additional two years. Those methods may 

consist of either of the following, or a combination thereof: 

1. Payment(s) by the City to the Districts of a sum proportionate to the City's Share (or a 

portion thereof, if this option is combined with section 111.8.2). These funds must be used 

by the Districts to help finance capital upgrades to address the Flood Capacity Shortfall. 

Any schedule of payments will be incoiJlorated into this Agreement by amendment. 

2. Capital upgrades to the Districts' systems performed by the City at its expense, including 

design, permitting, planning, mitigation, and construction. 

C. Any capital upgrades performed under this section Ill. B. 

1. Must comply with the accreditation standards, criteria, and timelines set by the Army Corps 

of Engineers and the Federal Emergency Management Agency; and 

2. May remain under the ownership and maintenance responsibility of the City, or, by mutual 

agreement, the Districts. Any such responsibility of the Districts will be inCOIJlOrated into 

this Agreement by amendment. 

D. Any capital upgrades or improvements that are associated with levee reconstruction or 

maintenance are not addressed in this Agreement and the City will not be assessed for levee 

maintenance or upgrades through this Agreement. · 

IV. ADMINISTRATION OF CONTRACT 

Through current intergovernmental agreements signed by the Boards of Supervisors of Peninsula 

Drainage District No. 1 and Peninsula Drainage District No.2, the Multnomah County Drainage 

District No. I (MCDD) is designated to administer this agreement on behalf of those two Districts. All 

payments should be made directly to the appropriate District. In the event that specified MCDD 

personnel are no longer able to administer this Agreement, the Executive Director of MCDD shall 

designate new MCDD staff to administer the Agreement. All parties will be notified in writing if such 

change occurs. In the event that current intergovernmental agreements are terminated such that MCDD 

Ciry of Portland and Peninsula Drainage District No. 1, Peninsula Drainage Disrrict No. 2, 

and Mullnomah County Drainage District No. 1, Intergovernmental Agreement 

Page 5of9 

PDXDOCS:2020687.1 
personnel are no longer able to administer this Agreement, the relevant District's board shall designate 

an administrator for this Agreement. 

V. TERM OF AGREEMENT 

This Agreement will be effective retroactively to July l, 2013 and remain in effect for an initial period 

of 25 years, with automatic yearly renewals thereafter, until either: 

(I) The execution of a new agreement between the Districts and the City that explicitly 

terminates this Agreement; or 

(2) The termination of this Agreement in accordance with Section XV below. 

VI. SEVERABILITY 

If any of the provisions of this A~:,.rreement are held to be invalid or unenforceable, the remaining 

provisions will remain valid and binding upon the parties. 

VII. WAIVER 

A waiver by either party of any provision, condition, or covenant of this Agreement may not be 

construed by the other party as a waiver or subsequent breach of the same by the other party. 

VIII. INTERPRETATION 

This Agreement was prepared as a joint effort ofthe City and the Districts and must be construed as 

such. 

IX. LIMITATION ON THE ROLE OF THE DISTRICTS 

Neither this Agreement nor the Districts' provision of services will operate to make the Districts 

owners, operators, generators, transporters, treaters, starers, or arrangers within the meaning of the 

Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation 

Recovery Act, and equivalent state and local laws. Neither this Agreement nor the Districts' provision 

of services, without more, will operate to make the Districts dischargers of any pollutant under the 

Clean Water Act and equivalent state and local laws. 

X. INDEMNIFICATION 

Within the limits of the Oregon Tort Claims Act, codified at ORS 30.260 through 30.300, each party 

hereby agrees to protect, defend, hold harmless, and indemnify the other, its officers, employees and 

agents of and from any claims, damages, compensation, suits, actions and expenses, including 

reasonable attorney's fees, occasioned in whole or in part by the negligent acts, errors or omissions of 

the indemnitor or its employees, while in any way engaged in the performance of this Agreement. In 

addition, each party will be solely responsible for any contract claims, delay damages, or similar items 

arising from or caused by the negligent or wrongful action or inaction of the party. 

City. of Portland and Peninsula Drainage District No. 1, Peninsula Drainage District No. 2, 

and Multnomah County Drainage District No. 1, Intergovernmental Agreement 

Page 6 of9 

PDXDOCS:2020687 .1 
XI. TIMING AND COORD INA TlON 

The City and Districts will take all reasonable steps within their abilities to perform their work under 

this Agreement in an efficient and timely manner. 

XII. AMENDMENT OF AGREEMENT 

The City and the Districts may amend this Agreement from time to time by mutual written agreement 

signed by the Districts' Executive Director and the Director of the Bureau of Environmental Services 

(collectively "Directors"). 

XIII. LAWS AND REGULATIONS 

The City and the District agree to abide by all applicable laws and regulations. 

XIV. INTEGRATION 

This Agreement constitutes the entire agreement between the parties on the subject matter and 

supersedes all prior or contemporaneous written or ora] understandings, representations or 

communications of every kind on the subject. No course of dealing between the parties and no usage 

of trade will be relevant to supplement any term used in this Agreement. Acceptance or acquiescence 

in a course of perfonnance rendered under this Agreement will not be relevant to determine the 

meaning of this Agreement. 

XV. TERMINATION OF THIS AGREEMENT 

A. At any time, either party may unilaterally or by mutual written agreement terminate this 

Agreement upon proper notice to the other party, which termination will not take effect until 

two years later. 

B. A notice of termination may be withdrawn at any time prior to the termination date with the 

written approval of both parties' Directors. 

C. If the City, by ordinance or resolution, abandons its policy of directly billing its customers 

within the Districts as explained in Section II.J, this Agreement will terminate at the end of the 

fiscal year in which the ordinance or resolution was passed, so long as the ordinance or 

resolution is passed 90 days or more prior to the end of the fiscal year. If such ordinance or 

resolution is passed less than 90 days prior to the end of the fiscal year, this Agreement will 

terminate at the end of the following fiscal year. 

D. If a court of competent jurisdiction determines that the City's policy of directly billing its 

customers within the Districts as explained in Section II.B is unenforceable, this Agreement 

will terminate at the end of the fiscal year in which the judgment was made, so long as the 

judgment is made 90 days or more prior to the end of the fiscal year. If such ordinance or 

resolution is passed less than 90 days prior to the end of the fiscal year, th Agreement will 

tenninate at the end of the following fiscal year. 

City of Portland and Peninsula Drainage District No. 1, Peninsula Drainage District No. 2, 

and Multnomah County Drainage District No. 1, Intergovernmental Agreement 

Page 7 of9 

PDXDOCS:2020687 .1 
• 

E. Upon the effective date of a termination ofthis Agreement, the parties will have 30 days to 

generate and pay final invoices for services rendered and received. Any ongoing capital 

construction begun under this Agreement and supervised by the City will be completed within a 

reasonable time after the effective date of termination. Any ongoing capital construction begun 

under this Agreement and supervised by any of the Districts will be completed within a 

reasonable time after the effective date ofterrnination. The City will pay its full share of any 

ongoing construction begun under this Agreement and supervised by the Districts upon 

completion of the construction project. 

XVI. DEFAULT 

Any failure of any party to comply with an obligation under this Agreement will be considered a 

default and another party may terminate this Agreement as provided under Section XV. However, a 

non-defaulting party must notify the defaulting party in writing of the default, and the defaulting party 

must be given a minimum of thirty days to cure the default. 

XVII. CHOICE OF LAWNENUE 

This Agreement and all rights, obligations and disputes arising out of the Agreement will be governed 

by Oregon law. All disputes and litigation arising out of this Agreement will be decided by the state 

courts in Oregon. Venue for all disputes and litigation will be in the Circuit Court for Multnomah 

County) Oregon. 

XVIII. CQUNTERP ARTS EXECUTION 

This Agreement may be executed in multiple counterparts, each of which will be deemed to be an 

original, and such counterparts will constitute one and the same instrument. For the convenience of the 

parties, the execution pages of any executed counterpart may be detached and reattached to any other 

executed counterpart to form one or more documents that are fully executed. This Agreement will not 

be effective until all parties have executed this Agreement or a counterpart of this Agreement. 

Execution of this Agreement may be accomplished by electronic means. 

City of Portland and Peninsula Drainage District No. 1, Peninsula Drainage District No. 2, 

and Multnomah County Drainage District No. 1, Intergovernmental Agreement 

Page Bof9 

PDXDOCS:2020687 .1 
PENINSULA DRAINAGE DISTRICT NO. 1 

PENINSULA DRAINAGE DISTRICT NO.2 

MUL TNOMAH COUNTY DRAINAGE DISTRICT NO. 1 

BY: 

Name: 

Title: 

IGA Nos. 

IGA Title: 

Executive Director 

P 1-1402-018-IGA 

P2-1402-023-IGA 

MC-1402-063-IGA 

City of Portland Stonnwater IGA 

CITY OF PORTLAND SIGNATURES: 

B)<~~ Bureau Director 

/J,c_ 9:_ BY------~~~~~-------­ COMMISSIONER 

II I 11-/ IL-f 

Approved as to Form: 

By: APPROVED AS TO FORM 

~~~ Date: 

CITY A TIORNEY 

City of Portland and Psninsule Drainage District No. 1, Peninsula Drainage Dlsfrict No. 2, 

and Multnomeh County Drainage District No. 1, Intergovernmental Agreement 

Page 9of9 

PDXDOCS:2020887.1 
ATTACHMENT H
City of Portland

Bureau of Environmental Services

FY 2016 Sewer System Rate Study

June 2015
Table of Contents

Page

I. INTRODUCTION AND SUMMARY OF RATES 1

Table 1 - FY 2015 and FY 2016 Sanitary Sewer and Stormwater Drainage Rates 2

II. BACKGROUND ON COST OF SERVICE RATEMAKING 3

Table 2 - Units of Measure for Service Parameters 4

III. CALCULATION OF FY 2016 RATES 5

A. FY 2016 Revenue Requirement Calculation 5

Table 3 – Calculation of FY 2016 Rate Revenue Requirement 6

1. Allocation of Operations and Maintenance Costs to Service Parameters 7

2. Allocation of Capital Costs to Service Parameters 8

3. Allocation of Non-Rate Revenue Offsets to Service Parameters 8

4. Calculation of Service Parameter Net Revenue Requirements 8

Table 4 - FY 2016 Development of Service Parameter Net Revenue Requirement 9

B. FY 2016 Customer Demand Characteristics 9

Table 5 - FY 2016 Sewer System Customer Flow and Strength Characteristics 10

C. FY 2016 Customer Counts 11

Table 6 - FY 2016 Forecast Customer Accounts 11

 1.Extra Strength Charges 11

D. FY 2016 Demand by Service Parameter 12

Table 7 - FY 2016 Forecast Annual Service Units by Service Parameter 12

E. FY 2016 Calculation of Unit Cost of Service 12

Table 8 – FY 2016 per Unit Cost of Service by Service Parameter 13

F. FY 2016 Adopted Sanitary Sewer and Stormwater Drainage Rates 13

Table 9 - FY 2016 Sanitary Sewer and Stormwater Drainage Rates 14

G. FY 2016 Typical Commercial Customer Bills 15

Table 10 - FY 2015 vs. FY 2016 Typical Commercial Bill Comparison 15

Table 11 – FY 2015 vs. FY 2016 Typical Commercial Bills with CRR Discount 16

IV. SANITARY SEWER AND STORMWATER DRAINAGE CAPITAL CHARGES 17

A. System Development Charges 17

B. FY 2016 Sanitary Sewer SDC Calculations 18

C. FY 2016 Stormwater Drainage SDC Calculations 19

D. FY 2016 Line and Branch Charges 20

Table 12 - FY 2016 Sewer System Line and Branch Charge Calculation 21

V. FY 2016 FORECAST OPERATING RESULTS 22

Table 13 - FY 2016 Forecast Sewer System Operating Fund (600) Budgetary Basis Results 22
I. INTRODUCTION AND SUMMARY OF RATES

The Sewer System Rate Study is the final step in a three part financial planning process performed 

each year by the Bureau of Environmental Services (Bureau, or BES). The first step in this process 

consists of updating the Bureau's Five-Year Financial Plan, the primary document addressing key 

policy issues related to the provision of sanitary sewer and stormwater drainage services. The FiveYear Financial Plan includes a forecast of operating and capital improvement program (CIP) 

expenditures, a CIP financing plan, and an estimate of the percentage change in residential customer 

monthly bills required to meet the Bureau's forecast expenditures.

The second step in the financial planning process is the preparation of a budget request for the 

upcoming fiscal year. The budget request is based on the first year of the Five-Year Financial Plan, 

which is refined into a detailed financial management tool for the upcoming fiscal year. The budget 

development process culminates with the budget request being submitted to the City Budget Office for 

review and eventual inclusion in the citywide Mayor’s Proposed Budget.

The final step in the financial planning process is the annual rate study that is conducted after City 

Council has approved the budget request. The rate study calculates the sanitary sewer and stormwater 

drainage rates necessary to fund Bureau operations for the upcoming fiscal year using formal cost of 

service ratemaking principles adopted by City Council in 1977. The rate study also calculates system

development charges for new customers connecting to the sanitary sewer and stormwater drainage 

system. Before going into effect, the rates and charges calculated in the rate study are adopted by City 

Council.

The rate study does not establish the recommended level or priority of Bureau services - these are 

addressed in the Five-Year Financial Plan and the annual budget. The rate study does, however, play a 

central role in determining how these services will be funded. The primary objectives of the rate study 

are to ensure that: 1) funding for Bureau operations is provided at the level authorized in the adopted 

budget; 2) costs are recovered from customers in a fair and equitable manner using City Council 

defined cost of service ratemaking principles; and, 3) cost recovery mechanisms are compatible with 

other City objectives, including environmental protection and sustainability, and compliance with legal 

and regulatory constraints.

Table 1 on the following page presents adopted sanitary sewer and stormwater drainage rates for the 

fiscal year ending on June 30, 2016 (FY 2016). Rates for FY 2016 reflect changes in operating and 

capital costs, as well as forecast reductions in customer usage, and changes in rate model assumptions 

regarding the strength of customer sanitary sewage discharges. The average monthly bill for singlefamily residential customers, assuming no participation in the Clean River Rewards (CRR) program 

increases by 3.6% relative to FY 2015 rates.
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 2 of 22 

Previous Adopted

Fiscal Year Ending June 30, 2015 2016

Residential Sanitary Sewer and Stormwater Drainage

Sanitary Sewage Volume ($ / ccf) 9.19 $ 9.50 $

Stormwater Drainage ($ / 1000 square feet of impervious area / month) 10.72 11.08

Average Single Family Bill ($ / month) 65.25 67.60

Low Income Discount ($ / month) 28.98 29.95

Commercial / Industrial Sanitary Sewer and Stormwater Drainage

Special Meter Charge ($ / month) 30.12 $ 31.21 $

Sanitary Sewage Volume ($ / ccf) 9.057 9.368

Stormwater Drainage ($ / 1000 square feet of impervious area / month) 11.19 11.55

Clean Water to Stormwater Drainage System ($ / ccf) 0.924 0.961

Extra Strength Sanitary Sewer

Biochemical Oxygen Demand ($ / pound) $ 0.650 0.622 $

Total Suspended Solids ($ / pound) 0.770 0.804

System Development Charges

Sanitary Sewer System Development Charge ($ / equivalent dwelling unit) 4,551 $ 4,779 $

Line and Branch Charges

Line Charge ($ / square feet) 1.470 1.550

Branch Charge ($ / branch) 5,392 5,732

Stormwater Drainage System Development Charge

$ / 1000 square feet of impervious area 169.00 $ 176.00 $

$ / linear feet of frontage 5.50 $ 5.66 $

$ / daily vehicle trip 2.91 $ 3.04 $

Note: Average bill assumes no CRR participation and excludes Account Service Charge.

Table 1

Bureau of Environmental Services

FY 2015 and FY 2016 Sanitary Sewer and Stormwater Drainage Rates
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 3 of 22 

II. BACKGROUND ON COST OF SERVICE RATEMAKING

The Bureau utilizes the following five-step process to calculate rates. This process is common to most 

sanitary sewer and stormwater drainage utilities throughout the United States. 

Step 1: Determine the Gross Revenue Requirement. Revenues are required to fund two broad 

categories of costs: operating and capital, which sum to form the Bureau's overall gross revenue 

requirement. Operating revenue requirements include the recurring cost of providing service plus 

overhead charges and contingency reserves. The Bureau's adopted budget provides a detailed 

description of these operating costs for the upcoming fiscal year. Capital expenditures are funded via 

bond debt and rate revenues from customers (so called cash financed CIP). The capital revenue 

requirement includes debt service payments to bondholders and the value of cash financed capital 

improvements. The Five-Year Financial Plan describes planned CIP expenditures for upcoming fiscal 

year and also provides a discussion of the Bureau's debt management policies.

Step 2: Calculate the Revenue Required from Rates (Net Revenue Requirement). Funding to meet 

the gross revenue requirement is provided from multiple sources, including: rate revenues, system 

development charges, wholesale contract revenues and interest earnings. To determine the amount of 

rate revenue required from customers, all sources of non-rate revenue must be identified and used as an 

offset to the gross revenue requirement. The remaining net revenue requirement is recovered from 

recurring sanitary sewer and stormwater drainage rates.

Step 3: Allocate the Revenue Requirement to Individual Service Parameters. Under cost of service 

ratemaking, the revenue requirement is allocated to individual service components, commonly called 

service parameters. This process translates the overall gross revenue requirement into a specific 

revenue requirement for each individual service parameter. As discussed in Section IV, the Bureau 

uses the service parameters that best represent the services provided to customers. These service 

parameters fall into one of the following three broad categories: 

Sanitary Sewage Flow includes the costs of managing the volume of sanitary sewer and 

stormwater drainage flow, beginning in the collection system and ending with treatment and 

discharge into the Willamette and Columbia Rivers.

Sanitary Sewage Strength captures the costs of purification at the treatment plant. Sanitary 

sewage strength is measured according to two characteristics: biochemical oxygen demand 

(BOD) and total suspended solids (TSS).

Stormwater Drainage Service includes all of the costs of managing the volume and quality of 

urban stormwater runoff.

There are a variety of approaches for allocating revenue requirements (costs) to service parameters. 

Some allocations are self-evident. For example, pump station maintenance costs are appropriately 

allocated to sanitary sewage flow because a pump station’s function is to transport wastewater – not 
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 4 of 22 

purify it. Other allocations are less obvious. The cost of maintenance functions within a combined 

sanitary sewer and stormwater drainage system should be allocated to both sanitary sewage flow and 

stormwater drainage. However, it is less apparent how costs should be divided between these two 

service parameters. Allocations of this type are based on the best professional judgment of the Bureau 

personnel responsible for performing these activities. 

To ensure that revenue requirements are allocated to individual service parameters in the most accurate 

and equitable manner, the Bureau periodically employs consultants to review the cost allocations used 

in the rate model. In 1998, the consulting firm Black & Veatch reviewed the Bureau’s capital cost 

allocations and offered specific recommendations that continue to be utilized. In 2005, Black & 

Veatch completed a comprehensive review of the Bureau's sanitary sewer and stormwater drainage rate 

model. This review included an evaluation of: 1) the methodologies used by the Bureau to allocate 

operations and maintenance (O&M) and capital costs to individual service parameters; 2) whether 

sanitary sewer and stormwater drainage rates are properly calculated to match revenue requirements; 

and, 3) and how the Bureau's ratemaking methodologies compare to those used by other sewer and 

stormwater utilities. As a result of this review, Black & Veatch concluded that the Bureau is allocating 

O&M and capital costs in a "reasonable manner consistent with industry practices."

Step 4: Assign Units of Measure to Each Service Parameter. The fourth step in the rate setting 

process is to quantify each of the service parameters by a unit of measure, which then allows individual 

unit rates be calculated. The units of service for sanitary sewage flow and strength are a direct measure 

of a customer’s wastewater discharge and, therefore, a direct measure of the level of service. 

Impervious area is currently the only stormwater drainage service unit of measure used by the Bureau. 

The precise level of stormwater drainage service provided to individual customers is also a function of 

property slope, soil type, semi-impervious area, and access to and use of public rights of way.

However, adding these additional factors would result in high customer billing analysis and transaction 

costs relative to the size of the stormwater drainage rate. For this reason, impervious area is used as 

the only unit of service measure. Table 2 below shows the units by which service parameters are 

currently quantified.

Service Parameter Units of Measure

Sanitary Sewage Flow Hundreds of cubic feet (ccf)

Sanitary Sewage Strength

 Biochemical Oxygen Demand (BOD) Pounds/ccf

 Total Suspended Solids (TSS) Pounds/ccf

Clean Water to Stormwater System Hundreds of cubic feet (ccf)

Basic Stormwater Drainage Service Square feet of impervious area

Commercial / Industrial Stormwater Drainage Service Sq. Ft. of commercial / industrial impervious area

Table 2

Bureau of Environmental Services

Units of Measure for Service Parameters
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 5 of 22 

Step 5: Calculate Sanitary Sewer and Stormwater Rates. The calculation of specific sanitary sewer 

and stormwater drainage rates is the final step in the rate setting process. Rates are based upon total 

forecast customer class use for each service parameter, and the unit costs of those services, allowing 

for changes in customer usage characteristics, as well as other market-and regulatory-driven 

influences. The FY 2016 ratemaking process is discussed below, including tables of data and results. 

III. CALCULATION OF FY 2016 RATES 

A. FY 2016 Revenue Requirement Calculation

The Bureau's gross revenue requirement for FY 2016 is $441.5 million. CIP related expenditures for the 

construction of new sanitary sewer and stormwater drainage facilities constitute $101.3 million, or 

approximately 22.9% of the gross revenue requirement. O&M expenditures constitute $140.0 million, or 

approximately 31.7% of the gross revenue requirement. O&M expenditures include the cost of direct 

labor, materials and services, as well as the utility license fees, City general fund overhead allocations 

and transfers to the Sewer System Rate Stabilization Fund (Fund 617000). All payments for O&M and 

CIP related expenditures are made through the Sewer System Operating Fund (Fund 600000) with CIP 

expenditures reimbursed by the Sewer System Construction (Fund 614000). 

Debt service payments to bondholders constitute $173.9 million, or approximately 38.6% of the gross 

revenue requirement. Debt service payments are made from the Sewer System Debt Redemption Fund 

(Fund 609000) and reimbursed by the Sewer System Operating Fund. Cash financed CIP was $26.3

million.

The Bureau's net revenue requirement (the amount of revenue that must be obtained from sanitary 

sewer and stormwater drainage rates) is projected to be $308.3 million in FY 2016. This is $133.2

million less than the gross revenue requirement of $441.5 million. The difference between the gross 

and net revenue requirements is the caused by the following revenue requirement offsets: $112.3

million in CIP expenditure reimbursements from the Sewer System Construction fund to the Sewer 

System Operating Fund; $14.7 million in system development charge revenue; and $3.4 million in 

wholesale service revenue. There is also a $2.5 million decrease to the Sewer System Operating Fund 

balance and a $3.1 million adjustment for undercollection of projected revenues. The remaining $8.4

million difference results from miscellaneous service reimbursements, interest income, grants that 

reimbursed certain project expenditures, rate stabilization transfers, licenses and permits, and other 

minor revenues. 

Revenues from sewer system line and branch extensions are not included as an offset to gross revenue 

requirements; they flow directly to the Sewer System Construction Fund and are used to reduce CIP 

related borrowing requirements.

Table 3 on the following page presents the Bureau’s revenue requirement calculation for FY 2016.
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 6 of 22 

Forecast

Year Ending June 30 2016

O&M AND CIP EXPENSES

Personal Services 52,289,678 $

Materials & Services - External 25,531,761

Materials & Services - Internal 35,014,705

Capital Outlay (non-CIP) 2,510,800

Expenditures for Capital Improvement Projects 101,299,040

Equipment Cash Transfers -

Lease/Purchase Payments 79,415

Accrued Bond Interest & Broker-Dealer Fees -

Cash Transfers:

General Fund Overhead 5,801,216

Utility License Fees 15,227,519

Rate Stabilization Fund -

Environmental Remediation Fund -

Pension Obligation Bonds Fund (Operating) 2,815,490

Other Funds 685,770

TOTAL O&M AND CIP EXPENSES $ 241,255,394

Cash Transfers to Debt Redemption Fund: 

Existing Debt Service 98,199,544

Existing/New Junior Lien Debt Service 75,692,184

Cash Transfers to Sewer Construction Fund: 

Cash Financed Capital Improvements 26,306,774

TOTAL DEBT AND CIP TRANSFERS $ 200,198,502

GROSS REVENUE REQUIREMENT $ 441,453,896

LESS: OTHER SYSTEM RESOURCES

 CIP Reimbursement from Construction Fund 112,331,991 $

 System Development Charges 14,700,030

 Wholesale Sewer Contracts 3,405,000

 Other Service Charges 1,697,050

 Service Reimbursements 1,400,508

 Intrafund Service Reimbursements -

 Rate Stabilization Fund Transfer In 575,000

 Other Cash Transfers 1,065,296

 Product Sales 350,687

 Inspections 250,000

 Rents 339,500

 Licenses and Permits 1,980,000

 Interest on Investments 297,520

 Miscellaneous 978,000

 Portland Harbor Rate Revenues Deposited in ERF (1,907,430)

 Accrued User Charge Revenue 1,280,856

 Over/(Under) Collection on Rate Revenues (3,114,051)

 Decrease / (Increase) in Operating Fund Balance (2,467,074)

TOTAL OTHER RESOURCES $ 133,162,884

RATE REVENUE REQUIREMENT $ 308,291,013

Table 3

Bureau of Environmental Services

Calculation of FY 2016 Rate Revenue Requirement
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 7 of 22 

The FY 2016 revenue requirement is allocated to the following service parameters that best 

approximate the services the Bureau provides to its customers.

Basic Sanitary Flow (Flow, or Q) represents the volume of sanitary sewage discharged by a 

customer, and is measured in hundreds of cubic feet per year.

Biochemical Oxygen Demand (BOD) is one measure of sanitary sewage discharge strength. It 

represents the oxygen required by microorganisms to break down the organic content of 

sanitary sewage. The stronger the discharge, the greater the quantity of oxygen required. This 

service parameter is measured in pounds per hundred cubic feet of sanitary sewage flow. 

Total Suspended Solids (TSS) is another measure of sanitary sewage discharge strength. It 

represents the weight of suspended particulate matter per unit of sanitary sewage flow. It is 

also measured in pounds per hundred cubic feet of sanitary sewage flow. 

Basic Impervious Area (IA) represents the responsible residential customer's contribution of 

stormwater runoff to the City's stormwater drainage system. It is measured in thousands of 

square feet.

Commercial/Industrial Impervious Area (C/I-IA) represents the responsible 

commercial/industrial customer's contribution of stormwater runoff to the City's stormwater 

drainage system. It is also measured in thousands of square feet.

Commercial/Industrial Flow-related Services (C/I QS) are related to customer sanitary 

sewage flow volumes. Examples include some source control planning and permitting 

activities. C/I QS is measured by the volume of commercial sanitary sewage flow.

Special Meter Services are provided whenever a meter is required to monitor discharge 

directly, as opposed to indirectly through water consumption. Special meter services are 

measured by the number of special meter billings.

Portland Harbor costs were separately identified on customer bills beginning in FY 2008. 

This ensures that customers know what these costs are. Because the costs are related to both 

sewage and stormwater flow, 40 percent of the costs will be recovered on a flow basis and 60 

percent on an impervious area basis. 

1. Allocation of Operations and Maintenance Costs to Service Parameters

The allocation of O&M costs (revenue requirements) to the eight service parameters described above is 

a two-step process. For each of the Bureau's cost centers, budgeted expenditures are classified as 

either indirect, relating to departmental-wide or Bureau-wide activities, or as direct, relating 

specifically to one or more service parameters. Direct costs for each cost center are allocated on a 

percentage basis among the service parameters. The percentage of total direct costs allocated to each 
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 8 of 22 

service parameter is then used to allocate the indirect costs. Therefore, the percentage of direct costs 

allocated to a particular service parameter (basic sanitary flow, for example) will define the percentage 

of indirect costs allocated to that same parameter. 

2. Allocation of Capital Costs to Service Parameters

The allocation of capital costs (revenue requirements) to service parameters is based on the existing 

asset approach. The depreciated value of existing system assets is allocated to the service parameter 

that influenced the sizing or capacity of that asset. The percentage of total depreciated value assigned 

to each service parameter determines the percentage of capital revenue requirements allocated to that

parameter. As discussed previously, the capital cost allocations used in this rate study reflect the 

findings and recommendations made in 1998 by Black & Veatch Corporation, updated to reflect 

current system assets. Black & Veatch reaffirmed the use of this methodology in its 2005 review of 

the Bureau's rate model.

3. Allocation of Non-Rate Revenue Offsets to Service Parameters

The allocation of non-rate revenues (gross revenue requirement offsets) to service parameters is based 

on a review of each individual Bureau revenue center. Revenues classified as offsets to capital costs 

are allocated to the service parameters in the same percentage as capital costs. These include 

connection charge revenues and cash line and branch charge revenues. The remaining revenues, 

including cash transfers from other funds, contract revenues, and interest income, are allocated in a 

manner similar to O&M costs. Revenues are allocated directly to service parameters where 

appropriate, and "indirect" revenues are allocated in the same percentage as total operating costs.

4. Calculation of Service Parameter Net Revenue Requirements

Service parameter net revenue requirements are calculated per the following formula for each 

individual service parameter:

O&M Revenue Requirement Allocated to Service Parameter

+ Capital Revenue Requirement Allocated to Service Parameter

- Revenue Requirement Offsets Allocated to Service Parameter

Service Parameter Net Revenue Requirement

Table 4 below summarizes the development of the net revenue requirement by service parameter for 

FY 2016. All capital expenditures are allocated to sanitary flow, BOD, TSS, or impervious area. 

Revenue requirements for other categories in this table are operating only.
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 9 of 22 

Gross Revenue 

Requirements Revenue Offsets

Net Revenue 

Requirements

Sanitary Sewage Flow

Operating $ 685,926 38,699,412 $ 38,013,486 $ 

Capital 116,512,878 15,225,348 101,287,530

Total $ 15,911,275 155,212,290 $ 139,301,015 $ 

Biochemical Oxygen Demand

Operating $ 2,023,818 18,989,435 $ 16,965,617 $ 

Capital 14,061,899 1,948,701 12,113,198

Total $ 3,972,518 33,051,334 $ 29,078,815 $ 

Total Suspended Solids

Operating $ 1,763,870 15,998,380 $ 14,234,510 $ 

Capital 12,555,267 1,828,661 10,726,606

Total $ 3,592,531 28,553,647 $ 24,961,116 $ 

Basic Impervious Area

Operating $ 2,001,533 57,414,395 $ 55,412,863 $ 

Capital 57,754,228 7,469,882 50,284,346

Total $ 9,471,415 115,168,624 $ 105,697,209 $ 

Commercial/Industrial Impervious Area $ 149,723 3,933,914 $ 3,784,191 $ 

Portland Harbor/Willamette River (Flow) 1,224,709 - 1,224,709

Portland Harbor/Willamette River (IA) 1,837,063 - 1,837,063

Commercial / Industrial Flow-Related Services 1,028,144 106,831 921,313

Special Meter Services 560,671 81,072 479,600

Totals $ 33,285,365 340,570,395 $ $ 307,285,031

Table 4

Bureau of Environmental Services

FY 2016 Development of Service Parameter Net Revenue Requirement
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 10 of 22 

B. FY 2016 Customer Demand Characteristics

To develop cost of service rates, the quantity and discharge strength for each customer class must be 

forecast. FY 2016 average residential sanitary sewer usage (as measured by the lesser of winter 

average water use and actual water use) is forecast to be 4.26 ccf per month. 

As a result of recommendations made by Black & Veatch, BOD and TSS sanitary sewage strength 

demand characteristic assumptions for residential and regular strength commercial customers were 

modified in FY 2006. In FY 2005, BOD and TSS strength levels were each forecast at 235 mg/l. In 

FY 2007, BOD and TSS strength assumptions were increased to 293 mg/l and 288 mg/l, respectively. 

These changes more accurately reflect the true BOD and TSS contributions of residential and regular 

strength commercial customers and they have the effect of lowering the amount of BOD and TSS 

revenue requirements recovered from commercial and industrial extra strength customers. Table 5 

below summarizes forecast customer usage characteristics for FY 2016.

BOD (mg/l) TSS (mg/l)

Residential Single Family 51.1 2.39 293 288

Multifamily 44.9 as measured 293 288

Commercial

Monthly 1,664 as measured 293 288

Quarterly 144 as measured 293 288

Extra Strength 16,481 as measured 1,420 501

Table 5

Bureau of Environmental Services

FY 2016 Sewer System Customer Flow and Strength Characteristics

Customer Class/Type

Annual Billed 

Flow (ccf)

Impervious Area

(1,000 sq. ft)

Strength
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 11 of 22 

C. FY 2016 Customer Counts

Table 6 on the following page presents FY 2016 forecast sanitary sewer and stormwater drainage 

customer account totals. To avoid double counting, extra strength accounts are not included in the 

totals because they are also regular accounts.

1. Extra Strength Charges 

Prior to 2012, the Bureau monitored and charged about 72 commercial/industrial customers for extra 

strength sanitary sewage discharges based upon samples taken and laboratory analysis of their sewage 

discharges. However, as many as 3,000 other customers are believed to have discharge strength 

significantly higher than the residential or baseline strength. Therefore the cost of treatment for the 

added loading from these customers has been born by others. 

The Bureau has developed a Class Average system of strength-based rates for commercial and 

industrial customers that will improve both customer equity and pollution prevention incentives. Apart 

from implementation costs, this is a revenue neutral program and the estimated $4.0 million collected 

annually will result in rate reductions for other customers. The program is also intended to provide an 

Forecast

Averages for Fiscal Year Ending June 30 2016

RESIDENTIAL

Single Family 156,116

Multifamily 11,100

TOTAL RESIDENTIAL ACCOUNTS 167,216

COMMERCIAL

Monthly 3,612

Quarterly 9,846

Extra Strength 58

Clean Water to Stormwater Drainage System 15

Stormwater Drainage Only 159

TOTAL COMMERCIAL ACCOUNTS 13,632

TOTAL SYSTEM ACCOUNTS 180,848

Table 6

Bureau of Environmental Services

FY 2016 Forecast Customer Accounts
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 12 of 22 

economic incentive to customers to reduce grease discharges, which is important to the Bureau for 

both regulatory compliance and reduced maintenance costs.

The Bureau has finalized its administrative rules for the Class Average Extra Strength Program and 

began implementation on January 1, 2012. Full implementation using a phased approached is expected 

to take approximately three years. As of May 31, 2015, more than 3,000 Class Average Extra Strength 

accounts have been set up.

D. FY 2016 Demand by Service Parameter

The quantities shown in Table 7 below represent forecast FY 2016 total units of demand by service 

parameter. Total forecast units of demand, together with the service parameter revenue requirements, 

determine the unit cost of service for each service parameter.

E. FY 2016 Calculation of Unit Cost of Service

Total O&M and capital revenue requirements by service parameter were shown in Table 4. Those 

costs, net of forecast non-rate revenue offsets, form the basis for developing cost of service rates. The 

next step in rate development is to compute the unit cost of service for each service parameter, based 

on forecast units for each type of service as shown in Table 7. This requires dividing the revenue 

requirement for each service parameter by its forecast number of units, as shown in Table 8 below.

Forecast

Service Parameter Units FY 2016

Basic Sanitary Sewage Flow ccf 20,481,346

Biochemical Oxygen Demand lbs. 47,468,699

Total Suspended Solids lbs. 36,850,353

Total Impervious Area 1,000 sq. ft. 830,827

Commercial / Industrial Impervious Area 1,000 sq. ft. 408,344

Portland Harbor/Willamette River ccf 21,095,786

Portland Harbor/Willamette River 1,000 sq. ft. 1,075,435

Commercial / Industrial Flow Related Services Comm. / Ind. ccf 8,371,656

Special Meter Services Special Meter Bills 15,612

Table 7

Bureau of Environmental Services

FY 2016 Forecast Annual Service Units by Service Parameter
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 13 of 22 

For example, total O&M and capital costs (net of revenue offsets) allocated to basic sanitary flow for 

FY 2016 are $139.3 million. Total sanitary sewer flow for all customer classes is forecast to be 20.5

million ccf. Dividing the cost by the forecast service demand yields an estimated unit cost of $6.80 per 

ccf. This unit cost allows revenue requirements to be charged to each customer class (and to individual 

customers) based on their contribution to basic sanitary flow. Table 8 presents the unit cost of service 

for each of the previously identified service parameters.

F. FY 2016 Adopted Sanitary Sewer and Stormwater Drainage Rates

The unit costs displayed in Table 8 are used to develop rates by customer class. For example, the 

residential sanitary volume rate includes the cost of flow ($6.80/ccf), and the cost of “residential 

strength” at $2.21/ccf. The latter is calculated by taking the assumed strength for BOD and TSS from 

Table 5 (293 mg/l for BOD and 288 mg/l for TSS), converting these numbers from mg/l to lbs/ccf (293 

mg/l is approximately 1.83 lbs/ccf and 288 mg/l is approximately 1.80 lbs/ccf), and computing cost of 

strength per ccf of flow (1.83 lbs/ccf * $0.61/lb for BOD plus 1.80 lbs/ccf * $0..68/lb for TSS). The 

resulting rate of $9.14 ccf is then adjusted upward by approximately 2.2% to reflect the cost of 

providing discounts to low-income customers. Finally, rates are adjusted upward by approximately 

1.7% to take into account projected uncollectable debts, yielding the $9.50/ccf rate for residential 

sanitary volume. 
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 14 of 22 

In computing final rates, it is Bureau policy to round to the nearest tenth of a cent for commercial flow 

and strength rates, and to the nearest cent for other rates. Table 9 on the following page illustrates the 

adopted sanitary sewer and stormwater drainage rates for FY 2016.

This year’s rate structure includes the effects of the CRR. Adopted rates for FY 2016 reflect CRR

participation levels of about 35,800 customers. For residential customers receiving the full (35%) 

discount on the stormwater charge, the average monthly sanitary sewer and stormwater bill is forecast 

to be $58.18 a 3.6% difference from the FY 2015 average of $56.16 (includes CRR). For customers 

receiving no discount, the average monthly bill for sanitary sewer and stormwater service is forecast to 

be $67.60, an increase of 3.6%. Intermediate levels of discount on stormwater charges are also 

possible.

Table 9

Adopted

Fiscal Year Ending June 30, 2016

Residential Sanitary Sewer and Stormwater Drainage

Sanitary Sewage Volume ($ / ccf) 9.50 $ 

Stormwater Drainage ($ / 1000 square feet of impervious area / month) 11.08

Average Single Family Bill ($ / month) 67.60

Low Income Discount ($ / month) 29.95

Commercial / Industrial Sanitary Sewer and Stormwater Drainage

Special Meter Charge ($ / month) 31.21 $ 

Sanitary Sewer Volume ($ / ccf) 9.368

Stormwater Drainage ($ / 1000 square feet of impervious area / month) 11.55

Clean Water to Stormwater Drainage System ($ / ccf) 0.961

Extra Strength Sanitary Sewer

Biochemical Oxygen Demand ($ / pound) 0.650 $ 

Total Suspended Solids ($ / pound) 0.804

System Development Charges

Sanitary Sewer System Development Charge ($ / equivalent dwelling unit) 5,867.00 $ 

Line and Branch Charges

Line Charge ($ / square feet) 1.61

Branch Charge ($ / branch) 5,974.00

Stormwater Drainage System Development Charge

$ / 1000 square feet of impervious area 183.00

$ / linear feet of frontage 5.84

$ / daily vehicle trip 3.12

Bureau of Environmental Services

FY 2016 Sanitary Sewer and Stormwater Drainage Rates
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 15 of 22 

G. FY 2016 Typical Commercial Customer Bills

Table 10 below illustrates estimated commercial customer bills computed from adopted sewer rates for 

FY 2016, as compared to bills under FY 2015 rates excluding the effects of the CRR. Assuming no 

discounts, bill changes range from an increase of 4.1% to an increase of 4.3%, depending on the 

customer type. 

Sanitary Impervious Area

Flow (Stormwater) BOD SS Current Proposed Percent

Typical Customer Monthly Quarterly (ccf/month) (square feet) (lbs./ccf) (lbs./ccf) FY 2015 FY 2016 Change

Large Office Building 1 1,417 38,100 - - 13,260 $ 13,805 $ 4.1%

Large Dairy 2 176 39,000 9.83 2.70 3,473 $ 3,623 $ 4.3%

Large Metal Plater 5 5 9,011 119,900 - 9.23 146,986 $ 153,225 $ 4.2%

Small Graphic Arts 1 4 1,500 - - 50 $ 52 $ 4.2%

Industrial Laundry 1 2 6,610 104,000 3.35 3.08 90,490 $ 94,309 $ 4.2%

Large Nightclub 2 185 4,800 - - 1,729 $ 1,800 $ 4.1%

Small Print Shop 1 9 1,500 - - 98 $ 102 $ 4.2%

Large Church 2 39 20,100 - - 581 $ 606 $ 4.2%

Big Box Retailer 1 443 657,000 8.45 3.03 14,727 $ 15,374 $ 4.4%

Brewery 4 2 3,385 30,000 15.60 1.07 66,639 $ 69,512 $ 4.3%

Hospital Complex 11 6 5,251 632,500 - - 54,634 $ 56,900 $ 4.1%

Neighborhood Tavern 1 30 5,100 - - 329 $ 342 $ 4.2%

Auto Repair Shop 1 15 10,000 - - 245 $ 255 $ 4.3%

Large Hotel 1 3,876 39,300 - - 35,545 $ 37,003 $ 4.1%

Fast Food 1 52 29,600 - - 802 $ 836 $ 4.3%

Large Process Industry 1 1,311 547,100 2.67 0.20 20,371 $ 21,240 $ 4.3%

Department Store 1 286 38,100 - - 3,017 $ 3,142 $ 4.2%

Meat Packer 1 1,773 25,000 0.39 - 16,772 $ 17,462 $ 4.1%

Large Manufacturer 3 2 12,210 414,000 - - 115,220 $ 119,958 $ 4.1%

Small Nightclub 2 40 3,000 - - 393 $ 409 $ 4.1%

Convenience Store 1 30 15,000 - - 437 $ 455 $ 4.2%

Fast Food 1 123 15,000 - - 1,282 $ 1,335 $ 4.1%

Electronics Manufacturer 1 20,240 73,900 - - 184,143 $ 191,689 $ 4.1%

Zoo 1 14,859 497,400 - - 140,145 $ 145,909 $ 4.1%

Small Office Building 1 57 34,500 - - 905 $ 944 $ 4.3%

Accounts Extra Strength

per Customer

Table 10

Bureau of Environmental Services

FY 2015 vs. FY 2016 Typical Commercial Customer Bill Comparison

Usage Characteristics

Assuming No Clean Rivers Rewards Discount

Monthly Cost
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 16 of 22 

Table 11 below illustrates estimated commercial customer bills computed from adopted sewer rates for 

FY 2016, as compared to bills under FY 2014 rates including the effects of the CRR. At a full (35%) 

discount, bill changes range from an increase of 3.3% to an increase of 3.4%.

Sanitary Impervious Area

Flow (Stormwater) BOD SS Current Proposed Percent

Typical Customer Monthly Quarterly (ccf/month) (square feet) (lbs./ccf) (lbs./ccf) FY 2015 FY 2016 Change

Large Office Building 1 1,417 38,100 - - 13,111 $ 13,561 $ 3.4%

Large Dairy 2 176 39,000 9.83 2.70 1,886 $ 1,950 $ 3.4%

Large Metal Plater 5 5 9,011 119,900 - 9.23 82,489 $ 85,321 $ 3.4%

Small Graphic Arts 1 4 1,500 - - 44 $ $ 3.4% 46

Industrial Laundry 1 2 6,610 104,000 3.35 3.08 60,628 $ 62,709 $ 3.4%

Large Nightclub 2 185 4,800 - - $ 1,769 1,710 $ 3.4%

Small Print Shop 1 9 1,500 - - 92 $ 96 $ 3.4%

Large Church 2 39 20,100 - - 502 $ 519 $ 3.4%

Big Box Retailer 1 443 657,000 8.45 3.03 8,799 $ 9,092 $ 3.3%

Brewery 4 2 3,385 30,000 15.60 1.07 30,887 $ 31,947 $ 3.4%

Hospital Complex 11 6 5,251 632,500 - - 52,156 $ 53,939 $ 3.4%

Neighborhood Tavern 1 30 5,100 - - 309 $ 319 $ 3.4%

Auto Repair Shop 1 15 10,000 - - 206 $ 213 $ 3.4%

Large Hotel 1 3,876 39,300 - - 35,391 $ 36,606 $ 3.4%

Fast Food 1 52 29,600 - - 686 $ 709 $ 3.4%

Large Process Industry 1 1,311 547,100 2.67 0.20 15,855 $ 16,392 $ 3.4%

Department Store 1 286 38,100 - - 2,867 $ 2,965 $ 3.4%

Meat Packer 1 1,773 25,000 0.39 - 16,240 $ 16,798 $ 3.4%

Large Manufacturer 3 2 12,210 414,000 - - 113,597 $ 117,494 $ 3.4%

Small Nightclub 2 40 3,000 - - $ 394 381 $ 3.4%

Convenience Store 1 30 15,000 - - 378 $ 391 $ 3.4%

Fast Food 1 123 15,000 - - 1,223 $ 1,265 $ 3.4%

Electronics Manufacturer 1 20,240 73,900 - - 183,851 $ 190,165 $ 3.4%

Zoo 1 14,859 497,400 - - 138,196 $ 142,936 $ 3.4%

Small Office Building 1 57 34,500 - - 770 $ 796 $ 3.4%

per Customer

Extra Strength

Usage Characteristics

Table 11

Bureau of Environmental Services

FY 2015 vs. FY 2016 Typical Commercial Customer Bill Comparison

Accounts

Assumes a 35% Clean Rivers Rewards Discount

Monthly Cost
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 17 of 22 

IV. SANITARY SEWER AND STORMWATER DRAINAGE CAPITAL CHARGES

The Bureau has several charges designed to recover capital costs from new customers to the system: 

the sanitary sewer system development charge (SDC), the stormwater drainage SDC, and line and 

branch charges. The sanitary sewer SDC and the stormwater drainage SDC are subject to State of 

Oregon statutes governing SDCs and have been calculated as "reimbursement fees" under the 

requirements of Oregon Revised Statute 223.299. Line and branch charges are not subject to these 

requirements.

The purpose of the sanitary sewer SDC and the stormwater drainage SDC is to ensure that new 

customers pay an equitable portion of the costs of major sanitary sewer and stormwater drainage 

facilities that serve the entire community. These facilities, such as sewage treatment plants, interceptor 

sewers, and stormwater detention facilities, are normally constructed with excess capacity in 

anticipation of future growth. As this growth occurs, new customers pay connection charges and 

SDCs to "reimburse" existing ratepayers for a share of the costs of these major facilities. In the case of 

the stormwater drainage SDC, new customers are also reimbursing existing customers for the capacity 

for draining the public right of way, and for draining excess runoff from properties adjacent to the right 

of way.

Line and branch charges recover the costs of local collector sewers from the properties they serve. 

Historically, collector sewers were assessed to benefited properties through local improvement district 

processes. Because of changes made to the Mid County Sewer Project, most of the new collector 

sewers being constructed in Portland are now financed as part of the Bureau's capital improvement 

program. Recovery of these costs occurs through payment of line and branch charges from properties 

adjacent to these sewer lines.

All of these charges are based upon historical construction costs for facilities that are now operational; 

there is no allowance for costs of facilities to be constructed in the coming years. This is consistent 

with requirements imposed by state statute for reimbursement charges. 

A. System Development Charges

The intent of the sanitary sewer and stormwater drainage SDCs is to recover an equitable share of 

facilities costs from new development. The calculation methodology takes the costs of existing 

facilities and several additional factors into consideration in arriving at a cost basis for reimbursement. 

Factors considered in developing the calculation methodology include:

The cost of existing facilities. The sanitary sewer and stormwater drainage SDCs are based on 

the replacement cost of existing facilities. Replacement cost calculations employ the 

Engineering News Record Construction Cost Index to bring original facilities costs up to their 

present replacement value.
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 18 of 22 

Ratemaking principles employed to finance publicly owned capital improvements. Only that 

portion of facilities costs paid by current and past customers are fully eligible for SDC 

recovery (reimbursable facilities costs). For facilities funded by bond issuances (essentially all 

facilities since 1985), replacement costs are prorated over 20 years to approximate the 

cumulative debt service paid on the bonds.

Gifts or grants from federal or state government or private persons. The portion of facilities 

costs paid for from these revenue sources are not included in the cost basis for SDCs. 

Prior contributions by existing ratepayers. A return on equity for the portion of facilities 

constructed with ratepayer funds is included in the calculation as a carrying cost for current 

and past ratepayers. The return on equity portion calculates simple interest foregone on each 

year’s original project cost using each year’s annual average yield on 6-month Treasury Bills.

The value of unused capacity available for future system users. The methodology used values 

each unit of capacity equally. New development “buys into” the existing system on the same 

basis as current ratepayers.

To compute reimbursable facilities costs for the sanitary sewer SDC, the original costs of sanitary 

sewer system facilities are adjusted by an index of construction costs to develop a present value 

replacement cost for those facilities. These costs are also adjusted to reflect a return on equity for 

existing ratepayers, who incurred the investment cost of constructing them. However, only that 

portion of facilities costs actually paid by ratepayers is included in the reimbursable cost total. For 

example, if a particular facility built five years ago was financed with 20-year revenue bonds, only one 

fourth of that facility’s adjusted costs are included in as a reimbursable cost for purposes of the 

sanitary sewer SDC. The calculation of reimbursable facilities costs is the same for the stormwater 

drainage SDC.

B. FY 2016 Sanitary Sewer SDC Calculations

Applying the above methodology to sanitary sewer facilities yields total costs of $2,006,782,305.

These costs specifically exclude Local Improvement District development projects, developer permit 

projects, and grant-funded facilities.

For each customer, the Sanitary SDC is calculated as an average cost per equivalent dwelling unit 

(EDU) times the number of dwelling units. For purposes of the Sanitary SDC, one EDU corresponds to 

the sanitary flow from a single-family dwelling. The Bureau of Environmental Services maintains a 

table of EDU equivalencies by type of occupancy. The total system treatment capacity is 342,072

EDUs. Dividing the above total cost by this amount yields an average cost of $5,867 per EDU. The 

customer’s charge is therefore:

Sanitary SDC = $5,867 u EDU
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 19 of 22 

C. FY 2015 Stormwater Drainage SDC Calculations

The calculation of the Stormwater SDC is intended to reflect the use of existing stormwater drainage 

facilities by new development. This use has several dimensions, corresponding to the various 

functions of the system. These functions include: 1) collection, conveyance, and treatment of 

stormwater flows from properties; and, 2) collection, conveyance, and treatment of stormwater flows 

from public rights of way. This service includes access to individual properties on local streets and use 

of arterial streets, unimpeded by flooding. It also includes protection of individual properties from 

hazardous materials spills in the right of way, as well as protection from flows originating elsewhere.

The charge has two components: an on-site charge and an off-site charge. The on-site charge reflects 

direct usage of public stormwater drainage facilities, corresponding to (1) above. Credits against this 

portion of the charge reflect the contributions made by developers in managing on-site flows. The offsite charge reflects the indirect uses and benefits, corresponding to (2) above. The measure of 

proportionality for this charge is intended to reflect the relationship between these uses and benefits 

and the particular characteristics of the development. 

Applying the above methodology to stormwater drainage facilities yields total costs of $383,681,435.

These costs specifically exclude Local Improvement District projects, developer permit projects, and 

grant-funded facilities.

Total facilities costs are divided between on-site and off-site costs. On-site costs represent that portion 

of total costs for facilities handling stormwater drainage flows from individual properties. Off-site 

costs represent the portion of total costs for facilities handling stormwater drainage flows from rights 

of way. Even a development discharging no water directly to public facilities uses and benefits from 

facilities handling off-site flows in one or more of the following ways: 1) access to properties 

unimpeded by stormwater-related flooding of rights of way; 2) general use of the right of way 

unimpeded by stormwater-related flooding; 3) protection from hazardous materials spills in the right of 

way; and 4) protection from off-site flows.

The allocation between on-site and off-site costs is based on a computation of relative flow 

contributions from properties and rights of way. The costs allocated to the on-site charge total 

$176,148,147. The remaining $207,533,288 represents off-site costs. Off-site costs are further split to 

reflect the various benefits received from facilities draining the right of way. There are two principal

benefits: drainage of arterial streets, and access to individual properties. These costs are split according 

to the relative amounts of impervious area in each type of street, adjusting for the portion of arterial 

streets used for access to properties. The resulting allocation is $192,109,117 to local access, and 

$15,424,172 to arterials.
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 20 of 22 

The units of service for the three categories described are as follows:

Cost Category Unit of Measurement

Total Units in 

Service Area Unit Cost

On-site Thousands of square feet of impervious 

area (excluding rights of way)

965,000 $183.00 per 

1000 square feet

Off-site

Local Feet of frontage 32,916,827 $5.84 per ft.

Arterial Daily vehicle trips 4,923,714 $3.12 per trip

In the absence of mitigation measures, flow from an individual site will be roughly proportional to the 

impervious area on that site. Access to an individual site is made using the right of way fronting the 

site. Daily vehicle trips are a proportionate measure of use of arterial streets. 

For each customer, the cost for each category is the product of service units times unit cost. The total 

charge is the sum of costs for the three categories. Using data from the above table, this is: 

Storm SDC = 

183.00u SIA + $5.84 u SF + $3.12 u ST, 

where: SIA = net new impervious area on the site;

SF = site frontage; and

ST = net new site vehicle trips.

Credits against the impervious area portion of the stormwater drainage SDC are allowed, reflecting onsite stormwater drainage facilities exceeding development standards, or direct (permitted) discharge of 

stormwater to the Columbia or Willamette rivers, or to the Columbia Slough.

D. FY 2016 Line and Branch Charges

Line and branch charges are based upon the average costs of constructing collector sewers and house 

branches, adjusted to current dollars. Only projects that have been completed since 2001 are included 

within the computation. Line sewer costs are divided by the net assessable square footage to determine 

a line charge for each project, and an average line charge is then calculated. (This calculation excludes

the highest and lowest line charge.) Total house branch costs are divided by the total number of house 

branches constructed to determine a house branch cost for each project. Again, the highest and lowest 

project branch costs are excluded from the average branch cost calculation.

These costs are then forecast for FY 2016, using the Engineering News Record cost index and 

applying linear regression analysis to develop a forward-looking construction cost estimate. FY 2016

represents the eighth year of a transition from the large, low unit-cost Mid-County projects from the 

1990’s, to a more current cost based on smaller (and more realistic), higher unit-cost sewer extension 
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 21 of 22 

projects. To smooth this transition, the Bureau is stepping into the higher rates by setting the rates at a 

level of 50% of the difference between FY 2015 adopted rates, and the projected FY 2016 costs. The 

application of the above described methodology in successive years will cause this gap to narrow and 

eventually disappear. 

Table 12 illustrates how the FY 2016 line and branch charges were calculated.

TABLE 12. Allocation of Line & Branch Costs :

 Line Charge: Branch Charge:

BASE YEAR 2015 Total Total Total House

Total Total Line Benefitted House Branch Costs Total # Average

Fiscal Year Line Costs in Area Line Charge Branch In Current of House Branch

PROJECTS Completed Costs Current Dollars (Sq. Feet) per Sq. Ft. Costs Dollars Branches Charge

N Cecelia & Hodge SEP 2003 $742,308 $1,117,168 597,735 $1.87 $310,809 $467,766 103 $4,541

N Hunt & Endicott SEP 2003 $102,762 $154,657 182,300 $0.85 $103,875 $156,331 26 $6,013

none 2004

none 2005

S. Airport Way Phase 1 SEP 2006 $1,634,161 $2,124,288 1,208,111 $1.76 $172,873 $224,722 47 $4,781

SE 60th & Steele SEP 2006 $1,620,383 $2,106,378 1,039,206 $2.03 $713,268 $927,195 209 $4,436

none 2007

S. Airport Way Phase 3 2008 $4,619,392 $5,599,438 4,806,281 $1.17 $1,141,991 $1,384,275 102 $13,571

SE Tolman and 69th Ave 2008 $653,463 $792,102 256,177 $3.09 $310,335 $376,175 61 $6,167

S. Airport Way Phase 5 2009 $1,837,445 $2,159,999 1,884,393 $1.15 $555,685 $653,233 54 $12,097

S. Airport Way Phase 2A 2010 $932,630 $1,067,452 345,791 $3.09 $179,998 $206,019 20 $10,301

NE 87th & Columbia Swr Ext. 2010 $117,368 $134,335 59,110 $2.27 $22,379 $25,614 2 $12,807

N. Alberta Emerg. Swr Replacement 2010 $91,804 $105,075 17,000 $6.181 $40,712 $46,597 4 $11,649

Lents San. Sewer Ext. 2011 $3,251,378 $3,611,440 1,444,272 $2.50 $798,813 $887,275 185 $4,796

Deltawood Ph. 1 & 2 2011 $386,089 $428,845 173,818 $2.47 $174,881 $194,247 42 $4,625

NW 29th & Savier San Sewer Ext. 2011 $301,088 $334,431 54,100 $6.182 $120,993 $134,391 13 $10,338

none 2012

none 2013

none 2014

TOTALS (after excluding High/Low projects): $15,886,421.99 $19,246,521 11,831,894 $1.627 $2,791,352.64 $3,372,370.96 557 $6,055

2,579,752 3,277,168 2,482,128 (0) 414,684 624,097 129 (367)

min $0.85 min $4,436

max $6.182 max $13,571

SUMMARY

Line Branch 

Charge Charge 

Adopted Line & Branch Charges for FY2014-15: $1.55 $5,732

Est'd Line & Branch Costs for FY2014-15 (from Table III): $1.63 $6,055

 increase(decrease) over FY15 Adopted: 4.9% 5.6%

Projected Full Cost Charges for FY2015-16: $1.670 $6,216

 increase(decrease) over FY15 Adopted: 7.7% 8.4%

50.0% $1.61 $5,974

 increase(decrease) over FY15 Adopted: 3.9% 4.2%

percent recovery 96.4% 96.1%

Proposed Charges for FY2015-16

(at % Difference between FY15 Adopted and 

FY16 Full Cost)
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 22 of 22 

V. FY 2016 FORECAST OPERATING RESULTS

Table 13 on the following page illustrates the forecast FY 2016 operating for the Sewer System 

Operating Fund, given the sources of rate revenues, non-rate revenues and costs discussed above. It 

shows that FY 2016 adopted rates will allow the Bureau to collect sufficient revenues to operate and 

maintain the sanitary sewer and stormwater drainage system, and to meet debt service coverage 

requirements as specified in revenue bond covenants.
Bureau of Environmental Services June 2015

Sewer System Rate Study Page 23 of 22 
EXHIBIT 2 
Page 1 - DECLARATION OF IAN WHITLOCK IN SUPPORT OF PORT OF 

PORTLAND’S MOTION FOR LEAVE TO APPEAR AS AMICUS CURIAE

86056449.1 0061364-00236 

Per A. Ramfjord, OSB No. 934024 

per.ramfjord@stoel.com 

Amy Edwards, OSB No. 012492 

amy.edwards@stoel.com 

Rachel C. Lee, OSB No. 102944 

rachel.lee@stoel.com 

STOEL RIVES LLP

900 SW Fifth Avenue, Suite 2600 

Portland, OR 97204 

Telephone: (503) 224-3380 

Facsimile: (503) 220-2480 

Attorneys for (Proposed) Amicus Curiae Port of Portland 

UNITED STATES DISTRICT COURT 

DISTRICT OF OREGON 

PORTLAND DIVISION 

AIR TRANSPORT ASSOCIATION OF 

AMERICA, INC. d/b/a Airlines for 

America, 

Plaintiff, 

v. 

MICHAEL J. JORDAN, in his official 

capacity as Director of the Bureau of 

Environmental Services of the City of 

Portland, NICK FISH, in his official 

capacity as Commissioner of the Bureau of 

Environmental Services of the City of 

Portland, Oregon, CHARLIE HALES, in 

his official capacity as Mayor of the City of 

Portland, Oregon, the CITY OF 

PORTLAND, OREGON, and the 

BUREAU OF ENVIRONMENTAL 

SERVICES of the City of Portland, Oregon, 

Defendants. 

Case No.: 3:16-cv-00230-SB 

DECLARATION OF IAN WHITLOCK IN 

SUPPORT OF PORT OF PORTLAND’S 

MOTION FOR LEAVE TO APPEAR AS 

AMICUS CURIAE

Case 3:16-cv-00230-SB Document 37 Filed 03/17/16 Page 1 of 4
Page 2 - DECLARATION OF IAN WHITLOCK IN SUPPORT OF PORT OF 

PORTLAND’S MOTION FOR LEAVE TO APPEAR AS AMICUS CURIAE

86056449.1 0061364-00236 

1. I, IAN WHITLOCK, hereby declare as follows: 

2. I am Deputy General Counsel at the Port of Portland, where I have worked since 

June, 2005. I am submitting this declaration in support of the Port of Portland’s Motion for 

Leave to Appear as Amicus Curiae. I am over 21 years of age and have first-hand knowledge of 

the information contained in this declaration. 

3. As Deputy General Counsel at the Port, I have participated in and/or have 

knowledge of discussions between the Port and representatives of airlines serving Portland 

International Airport (“PDX”) and the City of Portland, over the City’s “off-site” stormwater and 

Superfund charges. These discussions began in the summer of 2012, when the City was 

considering modifying the stormwater charge imposed on properties located in the Multnomah 

County Drainage District (“MCDD”), including PDX. Specifically, the City was considering 

(a) eliminating a discount on an “off-site” component of the stormwater charge that had 

previously been billed by the MCDD on behalf of the City, and (b) including a Superfund charge 

which previously been imposed on ratepayers in other portions of the City but not on those 

ratepayers within the MCDD (the “Disputed Charges”). 

4. The City’s proposal to assess the Disputed Charges on PDX raised concerns 

among some of the tenant air carriers serving PDX because the charges would be passed along to 

the air carriers, as costs of operation, under the Port’s agreement with the carriers. In response to 

these concerns, the Port agreed to seek advice from the Federal Aviation Administration 

(“FAA”) on whether the Disputed Charges could be viewed as a cost of airport operation and 

maintenance, and therefore payable with airport revenue and chargeable to the air carriers under 

the Port-air carrier agreements. 

Case 3:16-cv-00230-SB Document 37 Filed 03/17/16 Page 2 of 4
Page 3 - DECLARATION OF IAN WHITLOCK IN SUPPORT OF PORT OF 

PORTLAND’S MOTION FOR LEAVE TO APPEAR AS AMICUS CURIAE

86056449.1 0061364-00236 

5. To accomplish this, in July, 2012, I communicated with several individuals at the 

FAA to explain the factual basis for the air carrier’s concerns, and to solicit guidance from the 

FAA. My communications included e-mails to Patricia Deem, in the Office of Regional 

Counsel, Northwest Mountain Region, and Kevin Willis, in the Airports Compliance Division at 

FAA headquarters. I also sent both Ms. Deem and Mr. Willis various memoranda and 

correspondence intended to explain the context of the City charges, the manner in which the 

charges are passed along to the air carriers, and our understanding of the air carriers’ objection to 

the charges. 

6. I then participated in a conference call with FAA representatives on August 6, 

2012 to provide additional answers to questions they had regarding the materials I had sent 

earlier. Thereafter, on September 4, 2012, I participated in a second conference call with a group 

of FAA officials involved in Airport Compliance. The participants on the FAA side included: 

Kevin Willis, Head of Compliance at FAA in Washington, D.C, two of Mr. Willis’s colleagues, 

and Ms. Joelle Briggs with the compliance division at the Western Mountain Region in Renton, 

WA. Also on the call was Scott Lewis of the Anderson & Kreiger law firm, who was then 

serving as outside counsel to the Port. I restated my understanding of the facts relating to the 

Disputed Charges and the air carriers’ concern, and once again asked for guidance on whether 

the Port’s actions (i.e., passing along the City charges to the air carriers) would be appropriate 

under the applicable federal law and policy. 

7. The FAA representatives on the call confirmed that Port’s action would be 

appropriate. Specifically, the FAA representatives opined that they did not view the payment of 

the Disputed Charges as prohibited by the federal airport revenue-use rules because, as they 

understood the situation, (a) the charges are levied on all similarly-situated property owners in 

Case 3:16-cv-00230-SB Document 37 Filed 03/17/16 Page 3 of 4
the City; (b) the charges do not impose a disproportionate burden on the Airport (because the 

charges are levied on all property owners on the same basis of impervious surface and water 

usage); and (c) there is no double payment by the Airport (because the Port is exempted from 

paying the "on-site" portion of the charge since it has its own on-site system and the City's . 

allocation of costs between "on-site" and "off-site" components of the storm water charge is 

based upon a reasonable cost allocation study). 

8. Thereafter, on September 12, 2012 the Portland City Council passed Ordinance 

No. 185610, which had the effect of assessing the Disputed Charges on PDX. Since that time, as 

the Disputed Charges have been assessed, the Port has passed through a portion of the charges to 

tenant air carriers under the Port's agreements with such carriers. 

9. After the Port began passing through such charges, the FAA again confinned its 

position that the Port's actions were proper in a July, 2015 letter from Mr. Randy Fiertz to 

Mr. Dave Berg at A4A, a copy of which is attached as Exhibit F to the Declaration of David 

Berg In Support ofPlaintiffs Motion for Preliminary Injunction (Dkt. 16-6). 

I declare under penalty ofpetjury under the lawsofthe United States that the foregoing is 

true and conect to the best of my information and belief. 

Executed this 17th day of March, 2016, 

Ian Whitlock 

Page 4 - DECLARATION OF IAN WHITLOCK IN SUPPORT OF PORT OF 

PORTLAND'S MOTION FOR LEAVE TO APPEAR AS AMICUS CURIAE 

86056449.1 0061364-00236 

Case 3:16-cv-00230-SB Document 37 Filed 03/17/16 Page 4 of 4
EXHIBIT 3 
4/14/2016 17.36.020 Definitions. | Chapter 17.36 Sewer User Charges | The City of Portland, Oregon

https://www.portlandoregon.gov/citycode/article/512856 1/2

GENERAL INFORMATION: 503­823­4000 EMAIL: cityinfo@portlandoregon.gov

More Contact Info (http://www.portlandoregon.gov//citycode/article/15472)

Charter, Code and Policies

City of Portland

17.36.020 Definitions.

(Amended by Ordinance No. 186902, effective December 26, 2014.) The following definitions apply to this Chapter:

A. "Biochemical Oxygen Demand (BOD)" means the quantity of oxygen utilized in the biochemical oxidation of organic matter per

Guidelines Establishing Test Procedures for the Analysis of Pollutants, contained in 40 CFR 136.

B. “Branch” means the public portion of the horizontal piping system connecting from the plumbing system of a building or buildings to a

public or private sewer.

C. “Branch Charge” means a connection charge that reimburses the City for the costs of designing and constructing a public sewer

extension and providing individual service laterals.

D. “Connection Charge” means a charge assessed by the City for providing public sewer and stormwater management services to a

property. A connection charge may include a line charge, branch charge, sanitary sewer system development charge, and a stormwater

system development charge. Connection charges are for use or expansion of use of City sanitary or stormwater management services.

E. "Director” means the Director of the Bureau of Environmental Services or the Director’s designee.

F. "Equivalent Dwelling Unit (EDU)" means the estimated average sanitary flow from a single­family dwelling charged to a sewer account.

G. “Extra Strength Charge” means the additional charge to wastewater dischargers who have constituent discharges at concentrations

above levels normally expected in domestic wastewater, as determined by this Chapter and general ordinance.

H. “Groundwater” means subsurface water that occurs in soils and geological formations that are fully saturated. Groundwater fluctuates

seasonally and includes perched groundwater.

I. “Groundwater Discharge” means a discharge of water pumped or directed from the ground. Groundwater discharges include but are not

limited to subsurface water from site remediation and investigations, well development, Brownfield development, discharges from footing

and foundation drains, and subsurface water associated with construction or property management dewatering activities.

J. “Impervious Area” means the area of a property that does not allow rainwater to percolate naturally into the ground. The City classifies

the following as impervious areas for billing purposes: roofs; paved areas such as driveways, parking lots, or walkways; and areas of

property that are covered by porous pavement. The City does not bill for the following impervious areas: public rights­of­way; outdoor

recreation areas that are available to the general public without condition or restriction; and areas covered by compacted soils and

compacted gravels.

K. “ITE Manual” means the manual used per Section 17.15.020 to determine transportation system development charges.

L. “Line Charge” means a connection charge that reimburses the City for the costs of designing and constructing sanitary sewer lines that

serve multiple connecting properties.

M. “Net New Impervious Area” means the difference between existing impervious area on a property, and any increase in impervious area

that results from a proposed use(s) of the property.

N. “Net New Vehicular Trips” means the difference between the vehicular trips generated by the existing use of a property, and any

increased number of the vehicular trips generated from a proposed use(s) of the property.

O. “Non­Routine Discharge” means a definable/explainable uncontrolled release or spill to the sanitary sewer system that is not

representative of the normal or expected characteristics of a facility’s wastewater discharge and that may include discharges defined as

slugloads under Chapter 17.34.

P. “Rate” means the multiplication factor used to generate a connection or user charge based on cost­per­unit proxies such as gallons of
4/14/2016 17.36.020 Definitions. | Chapter 17.36 Sewer User Charges | The City of Portland, Oregon

https://www.portlandoregon.gov/citycode/article/512856 2/2

discharge, square feet, or feet of road frontage. Rates can be multiplied by other factors

Q. “Ratepayer” means a person who has the right to possession of a property and:

1. Who causes or permits the discharge of sanitary sewage into the public sewer system, or

2. Whose use of the property directly or indirectly benefits from stormwater management services provided by the City.

R. "Rolling Average" means the average of the 10 most recent monthly averages of representative City­ and/or self­monitoring events for

the purpose of calculating an extra­strength sewage charge rate, unless another period is approved by the Director.

S. “Sanitary Sewage” means wastewater discharged to the public sewer system by permit or other approval of the Director and includes,

but is not limited to, domestic wastewater, industrial and commercial process wastewater and contaminated stormwater.

T. “Sanitary Sewer Conversion Charge” means the charge to convert a nonconforming sewer, as that term is defined in Chapter 17.33. This

charge is assessed in lieu of line and branch connection charges.

U. “Sanitary System Development Charge (SDC)” means a connection charge for new or increased demand of the public sewer system.

This charge reimburses the City for an equitable portion of the costs of major sewer facilities such as wastewater treatment facilities, pump

stations and interceptor sewers.

V. “Seed” means a population of microorganisms capable of oxidizing biodegradable organic matter that is added to a wastewater sample as

part of the analysis of biochemical oxygen demand (BOD). Only seed prepared using primary effluent from the City’s Columbia Boulevard

Waste Water Treatment Plant may be used for this analysis.

W. “Stormwater Management Facility” means a facility or other technique used to reduce volume, flow rate, or pollutants from stormwater

runoff. Stormwater facilities may reuse, collect, convey, detain, retain, or provide a discharge point for stormwater runoff.

X. “Stormwater Management Services” means services and actions used to collect, convey, detain, retain, treat or dispose of stormwater.

These services include managing stormwater runoff from public streets, mitigating flooding, preventing erosion, improving water quality of

stormwater runoff, collecting and conveying stormwater runoff from private properties when runoff exceeds the capacity of private facilities

to manage stormwater onsite, mitigating impacts to natural habitats caused by stormwater runoff, and protecting properties and natural

habitats from hazardous soils and materials that are discharged from private properties and public rights­of­ way.

Y. “Stormwater System Development Charge (SDC)” means a connection charge for new or increased demand of the public stormwater

and drainage system. This charge reimburses the City for an equitable portion of the costs of public stormwater management facilities such

as collection and conveyance facilities, detention and disposal facilities, and water pollution reduction facilities.

Z. "Temporary Connection" means a connection to the sanitary sewer system where the duration of the connection is less than three years

and connection and disconnection occur only once. Connections made to the public sewer, stormwater or drainage system made for the

purpose of environmental remediation will not be considered a temporary connection unless approved by the Director.

AA. "Temporary Structure" means a structure that is separate and distinct from all other structures and is created and removed in its

entirety within 3 years, including all impervious area associated with the structure.

BB. "Total Suspended Solids (TSS)" means the total suspended matter that either floats on the surface or is suspended in water or

wastewater and that is removable by laboratory filtering in accordance with 40 CFR 136 Table B.

CC. “Transportation SDC Study” means the transportation system development methodology established by Chapter 17.15.

DD. “User Charge” means a charge paid by a ratepayer for the use of public sanitary or stormwater management services. User charges

are calculated on a routine basis such as monthly or annually.
4/13/2016 17.36.050 User Charges. | Chapter 17.36 Sewer User Charges | The City of Portland, Oregon

https://www.portlandoregon.gov/citycode/article/435158 1/3

GENERAL INFORMATION: 503­823­4000 EMAIL: cityinfo@portlandoregon.gov

More Contact Info (http://www.portlandoregon.gov//citycode/article/15472)

Charter, Code and Policies

City of Portland

17.36.050 User Charges.

Sewer user charges are established and made effective as follows:

A. Timing. User charges are calculated on a routine basis, such as monthly, quarterly or annually.

B. Sanitary Sewer Services. The City calculates and collects user charges for sanitary sewer services from ratepayers who cause or

permit the discharge of sanitary sewage from a property in their possession into the public sewer system. Charges for sanitary sewer

services may include sanitary sewer volume charges, account service charges and penalties for non­payment or late­payment of sewer

charges and other charges:

1. Residential dwellings. Residential dwelling units are assessed based on the volume of sewage discharged to the sanitary sewer

system. The Director may elect to use water consumption as the basis of this calculation. To avoid including irrigation water usage in

this calculation, the Director will establish a procedure that allows for irrigation credit. When a water meter reading is not available, a

sanitary sewer discharge estimate will be made based on the ratepayer class of characteristics per administrative rule.

2. Non­residential occupancies. The City calculates charges for commercial, industrial, and all occupancies based on the amount of

incoming water volume as measured by the City water meter, information from the water district serving the property, or by an

approved meter that measures actual sanitary discharge volume.

3. Combined dwelling units and other. Where dwelling units and other occupancies use the same water supply, the City calculates

charges for sanitary sewer service in the same manner as those for commercial, industrial, and all occupancies other than residential.

4. Estimating wastewater discharges for mobile dischargers. User charges are applicable to all wastewater discharges to the City

sewer system regardless of the source. In unusual circumstances where the wastewater is not from a fixed location, such as ships,

barges, houseboats and other movable facilities or dwelling units, a method of determining the volume provided by the user may be

used if approved by the Director. Otherwise, the Director estimates the volume of water to which user charges apply and this

determination is final.

5. In areas served by separated storm and sanitary sewer systems, the City may accept the discharge of contaminated stormwater

into the sanitary sewer. The discharge volumes will be determined by the amount of impervious area producing the contaminated

stormwater plus the average rainfall or a discharge meter. The discharge will be charged based on sanitary sewer volume rates.

C. In cases where water is supplied solely from a private source or sources such as wells, springs, rivers or creeks, or from a partial

supply in addition to that furnished by the City, residential ratepayers are assigned the class average volume for their alternative source

water use. Commercial ratepayers must meter the private supply either as an inflow or a discharge in conformance to the provisions of this

Chapter.

D. Meters required. Any meter or method used for calculation of a adjusted charge or credit is subject to the administrative or special

meter charge for each such meter or method. The property owner is responsible for purchasing, installing, maintaining, and calibrating the

private meter and must comply with all provisions in this Title. Meters must be approved by the Director as to type, maintenance, calibration

schedule, size and location before installation.

1. All meters must register in cubic feet.

2. Meters installed on water systems supplied from private or public sources and used to measure cooling, irrigation, evaporation or

product water for the purpose of obtaining reduced sewer charges must be connected in such a manner as to register only that portion

of the water supply used for that purpose.

3. Meters placed below the ground or pavement surface must have the top of the meter not more than 8 inches below the surface and

must be enclosed in a standard water meter box and cover as used by the Portland Water Bureau. Meters located above the ground or

floor level must not be more than 3­1/2 feet above the ground or floor level.
4/13/2016 17.36.050 User Charges. | Chapter 17.36 Sewer User Charges | The City of Portland, Oregon

https://www.portlandoregon.gov/citycode/article/435158 2/3

4. All meters must be located in an area that is freely accessible at all times and that, in determination of the Director, does not

present a danger to City employees.

5. The owner of a meter must implement a program to ensure meter accuracy. The program should consider the manufacturer’s

periodic maintenance and calibration requirements. All maintenance and calibration records must be retained and available for review

by City personnel.

6. Failure of the owner, the owner’s lessee, or others acting under the owner to maintain the meter in good working order constitutes a

violation of this Chapter. During the period of the meter’s non­operation and pending the proper repair and reinstallation of the meter,

the account may be billed on the basis of three times the normal water usage or in such an amount as deemed proper by the Director.

E. Credits. A ratepayer must submit a written request for establishing reduced charges or credit for water not subject to sewer user

charges. Requests must be received prior to any use of water that may be subject to reduced or special charges, and prior to installation of

any meter. A request for credit must include a meter maintenance plan and a mechanical plan showing the proposed meter location, access

route to the meter, the water supply or source, the cooling or other water­using equipment, and the discharge point. Reduced charges or

credits will not be given for any period prior to the date of approval. No reduced sewer charge may be given until the Director has approved

the request.

1. Water not subject to sewer user charges. The Director may exempt from sewer user charges water that is used in a manufactured

product such as ice, canned goods or beverages; or for water lost by evaporation or used in irrigation. To calculate the quantity of

exempt water, a meter must be installed to the satisfaction of the Director.

2. Clean water discharges. When a non­residential ratepayer requests approval for a temporary or permanent discharge of clean

water to a public sewer system, the discharger must install meters or provide other verifiable and quantifiable information using a

method approved by the Director to determine the volume of water to be discharged. Water such as that used for refrigerating or

cooling purposes or condensed from steam and that has been put to no other use may be discharged into the sanitary system as clean

water.

a. Clean water to storm sewer or other public drainage systems. Charges are calculated based on the clean water discharge­tostorm rate multiplied by the measured or estimated volume of water discharged to a public storm sewer or other public drainage

system.

b. Clean water to sanitary or combined sewer systems. Charges are the same for other sewer uses and are calculated based

on the non­residential sewer services rate multiplied by the measured or estimated volume of water discharged to a public sanitary

or combined sewer.

3. Conditions for revoking reduced charges or credits. The following conditions will nullify discounts and reinstate full user charges

until such time as the owner or person in charge of the premises formally notifies the Director that the situation has been rectified.

a. Defective discharge meters. During the period of the meter’s non­operation and pending the proper repair and reinstallation of

the meter, the account may be billed for the full amount of water passing through the supply meter and up to three times the

supply flow provided by non­City resources. At no time may a reduced charge or credit be allowed retroactively, or for a period in

which the meter is defective.

b. Failure to report. Failure to report on quantities of water subject to reduced charge or credit for 2 consecutive months is a

violation of this Chapter. User charges must be paid on the full amount of water passing through the supply meter and up to three

times the supply flow provided by non­City resources during these 60 days. At no time may a reduced charge or credit be allowed

retroactively, or for a period in which no reports were submitted.

F. Stormwater Management Services. Ratepayers who receive a direct or indirect benefit from City stormwater management services are

subject to the user charge. The ratepayer identified on the City utility billing account is assumed to be the user of stormwater management

services and responsible for the user charge. If the property is not subject to other City utility charges, the Director will determine the

ratepayer responsible for the user charge.

1. Billing Components. The user charge consists of the following components:

a. Stormwater On­Site. The user rate for the on­site component is 35 percent of the stormwater management services rate.

b. Stormwater Off­Site. The user rate for the off­site component is 65 percent of the stormwater management services rate.

2. Basis for charge. User charges are calculated based on the user’s proportionate share of City stormwater management services
4/13/2016 17.36.050 User Charges. | Chapter 17.36 Sewer User Charges | The City of Portland, Oregon

https://www.portlandoregon.gov/citycode/article/435158 3/3

as estimated by the amount of impervious area on the user’s site. Unless the site has been measured to the satisfaction of the

Director, impervious area is assumed to be the average impervious area for the user’s class.

3. Dwelling units. The City uses the following class averages of impervious areas for calculating user charges for dwelling units

located on a single property or tax lot:

a. One and Two Dwelling Units ­ 2,400 square feet

b. Three Dwelling Units ­ 3,000 square feet

c. Four Dwelling Units ­ 4,000 square feet

4. Properties other than dwelling units or with five or more dwelling units. The City calculates the ratepayer’s use of stormwater

drainage system services based on the amount of impervious area on the site.

5. Clean River Rewards. Clean River Rewards discounts are offered to increase ratepayer control over stormwater management

charges and to advance City environmental goals. The program provides economic incentives, technical assistance, and

environmental education to ratepayers who control and manage the quality and quantity of stormwater runoff on their private property.

G. Portland Harbor Superfund Charge. The City calculates and collects user charges for the Portland Harbor Superfund Program. If the

property is not subject to other City utility charges, the Director determines the ratepayer responsible for the Portland Harbor Superfund

charge. This user charge appears as a line item on the City utility bill, and is the sum of the following two rate calculations:

1. Sanitary Volume. This portion of the charge is the sanitary sewer service user charge multiplied by the Portland Harbor Superfund

Sanitary Volume rate.

2. Impervious Area. This portion of the charge is the stormwater management services charge multiplied by the Portland Harbor

Superfund Impervious Area rate.
EXHIBIT 4
INTRODUCED BY 

Calendar No. Commissioner Dick Bogle 

ORDINANCE No. 159085 j NOTED BY THE COMMISSIONER 

OTED 

Title 

Affairs 

Finance and 

Administration 

Nays 

An Ordinance amending Title 17, Chapters 

17.36 and 17.34 of the Code of the 

City by inserting a new Chapter 

17.36, to make housekeeping changes 

and to clarify the language of the 

 Code. 

OCT 21986 

T" "-,';!.'- 91986 

. ., .. I v r"JH.'INV 

DAR 

FilecLd_..:...:S __ 

JEWEL LANSING 

Auditor of the CRY OF PORTLAND 

Deputy 

Safety 

Utilities Il-e--:1/7
 -' 

Works 

. ... 

­

// 

BUREAU 

Bureau: 

Environmental Services 

Prepared By: O'Jte: 

Ron Houston 9/23/86 

Budget Impact Review: 

o Completed o Not required 

Bureau Head: 

John Lang b.,J 

r 

CALENDAR 

Consent IRegular 

NOTED BY 

City Attorney City Auditor City Engineer 
Pages Intentionally Omitted
159{)8~ 

17.36.0 1 0 Sewer User Service 

11 . ~:. . 0 I. U ·"""' E?wer"' Usc~l""' ~3el""'V ice Cl·1 a l" "' ~J !: ~' :>. Charges. (Amended by Ord. No. 13199 5, 

f..'JC- 't "'· ~:C- E~t- C::-5E?t"'ViCe Chal""'Q€-?S, \~";} C:\Utt lCH"'i :·:E~c:l 132327, 132359, 132737, 133365, 134052, 

b y til e' ;, ,- tE~l" ', al""'e establ :i. shed rJ.nd r1kHjE~ 134993, 136551, 138289, 139922, 143476 and 

r: ft t :i.vr:• ds follows: 143975;passed June 29, effective July 1, 

n. ::> t=•l" "' vice withir-1 thf2 City. Except c:\s 197 7.) Sewer user service charges, as 

.:::.-1: 1··1 E? r' w i !::> c::- P~" "' OV i ch-:d by this Tit 1 E-~, <.:.; l"?~'\lel" ' authorized by the Charter, are established 

l .. t<.::, el" ... :.:; E>J·"' vicE• chal""'ge~:; §!::!f~l.!. __ Q§ __ ~tl~~!:Y~ft_t~~ and made effective as follows: 

<::1JJ .... _f!r~ QP.~.t: ~_Q§ us in~~ a pub 1 i c san :i. t at"'Y (1) Service within the City. :::; E·? ~t-J E~ l""' , o 1··' lr'J i t h i Y1 1 0 0 feet of a Y1 a v a i 1 a b 1 e Except • 1 as otherwise provided by th1s Tit e, 

sa.-n it at"'Y 3 ewl?.r"', ~b.~r.:!_~_9!.:!il9ir.~g_ .. ~2!'J __ t.b.~ the-;rate-&f sewer user service charges 

Q C Q Q ~ t: ~~ Y. con t i:d n s san i t at"' y fa c i 1 i t i e s o .,... i s 

put to C":l. use which t"'equit"'es sewage -·· -··· against--ea€-A -and -every lot,--tfaet-; ·or-· parcel 

f d ciJ.ities, whethet ... Ol""' nc•t those facilities ·of land using a public sanitary sewer, or sn:~~ corrnect ed to t h~:.~~ sewe.,.-·. --J:t}@·---·-- --·----------- within 100 feet of the stroo.t-or=-ea-sement 

~-:~§]._~~~!J§t.i~:;:~D-~~~f-~.b.§~_Gb.~t:9§ sha 11 be based on Hfte.-of- an .. , available sanitary sewer, .a-f\4. 

the type of occupancy ar-.d -~h;ll--b; -·· ;~- ---- ·· ·· --. containi-Rg sanitary facilities or put to a use 

fo 1 1 c•ws: which requires sewage facilities whether or 

1. Owe 11 i ng units. The sewet"' uset"' not connected to the sewer, shali be 

t"'ates fot"' dwellings at"'e based c•n the accordinrc to the type of occupancy and shall 

avel""'age sewage d i schat"'ged by each c 1 ass of be as fol ows: 

uset"' and the billing ft--equency fot"' that A. Dwellingunits: Theseweruser 

c 1 c1.ss. The t"'ate fc•t"' a dwe 11 i ng ur-d t as rates for dwellings are based on the average 

defined in Sect i or• 17. 36~ 005, whet het"' sewage discharged by each class of user and 

occupied ot"' nc•t, shall be as given in the billing frequency for that class. The 

F"inut"'e 3 Q!.:!Qlished at the er1d of this rates for each and every dwelling unit I.L!~.lQ!'_ ------------------------·----·- defined in Section 17 .36.005, whether 

2. Comrnet"'cial, ir-.dustt"'ial ar-.d all occupied or not, shall be as given in Figure 3 

othet"' occupar-.cies c•thet"' thar-1 t"'esider-.t ial. te feUew. 

The vol urne t"'ate fot"' c•:•mrnet"cial and othet~ B. Commercial, industrial and all 

occupancies is based c•n the avet~age occupancies other than residential: The 

stt"'ength of sewage dischc:n--ged by all such volume rate for commercial and other 

uset"'s, E::oxcludir-•g extt"'a-stt"'ength wastes c:\S occupancies is based on the average 

det et"'m i r-1ed in e§£~ !Qn_l:Z!._J§!..Q§Q. The strength of sewage discharged by all such 

chc.n--ge fot"' sewet"' uset"' set--vice to all users, excluding extra-strength wastes as 

corllr11et"'c i a 1, i nd ust .,.~ i a 1, and all-ot het·' determined in Section 17.32.!-40. The 

occupancies except dwelling units shc:'\ll be charge for sewer user service against all 

on the basi!::; of watet"' c•:•nsumpt i.:•n tht"'ough commercial, industrial, and all other 

bc•th public ar-.d pt"'ivc:~te watet~ supplies. property except dwelling units shall be on 

The chat"ge shall be calculated by add.ir-.g the basis of water consumption through both 

the chat"'r.~es based on vo 1 urne to t h£-? ba~;e public and private water supplies. The 

chal""'ge §r.!Q __ .9~b.§t::_~Gb.£:t:9§§_t:~Q!:!ir.::~g __ iD_tb.i?. charge shall be computed by adding the 

~t1~f~~-~!.> The base cha;-~~~e, the water"' charges based on volume to the base 

consurnpt ion l""'at e, §!JQ __ 2:t.Jl.~c-~.::!J?jr :g~~- ~):.:~.:~-- -- ~~ ~ charge. ·Hewever,a- m-inimuffi-€harge ·shall 

~!J.~2~D._ !.rJ __ i. 9.~-:.\C~.-~--~:t_ __ :!;_b§ gr-1d of t hi !'3 apply -on----too-- basis--- of. each water. supply T.t:t..l~~ -~- - ----------····-·-·· met~r .afld..-eac-h--t.mm-etere-d-water -supply line 

whetheF-~ i-s- in- --u-se --er not. The 

rate on water consumption, #\e --minimum 

ooarge, . and the base charge are as shown 

trnder· -commercia!- -aRd .ffidu.s kial--- G€€~ncy 

GR- the Figure c~sing- ~Yb&eGt-ion- ,.3). 
,J. Co:::.mbint::.>d d~...,r~l.l.tr,q '-'1-,.i. t-=:. <:.~r--,cJ othc-' -r"'. 

t.J h E·! 1···. E' d ~·J E· J 1 :i. n ~;1 u n i t ~; :,\ n cl o t h E~ r ' o c c u p c~ n c i E! ::; 

d)·"'(::> L' Ofll!Jil"·l(::.'cj OY1 the> ~::;,:::\fllC · ~·J,:J t(·::''r' ':oUpply, th<-:·::> 

Chi:\r ·· qe~: ; f()r"' <;:;,3nitc-:1.t~y SE'WC:i.DE! ~.3f:?l''ViCt ! ~:;h.::\11 

be t h t·? t h F~ d we 1 l :i. r·t ~] u .,., :i. L ~ ,::\ t <:? r·' E:' q 1..1 i l·" E-? d i n 

p c:\ r'' ,:?\ q "r'' c'1 ph J w i t h C:\ d d i t: :i. o:::. n .::-\ 1 c h c:\ r~ ~] c~ s b a~_; E' cl 

•:.::• ·n w <:1 t E·? 1- ~ c.:.:. n ~: ; u m p t i on c:\ :; ·r~ e q u i r" c::~ d u n d e -,.~ 

p a r··-C:\ ~J l""' C:\ ph 2 , b u t t h c· c:\ rtl o u n t: o f.- t h e \I'J C::\ t e r--· 

cons u r11 p t i on u <:-; e d ,::\ s t h E? I:J E~ <::. i :;::, o f t h e v o l urn<:::' 

c h c:\ .,. ... ~J e u n d f-? r·· par" c":\ n r·· a ph b :..; h C:\ J. 1 bE? r" e d u c e d 

by d n a 1 1 o ~..., <':1 n c e o F Z ~2 Q .... ~~ -:! Q ;t._ ~~; ..... ~E q ~ t_ ... E~ ~C .... f!19!} t. tJ. 

fgc_~_§inul~-~~?!!ing_~nitL_Qc_~~-~n 

~~.!. .l ~~~ ~ ~~!..! ~ ~ ·-- ~;~ f ~} 0 0 c u b i c feE? t p t-? r ' mont h p E-:: 1·" 

u r:• i t f c:< t·· fJ~ .'=.! _1_ t j_ p ]._ ~ ___ Q ~ ~ ]._ J.. j_ (J .Y .... !.7! .n A t § ___ § ~ C Y- ~ Q ___ !~ Y 

th§_SQm~iD§~-§~CYi~§~ 

B. Char~ges fot" stot"TtlWatet~ rnanagement 

and control. Except as otherwise provided 

tJ y t h i s T i t 1 e, t t1 e t"' at e g i v e Yt i n F i g u ~~ e 3 

for storm water impervious area shall be 

chat··ged a~1a i nst a pt"'opet"t y hav i , ... ,g 

impervious area, as defined in Section 

17.36.005, whether or not the property is 

served by public storm sewers, or has a 

w at E~ t" s:; u p p 1 y • 

1 • rn 1 d we 1 1 i n g u n i t s ~5 h a J. 1 be chat"' g e d 

on the average impervious area for each 

c 1 ass o f d we 1 1 i n g u Yti t , w i t h t h e s i n g 1 e 

family dwelling average being 1,500 square 

feet and tht-:1 multiple Q~§Il.~_!..!g unit avet··age 

be~ing 1, 000 squat"e feet. The irnpet"'Viou~?. 

ar"ea chat"'[.le fot"' dwelling unit·:-; shall be 

inc 1 udecl in t hr::~ rnont h l y chc-:\t-·ges; q i vt-::·n in 

Fig ut"e 3. 

2. For Q~QQ§~~i§§ other than dwelling 

units, the iMpervious area shall be 

determined to be within one of the 

following brackets. 

I tr1PERV I tJUS AREA 

IN SC~UAF~E FEET 

!~~~}i. 

ARE~~ CHAI~GED 

IN SQUARE FEET 

f.~g~ \~J ..... ~tq 

Qc ..... Q~t.~~r~ l= ~? ~ .... It:~ ?:\ r.' ~:.oo NCli\IE 

~l.QQ t Co £!1-.~~~Q 

g,__g~~~) t ..-. ~,_ QQQ 

i..~;! ~) t 0 f.:!!l..~~~Q 

§,_ __ ~~~~ ~=! to f},_ __ Z~Q 

D,_ __ ?.~!Q t () 1~~'---~~ QQ 

FOr"' rn"'oper't i [:_:! ::; 

q ·r~ E.> <3. t C? ·r· t: h '"' ·n J. ;;~ '-·· ~ Q Q 

-:::; h i"\ l 1 b F· C ,·,1 l C:: IJ .l E\ t C~ d 

.1. 1 ~500 

,:~' 000 

.:;, 000 

7, :.=ioo 

10,00 0 

w i. t h i rn p E' t " v :l o u -,::;:. ,::\ t··. c:> c:\ 

~; q IJ ,;-;~. }-~ E::> f E? f? t , t h CO' C h ,:_:, ·r' q ·":~ 

,J. _, :3 f1liJ l i:; i p l f~ r:• f t h C1 

Chc~l'"'f:F-? ·f-1::<1 ., ~.;, 000 ~: ;ql..li.':\l f::' f'f.~E't, fO:::•l C'i:':\Ch 

:::J, (l(l(l ~::; qt .. J.r~C-::> fpr:=t r::rl""' the:' ql-~C:~<JtE'i·· p< \·r ; 

t hel""'C-.:>of. 

159(J8& 

C. (Amended by Ord. No.· 151606; 

effective July 1, 19& 1.) Combined dwelling 

units and other: Where both dwelling units 

and other occupancies are combined on the 

same water supply, the charges for sanitary 

sewage shall be at the dwelling unit rate 

required in paragraph A with addi tiona! 

charges based on water consumption as 

required in B, but the amount of water 

consumption used as the basis of the volume 

charge under 5 shall be reduced by an 

allowance of 500 cubic feet per month per 

dwelling unit. ~-1-Gw est- charge -shall be 

equal- -to-- --the number of. .. -dwelling units 

charged -at-the -dwelling unit rate or it shall 

be the-minimum-charge- based on the meter 

size,- which@..ver-is--tt::le--larger. 

(2) (Amended by Ord. No. 147573; 

passed April 19, effective July 1, 1979.) 

Charges for storm water management and 

control. Except as otherwise provided by 

this Title, the rate given in figure 3 for 

storm water impervious area shall be 

charged against each and every -l~-t=aGt or 

p~-Gf.-.la.fld having impervious area, as 

defined in Section 17 .36.005, whether or not 

the property is served by public storm 

sewers, or has a water supply. 

A. All dwelling units shall be , 

charged on the average impervious are~ for : 

each class of dwelling unit, with the s1ngle , 

family average being 1,500 square feet and. 

the multiple unit average being 1,000 square 

feet. The impervious area charge for 

dwelling units ~included in the 

-Hat-=fil-te monthly charges given in Figure 3. 

B. (Amended by Ord. No. 151606; 

effective July 1, 1981.) for other than 

dwelling units, the impervious area for ~a<:h 

property shall be determined to be w1 th1n 

one of the following brackets. 

Impervious Area 

in Square Feet 

Less than 500 

500 to 1,500 

1,501 to 3,000 

3,001 to 5,000 

5,001 to 7,500 

7,501 to 10,000 

Area Charged 

in Square feet 

None 

1,500 

3,000 

5,000 

7,500 

10,000 

for properties with impervious area 

greater than 10,000 square feet the charge 

shall be ca1cu1a ted as a m u1 tiple of the 

charge for 5,000 square feet, for each 5,000 

square feet or the greater part thereof. 
'··' • P ·, , .::o p r: r' t y Q :c --· Q ~~ !~ t i. 9 :C! ~ .. _ t. b ~~ C ~~ Q 1~ i n t h E~ 

fo.l.lowinq ~situ<J.t ion!:; ~;h,.":\ll Ytot bE? cha"r'!]ed 

thE~ st:o1··r•1 ~vE\tc~'r' irtlpe"r ·viou~~; a"r~ec':l. chal·'ge-::o: 

.':."\. nny pOt't ion () f d P'r"'() pe-r··t y which i ~=­

on t h£~~ Co J. urn hi a Ot"' W i ll C:\fllE)t t E-:.1 f~ i vt:7?t"'S O'r"' the 

Columbia Slough, and which discharges 

d i 'r" £-? c t 1 y t h £~ r"' e t o ; 

b. Rny p-r-·opE~t"'ty v-Jithin a d"r"ainage 

d i s t r"' i c t f o 1·~ m <.=-? d u n de t" S t at !::'? 1 a w w h i c h 

provides storm drainage service. However, 

if a portion of the property is served by a 

City maintained storm sewer, that portion 

•:•f the pt"Opt?"r"'ty shc:d 1 be subject to the 

ch.at"ge. 

C. F. i g u"r··e 3. Sewet" Use"r"' Set"'V ice 

Charges and Rates: 

(See Figure 3 at the end of Title 17) 

D. S e 'r"' v i c e out s i de t he C i t y : 1 • The 

charges for the use of the City's sewage 

system from properties outside the City 

shall be as given in Figure 3 at the end of 

Title 17. 

2. Bus i ness, i n d us t t" i a 1 , c .:• f11r.1e t" c i a 1 , 

and all other non-residential services 

outside the City: 

a. The City Engineer shall have 

authority to enter into agreements for and 

on behalf of the City, permitting 

connection and providing §§~~~ service to 

£QOOffi§r£i~!_§n~_in~Y§~ri~l_QrQQ§r~i§§ 

Q~t§id§_ib§_~iiY when he finds such service 

feasible and appropriate. The City 

Engineer shall have authority to conduct 

such investigations as deemed necessary in 

connection with the application of any 

business, industry, commercial plant, 

institution or similar use of property to 

connect to a public sewer under City 

control. All sewers to be connected under 

aut hol·" it y of this Subsect i OY• sha 11 be f i t"St 

<:\PPt"ovec:l by thE' City Eng i nee"r"' as to des i [Jn 

a Y"l d 1 o cat i on . 

15908.C 

C. Property in the following 

situations shall not be charged the storm 

water impervious area charge: 

(i) Any portion of a property which 

is on the Columbia or Willamette Kiver or 

the Columbia Slough, and which discharges 

directly krsakt-·river or slough. 

(ii) Any property within a drainage 

district formed under State law which 

provides storm drainage service. However, 

if a portion of the property is served by a 

City maintained storm sewer, that portion 

of the property shall be subject to the 

change. 

(3) (Amended by Ord. No. 147 57 3, 

151606, 154665 and 1571 97; April 3, l 9~5.) 

Figure 3. Sewer user service charges and 

rates: 

(See Figure 3 at the end of Title 17) 

(4) Service outside the City: 

A. (Amended by Ord. No. 147 57 3, 

1.51606, 1.5466.5, 157197 and 157 829; Sept. 

l8, 198.5.) Otttsiae tl=le City=SefflEe• The 

charges for the use of the City's sewage 

system from properties outside the City : 

shall be given in Figure 3 at the end of Title i 

17. 

B. Business, industrial, 

commercial, and all other nonresidential 

service outside the City: 

(i) The n•outhly charges for- use .. of 

the City's sewage--system- .. shaH~ be · -!--1-12 

t-imes the cha-t:ges-f-ot=--5-imilar- service inside 

-the-Git-y-r--·---

(ii) The City Engineer shall have 

authority to enter into agreements for and 

on behalf of the City, permitting~ 

connection and providing for ·s~ service 

when he finds such service feasible and 

appropriate. The City Engineer shall have 

authority to conduct such investigation as 

-Re-deems necessary in connection with the 

application of any business, industry, 

commercial plant, institution or similar use 

of property to connect with a public sewer 

under City control and he--sl:\a~-1- -have 

aYthority to- ~<¥J-l-Fe--the -£-onstr-uct-ion of 

adequate-pf.etr~atrnent-or-Gt~r-f.a€ili t y and 

pt:e-tr:eatment.-er.--.handling.-.oi . sewage as he 

deems.--Pr.oper---bet.ore .. - -t-he--same -may be 

plaeed--4-n---a· -City- seweF. ·t4e--sha.U---have 

au-thority----to · -fix · rnaximum ·Strength and 

ex€lusionafy-----+equirements.--as .he . deems : 

necessary __ jn_or.der __ thaL.the .op..era tion of the 

Ci ty's-sani tary··sewage -disposa·l-s-ystem ·may 

be---adequately- -prot.e{;ted--and-pollution not 

uoottly ·ifter-ea-sed. All lateral or lead sewers 

to be connected by authority of this 

Subsection shaH be first approved by the 

City Engineer as to design and location. 
Pages Intentionally Omitted
EXHIBIT 5 
2015-16 Adopted Budget

EXCERPT
Pages Intentionally Omitted
Port of Portland 2015-16 Adopted Budget

67

Aviation

The Aviation Division is responsible for the ownership and operation of a system of airports to meet the 

air transportation needs of the community. The airports are Portland International Airport (PDX), and two 

General Aviation reliever airports located at Hillsboro (HIO) and Troutdale (TTD). Budgetary information 

for the General Aviation airports is included in the General Aviation section of the General Fund.

The Aviation Division manages and provides facilities for the airlines and other airport tenants. Planning 

and budgeting is done by business line. The business lines are key areas of commercial operations 

where significant revenues, expenses, capital expenditures and customer service elements merge. There 

are five primary business lines: Terminal, Airfield, Landside Operations, Airside–Landside Properties, and 

General Aviation. Aviation primarily generates revenues from automobile parking fees, facility rentals, 

aircraft landing fees, and concession agreements.

Under the terms of the Airline and Cargo operating agreements at PDX, the signatory airlines serving PDX 

guarantee that revenues are equal to the cost of operations and maintenance and 130 percent of debt 

service costs for the Airfield and Terminal cost centers at PDX. The Port has the financial responsibility 

for all other airport facilities.

Airport capital improvements are funded by income from Airport operations, Revenue Bonds, Federal and 

State Grants, Passenger Facility Charges, and Customer Facility Charges (CFC).

The mission of the Aviation Division is to operate, maintain and promote an airport system that satisfies 

the air transportation needs of our customers by providing competitive cargo and passenger access to 

regional, national and international markets.

In support of this mission, the following business line goals and metrics have been established reflecting 

the Port’s strategic plan and Aviation key areas of focus:

• Meet or exceed safety, security and operational requirements (FAA and TSA inspections)

• Meet or exceed customer service goals (survey)

• Meet or exceed environmental goals and metrics (reduce waste, emissions and energy use)

• Cost-effectively maintain assets

• Focus on maintaining and increasing non-airline revenues

• Aggressively manage operating costs

• Maintain competitive airline rates (landing fee, terminal net requirement)
2015-16 Adopted Budget Port of Portland

68

Budget Volume Assumptions

PDX

FY 2013-14 FY 2014-15 FY 2015-16

Actual Budget Forecast

Total 

Passengers

(in millions)

Landed Weight

(lbs in millions)

Description Change

15.5 15.9 16.8 5.7%

9.8 9.9 10.0 1.0%
Port of Portland 2015-16 Adopted Budget

69

Airport Revenue Fund

This Fund is required to be administered by the Port as long as any PDX Revenue Bonds are outstanding. 

The money deposited in this Fund is not commingled with any other money of the Port, and is used and 

applied only in the manner specified in Section 13, Ordinance No. 155 and Section 6, Ordinance No. 323. 

PDX operations are accounted for in this Fund. Principal revenue sources include facility rentals, aircraft 

landing fees, automobile parking fees and concession agreements. 

(Information on revenue or expenditures attributable to General Aviation may be found in the General 

Fund, and is not included in the Airport Revenue Fund. However, a transfer of resources is made from 

the Airport Revenue Fund to the Bond Construction Fund to pay for General Aviation capital requirements 

not funded by earnings from General Aviation operations or by FAA grants.) 
2015-16 Adopted Budget Port of Portland

70

Airport Revenue Fund - Resources

Revised Proposed Approved Adopted

Resources and Requirements Actual Actual Budget Budget Budget Budget

2012-13 2013-14 2014-15 2015-16 2015-16 2015-16

Resources

Beginning Working Capital $53,451,827 $76,048,947 $77,800,443 $96,467,476 $96,467,476 $96,467,476 

Operating Revenue

Operating Revenue $29,968,536 $36,953,656 $32,405,550 $35,944,040 $35,404,686 $35,240,421 

Service Revenue 540,505 622,645 530,979 521,993 521,993 521,993 

Rental & Concessions 155,468,458 162,085,368 168,280,478 180,004,616 180,085,746 181,119,290 

Customer Facility Charge - 5,646,246 - - - - 

Other Revenue 697,910 849,399 640,133 626,599 626,599 626,599 

Total Operating Revenue $186,675,408 $206,157,314 $201,857,139 $217,097,247 $216,639,024 $217,508,302 

Interest On Investments $364,819 $1,522,769 $512,236 $634,027 $634,027 $634,027 

Other 125,322 438,544 - - - - 

Interfund Reimbursements-from

General Fund $433,016 $384,792 $484,713 $489,330 $489,330 $489,330 

Airport Construction Fund 1,113,278 891,074 1,258,503 1,486,503 1,486,503 1,486,503 

Bond Construction Fund 48,182 33,341 19,776 19,736 19,736 19,736 

Total Interfund Reimbursements $1,594,476 $1,309,206 $1,762,992 $1,995,568 $1,995,568 $1,995,568 

Cash Transfers from Other Funds

General Fund $369,106 $- - $- $- $- 

Bond Construction Fund 871,134 - 10,000 10,000 10,000 10,000 

CFC Fund - - 150,000 100,000 100,000 100,000 

PFC Fund - - - - - - 

Airport Construction Fund - - - - - - 

Total Cash Transfers from Other Funds $1,240,240 $- $160,000 $110,000 $110,000 $110,000 

Total Resources $243,452,091 $285,476,779 $282,092,810 $316,304,319 $315,846,095 $316,715,375 
Port of Portland 2015-16 Adopted Budget

71

Airport Revenue Fund - Requirements

Revised Proposed Approved Adopted

Resources & Requirements Actual Actual Budget Budget Budget Budget

2012-13 2013-14 2014-15 2015-16 2015-16 2015-16

Requirements

Operating Expenditures $78,267,650 $83,565,622 $88,515,287 $94,099,206 $93,788,838 $93,529,584 

Other Requirements

Sys Dev Chgs/Line Of Credit/Other $90 $4,639 $5,000 $5,000 $5,000 $5,000 

Interfund Reimbursements-to

General Fund $24,707,921 $27,158,276 $25,095,801 $26,843,269 $26,999,161 $26,950,395 

Total Interfund Reimbursements $24,707,921 $27,158,276 $25,095,801 $26,843,269 $26,999,161 $26,950,395 

Operating Expenditures & Reimbursements $102,975,661 $110,728,537 $113,616,087 $120,947,475 $120,792,999 $120,484,980 

Cash Transfers to Other Funds

Airport Revenue Bond Fund $48,377,256 $46,996,026 $45,917,505 $54,956,758 $52,156,758 $52,156,758 

Airport Construction Fund 14,023,993 28,001,733 16,858,002 47,203,731 49,697,265 50,891,259 

General Fund 134,615 333,408 3,244,267 3,619,311 3,622,030 3,605,335 

Bond Construction 1,891,619 5,207,215 17,038,501 3,615,000 3,615,000 3,615,000 

CFC Fund - - 6,218,448 - - - 

Total Cash Transfers to Other Funds $64,427,483 $80,538,382 $89,276,723 $109,394,801 $109,091,053 $110,268,352 

Contingencies $- $- $79,200,000 $85,962,043 $85,962,043 $85,962,043 

Ending Balance $76,048,948 $94,209,860 $- $- $- $- 

Total Requirements $243,452,091 $285,476,779 $282,092,810 $316,304,319 $315,846,095 $316,715,375 
2015-16 Adopted Budget Port of Portland

72

Commercial Aviation - Requirements Summary

Revised Proposed Approved Adopted

Fund: Airport Revenue Actual Actual Budget Budget Budget Budget

2012-13 2013-14 2014-15 2015-16 2015-16 2015-16

Requirements Summary

Personnel Services $39,530,086 $41,713,666 $44,227,174 $45,820,114 $45,834,578 $45,745,571 

Materials and Services 38,737,564 41,851,956 44,288,112 48,279,092 47,954,260 47,784,013 

Operating Expenditures $78,267,650 $83,565,622 $88,515,287 $94,099,206 $93,788,838 $93,529,584 

Interfund Reimbursements $21,112,835 $27,158,276 $25,095,801 $26,843,269 $26,999,161 $26,950,395 

Operating Expenditures & Reimbursements $99,380,485 $110,723,898 $113,611,087 $120,942,475 $120,787,999 $120,479,980 

Materials and Services Requirements

Contract & Consulting Services $28,401,047 $29,016,889 $27,948,011 $29,896,051 $29,616,219 $29,914,219 

Materials and Supplies 3,592,537 4,451,868 4,341,070 4,619,664 4,619,664 4,619,664 

Utilities 6,949,285 7,347,655 9,229,864 10,119,160 10,119,160 10,119,160 

Equipment, Fuel and Lubricants 1,324,840 1,304,032 1,543,315 1,567,381 1,567,381 1,567,381 

Insurance 1,597,114 1,424,472 1,827,039 2,555,008 2,555,008 2,086,761 

Management & Travel Expenses 1,034,293 989,689 1,300,183 1,531,158 1,486,158 1,486,158 

Miscellaneous Expenses* (4,161,551) (2,682,648) (1,901,370) (2,009,330) (2,009,330) (2,009,330)

Total Materials & Services $38,737,564 $41,851,956 $44,288,112 $48,279,092 $47,954,260 $47,784,013 

Interfund Reimbursements

General Fund $21,112,835 $27,158,276 $25,095,801 $26,843,269 $26,999,161 $26,950,395 

Total Interfund Reimbursements $21,112,835 $27,158,276 $25,095,801 $26,843,269 $26,999,161 $26,950,395 

* Includes: Rent, Equipment Repairs, Drainage Assessments, Software, Expense, Postage, Bad Debts, Discounts, etc.
Port of Portland 2015-16 Adopted Budget

73

Commercial Aviation - Personnel Services

Full Time Full Time

Position Equiv Adopted Equiv Adopted

Type Actual Actual Positions Budget Positions Budget

2012-13 2013-14 2014-15 2014-15 2015-16 2015-16

Commercial Aviation

Administration $4,572,043 $5,056,203 47.0 $5,218,200 44.0 $4,933,069 

Admin Professional/Tech 6,170,942 6,130,127 86.0 6,496,137 91.9 7,249,401 

Admin Support Staff 966,615 958,112 24.0 1,091,253 22.0 1,003,414 

Interns 18,523 17,011 - 72,360 - 92,041 

PDX Fire 3,034,290 3,053,054 47.3 3,220,819 47.0 3,365,817 

PDX Maintenance 6,085,735 6,086,567 91.0 6,376,070 92.0 6,654,652 

PDX Police/Security 4,463,592 4,585,646 67.0 4,911,593 69.0 5,191,989 

Subtotal Commercial Aviation $25,311,740 $25,886,720 362.2 $27,386,431 365.9 $28,490,383 

Total Overtime $1,836,957 $2,182,533 $2,236,554 $2,388,836 

Accrued Labor 13,626 155,850 405,892 287,406 

Fringe Benefits 12,367,763 13,488,562 14,198,298 14,578,947 

Total Commercial Aviation $39,530,086 $41,713,666 362.2 $44,227,174 365.9 $45,745,571 
Pages Intentionally Omitted
2015-16 Adopted Budget Port of Portland

102

Glossary of Terms

Administrative Divisions

Generally defined as Executive Administration, Public Affairs (Media & Government Relations, Environmental Affairs, 

Research & Strategy, and Corporate Marketing) Financial & Administrative Services, Project and Technical Services 

(Engineering, Information Technology, Project Portfolio Office), Human Resources, and Legal.

Allocated support service expense

Administrative expenses (not including Engineering) distributed to operating divisions for recovery purposes based on 

an established formula.

Beginning working capital

The estimated beginning balance of the fund.

Bond sale proceeds

Money received from bond sales.

Candidate Project

Internally, two types of Capital projects are in the proposed or development stage. Candidate Yes projects which have 

been given the approval to utilize resources to further develop the business case, scope, budget estimate, project plan 

to a point where it can be considered by the approval committee to open the project. Candidate No projects which are 

not actively being developed, but placed on the list as a future need.

Capital outlay

Major expenditures which result in the acquisition of, or, additions to fixed assets, including land, land improvements, 

buildings and additions, other structures, machinery, and equipment.

Citation Revenue

Revenue generated through the issuance of citations at Portland International Airport.

Consolidation pool revenue

Revenue obtained from combining container cargo from different steamship lines to obtain favorable rail rates on 

containers shipped east of Denver.

Contingencies

Estimates for expenditures which cannot be foreseen and planned for in the budget either because of the occurrence 

of some unplanned event or because of insufficient data at the time the budget is compiled.

Corporate Administration

Corporate Administration is comprised of Executive Administration, Public Affairs (Media & Government Relations, 

Environmental Affairs, and Corporate Marketing) Financial & Administrative Services, Information Technology, Project 

Portfolio Office, Human Resources, and Legal.

Cost allocation

Engineering Division costs are charged directly to projects when the service is provided. The Administrative divisions 

also charge direct costs to users. The remaining indirect costs in the Administrative divisions are allocated to the operating divisions as allocated support service expense.
Port of Portland 2015-16 Adopted Budget

103

Direct transfer capitalized costs

Direct in-house services provided for capital projects.

Ensuing year

The budget year; in this case, it isFiscal Year 2015-16.

Equipment fuel and lubricants

Expenses for fuel or lubricants used in the operation of equipment.

Fiscal Year (FY)

A 12-month period beginning July 1 and ending June 30.

Fixed charges

Expenses for insurance, rent, and property taxes.

Full-time equivalent position (FTE)

One FTE equates to 2,080 working hours in a year; excludes overtime hours.

Grants

Estimated grants to be received from federal and state government sources.

Interest on investments

Interest earned through investment of cash balances.

Interfund transfers

Payment for services provided to a division in a different fund.

Land sale proceeds

Revenues generated by land sales.

Longshore contract services

Salaries, wages, and other payroll expenses paid to International Container Terminal Services, Oregon (ICTSI, Oregon) for longshore contract services.

Management and travel expenses

Expenses for memberships, dues, subscriptions, promotional, employee education, local and out of town travel, and 

miscellaneous management activities.

Materials and supplies

Purchase of materials and supplies which have a short life and are usually low in cost.

Miscellaneous expenses

Expenses not accounted for elsewhere, including bad debts.

Open Project

A category of capital projects which are in process to some degree. Costs are being incurred.
2015-16 Adopted Budget Port of Portland

104

Operating Division

The operating divisions are Marine, Industrial Development, Commercial Aviation, General Aviation, and Navigation 

divisions.

Operating revenue

Revenue resulting from sales or service to customers

Other revenue

Miscellaneous operating revenue not specifically defined.

Outside service expense

Expenditures for services procured from outside the Port.

Personnel services

Salaries, wages, benefits and other payroll expenses paid to Port employees (does not include longshore contract 

services).

Rental and concession revenue

Revenue generated through space rentals and percentage of concessionaire revenues.

Revenues

Monies earned through the operation or use of Port land facilities or services.

Revised Budget

Revisions made to the existing Adopted Budget that have been approved by Commision.

Second ensuing year

The fiscal year immediately following the budget year.

Services provided

Credits for specific and direct services provided to another Port division.

Services received

Charges for specific and direct services received from another Port division.

Service revenue

Revenue generated by performing a specific service, generally equipment oriented, including rental.

Total project cost

Total cost of a project.

Unappropriated Ending Balance

The estimate intended to provide working capital or cash balance to finance activities for the period between July 1 of 

the ensuing fiscal year and the time when sufficient new revenues become available to meet cash flow needs of the 

fund.

Utilities

Cost of electricity, water, telephone, natural gas, sewer, etc.
EXHIBIT 6
AMENDED AND RESTATED 

SIGNATORY PASSENGER 

AIRLINE LEASE AND OPERATING 

AGREEMENT

BETWEEN

THE PORT OF PORTLAND

AND

ALASKA AIRLINES, INC.

EXCERPT
TABLE OF CONTENTS

1. DEFINITIONS .................................................................................................................... 1

2. TERM ............................................................................................................................... 11

2.1 Agreement Term ................................................................................................ 11

2.2 No Early Termination of Agreement or Return of Leased Space ...................... 11

2.3 July 1, 2015 Space Reduction ............................................................................ 11

2.3.1 Election to Continue as Signatory Passenger Airline Under Amended 

and Restated Agreement .................................................................................... 12

2.3.2 Election to Become a Non-Signatory Airline and Operate under the 

Port Ordinance 433-R ........................................................................................ 12

2.4 July 1, 2020 Space Reduction ............................................................................ 12

3. COMPLIANCE WITH LAW ........................................................................................... 12

3.1 General Laws ..................................................................................................... 12

3.2 PDX Rules ......................................................................................................... 12

4. USE OF AIRPORT FACILITIES .................................................................................... 13

4.1 Airline General Use Rights and Privileges ........................................................ 13

4.2 Right of Ingress and Egress ............................................................................... 14

4.3 Restrictions Upon Airline General Use Rights and Privileges .......................... 14

4.4 Installation of Wireless Communication Devices.............................................. 15

4.5 Installation of Communications Equipment; Use of Port Network Room ........ 15

4.6 Port's Right to Install Vending Machines .......................................................... 16

4.7 Port's Right to Install Seating ............................................................................. 16

4.8 Rights Limited to Air Transportation Activities ................................................ 16

4.9 Landing Area Weight Limitations ..................................................................... 16

4.10 Interference with Airport Systems ..................................................................... 16

4.11 Limitations on Distribution of Food and Beverages at Airport ......................... 17

4.12 Limitations on Ground Transportation Services ................................................ 17

4.13 Installation of Advertising ................................................................................. 17

4.14 Passenger Surveys .............................................................................................. 18

4.15 Goods, Services and Subcontracting.................................................................. 18

5. TERMINAL AND OPERATIONS SPACE ..................................................................... 18

6. SERVICING OF AIRCRAFT .......................................................................................... 18

7. GROUND RUN-UP ENCLOSURE ................................................................................. 19

8. PARKING/STORAGE OF AIRCRAFT; GROUND SUPPORT EQUIPMENT; 

LIMITATIONS ............................................................................................................................. 19

9. REMOVAL OF AIRCRAFT ............................................................................................ 19

ii
10. ALTERATIONS AND IMPROVEMENTS BY AIRLINE ............................................. 20

10.1 Construction or Installation of Improvements ................................................... 20

10.2 Ownership of Improvements.............................................................................. 20

10.3 Liens ................................................................................................................... 21

10.4 Signs ................................................................................................................... 21

10.4.1 Airline Signage ................................................................................ 21

10.4.2 Port Signage ..................................................................................... 21

10.4.3 Temporary Airline Signage .............................................................. 22

11. MAINTENANCE AND OPERATION OF AIRPORT .................................................... 22

11.1 Port Obligations ................................................................................................. 22

11.2 Airline Obligations............................................................................................. 22

11.2.1 Baggage Consortium ........................................................................ 22

11.2.2 General Maintenance Requirements ................................................ 22

11.2.3 Waste Disposal, Recycling, including Food Waste ......................... 22

11.2.4 Aircraft Apron .................................................................................. 23

11.3 Maintenance Responsibilities for Terminal and Apron ..................................... 23

11.4 Maintenance Responsibilities for Leased Equipment ........................................ 23

12. PREMISES AND OTHER SPACE .................................................................................. 23

12.1 Long Term Lease of Premises ........................................................................... 23

12.1.1 Exclusive Space ............................................................................... 23

12.1.2 Preferential Space ............................................................................ 23

12.1.3 Shared Space .................................................................................... 23

12.2 Other Space Available for Rent ......................................................................... 23

12.2.1 Month-to-Month Space .................................................................... 24

12.2.2 Short Term Space ............................................................................. 24

12.2.3 Baggage Make-up Overflow Area ................................................... 24

12.2.4 Baggage Claim Area ........................................................................ 25

12.2.5 Non-Preferential Ground Load Holdrooms ..................................... 25

12.2.6 International Arrival Facility ........................................................... 25

12.2.7 Baggage Make-up Run-out Areas .................................................... 25

12.3 Changes in Airlines Premises ............................................................................ 25

12.4 Port Equipment .................................................................................................. 25

13. SELF SERVICE KIOSKS ................................................................................................ 26

14. COMMON USE SPACE .................................................................................................. 26

14.1 Common Use Ticket Counters ........................................................................... 26

14.2 Common Use Ticket Offices ............................................................................. 26

14.3 Common Use Gates (including International Gates) ......................................... 26

14.4 Common Use Kiosks ......................................................................................... 27

15. INTERNATIONAL ARRIVALS FACILITY (IAF) ........................................................ 27

16. EMPLOYEE PARKING .................................................................................................. 27

iii
17. RISK MITIGATION PROGRAM .................................................................................... 27

17.1 Risk Mitigation Program Eligibility .................................................................. 27

17.2 Duration of Risk Mitigation Program Offer ...................................................... 28

17.3 Term of Fee Waivers ......................................................................................... 28

17.4 Reimbursement for Waived Fees ....................................................................... 28

17.5 Fee Waiver Program Options............................................................................. 28

18. RENTS .............................................................................................................................. 29

18.1 Airline's Financial Responsibility ...................................................................... 29

18.2 Landing Fees ...................................................................................................... 29

18.2.1 Amount of Landing Fees ................................................................. 29

18.2.2 Reporting of Landing Fees............................................................... 29

18.3 Aircraft Parking Fees ......................................................................................... 29

18.4 Aircraft Apron .................................................................................................... 30

18.4.1 Aircraft Apron Fees ......................................................................... 30

18.4.2 Adjustments to Aircraft Apron Rates .............................................. 30

18.5 Rent for Exclusive Space, Preferential Space, Shared Space, and 

Month-to-Month Space ..................................................................................................... 30

18.6 Baggage Make-up Overflow Area ..................................................................... 30

18.7 Baggage Claim Area .......................................................................................... 31

18.7.1 Baggage Claim Area Rent Allocation.............................................. 31

18.7.2 Reporting Baggage Claim Use......................................................... 31

18.7.3 Air Carriers Exempt from Baggage Claim Ten Percent (10%) 

Component ......................................................................................................... 31

18.8 Non-Preferential Ground Load Holdrooms ....................................................... 31

18.9 Self Service Kiosks ............................................................................................ 32

18.10 Common Use ..................................................................................................... 32

18.10.1 Common Use Ticket Counters ......................................................... 32

18.10.2 Common Use Ticket Office ............................................................. 32

18.10.3 Common Use Gates ......................................................................... 32

18.10.4 Common Use Kiosks ....................................................................... 32

18.11 IAF Rent Allocation ........................................................................................... 33

18.11.1 Reporting IAF Use ........................................................................... 33

18.11.2 IAF Rate for Reduced IAF Usage .................................................... 33

18.12 Annual Equipment Rent ..................................................................................... 33

18.12.1 Loading Bridges ............................................................................... 34

18.12.2 Baggage Make-up Conveyor System............................................... 34

18.12.3 Tenant Improvements ...................................................................... 34

18.12.4 Other Equipment .............................................................................. 34

18.13 Billable Fees for Equipment .............................................................................. 34

18.14 Non-Signatory Premium .................................................................................... 34

18.15 Other Charges .................................................................................................... 34

18.15.1 Taxes ................................................................................................ 34

18.15.2 Other Taxes, Assessments, and Licenses ......................................... 35

18.15.3 Miscellaneous Charges to Airline .................................................... 35

18.16 Payment Due Dates ............................................................................................ 35

18.17 Place of Payment................................................................................................ 36

iv
18.18 Delinquency Charge........................................................................................... 36

18.19 Returned Checks ................................................................................................ 36

18.20 Transition Payment ............................................................................................ 37

18.21 Reports to be Supplied by Airline ...................................................................... 37

18.22 Information to be Supplied by the Port .............................................................. 37

18.23 Calculation of Deplaned Passengers and Enplaned Passengers ........................ 37

18.24 Invoices Upon Airline Failure to Supply Required Information ....................... 37

18.25 Acceptance of Payment Is No Waiver ............................................................... 38

18.26 Late Monthly Reports ........................................................................................ 38

18.27 Audit of Airline Records .................................................................................... 38

19. TERMINAL RENT .......................................................................................................... 39

19.1 Terminal Requirement ....................................................................................... 39

19.2 Terminal Net Requirement ................................................................................ 39

19.3 Weighted Values Table ...................................................................................... 40

19.4 Weighted Terminal Space .................................................................................. 40

19.5 Leased Space ...................................................................................................... 41

19.6 Terminal Rent Rate ............................................................................................ 41

19.6.1 Allocation of Terminal Net Requirement ........................................ 41

19.6.2 Terminal Rent Rates for Signatory Space ........................................ 41

19.6.3 Terminal Rent Rates for Common Use Ticket Office Space ........... 42

19.6.4 Terminal Rent Rates for Non-Signatory Space ............................... 42

20. ADJUSTMENTS TO RENT ............................................................................................ 42

20.1 Annual and Periodic Rent Adjustments ............................................................. 42

20.2 Annual Operating Budget Process ..................................................................... 42

20.3 Final Adjustment of Rates after Annual Audit of Port Records ........................ 43

20.3.1 Time Limit on Reconciliation .......................................................... 43

20.4 Adjustments for Additional Bonds .................................................................... 43

20.5 No Formal Amendment ..................................................................................... 43

20.6 Continuation of Unadjusted Rates ..................................................................... 44

20.7 Refunds and Payments to the Airline ................................................................. 44

20.7.1 Source of Funds ............................................................................... 44

20.7.2 Offset for Amount Owed to the Port................................................ 44

20.8 Port Accounting Covenants ............................................................................... 44

20.8.1 Maintenance of Books and Records ................................................ 44

20.8.2 Calculation Methodology................................................................. 45

21. PASSENGER CHARGES ................................................................................................ 45

21.1 Passenger Facility Charges ................................................................................ 45

21.2 Miscellaneous Charge to Passengers ................................................................. 45

22. REVENUE SHARING ..................................................................................................... 45

22.1 Distribution Formula .......................................................................................... 45

22.2 Discontinuation of Revenue Sharing ................................................................. 46

22.3 Additional Revenue Sharing .............................................................................. 46

v 
23. OPERATING AND MAINTENANCE EXPENSE REBATE PROGRAM .................... 46

24. AIRPORT CAPITAL IMPROVEMENTS ....................................................................... 47

24.1 Airport Capital Improvement Program .............................................................. 47

24.1.1 Capital Improvement Projects Subject to MII Disapproval ............. 47

24.1.2 South Runway Pre-Approval ........................................................... 47

24.2 Capital Improvement Projects Not Impacting Airline Rate Base ...................... 48

24.3 Other Capital Improvement Projects Not Subject to the MII Process ............... 48

24.3.1 Public Safety .................................................................................... 48

24.3.2 Damage Not Covered by Insurance Proceeds .................................. 48

24.3.3 Lawful Compliance .......................................................................... 48

24.3.4 Settlements ....................................................................................... 48

24.3.5 Emergency/Failure of Essential Equipment..................................... 49

24.3.6 Hazardous Substance Release .......................................................... 49

24.3.7 Additional Space for New or Expanding Air Carrier ...................... 49

24.3.8 Improvements Requested by the Airline .......................................... 49

24.4 Allocation of Debt Service Coverage ................................................................ 49

24.5 MII Disapproval Process for Capital Improvements ......................................... 49

24.5.1 MII Disapproval Process for Capital Improvements or Programs 

Impacting only the Terminal Cost Center.......................................................... 50

24.5.2 MII Disapproval Process for Capital Improvements or Programs 

Impacting only the Airfield Cost Center............................................................ 50

24.5.3 MII Disapproval Process for Capital Improvements or Programs 

Impacting Both Terminal and Airfield Cost Centers ......................................... 50

24.5.4 No MII Disapproval Process for Capital Improvements or Programs 

valued under One Million Dollars ..................................................................... 50

24.6 Disapproval of a Capital Improvement .............................................................. 51

24.6.1 Capital Improvement Not Impacting Airline Supported Area Rents51

25. MII APPROVAL PROCESS ............................................................................................ 51

25.1 Signatory Agreement Amendment Process ....................................................... 51

25.1.1 MII Approval Process for Amendments Impacting Only the 

Terminal Cost Center ......................................................................................... 52

25.1.2 MII Approval Process for Amendments Impacting Only the Airfield 

Cost Center ........................................................................................................ 52

25.1.3 MII Approval Process for Amendments Impacting Both Terminal 

and Airfield Cost Centers .................................................................................. 52

25.2 Rejection of Signatory Agreement Amendment ................................................ 52

26. DAMAGE TO PREMISES OR ADJACENT PROPERTIES .......................................... 53

26.1 Minor Damage to Airport Property.................................................................... 53

26.2 Substantial Damage ........................................................................................... 53

26.3 Total Damage ..................................................................................................... 53

26.4 Temporary Replacement Space ......................................................................... 53

26.5 Decision Not to Reconstruct .............................................................................. 53

26.6 Scope of Port Restoration of Premises ............................................................... 54

26.7 Airline Reconstruction of Premises ................................................................... 54

vi 
26.8 Damage From Airline Negligence ..................................................................... 54

27. INDEMNIFICATION AND INSURANCE ..................................................................... 54

27.1 Indemnification .................................................................................................. 54

27.2 Airline Insurance ................................................................................................ 55

27.2.1 Aviation and Premises Operations Liability Insurance ................... 55

27.2.2 Automobile Liability Insurance ....................................................... 56

27.2.3 Workers' Compensation Insurance .................................................. 56

27.2.4 Property Insurance ........................................................................... 56

27.2.5 Review of Insurance Coverage ........................................................ 56

27.2.6 Certificate of Insurance .................................................................... 57

27.2.7 Other Forms of Insurance ................................................................ 57

27.2.8 Cancellation or Unauthorized Policy Changes ................................ 57

27.2.9 No Representation of Adequacy ...................................................... 57

27.2.10 Port's Right to Request Information from Insurance Company ....... 57

27.2.11 Primary Coverage ............................................................................ 57

27.2.12 Excess Coverage .............................................................................. 57

27.3 Port Insurance .................................................................................................... 57

27.4 Actions that Impact Coverage ............................................................................ 58

27.5 Airline's Risk ...................................................................................................... 58

27.6 Waiver of Subrogation ....................................................................................... 58

28. SECURITY DEPOSIT...................................................................................................... 58

28.1 Security Deposit Exemption .............................................................................. 58

28.2 Security Deposit Required ................................................................................. 59

28.2.1 New Operations ............................................................................... 59

28.2.2 Events of Default ............................................................................. 59

28.2.3 Reimbursement Agreement ............................................................. 60

28.3 Acceptable Forms of Security Deposit .............................................................. 60

28.3.1 Letter of Credit ................................................................................. 60

28.3.2 Cash.................................................................................................. 60

28.4 Amount of Security Deposit .............................................................................. 60

29. ENVIRONMENTAL COVENANTS ............................................................................... 60

29.1 Environmental Compliance ............................................................................... 60

29.2 Duty to Notify .................................................................................................... 60

29.3 Duty to Share Information ................................................................................. 61

29.4 Storm Water Management ................................................................................. 61

29.5 Deicing and Anti-icing Discharge Management ................................................ 61

29.6 Hazardous Substance Release ............................................................................ 61

29.7 Air Quality Improvements ................................................................................. 62

29.8 Noise Mitigation ................................................................................................ 62

29.9 Asbestos and Lead Paint .................................................................................... 62

29.10 Safety Requirements .......................................................................................... 63

30. DISCRIMINATION ......................................................................................................... 63

30.1 Federal Nondiscrimination Regulations ............................................................ 63

vii 
30.2 Affirmative Action ............................................................................................. 63

30.3 Contractor Compliance ...................................................................................... 63

30.4 Default in Compliance ....................................................................................... 64

31. DEFAULT AND TERMINATION .................................................................................. 64

31.1 Events of Default by Airline .............................................................................. 64

31.2 Uncured Events of Default................................................................................. 65

31.3 Remedies for Uncured Event of Default by Airline .......................................... 65

31.4 Rent Revenues Due and Owing ......................................................................... 66

31.5 Proceeds for Reletting ........................................................................................ 66

31.6 Payment Under Protest ...................................................................................... 66

32. REDELIVERY OF AIRLINE PREMISES ...................................................................... 67

32.1 Upon Termination of Agreement ....................................................................... 67

32.2 Removal of Property .......................................................................................... 67

32.2.1 Timeframe for Removal ................................................................... 67

32.2.2 Extension of Time for Removal ....................................................... 67

32.3 Abandoned Property .......................................................................................... 68

32.4 Holding Over ..................................................................................................... 68

33. ASSIGNMENT, SUBLETTING AND HANDLING AGREEMENTS .......................... 68

33.1 Assignment ........................................................................................................ 68

33.1.1 Assignment Generally ...................................................................... 68

33.1.2 Assignment by Merger ..................................................................... 68

33.2 Subletting ........................................................................................................... 69

33.3 Written Sublease Required ................................................................................ 69

33.4 Continuation of Payments .................................................................................. 69

33.5 Ground Handling Arrangements ........................................................................ 69

33.6 Affiliates ............................................................................................................ 70

33.6.1 Notification Required by Airline before Use of Affiliate ................ 70

33.6.2 Special Terms for Affiliates ............................................................. 70

33.6.3 Space Leased Under Affiliate's Name ............................................. 70

34. REALLOCATION OF TERMINAL PREMISES AND ACCOMMODATION ............. 70

34.1 Measurement of Space ....................................................................................... 70

34.2 Accommodation of Other Airlines ..................................................................... 70

34.3 Process of Seeking Accommodation Required by Law ..................................... 71

34.4 Accommodation Protocol for Other Reasons .................................................... 71

34.5 Accommodation Requirements .......................................................................... 71

34.6 Right to Take Back Underutilized Airline Premises.......................................... 72

34.7 Requirements for Final Determination .............................................................. 72

34.8 Alterations to Space ........................................................................................... 72

34.9 Published Schedule Changes ............................................................................. 72

34.10 Payment for Accommodation Moves ................................................................ 72

35. EARLY TERMINATION OF AGREEMENT BY PORT ............................................... 73

viii
36. GENERAL PROVISIONS ............................................................................................... 73

36.1 Advances by Port ............................................................................................... 73

36.2 Agent for Service of Process.............................................................................. 73

36.3 Airport Security ................................................................................................. 73

36.4 Approvals and Permits from the Port................................................................. 74

36.5 Attorneys' Fees ................................................................................................... 74

36.6 Aviation Rights .................................................................................................. 74

36.7 Calculation of Time ........................................................................................... 74

36.8 Capacity to Execute and Thorough Review....................................................... 74

36.9 Compliance by Other Tenants ........................................................................... 75

36.10 Entire Agreement ............................................................................................... 75

36.11 Gender ................................................................................................................ 75

36.12 Governing Law/Forum Selection ....................................................................... 75

36.13 Governmental Compliance ................................................................................ 75

36.14 Headings and Titles............................................................................................ 75

36.15 Height Limitations ............................................................................................. 76

36.16 Incorporation of Exhibits ................................................................................... 76

36.17 Interpretation of Agreement ............................................................................... 76

36.18 Labor Disputes ................................................................................................... 76

36.19 Mediation ........................................................................................................... 76

36.20 National Emergency........................................................................................... 76

36.21 No Implied Warranty ......................................................................................... 77

36.22 No Third Party Beneficiary ................................................................................ 77

36.23 Nonliability of Agents and Employees .............................................................. 77

36.24 Nonwaiver of Rights .......................................................................................... 77

36.25 Notices ............................................................................................................... 77

36.26 Other Agreements Continued ............................................................................ 78

36.27 Public Contracting Requirements ...................................................................... 79

36.28 Quiet Enjoyment ................................................................................................ 79

36.29 Right of Port to Enter ......................................................................................... 79

36.29.1 Inspections ....................................................................................... 79

36.29.2 Maintenance and Repairs ................................................................. 79

36.29.3 Environmental Compliance Inspection ............................................ 80

36.29.4 Impact of Entry on Rent ................................................................... 80

36.30 Rights Non Exclusive ........................................................................................ 80

36.31 SEC Rule 15c2-12.............................................................................................. 80

36.32 Severability ........................................................................................................ 80

36.33 Status of Parties.................................................................................................. 80

36.34 Subordination of Agreement/References to the Governmental Agreements and 

Port Ordinances ................................................................................................................. 81

36.35 Successors and Assigns Bound .......................................................................... 81

ix
DEFINITIONS

2010 Agreement .............................................................................................................................. 1 

2015 Agreement .............................................................................................................................. 1 

AAAC ............................................................................................................................................. 2 

AAAC Chair ................................................................................................................................... 2 

ACM ............................................................................................................................................... 2 

Affiliate ........................................................................................................................................... 1 

Agreement ................................................................................................................................. 1, 10 

Air Carrier ....................................................................................................................................... 2 

Aircraft Apron ................................................................................................................................. 2 

Aircraft Apron Fees ........................................................................................................................ 3 

Airfield ............................................................................................................................................ 2 

Airfield Cost Center ........................................................................................................................ 2 

Airline ......................................................................................................................................... 1, 2 

Airline Cost Centers ........................................................................................................................ 2 

Airline Supported Areas ................................................................................................................. 2 

Airport ......................................................................................................................................... 1, 2 

Airport and Airline Affairs Committee........................................................................................... 2 

Airport and Airline Affairs Committee Chair ................................................................................. 2 

Airport Certification Manual .......................................................................................................... 2 

Airport Fund.................................................................................................................................... 2 

Airport General Account................................................................................................................. 2 

Airport Layout Plan ........................................................................................................................ 3 

Airport Security Program ................................................................................................................ 3 

all-risk ........................................................................................................................................... 56 

Annual Equipment Rent ................................................................................................................ 33 

ASP ........................................................................................................................................... 3, 14 

Baggage Claim Areas ..................................................................................................................... 3 

Baggage Consortium ................................................................................................................. 3, 22 

Baggage Make-up Areas ................................................................................................................. 3 

Baggage Make-up Overflow Areas ................................................................................................ 3 

Best Management Practices ............................................................................................................ 3 

Bond Ordinance ............................................................................................................................ 81 

Business Day ................................................................................................................................... 3 

Business Days ............................................................................................................................... 74 

Capital Expenditure ........................................................................................................................ 3 

Capital Improvement ...................................................................................................................... 3 

Capital Improvement Program ........................................................................................................ 3 

Cargo Carrier .................................................................................................................................. 3 

CBP ............................................................................................................................................... 11 

CIP .................................................................................................................................................. 3 

Commencement Date ...................................................................................................................... 3 

Common Use Equipment ................................................................................................................ 4 

Common Use Gates ........................................................................................................................ 4 

Common Use Space ........................................................................................................................ 4 

x 
Common Use Ticket Counters ........................................................................................................ 4 

Common Use Ticket Offices .......................................................................................................... 4 

Concessionaire ................................................................................................................................ 4 

Connecting Passenger ..................................................................................................................... 4 

Contracting Carrier ......................................................................................................................... 4 

Cost Center...................................................................................................................................... 4 

Costs of Operation and Maintenance .............................................................................................. 8 

Coverage Ratio................................................................................................................................ 4 

CPI-U ............................................................................................................................................ 30 

Debt Service Coverage ................................................................................................................... 4 

Debt Service Coverage Ratio .......................................................................................................... 4 

Delinquency Charge...................................................................................................................... 36 

Deplaned Passengers ....................................................................................................................... 5 

DEQ .............................................................................................................................................. 62 

Design Review Process ................................................................................................................... 5 

Direct Cost Centers ......................................................................................................................... 5 

Direct Debt Service ......................................................................................................................... 5 

Direct O&M Expenses .................................................................................................................... 5 

Director of Aviation ........................................................................................................................ 5 

Effective Date ............................................................................................................................. 1, 5 

Employer's Liability ...................................................................................................................... 56 

Enplaned Passengers ....................................................................................................................... 5 

Environmental Laws ....................................................................................................................... 5 

Environmental Management System .............................................................................................. 5 

Event of Default ............................................................................................................................ 64 

Exclusive Space .............................................................................................................................. 5 

Executive Director .......................................................................................................................... 5 

Expiration Date ............................................................................................................................... 5 

FAA................................................................................................................................................. 6 

Federal Aviation Administration .................................................................................................... 6 

Fiscal Year ...................................................................................................................................... 6 

Gate Position ................................................................................................................................... 6 

General Account ............................................................................................................................. 2 

GRE........................................................................................................................................... 6, 19 

Ground Run-up Enclosure .............................................................................................................. 6 

Hazardous Substance Release ......................................................................................................... 6 

Hazardous Substances ..................................................................................................................... 6 

IAF .................................................................................................................................................. 6 

IAF Fees .......................................................................................................................................... 6 

IAF Rate .......................................................................................................................................... 6 

Indemnified Parties ....................................................................................................................... 54 

Indirect Cost Centers....................................................................................................................... 6 

Indirect Debt Service ...................................................................................................................... 6 

Indirect O&M Expenses ................................................................................................................. 6 

Interest Rate Swaps ......................................................................................................................... 6 

International Arrival Facility .......................................................................................................... 6 

xi
Kiosk Fee ...................................................................................................................................... 32 

Kiosks ........................................................................................................................................... 10 

Landing Activity Fees ................................................................................................................... 28 

Landing Area .................................................................................................................................. 7 

Landing Fees ................................................................................................................................... 7 

Legal Holiday............................................................................................................................ 7, 74 

Majority In Interest ......................................................................................................................... 7 

Maximum Gross Landed Weight .................................................................................................... 7 

MII .................................................................................................................................................. 7 

Minimum Space Commitment ........................................................................................................ 7 

Monthly Reports ........................................................................................................................... 37 

Month-to-Month Space ................................................................................................................... 7 

Net Requirement ............................................................................................................................. 7 

Net Revenues .................................................................................................................................. 7 

non exclusive ................................................................................................................................ 80 

Non-Airline Revenues .................................................................................................................... 7 

Non-Preferential Ground Load Holdroom ...................................................................................... 7 

Non-Revenue Landings .................................................................................................................. 7 

Non-Signatory Airline .................................................................................................................... 8 

O&M Expenses ............................................................................................................................... 8 

Official Airline Guide ..................................................................................................................... 9 

Offsetting Revenues ........................................................................................................................ 8 

Operating and Maintenance Expenses ............................................................................................ 8 

Operational Credit Programs ........................................................................................................ 28 

Ordinance ........................................................................................................................................ 8 

Ordinance No. 155 .......................................................................................................................... 8 

Ordinance No. 323 .......................................................................................................................... 8 

OSHA ............................................................................................................................................ 63 

Passenger Carrier ............................................................................................................................ 8 

Passenger Facility Charges ............................................................................................................. 8 

PDX Rules ...................................................................................................................................... 8 

Personal Property ............................................................................................................................ 8 

PFCs ................................................................................................................................................ 8 

Port .............................................................................................................................................. 1, 9 

Port Cost Center .............................................................................................................................. 8 

Port of Portland ............................................................................................................................... 9 

Port Records .................................................................................................................................. 44 

Port Supported Area ........................................................................................................................ 8 

Preferential Space ........................................................................................................................... 9 

Premises .......................................................................................................................................... 9 

Private Passenger Lounge ............................................................................................................... 9 

Project Fact Sheet ......................................................................................................................... 47 

Public Area...................................................................................................................................... 9 

Records ......................................................................................................................................... 38 

Regional/Commuter Airline.......................................................................................................... 55 

Rent ................................................................................................................................................. 9 

xii
Revenue Landed Weight ................................................................................................................. 9 

Revenue Landings ........................................................................................................................... 9 

Revenue Sharing ............................................................................................................................. 9 

Revenues ......................................................................................................................................... 9 

Risk Mitigation Program........................................................................................................... 9, 27 

Scheduled Service ........................................................................................................................... 9 

Security Deposit .............................................................................................................................. 9 

Security Screening Areas ................................................................................................................ 9 

Self Service Kiosks ....................................................................................................................... 10 

Shared Space ................................................................................................................................. 10 

Signatory Agreement ................................................................................................................ 2, 10 

Signatory Airline ........................................................................................................................... 10 

Signatory Cargo Airline ................................................................................................................ 10 

Signatory Cargo Carrier Operating Agreement ............................................................................ 10 

Signatory Passenger Airline .......................................................................................................... 10 

Signatory Passenger Airline Lease and Operating Agreement ..................................................... 10 

Sterile Area ................................................................................................................................... 10 

Stormwater Permit ........................................................................................................................ 61 

Subcontractor ................................................................................................................................ 18 

sublease ......................................................................................................................................... 69 

Swap ................................................................................................................................................ 6 

SWPCP ......................................................................................................................................... 61 

System ........................................................................................................................................... 61 

Taxes ............................................................................................................................................. 35 

Tenant Construction Permit Process ............................................................................................. 10 

Terminal ........................................................................................................................................ 10 

Terminal Cost Center .................................................................................................................... 10 

Terminal Rents .............................................................................................................................. 11 

Transportation Security Administration ....................................................................................... 11 

TSA ............................................................................................................................................... 11 

Uncured Event of Default ............................................................................................................. 11 

United States Customs and Border Protection .............................................................................. 11 

Wireless Communication Services ............................................................................................... 11 

xiii
EXHIBITS 

Exhibit A Airport Boundary Map 

Exhibit B Airline Premises

Exhibit C Rent/Rates and Charges

Exhibit C-1 Rent/Rates and Charges Payment Schedule

Exhibit D Maintenance Responsibilities

Exhibit E Allocations to Cost Centers 

Exhibit F Port's Storm Water Pollution Control Plan 

Exhibit G Baggage Claim Area 

Exhibit H Non-Preferential Ground Load Holdrooms

Exhibit I International Arrival Facility

Exhibit J Examples of Additional Revenue Sharing & Reduced Revenue Sharing

Exhibit K Project Fact Sheet

Exhibit L Common Use Ticket Counter Calculation

xiv
AMENDED AND RESTATED SIGNATORY PASSENGER AIRLINE LEASE AND 

OPERATING AGREEMENT

This AMENDED AND RESTATED SIGNATORY PASSENGER AIRLINE LEASE AND 

OPERATING AGREEMENT ("Agreement") effective July 1, 2015 ("Effective Date") is between

THE PORT OF PORTLAND ("Port"), a port district of the State of Oregon, and ALASKA 

AIRLINES, INC., a corporation organized under the laws of the State of Alaska ("Airline").

RECITALS

A. The Port is the owner and operator of the Portland International Airport 

("Airport"), located in Portland, Oregon. 

B. The Airline desires to lease or acquire the right to use certain Airport facilities 

from the Port.

C. The Port and Airline entered into that certain Signatory Passenger Airline Lease 

and Operating Agreement effective from the later of the date of execution or July 1, 2010, 

through June 30, 2015 ("2010 Agreement"). Pursuant to Section 25.1.3 of the Agreement, the 

Signatory Airlines approved an amendment to the Agreement to be memorialized in an amended 

and restated agreement that would: (i) extend the term of the Agreement for an additional ten 

(10) years through June 30, 2025; (ii) permit leased Premises reductions every five (5) years in 

accordance with the schedule established in the 2015 Agreement; and (iii) extend Revenue 

Sharing in accordance with the parameters established in the 2010 Agreement. All other 

provisions of the 2010 Agreement would remain unchanged. 

THEREFORE, the parties, intending to be legally bound by the terms and conditions contained 

in this Agreement and in consideration of the mutual covenants contained in this Agreement, 

hereby agree to the following terms and conditions.

1. DEFINITIONS 

For the purposes of this Agreement, the following definitions shall apply. 

"2010 Agreement" means that certain Signatory Passenger Airline Lease and Operating 

Agreement, effective July 1, 2010 through June 30, 2015. 

"2015 Agreement" means the Amended and Restated Signatory Passenger Airline Lease 

and Operating Agreement, effective July 1, 2015. 

"Affiliate" means (a) any Air Carrier flying in or out of the Airport solely for the benefit 

of another Air Carrier(s), under the livery of that Air Carrier, and under contract to that Air 

Carrier(s); or, if flying under its own livery, is not selling any seats in its own name and all seats 

are being sold in the name of the Air Carrier the Affiliate is under contract to; or (b) a wholly 

owned subsidiary of Air Carrier or a subsidiary of the same corporate parent of the Air Carrier. 

For the purposes of this Agreement, the Air Carrier that contracts with the Affiliate is referred to 

as the Contracting Carrier. An Affiliate shall be considered an agent of the Contracting Carrier 

for which it flies. Any Air Carrier(s) that flies under its own livery and sells seats in its own 

name shall not be classified as an Affiliate. 

"Agreement" means this particular Signatory Passenger Airline Lease and Operating 

Agreement, as the same may be amended or supplemented from time to time. References to 

1 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Signatory Agreement" herein means the Signatory Passenger Airline Lease and Operating 

Agreement. 

"Air Carrier" means a business engaged in scheduled or non-scheduled commercial air 

transportation of persons, property and/or mail. 

"Aircraft Apron" means that part of the ramp area used for the loading and unloading of 

passengers and cargo from aircraft, servicing aircraft, and maneuvering aircraft to and from 

active taxiways. 

"Airfield" means areas and facilities provided for the landing, takeoff, and taxiing of 

aircraft, including all runways, taxiways, ramps and aprons; aircraft parking areas; areas required 

for approach and clear zones; airfield access and related roadways; aviation easements and other 

related support facilities (i.e., lighting, navigational aids, etc.). 

"Airfield Cost Center" means the Cost Center to which Revenues and expenses 

associated with the Landing Area, excluding the Aircraft Apron, are allocated. The "Airfield 

Cost Center" shall include a portion of Indirect Cost Centers, as specified in Exhibit E. 

"Airline" means the Air Carrier identified in the first sentence of this Agreement, above, 

who is also a Signatory Airline by virtue of signing this Signatory Agreement.

"Airport and Airline Affairs Committee" or "AAAC" means a committee composed of 

one representative of each Signatory Airline and each Signatory Cargo Carrier, which 

representative shall be empowered to speak on behalf of the represented Signatory Carrier on 

matters brought before the committee and the Director of Aviation and his or her staff. 

"Airport and Airline Affairs Committee Chair" or "AAAC Chair" means the 

individual designated by the AAAC as the lead committee member; however, the AAAC Chair 

shall have no greater authority than any other airline in the AAAC.

"Airline Cost Centers" or "Airline Supported Areas" means the Airfield Cost Center 

and the Terminal Cost Center.

"Airport" means the Portland International Airport, owned and operated by the Port, and 

all additions, expansions and improvements thereto, the boundaries of which are more 

particularly depicted on Exhibit A, attached hereto, as the same may be changed by the Port 

from time to time. 

"Airport Certification Manual" or "ACM" means the document prepared and 

maintained by the Airport operator outlining measures intended to comply with requirements of 

CFR 14 Part 139, "Certification and Operations: Land Airports Serving Air Carriers." The ACM 

contains operating procedures, facilities and equipment, responsibility assignments, and any 

other information needed by personnel concerned with operating the Airport in order to comply 

with applicable provisions of FAR Part 139. 

"Airport Fund" means that fund so defined in Ordinance No. 155, as amended, and as 

may be amended, from time to time.

"Airport General Account" means that account designated as the "General Account" in 

Section 13 of Ordinance No. 155, as amended, and as it may be amended from time to time. 

2 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Airport Layout Plan" means the FAA required scaled drawing of existing and 

proposed land and facilities necessary for the operation and development of the Airport. 

"Airport Security Program" or "ASP" means the confidential Airport security program 

required by 49 CFR 1542 and approved by the TSA, that describes the security requirements that 

must be implemented at the Airport. The current ASP is provided to Airline's Station Manager, 

and is also on file in the Airport's Security Department and Legal offices.

"Apron Fees" means the Revenues earned from use of the Aircraft Aprons.

"Baggage Claim Areas" means those areas of the Terminal designated for delivery of 

in-bound baggage to arriving passengers and also those areas of the enclosed baggage road 

designated for delivery of baggage from the aircraft into the Terminal, and is shown, as currently 

configured, on Exhibit G. 

"Baggage Consortium" means a consortium formed by airlines that will be responsible 

for the ongoing operation of the baggage handling system for the use of any Air Carrier serving

the Airport. 

"Baggage Make-up Areas" means those areas of the Terminal and those devices used to 

sort out-bound baggage for delivery to departing aircraft. 

"Baggage Make-up Overflow Areas" means those Baggage Make-up Areas made 

available by the Port to Airlines to accommodate seasonal and peak period baggage volume 

increases. 

"Best Management Practices" means those environmental or operational standards: 

(a) implemented by a business or industry group pertinent to Airline operations as a matter of 

common and accepted practice; or (b) developed by Airline for use in Airline's operations. 

"Business Day" means Monday through Friday and shall exclude Saturday, Sunday and 

Legal Holidays. 

"Capital Expenditure" means an expenditure made to acquire, purchase or construct a 

single capital item ("Capital Improvement") for the purpose(s) of operating, improving, 

maintaining or developing the Airport. For the purposes of this Agreement, a Capital 

Improvement shall have a gross cost in excess of FIVE THOUSAND DOLLARS AND NO 

CENTS ($5,000.00), and an economic life greater than one (1) year. 

"Capital Improvement" is defined within the definition of Capital Expenditure. 

"Capital Improvement Program" or "CIP" means the Port's Capital Improvement 

Program for capital projects opened between July 1, 2010, and June 30, 2025, funded through the 

Airline Cost Centers and the Airline allocated portions of the shared Cost Centers.

"Cargo Carrier" means an Air Carrier in the business of transporting property by air, but 

not passengers, which company has signed a Signatory Cargo Carrier Operating Agreement

with the Port. 

"Commencement Date" means July 1, 2010, and is the date upon which this Signatory 

Agreement went into effect for all Signatory Airlines serving the Airport on that date.

3 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Common Use Equipment" means equipment, seating, electronics, hardware and 

software that the Port reserves for the flexible and temporary use of any Air Carrier serving the 

Airport. 

"Common Use Gates" means any Port controlled gates, excepting gates associated with 

Non-Preferential Ground Load Holdrooms, not assigned by the Port as Preferential Space to any 

Air Carrier, and which the Port reserves for the flexible and temporary use of any Air Carrier 

serving the Airport. Common Use Gates include all equipment and utilities necessary to operate 

from the gates, including loading bridges, ground power units, and potable water supply. 

"Common Use Space" means Port controlled ticket counter, ticket office, equipment, 

Kiosks and gates which the Port has not leased and which it reserves for the flexible and 

temporary use of any Air Carrier serving the Airport. 

"Common Use Ticket Counters" means any ticket counter not assigned by the Port as 

Exclusive Space to any Air Carrier, and which the Port may reserve for the flexible and 

temporary use of any Air Carrier serving the Airport. Common Use Ticket Counters shall 

include a Baggage Make-up Area. 

"Common Use Ticket Offices" means each of nine (9) offices located directly behind the 

Common Use Ticket Counters which the Port will make available for rent to support that 

Common Use Ticket Counter. 

"Concessionaire" means any business entity other than Air Carriers permitted by the Port 

to sell goods and/or provide services at the Airport, primarily to support the air transportation of 

passengers, guests and employees based at the Airport in accordance with Port Ordinances, and 

the PDX Rules as they may be supplemented or amended from time to time. Concessions 

businesses include without limitation, retail sales, food and beverage sales, passenger services,

and rental car services. 

"Connecting Passenger" means any passenger who is a through passenger, including 

those who are connecting or transferring between aircraft, and their baggage continues on to a 

destination beyond the Airport. 

"Contracting Carrier" means a Signatory or Non-Signatory Airline who contracts with 

another Air Carrier that is an Affiliate. The Affiliate provides transportation of property or 

passengers for the Contracting Carrier, under the name of the Contracting Carrier. 

"Cost Center" means an accounting center used to collect Revenues and expenses 

(including O&M Expenses and debt service), as more particularly described on Exhibit E. 

"Coverage Ratio" or "Debt Service Coverage Ratio" means the multiple derived by 

dividing the annual debt service requirements under Ordinance No. 155, by available annual Net 

Revenues.

"Debt Service Coverage" means the coverage component of the rate covenant 

requirement of Ordinance No. 155, as amended, and as may be amended from time to time, 

currently equal to thirty percent (30%) of the sum of Direct and Indirect Debt Service 

attributable to Airport revenue bonds issued to acquire Capital Improvements at the Airport for a 

particular Cost Center, or such other similar amounts that may be required for any debt 

financing.

4 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Deplaned Passengers" means disembarking revenue passengers at the Terminal, who 

are: (a) terminating their air travel; (b) transferring between airplanes of the same Air Carrier; or 

(c) transferring between airplanes of different Air Carriers.

"Design Review Process" means the Airport's process for ensuring that tenant 

developments, alterations or modifications comply with the Airport's Terminal Design 

Standards, which preserve the design quality that has been established in the Airport, and are 

kept on file in the Airport administrative offices.

"Direct Cost Centers" means those Cost Centers allocated completely to either the 

Signatory Airlines or the Port, as more particularly described on Exhibit E. Direct Cost Centers 

allocated to the Signatory Airlines are the Airfield Cost Center and the Terminal Cost Center. 

Direct Cost Centers allocated to the Port Cost Center are the Ground Transportation Cost Center, 

the Air Cargo Cost Center, the Other Aviation Cost Center, and the Non-Aviation Cost Center.

"Direct Debt Service" means the principal and interest payments on debt attributable to a 

Direct Cost Center.

"Direct O&M Expenses" means O&M Expenses which are attributable to each Direct 

Cost Center.

"Director of Aviation" means the person in charge of overall Airport management for 

the Port. 

"Effective Date" means the date shown on the first page of this Agreement, and the date 

upon which this Agreement becomes legally binding upon the Airline signing this Agreement. 

"Enplaned Passengers" means embarking revenue passengers at the Terminal who are: 

(a) originating their air travel; (b) transferring between airplanes of the same Air Carrier; or 

(c) transferring between airplanes of different Air Carriers.

"Environmental Laws" means any and all federal, state of Oregon and local laws, 

regulations, rules, permit terms, administrative orders issued pursuant to federal and state laws, 

Best Management Practices, codes and ordinances now or hereafter in effect, as the same may be 

amended from time to time, which govern Hazardous Substances, regulated wastes, emissions, 

pollutants, animals or plants, noise, or products and relate to the protection of health, natural 

resources, safety or the environment. 

"Environmental Management System" means part of an organization's management 

system used to develop and implement its environmental policy and manage its activities or 

products or services that can interact with the environment. 

"Exclusive Space" means Terminal space leased to a Signatory Airline for its exclusive 

use; and, with respect to the Airline, as shown on Exhibits B and C. 

"Executive Director" means the chief executive officer of the Port or his or her delegates 

including without limitation, the Director of Aviation. 

"Expiration Date" means June 30, 2025, the date on which the Signatory Agreement 

expires. 

5 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Federal Aviation Administration" or "FAA" means the federal agency within the U.S. 

Department of Transportation that is responsible for the safety and efficiency of aviation 

operations. 

"Fiscal Year" means the annual accounting period of the Port for its general accounting 

purposes, which is currently the period of twelve (12) consecutive calendar months commencing 

July 1 and ending June 30. 

"Gate Position" means passenger gate(s), including Aircraft Apron, holdroom, aircraft 

loading bridge (if any), and appurtenant furnishings in and about the Terminal that are 

reasonably necessary for the use thereof.

"Ground Run-up Enclosure" or "GRE" means that facility identified on the Airfield as 

the place where all aircraft engine run-ups must be conducted, unless specifically exempted by 

the Port. 

"Hazardous Substances" means any and all substances defined or designated as 

hazardous, toxic, radioactive, dangerous or regulated wastes or materials, or any other similar 

term in or under any applicable Environmental Law. Hazardous Substance shall also include, 

but not be limited to, fuels, petroleum and petroleum-derived products, and deicing and 

anti-icing materials.

"Hazardous Substance Release" means the spilling, discharge, deposit, injection, 

dumping, emitting, releasing, leaking, migrating, leaching, placing, or seeping of any Hazardous 

Substances into the environment, including air, land, sediment, water, groundwater, and storm 

water, in violation of any applicable Environmental Law, except as specifically authorized by a 

valid permit issued under applicable Environmental Laws. 

"International Arrival Facility" or "IAF" means the U.S. Customs and Border 

Protection clearing facility through which international passengers must pass.

"IAF Fees" means the Revenues received from Air Carriers for use of the IAF and 

associated services provided in conjunction with IAF use. 

"IAF Rate" means the rate charged to an Air Carrier for IAF use.

"Indirect Cost Centers" means those Cost Centers shared by the Signatory Airlines and 

the Port, and include Maintenance, Aviation Security and Public Safety, Airport Rescue and Fire 

Fighting, Operations, Systems and Services, Administration, and Environmental, as more 

particularly described and defined on Exhibit E. 

"Indirect Debt Service" means the principal and interest payments on debt attributable 

to the particular Indirect Cost Center.

"Indirect O&M Expenses" means O&M Expenses which are attributable to Indirect 

Cost Centers.

"Interest Rate Swaps" means a contractual agreement wherein two (2) parties agree to 

exchange ("Swap") certain cash flows for a defined period of time and is an approved financing 

device that the Port is authorized by this Agreement to utilize, in its discretion, in order to 

manage Airport debt. 

6 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Landing Area" means those portions of the Airport provided for the landing, take-off 

and taxiing of aircraft, including without limitation, approach and turning zones, avigation or 

other easements, runways, taxiways, runway and taxiway lights, and other appurtenances in 

connection therewith. 

"Landing Fees" means those fees charged for landing an aircraft, as more particularly 

described in Section 18.2. 

"Legal Holiday" means any holiday observed by the Federal Government. 

"Majority In Interest" or "MII" means the mechanism used by the Airlines to 

disapprove a Capital Expenditure or approve an amendment to this Agreement, as the case may 

be. 

"Maximum Gross Landed Weight" means the maximum gross certificated landing 

weight in one thousand (1,000) pound units for which each aircraft operated by Airline is 

certified by the FAA, or any successor agency thereto.

"Minimum Space Commitment" means a minimum of one hundred (100) square feet 

of Exclusive Space that the Signatory Passenger Airlines are required to lease during the term of 

the Agreement.

"Month-to-Month Space" means those areas of the Terminal that the Port makes 

available for rent on a short term basis, in accordance with the terms and conditions of this 

Agreement.

"Net Requirement" means the annual sum of all expenses and fees, including Debt 

Service Coverage allocated to a particular Cost Center, minus all Offsetting Revenues. 

"Net Revenues" means that amount so defined in Section 2(r) of Ordinance No. 155, as 

amended, and as may be amended from time to time. 

"Non-Airline Revenues" means other revenues associated with the Airfield and 

Terminal Cost Centers, which are not paid by Signatory Airlines (e.g., revenue from aircraft 

parking other than Terminal Apron Fees, military use fees, all Terminal concessions, and 

Terminal Rents from non-airline tenants). 

"Non-Preferential Ground Load Holdroom" means any ground load holdroom not 

assigned by the Port as Preferential Space, and which the Port reserves for the flexible use by any 

Air Carrier serving the Airport. As of the Commencement Date, the Port has designated those 

locations set forth on Exhibit H as Non-Preferential Ground Load Holdrooms. The Port may, 

without adversely impacting existing ground load operations, change these locations from time 

to time during the Term of the Agreement, if other Non-Preferential Ground Load Holdrooms 

aren't available. 

"Non-Revenue Landings" means any aircraft landing by Airline at Airport for which 

Airline receives no revenue, and shall include (a) ferry, test, training, courtesy, inspection or 

other similar flights; (b) any landing of an aircraft which, after having taken off from the Airport 

and without making a landing at any other airport, returns to land at Airport because of 

meteorological conditions, mechanical or operating causes, or any other reason of emergency or 

precaution; or (c) any landing entirely associated with a government operation. 

7 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Non-Signatory Airline" means any Passenger Carrier or Cargo Carrier that has not 

signed this Agreement or a Signatory Cargo Carrier Operating Agreement. Non-Signatory 

Airlines do not have all of the same rights and privileges afforded to a Signatory Airline and are 

charged materially higher rates and fees. 

"Offsetting Revenues" means: (a) with respect to the Airfield Cost Center, including, 

but not limited to, all Revenues other than the Landing Fees of Signatory Airlines; and (b) with 

respect to the Terminal Cost Center, including, but not limited to, all Revenues other than the 

Signatory Airline Terminal Rents. 

"Operating and Maintenance Expenses" or "O&M Expenses" means those expenses 

designated as "Costs of Operation and Maintenance" in Section 13 of Ordinance No. 155. 

"Ordinance" means collectively Ordinance No. 155 and Ordinance No. 323, as 

amended, modified and/or restated, as provided below, and any successor or replacement of such 

ordinance(s). 

"Ordinance No. 155" means the Ordinance enacted by the Port of Portland on 

November 10, 1971, as amended and restated pursuant to Port Ordinance No. 368B, enacted 

October 13, 1993; Port Ordinance No. 375B, enacted August 10, 1994; and Port Ordinance 

No. 393B, enacted February 10, 1999, as it may be further amended, modified, or supplemented 

from time to time. 

"Ordinance No. 323" means the Ordinance enacted by the Port of Portland on 

October 9, 1985, as amended, modified, and supplemented by Ordinance No. 337A, enacted 

October 14, 1987; Port Ordinance No. 323A, enacted August 10, 1988; Port Ordinance 

No. 368B, enacted October 13, 1993; and Port Ordinance No. 375B, enacted August 10, 1994, as 

it may be further amended, modified, or supplemented from time to time.

"Passenger Carrier" means an Air Carrier in the business of transporting persons and 

property by air. 

"Passenger Facility Charges" or "PFCs" means the fee charged to passengers by the 

Airline, on behalf of the Port, in accordance with Federal Law 49 U.S.C. § 40117, and applicable 

implementing regulations adopted by FAA 14 CFR Part 158, as they may be amended from time 

to time. 

"PDX Rules" means the Portland International Airport Rules that are enacted by the 

Director of Aviation, pertaining to the use of the Airport, as they may be amended from time to 

time, by which all Air Carriers, Concessionaires, and others utilizing the Airport must abide. 

The PDX Rules can be found at the following link: 

http://www.portofportland.com/PDFPOP/PDX_Rules_Regulations.pdf. 

"Personal Property" means trade fixtures, signs, cabling, conduit and other property not 

permanently affixed to the Premises.

"Port Cost Center" or "Port Supported Area" means the Cost Center to which 

Revenues and expenses associated with the Ground Transportation Cost Center, the Air Cargo 

Cost Center, the Other Aviation Cost Center, and the Non-Aviation Cost Center, all as described 

and defined on Exhibit E, are allocated. The Port Cost Center shall include a portion of the 

Indirect Cost Centers, as specified on Exhibit E. 

8 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Port of Portland" or "Port" means a port district of the State of Oregon that owns and 

operates the Airport pursuant to ORS 778.005 through ORS 778.990. 

"Preferential Space" means the portion of the Airport leased to the Airline, as shown on 

Exhibits B and C, attached hereto, and to which Airline shall have a higher and continuous 

priority of use over all other Air Carriers and Concessionaires. Said space may also include 

aircraft loading bridges and/or other aircraft support equipment. 

"Premises" means Airline's leased Exclusive Space, Preferential Space, Shared Space, 

Month-to-Month Space, and Kiosks as shown on Exhibit B. 

"Private Passenger Lounge" means any restricted access passenger waiting room, 

lounge or other area leased to the Airline as Exclusive Space to provide special services or 

handling for its preferred passengers, guests or invitees. 

"Public Area" means those areas used by the public within the Airport Terminal and 

concourse areas, including: (a) all concourse corridors and connectors; (b) concession areas; 

(c) ticket lobby; and (d) non-rentable areas.

"Rent" shall include all Terminal Rents, Landing Fees, other rents, charges, fees, fines, 

costs, reimbursements, penalties, taxes, late charges, liquidated damages, and interest of all types 

and of all nature that Airline is required to pay to the Port under this Agreement.

"Revenue Landed Weight" means the sum of the products of the Maximum Gross 

Landed Weight of each type of Airline's aircraft, by the number of Revenue Landings of each 

said aircraft at the Airport.

"Revenue Landings" means an aircraft landing at the Airport in conjunction with a flight 

which is published in the "Official Airline Guide," or for which an Air Carrier makes a charge, or 

for which revenue is derived, for the transportation by air of persons, property or mail. Revenue 

Landings shall not include Non-Revenue Landings. 

"Revenues" has the meaning given to that term in Section 2(w) of Ordinance No. 155, as 

amended, and as may be amended from time to time.

"Revenue Sharing" means that program by which the Port has agreed to share a certain 

amount of Port Cost Center Revenues with the Signatory Airlines, subject to meeting certain 

minimum Net Revenue requirements, in exchange for the Signatory Airlines approval of the 

terms of the Signatory Agreement.

"Risk Mitigation Program" means a program utilized to attract certain targeted new air 

service to the Airport. 

"Scheduled Service" means any flight of an Air Carrier scheduled in the Official Airline 

Guide for the Airport. 

"Security Deposit" means a cash deposit or letter of credit paid by an Air Carrier to the 

Port to secure the performance of the Signatory Passenger Airline Lease and Operating 

Agreement, and the Signatory Cargo Carrier Operating Agreement. 

"Security Screening Areas" means those areas of the Terminal used for the screening of 

passengers and baggage before allowing passengers to enter onto the secured concourses, or 

allowing baggage to be loaded onto an aircraft. 

9 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
"Self Service Kiosks" or "Kiosks" means machines that assist passengers with service 

which include without limitation, check-in, rebooking, pre-boarding purchase of goods or 

services to be consumed in-flight, and baggage location information, but which excludes all 

other sales. 

"Shared Space" means those leased areas of the Terminal whose usage is shared by more 

than one (1) Air Carrier, excluding Baggage Claim Areas and Non-Preferential Ground Load 

Holdrooms and associated Aircraft Aprons. As of the Commencement Date, Shared Space 

includes some Baggage Make-up Areas, corridors and ticket offices. 

"Signatory Airline" means an Air Carrier which has signed a Signatory Passenger 

Airline Lease and Operating Agreement or a Signatory Cargo Carrier Operating Agreement

with the Port which creates certain rights and obligations in the parties pertaining to the use of 

the Airport. 

"Signatory Cargo Airline" means a Signatory Airline which is in the business of air 

transportation of property, but not passengers. 

"Signatory Cargo Carrier Operating Agreement" means the operating agreement 

between the Port and Signatory Cargo Airlines. 

"Signatory Passenger Airline" means a Signatory Airline which is in the business of air 

transportation of passengers and property. 

"Signatory Passenger Airline Lease and Operating Agreement" or "Signatory 

Agreement" means the lease and operating agreement between the Port and Signatory Airlines 

that carry passengers and lease space at the Airport. This Agreement is a Passenger Airline 

Lease and Operating Agreement. This particular Signatory Passenger Airline Lease and 

Operating Agreement is referred to herein as this "Agreement." 

"Sterile Area" means an area, including the Airport concourses, that provides passengers 

access to boarding aircraft and to which the access is controlled by the TSA through the 

screening of persons and property, at a Security Screening Area.

"Tenant Construction Permit Process" means that portion of the Design Review 

Process which reviews and comments on tenant construction documents and which issues a 

written construction permit before commencement of construction by the tenant. 

"Terminal" means: (a) the passenger Terminal building and concourse areas (including 

the areas below the concourses); (b) the enplaning, deplaning, and commercial access roadways 

immediately adjacent to the Terminal (and sidewalks associated therewith); (c) the Public Area; 

(d) the Aircraft Apron; and (e) the Security Screening Areas, all as generally shown on 

Exhibit A. 

"Terminal Cost Center" means the Cost Center to which Revenues and expenses 

associated with the Terminal, including the Aircraft Apron, are allocated. The "Terminal Cost 

Center" shall include a portion of Indirect Cost Centers, as defined in Exhibit E. With respect to 

access roadways which are a part of the Terminal Cost Center: (a) the Terminal Cost Center 

shall pay one hundred percent (100%) of the capital costs of said roadways; (b) the Port Cost 

Center shall pay one hundred percent (100%) of the O&M Expenses; and, (c) the Port Cost 

Center shall receive one hundred percent (100%) of the concession revenues. 

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"Terminal Rents" means all Rents charged by the Port for Airline's use of the Terminal.

"Transportation Security Administration" or "TSA" means the United States 

Transportation Security Administration with jurisdiction over Airport security.

"Uncured Event of Default" means those Events of Default that are not timely remedied 

as more specifically described in Section 31.2. 

"United States Customs and Border Protection" or "CBP" means that federal agency 

within the U.S. Department of Homeland Security that has jurisdiction over immigration and the 

IAF at the Airport.

"Wireless Communication Services" means the use of regulated or unregulated wireless 

signals between multiple electric devices or objects. This includes, but is not limited to, the 

wireless technologies used by Wireless Fidelity (WiFi), WiMax, Zigbee, cellular phone service 

for data or voice communications, 800MHz radio systems, and Radio Frequency Identification 

Devices or objects. 

Additional words and phrases used in this Agreement, but not defined above, or 

elsewhere in this Agreement, or in the Ordinances referenced above, shall have their usual and 

customary meaning.

2. TERM

2.1 Agreement Term

The 2010 Agreement commenced on July 1, 2010 ("Commencement Date") for a period 

of five (5) years, ending on June 30, 2015. Prior to the expiration of the 2010 Agreement, the 

Signatory Airlines approved an amendment to the Agreement to extend the term for an additional 

ten (10) year period, to be memorialized in an amended and restated agreement ("2015 

Agreement"). The 2015 Agreement shall be binding upon execution and effective July 1, 2015 

and thereafter, unless earlier terminated under its terms, until June 30, 2025 ("Expiration Date"). 

2.2 No Early Termination of Agreement or Return of Leased Space 

There will be no right to terminate this Agreement early, except by the Port due to an 

Event of Default (as defined in Section 31), or as required by law. Airline will not be allowed to 

return any Exclusive Space, Preferential Space, or Shared Space that the Airline leases under this 

Agreement except as provided in Sections 2.3 and 2.4. The Port shall have the right to relocate 

the Airline to comparable Exclusive Space, Preferential Space, or Shared Space when required 

for efficient Airport operations in accordance with the provisions of Section 12.3 and Section 34. 

2.3 July 1, 2015 Space Reduction 

Airline shall have the right to reduce its Exclusive Space, Preferential Space, or Shared 

Space by providing the Port with written notice of its intent to do so not later than 

January 1, 2015. Each Signatory Passenger Airline shall lease a minimum of one hundred (100) 

square feet of Exclusive Space ("Minimum Space Commitment") for the term of the Agreement. 

The resulting change in leased Premises, excluding Month-to-Month Space, and the reduction in 

Rent will be memorialized in an amendment to this Agreement that will become effective on 

July 1, 2015. The Airline will return space in accordance with the terms of this Agreement. The 

Port, in its sole discretion, may elect to reject space changes that result in uneconomic remnants 

of space.

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17.5.2 Terminal Rents for the new service (may include ticket counter, ticket 

office, holdroom, Common Use Space, Self Service Kiosk Fees, Private Passenger Lounge, 

Baggage Make-up Area fees, Baggage Claim Area fees, lower level operations space, baggage 

service office space, Apron fees, loading bridge fees and Bag Make-up conveyor fees), measured 

one (1) year from the date of occupancy of the leased space, or on the one (1) year anniversary of 

the Carrier's first flight of the new non-stop service, whichever occurs first; and

17.5.3 IAF Fees, measured one (1) year from the date of the Carrier's first flight 

of the new non-stop service. 

18. RENTS

18.1 Airline's Financial Responsibility

This Agreement is residual to the extent the Signatory Airlines are obligated to: 

(a) discharge all claims, obligations and indebtedness payable from the Airport Revenues; and

(b) produce Net Revenues in each Fiscal Year sufficient to comply with the minimum rate 

covenant of Ordinance No. 155 and Ordinance No. 323, and for any additional bonds applicable 

to the Airfield Cost Center and Terminal Cost Center. Rent as noted below is subject to 

adjustment as provided in Section 20 in order to meet the requirements of this Section. 

18.2 Landing Fees

18.2.1 Amount of Landing Fees 

Landing Fees shall equal the product of the then current Landing Fees rate by the 

Revenue Landed Weight. The current Landing Fees rate shall be calculated as follows: The 

Airfield Net Requirement shall be allocated between Signatory and Non-Signatory Airlines 

based on landed weight, with the Non-Signatory landed weight being increased by twenty-five 

percent (25%). The allocated Signatory Net Requirement shall be reduced by Revenue Sharing 

allocated to the Airfield. The Signatory Landing Fee rate shall be the reduced allocated 

Signatory Net Requirement divided by Signatory landed weight. Signatory Landing Fees are 

subject to adjustment as provided in Section 20.3. The Non-Signatory Landing Fee rate shall be 

the allocated Non-Signatory Net Requirement divided by Non-Signatory landed weight. 

18.2.2 Reporting of Landing Fees 

The Airline shall report payment for Landing Fees on the form described in 

Section 18.21 and shall include a report of monthly Revenue Landed Weight which supports the 

calculation of the Landing Fees. The Port, however, reserves the right to use other reasonable 

and accurate systems or procedures to determine usage to generate invoices for Airline Landing 

Fees. If the Port invoices the Airline based on an alternative source, the Airline shall have the 

right to review and provide additional information to the Port justifying the Airline's position. 

18.3 Aircraft Parking Fees

The Port shall set rates for aircraft parking and may adjust those rates from time to time. 

Air Carriers who elect to park aircraft will self-report all usage on their monthly landing and gate 

use report. The Port, however, reserves the right to use other reasonable and accurate systems or 

procedures to determine usage and to bill the Airline for their use of aircraft parking areas. If the 

Port invoices the Airline based on an alternative information source, the Airline shall have the 

right to review and provide additional information to the Port justifying the Airline's position. 

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18.4 Aircraft Apron

18.4.1 Aircraft Apron Fees 

For Aircraft Aprons associated with holdroom(s) classified as Preferential Space, 

the Airline shall pay to the Port as follows, adjusted pursuant to Section 18.4.2: 

(a) for each wide-body Aircraft Apron, TWENTY EIGHT THOUSAND SIX 

HUNDRED TWENTY DOLLARS AND NO CENTS ($28,620.00) per year. 

(b) for each narrow-body Aircraft Apron, NINETEEN THOUSAND 

EIGHTY DOLLARS AND NO CENTS ($19,080.00) per year. 

(c) for ground-load Aircraft Aprons capable of simultaneous use by more than 

one (1) aircraft, SEVEN THOUSAND SIX HUNDRED THIRTY-TWO DOLLARS AND NO 

CENTS ($7,632.00), multiplied by the number of parking positions, per year. 

(d) for Aircraft Aprons capable of simultaneous use by more than one (1) 

aircraft and which are associated with a Non-Preferential Ground Load Holdroom, SEVEN 

THOUSAND SIX HUNDRED THIRTY-TWO DOLLARS AND NO CENTS ($7,632.00), 

multiplied by the number of parking positions, per year. The Airline's portion for said Aircraft 

Apron(s) shall be prorated, based upon the Airline's percentage of the total Enplaned Passengers 

among all the Air Carriers using said Aircraft Apron(s). For the purpose of the calculations of 

this Section, the provisions of Section 18.23 shall apply. 

(e) for any other Aircraft Apron, the Airline shall pay an amount agreed upon 

by the Port and the Airline. 

18.4.2 Adjustments to Aircraft Apron Rates

The Aircraft Apron Fees described in Section 18.4.1, excepting those in 

Section 18.4.1(e), shall be increased by the Consumer Price Index each Fiscal Year, commencing 

July 1, 2011. The Consumer Price Index Rate shall be an amount calculated by increasing the 

then current Agreement rates by a percentage equal to the Port's calculation of the percentage 

change over the preceding twelve (12) month period of the Consumer Price Index - U.S. City 

Average for all Items for All Urban Consumers (1982- 84=100) published in the Monthly Labor 

Review by the Bureau of Labor Statistics of the United States Department of Labor ("CPI-U") 

using the CPI-U published sixty (60) calendar days prior to July 1, of each Fiscal Year during the 

Term of this Agreement as the ending date of the twelve (12) month period. In the event that the 

CPI-U for the relevant period decreases, the rate will remain the same as that of the prior twelve 

(12) month period. 

18.5 Rent for Exclusive Space, Preferential Space, Shared Space, and 

Month-to-Month Space

Monthly Rent for Exclusive Space, Preferential Space, Shared Space and 

Month-to-Month Space is shown on Exhibit C, and is subject to adjustment as provided in

Section 20.3. 

18.6 Baggage Make-up Overflow Area

Airline shall pay a fee for the use of the Baggage Make-up Overflow Areas as described 

in Section 12.2.3. The Port will invoice the Baggage Consortium for these fees. The fee shall be 

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a rate per bag multiplied by the number of out-bound bags sent to the Baggage Make-up 

Overflow Area for Airline. The rate per bag shall be equal to the cost of all Baggage Make-up 

Areas before any reduction for Revenue Sharing, divided by the number of out-bound bags 

processed by the baggage sorting system. 

18.7 Baggage Claim Area 

18.7.1 Baggage Claim Area Rent Allocation 

The Port shall invoice the Airline monthly for the Airline's share of Rent for the 

Baggage Claim Area, as determined in Section 18.7. Rent for the Baggage Claim Area shall be 

the Net Requirement allocated per Section 19.6.1(b), reduced by fifty percent (50%) of Revenue 

Sharing allocated to the Terminal. Rent for the Baggage Claim Area is calculated and paid, as 

follows: (a) ten percent (10%) of the total amount calculated for the Baggage Claim Area shall 

be divided equally among all Air Carriers, except those qualifying as exempt under 

Section 18.7.3. The Air Carriers shall be obligated for this amount throughout the Term of this 

Agreement regardless whether the Air Carriers continue to operate at the Airport and regardless 

how much the Air Carriers use the Baggage Claim Area; (b) ninety percent (90%) of the total 

amount calculated for the Baggage Claim Area shall be prorated, based upon the actual number 

of outbound bags that enter the baggage handling system. Rent for the Baggage Claim Area is 

subject to adjustment as provided in Section 20.3. 

18.7.2 Reporting Baggage Claim Use 

In order for the Port to calculate the cost of the Airline's utilization of the Baggage 

Claim Area, the Airline shall provide the Port with information as required in Section 18.21. 

The Port may use other reasonable and accurate alternate sources of information to calculate said 

amount. If the Port invoices the Airline based on an alternate source, the Airline shall have the 

right to review and provide additional information to the Port justifying the Airline's position. 

18.7.3 Air Carriers Exempt from Baggage Claim Ten Percent (10%) 

Component

The following classes of Air Carriers shall be exempted from Section 18.7.1(a) if: 

(a) the only aircraft used by the Air Carrier at the Airport has less than a twenty (20) seat 

capacity; (b) the Air Carrier is an Affiliate that uses the Airport solely as an Affiliate (because 

the Air Carrier who contracts with the Affiliate is subject to Section 18.7.1); or (c) the Air 

Carrier provides service to Airport on an occasional unscheduled basis. 

18.8 Non-Preferential Ground Load Holdrooms

The Port shall invoice Airline monthly for Airline's share of the Rents for 

Non-Preferential Ground Load Holdrooms. Airline's share shall be calculated as follows: 

Airline's percentage of the total Enplaned Passengers among all the Air Carriers using said 

Non-Preferential Ground Load Holdrooms, multiplied by the product of the amount of holdroom 

space and the holdroom rate, as calculated in accordance with Section 19. Rent for 

Non-Preferential Ground Load Holdrooms is subject to adjustment as provided in Section 20.3. 

In order to allow the Port to calculate Airline's share, Airline shall provide the Port with its use 

information, in accordance with Section 18.21 and Section 18.23. The Port may use reasonable 

and accurate alternate sources of information to calculate said Airline's share. If the Port 

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invoices Airline based on an alternate source, Airline shall have the right to review and provide 

additional information to the Port justifying the Airline's position. 

18.9 Self Service Kiosks

The Airline Kiosks located outside leased Premises shall bear a monthly fee ("Kiosk 

Fee") calculated based on the number of the Airline's Kiosks outside the Premises, times nine (9) 

square feet, times the rental rate for Type 1-(ATI) Self Service Kiosks or, in the Port's sole 

discretion, by the number of monitor screens. If the Port determines the Kiosk occupies more 

than nine (9) square feet, the Port may charge the Airline for additional square footage or deny 

the request for placement outside the Premises. The Kiosk Fee shall be adjusted subject to the 

provisions of Section 20.3, and shall be due and payable to the Port at the beginning of each 

month. There is no additional charge for Kiosks located within the Premises.

18.10 Common Use 

18.10.1 Common Use Ticket Counters

Airline shall pay for the use of Common Use Ticket Counters at rates based on 

the daily average cost, which cost is not reduced by Revenue Sharing. The rate shall be 

calculated assuming six (6) hourly uses daily. There is no maximum charge for Common Use 

Ticket Counter Rent. See Exhibit L for calculation details.

18.10.2 Common Use Ticket Office 

Common Use Ticket Office space will be charged at Type 2-(ATM) ticket office 

(month-to-month) rates and shall be adjusted subject to the provisions of Section 20.3. 

18.10.3 Common Use Gates

Airline shall pay for the use of Common Use Gates at rates based on the costs of 

gates needed for flights not handled at leased gates. The rates shall include a fee for active use of 

the gate, and a fee for remaining at the gate overnight. The Port, in its sole discretion, shall 

determine the number of gates reasonably required to handle these flights and will periodically 

review the number of gates at least annually. The rates shall be computed using an allocation of 

the Terminal Net Requirement, which allocation shall be increased prorata by the square footage 

of the unleased holdrooms. The result shall be divided by the number of holdrooms which have 

loading bridges. The resulting cost per holdroom shall be multiplied by the number of Common 

Use Gates to determine the holdroom cost to be recovered by Common Use Gate fees. The 

holdroom cost shall be added to the Apron Fees associated with the Common Use Gates, and the 

equipment Rent for loading bridges at the Common Use Gates and Common Use Equipment fees 

to determine the total to be recovered. The total of those costs shall be reduced by the fees for 

remaining at the gate overnight. The remainder shall be divided by the number of flights to 

establish the rate for active use of the gate. The rate shall not be reduced by Revenue 

Sharing. The rates established by this Section shall not be subject to adjustment as provided in 

Section 20.3. 

18.10.4 Common Use Kiosks

The Airline shall pay an annual fee for use of Common Use Kiosks. The fee shall 

not be pro-rated for any part of the Fiscal Year and shall be calculated as follows: the number of 

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Common Use Kiosks times nine (9) square feet, times the rental rate for Type 1-(ATI) space, 

divided by the number of airlines using Common Use Kiosks.

18.11 IAF Rent Allocation 

The Port shall invoice the Airline monthly for the Airline's share of Rent for the IAF. 

Rent for the IAF shall be calculated as the product of the applicable Terminal Rent rate, 

determined in accordance with Section 19 for each type of space, subject to adjustment by the 

provisions of Section 20.3, and the amount of each type of space. Airline's share shall be 

calculated as follows: Airline's percentage of the Deplaned Passengers using the IAF among all 

Deplaned Passengers using the IAF for all Air Carriers, multiplied by the Rent for the IAF. The 

amount of space for the IAF and the related Baggage Claim Area is calculated as follows: (a) if 

more than 100,000 and less than 300,000 Deplaned Passengers use the IAF in a Fiscal Year, the 

IAF space and the related Baggage Claim Area shall be reduced two thirds (2/3); (b) if more than 

300,000 and less than 500,000 Deplaned Passengers use the IAF in a Fiscal Year, the IAF space 

and the related Baggage Claim Area shall be reduced one third (1

/3); (c) if more than 500,000 

Deplaned Passengers use the IAF in a Fiscal Year, the IAF space and the related Baggage Claim 

Area shall not be reduced; (d) if less than 100,000 Deplaned Passengers use the IAF in a Fiscal 

Year, the IAF space and the related Baggage Claim Area shall be reduced one hundred percent 

(100%); the Airlines shall pay for use of the IAF per Section 18.11.2. All Air Carriers shall pay 

for the related Baggage Claim Area per Section 18.7. 

18.11.1 Reporting IAF Use 

In order to allow the Port to calculate the Airline's share amount for IAF use, the 

Airline shall provide the Port with the required information, as set forth in Section 18.21 and

Section 18.23. The Port may use other reasonable and accurate alternate sources of information 

to calculate said amount. If the Port invoices the Airline based on an alternate source, the Airline 

shall have the right to review and provide additional information to the Port justifying the 

Airline's position. 

18.11.2 IAF Rate for Reduced IAF Usage

If the number of Deplaned Passengers using the IAF in a Fiscal Year is less than 

100,000, the Airlines shall pay IAF Fees equal to the IAF Rate multiplied by the number of 

Deplaned Passengers using the IAF for that Fiscal Year. As of the Effective Date, the IAF Rate 

is FIVE DOLLARS AND NO CENTS ($5.00), per passenger, and will increase by three percent 

(3%) as of July 1 of each Fiscal Year beginning July 1, 2011, throughout the Term of this 

Agreement. The IAF Rate for reduced usage may not be sufficient to generate IAF Fees to pay 

all O&M Expenses and debt service requirements of the IAF. The Passenger Carriers pay the 

difference (if any) as part of Terminal Rent. 

18.12 Annual Equipment Rent

"Annual Equipment Rent" for equipment owned by the Port and leased to the Airline 

shall be in addition to the Rent charged for space leased to the Airline. For the purposes of 

calculating the annual capital costs referred to below, the useful life of aircraft loading bridges 

shall be fifteen (15) years; the useful life of conveyor systems shall be ten (10) years; and the 

useful life of tenant improvements shall be ten (10) years. Annual Equipment Rent thus shall be 

calculated as follows:

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18.12.1 Loading Bridges 

Annual Equipment Rent for each aircraft loading bridge shall be the average of 

the capital costs, including Debt Service Coverage and Port incurred O&M Expenses for all such 

aircraft loading bridges. Rent for loading bridges is subject to adjustment as provided in 

Section 20.3. 

18.12.2 Baggage Make-up Conveyor System 

Annual Equipment Rent for Baggage Make-up conveyor system shall be equal to 

the Port incurred O&M Expenses for the Baggage Make-up conveyors. Rent for the Baggage 

Make-up conveyor system is subject to adjustment as provided in Section 20.3. The Port will 

invoice the Baggage Consortium for these charges. The Airlines shall individually or, through 

their Baggage Consortium, provide the Port with a monthly report of the actual number of bags 

handled on their behalf in accordance with Section 18.21. 

18.12.3 Tenant Improvements

Annual Equipment Rent for tenant improvements shall be equal to the capital 

costs including Debt Service Coverage. 

18.12.4 Other Equipment

Any other equipment owned by the Port and leased by the Airline shall bear an 

Annual Equipment Rent equal to the capital costs, including Debt Service Coverage and Port 

incurred O&M Expenses for each such piece of equipment. 

18.13 Billable Fees for Equipment

The Port may charge the Airline directly for repairs and/or O&M Expenses for 

equipment, which the Port reasonably believes to be beyond normal wear and tear, and which the 

Port reasonably believes to be caused by the Airline. Any such items charged to the Airline shall 

be excluded from the calculation of O&M Expenses in Section 18.12. 

18.14 Non-Signatory Premium 

The Non-Signatory Airlines, excluding Affiliates to the extent provided in Section 33.6, 

shall pay a twenty-five percent (25%) premium for the lease of all Month to Month or long term 

space at the Airport as well as: (a) allocated costs of Baggage Claim Areas, Non-Preferential 

Ground Load Holdrooms, the International Arrival Facility, Common Use Self Service Kiosks, 

Baggage Make-up conveyors and Overflow Baggage Make-up Areas; and (b) fees for Common 

Use Gates, Common Use Ticket Counters, Common Use Ticket Office, Apron Fees and loading 

bridges. 

18.15 Other Charges

18.15.1 Taxes 

The Airline agrees to pay when due all taxes, assessments, user fees, and other 

charges, however named, which after the Effective Date and before the termination of this 

Agreement may become a lien, or which may be levied by the state, county, city, district or any 

other body upon the Premises, or improvements thereto, or upon any interest of the Airline 

acquired pursuant to this Agreement, or any possessory right which the Airline may have in or to 

the Premises or the improvements thereon by reason of its occupancy thereof, as well as all 

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taxes, assessments, user fees or other charges on all property, real or personal, owned by the 

Airline in or about said Premises (collectively, "Taxes"), together with any other charge levied 

wholly or partly in lieu thereof. If available by law, rule or order of the taxing authority, the 

Airline may, but only with the Port's prior written consent, which consent shall not be

unreasonably withheld, make payments in installments, as allowed by Multnomah County. To 

the extent that the Airline qualifies for tax-exempt status, the Airline may apply for such 

exemption; however, unless an exemption is obtained, the Airline shall pay all Taxes due under 

this Section. The Airline may contest the validity of an assessment against the Premises so long 

as the Airline deposits with an escrow agent approved by the Port, with irrevocable instructions 

to pay such funds to the taxing authority upon written instruction from the Port, sufficient funds 

to satisfy any amount determined to be owing at the conclusion of the proceeding to contest the 

assessment. In the event that the Airline fails to pay Taxes on or before their due date, then, in 

addition to all other remedies set forth in Section 31, the Port shall automatically have the right, 

but not the obligation, to pay the Taxes and any interest and penalties due thereon, with notice to 

the Airline, and the Airline shall promptly reimburse the Port for any sums so paid. The Airline 

understands that the Premises is exempt from real property taxes until leased to a taxable entity. 

In the event that the Term of this Agreement ends after the end of any tax year, the Airline, 

unless exempt, shall be responsible for payment of property taxes for the entire tax year without 

proration, or, in the event of any change in property tax law, for any taxes due under such law 

(currently, the Multnomah County tax year runs from July 1 to June 30), and such taxes shall be 

paid, in full by Airline, on or before termination of this Agreement. 

18.15.2 Other Taxes, Assessments, and Licenses

The Airline shall, at its own expense, obtain all permits, licenses, approvals and 

certificates and pay all Taxes, assessments, fees and charges owed by the Airline, as required by 

any regulation, or any law of the City of Portland, County of Multnomah, State of Oregon, the 

United States, or other governmental body with regard to the business to be conducted by the 

Airline on the Airport, or within its Airline Premises pursuant to the terms of this Agreement. 

The Airline may, however, at its own risk, cost, and expense, and at no cost to the Port, contest 

by appropriate judicial or administrative proceedings, the applicability or amounts of any such 

Taxes, assessments, fees and charges. 

18.15.3 Miscellaneous Charges to Airline

The Port may assess reasonable and non-discriminatory charges for miscellaneous 

facilities, activities, items or services provided to, or performed for Airline by the Port, but only 

if such charges, facilities, activities, items or services are either: (a) not specifically addressed in 

this Agreement and are accepted by the Airline; or (b) mandated by a governmental body or 

agency other than the Port. 

18.16 Payment Due Dates

All Rent payments for leased or rented space are calculated on a per day basis. The 

Airline shall pay: (a) Exclusive Space; (b) Preferential Space; (c) Shared Space; 

(d) Month-to-Month Ticket Office; (e) Self Service Kiosk Rent; (f) Baggage Claim Area fees; 

(g) Baggage Make-up conveyor Rent and equipment fees; and the (h) Aircraft Apron Fees 

specified in Section 18.4.1 in advance on or before the first (1st) day of each calendar month. For 

ease of payment and administration, the Airline and the Port have agreed to the payment 

schedule set forth in this Section, and as summarized for the Airline's ease of reference on 

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Exhibit C-1, with the express understanding that in the event of a bankruptcy filing, Rent is due 

each day and Rent for each and every day following the date of the bankruptcy filing is agreed to 

be a post petition obligation of the Airline. The Airline shall pay its charges for Landing Fees 

and IAF Fees within thirty (30) calendar days following the last day of each calendar month, 

without demand or invoice. The Airline's Non-Preferential Ground Load Holdroom rentals, 

Common Use Space rentals, Aircraft Apron Fees prorated per Section 18.4.1(d), employee 

parking fees, and all other charges permitted hereunder shall be due within thirty (30) calendar 

days of the Port's invoice therefore. In the event the Effective Date or the Expiration Date or 

earlier termination date with respect to any of the Premises, facilities, rights, licenses, services or 

privileges as herein provided falls on any date other than the first or last day, respectively, of a 

calendar month, the applicable Rent for that month shall be paid for said month on a pro rata 

basis according to the number of days during which said particular Premises, facilities, rights, 

licenses, services or privileges were enjoyed during that month. Notwithstanding the foregoing, 

Aircraft Apron Fees associated with a Non-Preferential Ground Load Holdroom, 

Non-Preferential Ground Load Holdroom rentals, Baggage Make-up conveyor fees and Baggage 

Claim Area fees shall be paid in the manner provided in Sections 18.4.1(d), 18.8, and 18.12.2. 

Payment of Rent and other amounts due under this Agreement shall be made without offset, 

abatement or deduction, to the Port at the address set forth in Section 18.17, or such other place 

as the Port may designate. 

18.17 Place of Payment 

All payments required of Airline by any section of this Agreement shall be made to the 

following address: 

Port of Portland 

P.O. Box 5095 

Portland, Oregon 97208-5095 

or to such other address as the Port may substitute therefore, in accordance with the requirements 

of Section 36.25. 

18.18 Delinquency Charge

All Rent and other amounts not paid when due shall bear a delinquency charge of 

eighteen percent (18%) per annum ("Delinquency Charge"), or the maximum rate of interest 

allowed by law, whichever is less, from the date such Rent or other amount is due until paid in 

full. The Delinquency Charge is subject to periodic change by the Port. No change shall occur, 

however, without at least thirty (30) calendar days prior written notice to the Airline. Imposition 

of a Delinquency Charge shall not constitute a waiver of any other remedies available to the Port 

for Airline's failure to timely pay Rent or any other amounts.

18.19 Returned Checks

If the Airline's check for payment of Rent, or any other amount due under this 

Agreement, is returned to the Port for any reason, the payment shall be considered not to have 

been made and shall be delinquent. In addition to the Delinquency Charge, the Port may charge 

the Airline a returned check fee of FIFTY DOLLARS AND NO CENTS ($50.00) per returned 

check, which the Airline agrees is a reasonable fee for the additional administrative time and 

expense incurred by the Port in having to deal with the returned check. The Delinquency Charge 

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shall continue to accrue until the returned check fee is paid, the check can be cashed, and the Port 

receives all funds due.

18.20 Transition Payment 

If, for any reason, execution of this Agreement follows the Effective Date, the Port shall 

invoice the Airline and the Airline shall pay within thirty (30) calendar days following receipt of 

said invoice, a one (1) time billing adjustment for the period between the Effective Date and the 

execution date of this Agreement. Such invoice shall be based upon the activity of the Airline 

during said period, the space actually occupied by the Airline, and the rentals, fees, and charges 

established in this Agreement.

18.21 Reports to be Supplied by Airline

Unless and until the PDX baggage handling system is commissioned, and during any 

periods of system malfunction, each airline shall provide reports to the Port. Not later than five 

(5) Business Days after the end of each month, the Airline shall file with the Port separate 

reports, on form(s) provided by the Port or forms approved and accepted by the Port: (a) for 

activity conducted by the Airline during said month at the Airport; (b) for any aircraft flights, 

scheduled or non-scheduled, handled by the Airline for other aircraft operators not having an 

agreement with the Port; (c) for actual outbound baggage counts that enter the baggage handling 

system; and (d) for activity conducted by any Affiliate(s) during said month at the Airport 

(collectively, "Monthly Reports"). The Port prefers that the Airlines submit reports 

electronically but will accept timely filed hard copy reports. The Port reserves the right to 

collect and use information for the calculation of Rent from other reasonable and accurate 

sources. If the Port uses information from other sources for the calculation of Rent, the Airline 

has the right to review and provide additional information justifying the Airline's position. 

Notwithstanding the foregoing, if Airline is no longer serving Airport, Airline is released of the 

monthly reporting obligation until Airline resumes service to Airport.

18.22 Information to be Supplied by the Port

Not later than the twentieth (20th) day of each month, the Port shall post a composite 

statistical report for the preceding month on the Port of Portland website, 

http://www.portofportland.com/Aviation_Stat.aspx. 

18.23 Calculation of Deplaned Passengers and Enplaned Passengers 

The Airline's Deplaned Passengers and Enplaned Passengers totals shall include, in 

addition to the Deplaned Passengers and Enplaned Passengers directly served by the Airline, the 

number of Deplaned Passengers and Enplaned Passengers for Affiliates, plus the number of 

Deplaned Passengers and Enplaned Passengers handled by the Airline for other Air Carriers who 

do not have an agreement with the Port. 

18.24 Invoices Upon Airline Failure to Supply Required Information

In the event the Airline fails to submit the Monthly Report required by Section 18.21 

when due, the Port shall base its invoice for Rent upon the most recent data transmitted by the 

Airline to the Port, with such charges to be adjusted as necessary on the next succeeding 

payment date. If statistical data to be submitted by the Airline continues to be unavailable in the 

next succeeding month, the Port may consider such conduct to be an Event of Default (as defined 

in Section 31) and/or the Port may develop estimates as to the Airline's monthly activity at one 

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hundred twenty percent (120%) of the Airline's highest monthly activity level during the 

preceding six (6) months for use in the calculation of Rent until such time as actual data is 

available, at which time the Airline shall pay any additional amount due within thirty (30) 

calendar days of the date of the Port's issuance of its billing. In the event said actual data 

establishes that the Airline has been overcharged as a result of the estimate, then the Airline shall 

be entitled to an offsetting credit for any future amounts due for the same Rent. 

18.25 Acceptance of Payment Is No Waiver 

The acceptance by the Port of any Airline payment shall not preclude the Port from 

verifying the accuracy of the Monthly Reports on which Rent is based, and shall not be 

construed as a waiver of any balance which may be due from the Airline. In the event any such 

balance is found to be due from the Airline as the result of an audit pursuant to Section 18.27, 

interest shall accrue thereon from the date the payment was originally due, at the Delinquency 

Charge.

18.26 Late Monthly Reports

The parties acknowledge that the Port incurs additional administrative expense if 

Airline's Monthly Reports, as described in Section 18.21, are not completed and received by the 

due date of each Report. To compensate the Port for this administrative expense, Airline agrees 

to pay the Port TWO HUNDRED FIFTY DOLLARS AND NO CENTS ($250.00) per month, as 

a reasonable fee to compensate the Port for its additional administrative costs, for each Monthly 

Report which is not complete and received by its due date. Said TWO HUNDRED FIFTY 

DOLLARS AND NO CENTS ($250.00) payment shall be paid within thirty (30) calendar days 

of the Port's invoice. 

18.27 Audit of Airline Records

The Airline shall at all times maintain, for a period of at least six (6) years, following 

expiration of the Agreement, its books, records, ledgers, accounts or other records ("Records") 

containing entries as are relevant to the determination and verification of any Rents, fees or 

charges under this Agreement. All such Records shall be kept in accordance with generally 

accepted accounting principles, consistently applied, showing in detail all business done or 

transacted in, on, about or from or pertaining to the Airport, and shall be sufficient to permit the 

Port to calculate and verify the fees and charges due under this Agreement. The Port shall have 

the right, upon reasonable notice, during reasonable business hours, and in a manner that is not 

unduly disruptive to the Airline, to conduct an audit, examination, or inspection of the Airline's 

original Records and computerized systems relating to the Airline's operations in order to 

determine the accuracy of the fees and charges paid by the Airline to the Port. The Airline 

agrees to reasonably accommodate the Port's representatives by providing adequate workspace 

(including electrical outlets and phone access), allowing photocopying of any records and 

documents, allowing access to fax machines and other needed office equipment, and allowing 

the interviewing of such employees as the representatives deem necessary to conduct and support 

their audit. The Airline shall, if requested, freely lend assistance in making such audit, 

examination or inspection; and, if such Records are maintained in electronic and other machine 

readable format, shall provide the Port and/or its representatives such assistance as may be 

required to allow complete access to such Records within fifteen (15) Business Days from the 

original request. If the Airline does not make the Records available within fifteen (15) Business 

Days, a charge of ONE HUNDRED DOLLARS AND NO CENTS ($100.00) per day, which the 

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parties hereby agree is a reasonable amount to cover the Port's administrative expenses of 

enforcing compliance with this Section, for each day the Records are late, will accrue and be due 

and payable to the Port. In those situations where the Airline's Records have been generated 

from computerized data, the Airline agrees to provide the Port's representative with extracts of 

data files in a computer readable format on data disks, e-mail with attached files or suitable 

alternative computer data exchange formats. If such Records are maintained outside the City of 

Portland, Oregon, the Airline shall make provisions to transfer the documents to Portland, but if 

the Airline fails to provide all required documentation to a location within Portland, Oregon, the 

Airline agrees, subject to the limitation below, to reimburse the Port for expenses incurred in 

sending representatives to wherever such Records are maintained. Such expense will include 

transportation, lodging, food and other out of pocket expenses resulting from the necessity to 

leave Portland, Oregon. If the result of any audit reveals an underpayment by the Airline of 

more than three percent (3%) of fees and charges due pursuant to this Agreement: (a) Airline 

shall, within thirty (30) calendar days following issuance of the Port's invoices therefore, pay the 

balance owed, plus interest thereon at the rate specified in Section 18.18, from the date originally 

due; and (b) all costs and expenses of the audit incurred by the Port hereunder shall be paid by 

the Airline and credited by the Port to the appropriate Cost Center of the Airline Supported Area. 

If the result of any audit reveals an overpayment by the Airline of more than three percent (3%) 

of Rents due pursuant to this Agreement, the Port shall, within thirty (30) calendar days 

following the discovery of the Airline's overpayment, pay the Airline the overpaid amount. The 

Port's right to inspect and audit Airline Records shall survive the expiration or early termination 

of this Agreement. 

19. TERMINAL RENT

Terminal Rent for Exclusive Space, Preferential Space, Shared Space, the Baggage Claim Area, 

the International Arrival Facility, Month-to-Month Space, Common Use Ticket Offices, Self 

Service Kiosks and Non-Preferential Ground Load Holdrooms shall be effective July 1 of each 

Fiscal Year and shall be calculated according to the methodology described in this Section. 

19.1 Terminal Requirement

The Terminal requirement shall be calculated by summing the following elements: 

(a) the total annual Direct O&M Expenses and Indirect O&M Expenses allocated to the Terminal 

Cost Center; (b) the total annual Direct and Indirect Debt Service allocated to the Terminal Cost 

Center; and (c) annual Debt Service Coverage on Direct and Indirect Debt Service allocated to 

the Terminal Cost Center.

19.2 Terminal Net Requirement

The Terminal Net Requirement shall be calculated by subtracting the following items 

from the Terminal requirement: (a) loading bridge fees; (b) Baggage Make-up conveyor systems 

fees; (c) tenant improvement fees; (d) reduced IAF Fees per Section 18.11.2; (e) Common Use 

Space fees; (f) Common Use Kiosk fees; (g) Aircraft Apron fees; (h) Overflow Baggage 

Make-up Area fees; (i) other Terminal Rents; (j) Non-Airline Revenues, both direct and indirect, 

allocated to the Terminal Cost Center; and (k) interest income allocated to the Terminal from the 

Airport Fund. 

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19.3 Weighted Values Table 

The Port and the Airline desire to use existing Terminal space in a manner that postpones 

or minimizes new construction. Accordingly, to encourage the efficient use of space, the 

Terminal Rents are calculated using the following weighted values:

Coded Type of Space Description Weight Value

1-(ATC) Ticket Counters 1.00

1-(ATI) Self Service Kiosks 1.00

2-(ADA) Departure Area (Holdrooms) .90

2-(APL) Passenger Lounges .90

2- (ATO) Ticket Offices .90

2-(ATM) Common Use Ticket Offices .90 

3-(AUA) Upper Levels Area .75 

3-(ABC) Joint Baggage Claim .75

4-(ASO) Baggage Service Offices .60

4-(AOM) Operations and Maintenance (lower 

level space) 

.60 

5-(AIA) International Arrival Facility .40

5-(AOB) Baggage Make-up Rooms .40 

6-(AIB) In-bound Baggage Road (Enclosed 

Baggage Road) 

.25 

19.4 Weighted Terminal Space 

Weighted Terminal space shall be the total of the following:

(a) The total of the products of each type of Signatory Passenger Airline Exclusive, 

Preferential and Shared Space, Self Service Kiosks; the portion of the International Arrival 

Facility used by Signatory Passenger Airlines, unless its Rent is computed per Section 18.11.2; 

the portion of Non-Preferential Ground Load Holdrooms used by Signatory Passenger Airlines; 

Common Use Self Service Kiosks square footage; and the appropriate weight from the weighted 

values table in Section 19.3; 

(b) The total of the products of each type of Month-to-Month Space square footage 

and the appropriate weight from the weighted values table in Section 19.3. The total shall be 

increased by twenty-five percent (25%); 

(c) The total of the products of each type of space in the Baggage Claim Areas and 

the appropriate weight from the weighted values table in Section 19.3; 

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(d) The total of the product of leased Common Use Ticket Office space square 

footage and the appropriate weight from the weighted values table in Section 19.3; and

(e) The total of the products of each type of Non-Signatory Airline occupied 

Exclusive, Preferential and Shared Space square footage; the portion of the International Arrival 

Facility used by Non-Signatory Airlines, unless its Rent is computed per Section 18.11.2; the 

portion of Non-Preferential Ground Load Holdrooms used by Non-Signatory Airlines; and the 

appropriate weight from the weighted values table in Section 19.3. The total shall be increased 

by twenty-five percent (25%). 

19.5 Leased Space

The calculation of weighted Terminal space shall exclude: (a) unleased space; (b) all 

Common Use Gates; (c) all Common Use Ticket Counter; (d) Aircraft Parking Aprons; 

(e) Overflow Baggage Make-up Areas; and (f) the International Arrivals Facility if its Rent is 

computed per Section 18.11.2. 

19.6 Terminal Rent Rate 

The allocation of Terminal Net Requirement and Terminal Rent rates shall be calculated 

as follows: 

19.6.1 Allocation of Terminal Net Requirement

The Terminal Net Requirement shall be allocated by weighted Terminal space 

into the following categories:

(a) Signatory Passenger Exclusive, Preferential and Shared Space; Self 

Service Kiosks; the portion of the International Arrival Facility used by Signatory Passenger 

Airlines, unless its Rent is computed per Section 18.11.2; the portion of Non-Preferential Ground 

Load Holdrooms used by Signatory Passenger Airlines; Common Use Self Service Kiosks; and 

Month-to-Month Space. 

(b) the Baggage Claim Areas.

(c) Common Use Ticket Offices.

(d) Non-Signatory Airlines' Exclusive, Preferential and Shared Space; the 

portion of the International Arrival Facility used by Non-Signatory Airlines unless its Rent is 

computed per Section 18.11.2; the portion of Non-Preferential Ground Load Holdrooms used by 

Non-Signatory Airlines.

19.6.2 Terminal Rent Rates for Signatory Space 

The Terminal Rent rates for Signatory Exclusive, Preferential and Shared Space; 

Self Service Kiosks; the portion of the International Arrival Facility used by Signatory Airlines, 

unless its Rent is computed per Section 18.11.2; the portion of Non-Preferential Ground Load 

Holdrooms used by Signatory Airlines; Common Use Self Service Kiosks shall be calculated as 

follows: 

(a) The allocated Terminal Net Requirement from Section 19.6.1(a) shall be

reduced by fifty percent (50%) of Revenue Sharing allocated to the Terminal; 

(b) The weighted Terminal space from Section 19.4(a) and Section 19.4(b) 

shall be combined; 

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(c) the Signatory Type 1-(ATC) Ticket Counters Rent rate shall be calculated 

by dividing the reduced Terminal Net Requirement by the combined weighted Terminal space; 

(d) the Signatory Passenger Airline Rent rate for other space types for areas 

shall be calculated by multiplying the Signatory Type 1-(ATC) Ticket Counters Rent rate by the 

appropriate weight from the weighted values table in Section 19.3; 

(e ) the Signatory Passenger Airline Rent rate for Month-to-Month Space shall 

be calculated by increasing the rates calculated above by twenty-five percent (25%).

19.6.3 Terminal Rent Rates for Common Use Ticket Office Space

The Terminal Rent rates for Common Use Ticket Office Space shall be calculated 

as follows: 

(a) the Terminal Net Requirement allocated per Section 19.6.1(c) shall be 

divided by weighted Terminal space per Section 19.4(d);

(b) the result of step (a) above shall be multiplied by the Type 2-(ATM) Ticket 

Offices weight from the table in Section 19.3. 

19.6.4 Terminal Rent Rates for Non-Signatory Space 

The Terminal Rent rates for Non-Signatory Exclusive, Preferential and Shared 

Space; the portion of the International Arrival Facility used by Non-Signatory Airlines, unless its 

Rent is computed per Section 18.11.2; and the portion of Non-Preferential Ground Load 

Holdrooms used by Non-Signatory Airlines shall be calculated as follows:

(a) the Type 1 - (ATC) Ticket Counters Rent rate shall be calculated by 

dividing the allocated Net Requirement per Section 19.6.1(d) by the weighted Terminal space 

per Section 19.4 (e);

(b) the Rent rate for other space types shall be calculated by multiplying the 

Type 1-(ATC) Ticket Counters Rent rate by the appropriate weight from the weighted values 

table in Section 19.3. 

20. ADJUSTMENTS TO RENT

20.1 Annual and Periodic Rent Adjustments

Rent rates shall be reviewed annually, in conjunction with the Port's budgeting process, 

and may be adjusted effective on July 1 of each Fiscal Year. Any adjustments shall be in 

conformance with the methods and format described in Section 19. In addition, the Port may 

adjust Rent rates in order to remain in compliance with Ordinance No. 155 and Ordinance 

No. 323, with respect to the Airfield Cost Center and the Terminal Cost Center. Such 

adjustments may be made at any time that un-audited monthly Airport financial data indicates 

that total Rent payable pursuant to the then current rate schedule is estimated and anticipated by 

the Port to produce higher or lower Revenues than would be received if rates for Rent were 

based upon more current information. The Port shall provide an adjusted rate schedule to the 

Airline at each adjustment.

20.2 Annual Operating Budget Process

Prior to the inception of a new Fiscal Year, the Port shall provide the Airline with 

electronic access to, or a hard copy of the Port's proposed schedule of Rent rates for the ensuing 

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Fiscal Year. Said rates shall be determined in conformance with the methods described in 

Section 19. Within thirty (30) calendar days after the forwarding of the proposed schedule for 

Rent, the Port and the AAAC shall meet, at a mutually convenient place and time, to engage in 

meaningful discussions regarding the proposed budget and proposed Rent rates. In advance of 

said meeting, the Port agrees to make available any reasonably requested additional information 

related to the determination of Rent rates. The Port desires the input of the members of the 

AAAC regarding the schedule of Rent for the ensuing Fiscal Year. Following this meeting, the 

Port shall finalize the budget and determine Rent. The Port shall thereafter notify the Airline of 

Rent rates established for the ensuing period. The Port shall, upon request, provide the Airline a 

copy of the finalized operating budget. 

20.3 Final Adjustment of Rates after Annual Audit of Port Records 

Within one hundred twenty (120) calendar days following the close of each Fiscal Year, 

or as soon as audited financial data for said Fiscal Year is available, rates for Rent for the 

preceding Fiscal Year shall be recalculated using audited financial data and the methods set forth 

in Section 19. Any difference(s) between the Rent that would have been paid by Signatory 

Airlines using said recalculated rates shall be applied as year end adjustments to the Airport 

accounts. Said adjustments shall be applied to the particular Rent for which a difference(s) in 

rates resulted in overpayment or underpayment of Rent. Any underpayment shall be invoiced by 

the Port and paid by the Airline within thirty (30) calendar days following the issuance of said 

invoice. Subject to the provisions of Section 20.7, any overpayment shall be refunded to the 

Airline within thirty (30) calendar days of its determination. 

20.3.1 Time Limit on Reconciliation

The Port shall not invoice the Airline, and the Airline shall not seek a 

reconciliation reimbursement from the Port for any error in Terminal Rents discovered more than 

six (6) months after the final adjustment of Terminal Rents is issued as provided in Section 20.3. 

This time limit on reconciliation adjustments will not apply to a significant error identified 

through audit findings per Section 18.27 or Section 20.8. 

20.4 Adjustments for Additional Bonds 

For any Capital Improvement in the Airline Supported Area allowed under the provisions 

of Section 24, if the Port intends to finance the Capital Improvement(s) through revenue bonds, 

the Port may adjust Rent to the extent necessary to comply with any earnings test(s) of Section 4 

of Ordinance No. 155 and Section 10 of Ordinance No. 323, for the issuance of additional 

revenue bonds. Prior to adjusting said Rent in the Airline Supported Area as provided in 

Section 20.1, the Port shall ascertain which Cost Centers would benefit from the Capital 

Improvement(s). Rent for those Cost Centers shall then be adjusted to generate the necessary 

Debt Service Coverage required by Ordinance No. 155 and Ordinance No. 323. If the bonds are 

not issued, or if the additional Revenues are no longer required to comply with Ordinance 

No. 155 and Ordinance No. 323 after issuance of the additional bonds, Rent paid by the Airline 

under this Section shall be considered an overpayment by the Airline and shall be credited to the 

Airline in a like manner to that provided for in Section 20.3. 

20.5 No Formal Amendment

Adjustments to Rent pursuant to Section 20 shall apply without the necessity of formal 

amendment of this Agreement by replacing Exhibit C with a new Exhibit C. The new 

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Exhibit C will show the calculation of Rent rates for the Fiscal Year and shall be deemed part of 

this Agreement. 

20.6 Continuation of Unadjusted Rates

If adjustment of Rent is not completed by the Port on or prior to the end of any Fiscal 

Year, Rent then in existence shall continue to be paid by the Airline until adjustment is 

concluded. At the time such adjustment is concluded, appropriate payments by the Airline, or 

credits to the Airline, shall be made to adjust Rent paid to date in said Fiscal Year to the amounts 

that would have been paid had the new Rent rates been effective at the beginning of said Fiscal 

Year.

20.7 Refunds and Payments to the Airline

20.7.1 Source of Funds

Any cash payment of any amounts due to the Airline pursuant to this Agreement, 

except for Revenue Sharing, shall be payable only from funds in or available for deposit in, the 

Airport General Account. Revenue Sharing shall be paid from the Port Cost Center.

20.7.2 Offset for Amount Owed to the Port

Any refund or payment to the Airline pursuant to this Agreement to the extent 

payable under the provisions of Section 22, shall be retained by the Port for offset if Airline is 

not current on payment of all Rent due to the Port. The set-off amounts shall be applied as 

determined by the Port in its sole discretion and may be applied to pay any amounts, including 

amounts that became due prior to the commencement of bankruptcy by the Airline. To the 

greatest extent allowed by law, if the Airline is in bankruptcy, all refunds and all payments will 

be retained by the Port for offset until: (a) the Signatory Agreement has been assumed by the 

Airline and all Rent due under this Agreement has been paid in full; (b) the Signatory Agreement 

has been rejected by the Airline and all Rent and any rejection damages suffered by the Port have 

been paid in full; or (c) the Signatory Agreement expires and all Rent has been paid in full. 

20.8 Port Accounting Covenants 

20.8.1 Maintenance of Books and Records 

The Port shall maintain and keep proper books of account, and observe sound 

business principles for effective and prudent control of operation, maintenance, and 

administration expenses. Except as restricted by law, the Airline shall have the right to 

reasonably inspect the Port's books of account during regular business hours. The Port shall at 

all times maintain and, for a period of at least six (6) years, keep books, records, ledgers, 

accounts or other records ("Port Records") containing entries as are relevant to the determination 

and verification of any Rent, fees or charges under this Agreement. All Port Records shall be 

kept in accordance with generally accepted accounting principles, consistently applied, showing 

in detail all business done or transacted in, on, about or from or pertaining to the Airport, and 

shall be sufficient to permit the Airline to calculate and verify the fees and charges due under this 

Agreement. The Airline shall have the right, upon reasonable notice, during reasonable business 

hours, and in a manner that is not unduly disruptive to the Port, to conduct an audit, examination, 

or inspection of the Port Records and computerized systems relating to the Port's operations in 

order to determine the accuracy of the fees and charges paid by the Airline to the Port. The Port 

agrees to reasonably accommodate Airline's representatives by providing adequate workspace 

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(including electrical outlets and phone access), allowing photocopying of any records and 

documents, allowing access to fax machines and other needed office equipment, and allowing 

the interviewing of such employees as the representatives deem necessary to conduct and support 

their audit. The Port shall, if requested, freely lend assistance in making such audit, examination 

or inspection; and, if such Records are maintained in electronic and other machine-readable 

format, shall provide Airline and/or its representatives such assistance as may be required to 

allow complete access to such records within twenty (20) Business Days from the original 

request.

20.8.2 Calculation Methodology 

The Port shall calculate the Airline's rates for Rent in a manner: (a) that is 

consistent with this Agreement; (b) which shall not render taxable any federally tax exempt 

revenue bonds issued to finance Airport construction; and (c) which includes in the calculation 

Rent rates payable by the Airline those Revenues, expenses, debt service, Debt Service Coverage 

and unpaid Revenues due from any user of the Airline Supported Area, all of which must be 

properly allocable to the Airline Supported Area, together with any payment obligations or costs 

assessed, or expenditures mandated or required by any governmental agency (other than the Port) 

if a direct charge is paid, or accrued, by the Port as a result of the governmental action. Rent 

charged by the Port shall be consistent with federal law or applicable federal policy statements 

with respect to rates and charges. 

21. PASSENGER CHARGES 

21.1 Passenger Facility Charges 

The Port imposes PFCs in accordance with 49 USC 40117 and applicable implementing 

regulations adopted by the FAA, 14 CFR 158, as they may be amended from time to time. The 

Airline acknowledges that the PFCs are Port revenue and that the Airline has no property interest 

in these funds, with the exception of the amounts Airline may withhold constituting "Collection 

Compensation" as that term is defined under 14 CFR 158.53. 

21.2 Miscellaneous Charge to Passengers

To the extent allowed by law, this Agreement shall not preclude the Port from charging 

passengers and other members of the general public any other fees it deems reasonable for use of 

Airport facilities. Notwithstanding the foregoing sentence, the Port will consult with the AAAC 

on any new fee potentially impacting Airline operations in the Terminal. 

22. REVENUE SHARING 

The parties acknowledge that the Port is under no obligation to share Port Cost Center Revenues, 

however, in response to the Signatory Airlines' request, the Port has agreed to share SIXTY

MILLION DOLLARS AND NO CENTS ($60,000,000.00) of Port Cost Center Revenue with 

the Signatory Airlines. The Revenue Sharing will be divided into annual installments of SIX 

MILLION DOLLARS AND NO CENTS ($6,000,000.00) subject to any adjustments, offsets or 

reductions, as set forth in Sections 22.2, 22.3, and 23. 

22.1 Distribution Formula 

Revenue Sharing will be allocated between the Terminal and the Airfield in proportion to 

the Net Requirements of those Cost Centers before Revenue Sharing. With respect to the 

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Terminal, Revenue Sharing will be allocated fifty percent (50%) to offset Terminal rental rates, 

and fifty percent (50%) to offset Baggage Claim Area rates. 

22.2 Discontinuation of Revenue Sharing

Revenue Sharing will only occur to the extent that the Port Cost Center Coverage Ratio 

remains above 2.350. If, at any time during the Term of this Agreement, the scheduled Revenue 

Sharing transfer would cause the Port Cost Center Coverage Ratio to drop below 2.350, then the 

amount of the scheduled transfer will be reduced to a level that will keep the Port Cost Center 

Coverage Ratio level from falling below 2.350. This reduction shall be made without liability to 

the Port and shall not result in any other changes to the terms of this Agreement. If a reduction 

in Revenue Sharing occurs due to the Port Cost Center Coverage Ratio dropping below 2.350, 

the Port shall transfer the reduction in the next year of this Agreement if the Port Cost Center 

Coverage Ratio remains above 2.350 with the shortfall added. This provision shall continue until 

the Port transfers all shortfalls, or this Agreement expires, whichever shall occur first. 

22.3 Additional Revenue Sharing

The Port shall transfer the following percentages of incremental Net Revenues as 

additional Revenue Sharing if the Airport Coverage Ratio exceeds 1.750 after the transfers of all 

shortfalls per Section 22.2. 

Net Revenues above this 

Airport Coverage Ratio 

Net Revenues up to and 

including this Airport Coverage 

Ratio

Percentage of this increment 

paid as additional Revenue 

Sharing 

1.700 1.800 50%

1.800 1.900 25%

1.900 2.000 15%

2.000 0%

A hypothetical example of additional Revenue Sharing calculation is shown on 

Exhibit J. 

23. OPERATING AND MAINTENANCE EXPENSE REBATE PROGRAM 

The Port intends to aggressively manage O&M Expenses. If the Port is able to spend less for 

O&M Expenses than it did for the prior Fiscal Year, the Signatory Airlines have agreed to reduce 

Revenue Sharing pursuant to the calculation provided in this Section. The target for each Fiscal 

Year shall be the prior Fiscal Year's O&M Expenses.

The O&M targets are subject to adjustment upward, based on any change in state or federal law, 

or federal agency directive, that requires additional O&M expenditures that were required in the 

prior Fiscal Year. The Port will advise the AAAC of any such adjustments at the next regularly 

scheduled AAAC meeting. At no time will the amount of a Revenue Sharing reduction exceed 

the amount contributed to total Revenue Sharing by the Port. 

If actual O&M Expenses are less than the target established in any Fiscal Year, Revenue Sharing 

will be reduced as calculated below.

46 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
O&M Expenses Below this 

Percentage of Target

O&M Expenses Down to and 

including this Percentage of 

Target

Revenue Sharing Reduced by 

this Percentage of the 

Increment 

100% 98% 10%

98% 96% 15%

96% 94% 20%

94% 92% 25%

92% 30%

A hypothetical example of a reduced Revenue Sharing calculation is shown on Exhibit J. 

24. AIRPORT CAPITAL IMPROVEMENTS

The Port may not commence construction on any Capital Improvement project that received 

Airline approval under the MII process if the estimate later exceeds one hundred and ten percent 

(110%) of initial estimate approved pursuant to Section 24.5. Instead, the Port will submit the 

project for MII review a second time to obtain approval for the project in light of the new 

construction cost estimate.

24.1 Airport Capital Improvement Program

The parties hereto recognize that capital development of the Airport will be required 

during the Term of this Agreement to preserve, protect, enhance, expand, or otherwise improve 

the Airport, or any part thereof. The Port may, therefore, incur indebtedness and make 

expenditures for Capital Improvements in the Airport. Except as restricted by Section 24, all 

costs associated with Capital Improvements in the Airline Supported Area, including finance 

charges, if any, shall be included in the calculations of Airline Rents. In conjunction with 

issuing additional bonds to pay for Capital Improvements, the Port agrees to pursue and use grant 

funding and other funding sources, such as PFCs, Debt Service Coverage, and Interest Rate 

Swaps, to the extent the Port deems reasonable. 

24.1.1 Capital Improvement Projects Subject to MII Disapproval 

Prior to implementation of any Capital Expenditure with a total cost in excess of 

ONE MILLION DOLLARS AND NO CENTS ($1,000,000.00), the Port will provide the 

following information to the Signatory Airlines on a Project Fact Sheet ("Project Fact Sheet"): 

(a) project name; (b) project number; (c) project description; (d) project schedule; and 

(e) financial information, including total project cost, cash flows, funding plan, the anticipated 

operating cost, and the anticipated impact on Airline Rents as shown on Exhibit K. This 

information will be presented to the AAAC, and will proceed in accordance with the 

MII disapproval process outlined in Section 24.5. Not less than twice annually, the Port will 

report to the AAAC regarding the schedule, budget, and any scope revisions on projects subject 

to the MII process. 

24.1.2 South Runway Pre-Approval 

The Port and Airline acknowledge and agree that the South Runway requires 

substantial repairs and/or rehabilitation within the next two (2) years and that South Runway 

construction must begin during the 2011 construction season. The Port and Airline have agreed 

47 – Amended and Restated Signatory Passenger 

Airline Lease and Operating Agreement

Legal-ltd\Airlines\Alaska Amended and Restated Signatory Passenger 

Agreement (2010-063) -a.docx
Pages Intentionally Omitted
ALLOCATIONS TO COST CENTERS 

1. AIRPORT COST CENTERS: 

Revenues, Direct and Indirect O&M Expenses, Direct and Indirect Debt Service and Capital 

Expenditures shall be allocated to the Cost Centers, generally described as follows: 

1.1 Airline Supported Areas (Direct Cost Centers): 

Airfield 

Tenninal 

The Airfield. 

The Terminal. 

1.2 Port Supported Areas (Direct Cost Centers): 

Ground Transportation 

Air Cargo 

Other Aviation 

Non-Aviation 

1.3 Indirect Cost Centers: 

Operations 

Maintenance 

Systems and Services 

Airport Rescue and 

Fire Fighting 

Aviation Security and 

Public Safety 

Environmental 

Administration 

Areas and facilities accommodating ground transportation, 

including Airport public access roadways (other than those 

which are part of the Terminal), auto parking facilities and 

rental car operation. 

Areas and facilities leased or provided for air cargo activities. 

Areas and facilities provided for aviation activities which are 

not allocated to the Airfield Cost Center, Terminal Cost Center 

or Air Cargo Cost Center. 

Areas and facilities provided for non-aviation activities (e.g., 

commercial and industrial property ground leases). 

Operations activities and facilities which are not attributable 

to any Direct Cost Centers. 

Maintenance activities and facilities which are not attributable 

to any Direct Cost Centers. 

Systems and services, and associated facilities (e.g., sewer, 

water, electrical distribution and heating-ventilation-air 

conditioning system), which are not attributable to any Direct 

Cost Centers. 

Crash, fire and rescue activities and facilities, including those 

required under federal aviation regulations. 

Police activities and facilities, including those required under 

federal aviation regulations. 

Environmental activities and facilities, including control of 

deicing run-off, wildlife control, excluding noise abatement. 

Airport administration activities and facilities. 

EXHIBITE 

Page 1 of2 
2. ALLOCATION OF EXPENSES, REVENUES, DEBT SERVICE AND CAPITAL 

EXPENDITURES FROM INDIRECT COST CENTERS 

2.1 Expenses and Debt Service 

O&M Expenses and debt service for the Indirect Cost Centers shall be allocated to the 

Airfield, Terminal and Port Cost Centers, as indicated below: 

Airfield Terminal Port Cost 

Cost Center Cost Center Centers 

Operations 50% 25% 25% 

Maintenance 15% 52% 33% 

Systems and services 33% 55% 12% 

Aviation security and public safety 13% 61% 26% 

Airport rescue and fire fighting (ARFF) 88% 6% 6% 

Environmental 60% 16% 24% 

Administration Varies Varies Varies 

O&M Expenses and debt service for the Administration Cost Center are allocated to the 

Direct Cost Centers based upon each Direct Cost Center's share of total Direct O&M Expenses. 

2.2 Revenues 

The Revenues for the Indirect Cost Centers are allocated to the Direct Cost Centers in 

proportion to each Direct Cost Center's share of total debt service (i.e., Direct and allocated 

Indirect Debt Service). 

2.3 Allocation of Bond Issues and Debt Service 

Debt service for each bond issue shall be allocated to Cost Centers based on the actual or 

estimated Capital Expenditures funded by that bond issue. 

EXHIBITE 

Page 2 of2 
Pages Intentionally Omitted
EXHIBIT 7 
AIRPORT FINANCE

Information on 

Funding Sources

and Planned Capital 

Development

Report to Congressional Committees

April 2015

GAO-15-306

United States Government Accountability Office

EXCERPT
United States Government Accountability Office

Highlights of GAO-15-306, a report to 

congressional committees

April 2015

AIRPORT FINANCE

Information on Funding Sources and Planned Capital 

Development

Why GAO Did This Study

Roughly 3,300 of the public-use 

airports across the United States have 

been determined by FAA to be 

significant to national air transportation. 

These airports form a national airport 

system intended to provide convenient 

access to air transportation and 

support important national functions, 

such as defense, emergency 

readiness, and postal delivery. These 

airports are eligible to receive federal 

AIP grants to help fund their capital 

development. Commercial service 

airports—if they choose and subject to 

federal approval—are also authorized 

to collect local PFCs from passengers, 

which are also used to fund capital 

development projects.

GAO was asked to provide information 

about airport infrastructure plans and 

funding. This report discusses (1) how 

much national system airports received 

in funding for capital development 

projects from 2009 through 2013 and 

from which sources, (2) the estimated 

costs of airports’ planned capital 

development from 2015 through 2019, 

(3) how past funding levels compare 

with planned development costs, and 

(4) how changes to AIP funding and 

the maximum allowable PFC might 

affect airport funding. GAO analyzed 

funding data and conducted a survey 

of state aviation officials, examined 

reports on airports’ development plans, 

assessed changes included in the 

President’s fiscal year 2016 budget 

proposal, and interviewed FAA 

officials, industry representatives, 

airport financial-consulting firms, and 

bond-rating agencies. 

GAO is not making any 

recommendations in this report. FAA 

reviewed a draft of this report and 

provided technical comments. 

What GAO Found

From 2009 through 2013, national system airports had available an average of 

$10 billion annually for capital development from the following funding sources:

• airport-generated net income ($3.8 billion),

• federal Airport Improvement Program (AIP) grants ($3.3 billion),

• local passenger facility charges (PFC) ($1.8 billion),

• airport sponsor or owner capital contributions ($644 million), and

• state grants ($477 million).

Larger airports (large and medium hubs) obtained more than half of their capital 

development funding from airport-generated net income, while smaller airports 

(small and non hubs and general aviation airports) relied on AIP grants for 69

percent of their funding.

Airports’ planned capital development costs for fiscal years 2015 through 2019 

are estimated at $13 billion annually (in 2013 dollars). Larger airports account for 

65 percent of the planned development. For AIP-eligible projects, the largest 

shares of planned development costs are for projects to reconstruct facilities 

($2.2 billion), meet the Federal Aviation Administration’s (FAA) airport design 

standards ($2.1 billion), and enhance airfield capacity ($977 million).

Airports’ planned capital development exceeds past funding levels, but airports 

have some options in how they choose to fund capital projects. GAO adjusted 

past funding amounts to 2013 dollars to make them comparable with planned 

development costs. This inflation-adjusted amount of funding—$10.3 billion per 

year—would still fall short of the $13 billion in planned capital development costs 

by $2.7 billion per year. Airports have several options for trying to align capital 

funding and the costs of planned development, including prioritizing projects, 

increasing airport-generated net income, and borrowing money to fund capital 

projects. Borrowing is generally accomplished by issuing bonds; bonds entail 

leveraging future funding to pay for projects. Two airport financial consulting firms 

with whom GAO spoke noted that some airports are already highly leveraged. 

Consistent with this, analysis of data from PFC applications for projects with start 

dates from 2009 through 2013 indicates that airports plan to spend 74 percent of 

their PFC revenues on debt service—38 percent on principal payments and 36 

percent on interest payments. Nonetheless, three bond rating agencies that GAO 

spoke with continued to give airports high or stable ratings and one stated that 

access to capital markets for larger airports remains strong.

Federal funding for national system airports involves policy decisions, such as 

choices about the overall amount of AIP grant funding to make available

annually, which airports should be included in the national system and thus be 

eligible for AIP grants, the maximum allowable PFC, and how, if at all, AIP and 

PFCs should be interrelated. The President’s fiscal year 2016 budget proposal 

includes some possible changes to AIP and PFCs. The proposal seeks to lower 

the overall amount of AIP funding to $2.9 billion, but simultaneously increase the 

maximum allowable PFC. Specific provisions in the proposal would operate to 

increase AIP funding for small airports and decrease AIP funding for larger 

airports, presuming that larger airports would generally opt for higher PFCs and 

that doing so would offset, or more than offset, their AIP decreases.

View GAO-15-306. For more information, 

contact Gerald L. Dillingham, Ph.D., at (202) 

512-2834 or dillinghamg@gao.gov. 
Pages Intentionally Omitted
Page 30 GAO-15-306 Airport Finance

increase from its 2013-2017 estimate of $4.2 billion.36 An ACI-NA official, 

as well as FAA officials, told us that this increase partly reflects airports’ 

increased emphasis on revenue-generating projects, which are generally 

not eligible for AIP funding. The ACI-NA official also said that they believe 

that some large airports that responded to ACI-NA’s survey may have 

classified terminal and other landside projects as fully AIP-ineligible when 

some portion of these projects may actually have been AIP-eligible; such 

misclassifications would tend to overstate ACI-NA’s estimate of AIP noneligible development. Although this could affect the proportion of AIPeligible to AIP-ineligible planned-development costs, to the extent that 

airports that reported AIP-eligible costs as ineligible to ACI-NA also did 

not report those same costs to FAA, our estimate of total planneddevelopment costs is not affected.

After adjusting past funding amounts for inflation, planned airport 

development for 2015 through 2019 exceeds prior airport funding for 

2009 through 2013 by an average of $2.7 billion annually. As discussed 

above, the funding available from various sources for national system 

airports’ capital development projects from 2009 through 2013 averaged 

$10 billion annually, in nominal dollars. Also as discussed above, the 

national system airports have plans to spend an annual average of $13 

billion, in 2013 dollars, on airport capital-development projects from 2015 

through 2019. However, these amounts are not comparable because the 

available funding was reported in nominal dollars—that is, the dollar 

values in the years these funds were received—and the planned 

development was reported in 2013 dollars. To make these data 

comparable, we adjusted the past funding amount to the level that it 

would be in fiscal year 2013 dollars, assuming that the amount of funding 

across the various sources would grow, on average, at the general rate of 

economy-wide inflation.37

36As mentioned previously, ACI-NA estimated total costs of planned development (both 

AIP eligible and non-eligible) for fiscal years 2015-2019 to be an annual average of $14.3 

billion. This is a 3-percent increase from ACI-NA’s prior estimate of $13.9 billion for fiscal 

years 2013-2017.

The annual average funding level after the 

inflation adjustment—$10.3 billion per year—is slightly higher than the 

nominal value of $10 billion. Nonetheless, as shown in figure 10 below, 

37Specifically, we used fiscal year-based annual averages of quarterly indexes from the 

Bureau of Economic Analysis’s gross domestic product price index, as it reflects the 

general level of inflation for the U.S. economy. 

Airports’ Planned 

Development 

Exceeds Past 

Funding Levels, 

but Several 

Considerations Affect 

the Comparison and 

How Airports Choose 

to Fund Capital 

Projects
Page 31 GAO-15-306 Airport Finance

the inflation-adjusted average annual funding level is still $2.7 billion per 

year (in 2013 dollars) less than planned development.38

Figure 10: Comparison of Past Airport Funding and Planned Development Costs

While this 

difference is not an absolute predictor of future funding shortfalls—both 

funding and planned development may change in the future—it is a useful 

indicator of potential future funding shortfalls that, as discussed below, 

airports, the states, and Congress can choose to address in a variety of 

ways.

a

Average annual funding is in fiscal year 2013 dollars and planned development is in 

calendar year 2013 dollars; the difference between these dollar bases likely has a minimal 

impact on the comparison of average annual funding and planned development.

The difference between past funding and planned development costs for 

larger airports is $1.6 billion and for smaller airports is $1.1 billion; 

 38Average annual funding is in fiscal year 2013 dollars and planned development is in 

calendar year 2013 dollars; the difference between these dollar bases likely has a minimal 

impact on the comparison of average annual funding and planned development.
Page 32 GAO-15-306 Airport Finance

however, the difference is proportionately greater for smaller airports. 

More specifically, planned development is 24 percent greater than past 

funding for larger airports but is 30 percent greater for smaller airports.39

Airports have a number of options for addressing any shortfall in funding 

airports’ capital development, including prioritizing capital development 

projects, financing projects, attempting to increase airport revenues, or 

entering into public private partnerships. States can also choose to 

increase state grant funding. Congress also has options in how it chooses 

to fund AIP or set PFCs, which we will discuss in the next section. For 

individual airports, a common method for aligning funding with planned 

development is to prioritize projects. This generally entails decisions 

about which projects to move forward with and which to defer, but could 

also include scheduling a project in phases, or reducing the scope of or 

cancelling a planned project. As mentioned, airports’ AIP-eligible planned 

development costs declined in the two most recent NPIAS reports. FAA 

stated in the 2015-2019 NPIAS report that the decline reflected a 

decrease in planned development for all airport type categories. With 

regard to the project type categories, FAA noted large decreases in 

capacity-related and terminal-related projects. At the same time, however, 

the 2015-2019 NPIAS reported small increases in projects to reconstruct 

or rehabilitate airport facilities, mostly at large hub airports, and in 

We asked state aviation officials—whose primary focus is on smaller 

airports—if they anticipated that the costs of airports’ planned 

development would exceed available funding through 2017; a majority of 

respondents (31 of 45, or 69 percent) said that they thought planned 

development would exceed funding. These respondents tended to 

indicate that smaller airports are more likely to be affected by a funding 

shortfall than larger airports. For example, when asked which types of 

airports are likely to be particularly affected by the shortfall, 29 

respondents (94 percent) indicated general aviation airports, compared to 

6 respondents (19 percent) who indicated large hubs. Appendix III 

compares past funding with planned development for large hub airports; 

medium hub airports; small hub airports; and the combination of nonhub, 

nonprimary commercial service, reliever, and general aviation airports.

39Larger airports’ average annual funding was $6.8 billion, compared to an annual 

average of $8.4 billion in planned development costs. Smaller airports’ average annual 

funding was $3.5 billion, compared to an annual average of $4.6 billion in planned 

development.
Page 33 GAO-15-306 Airport Finance

security-related infrastructure projects including perimeter and security 

fencing and access control systems, mostly at small hub airports.

Stakeholders we spoke with and surveyed discussed the prioritizing of 

different types of projects. For example, representatives of FAA, three 

industry associations, and one financial-consulting firm stated that 

infrastructure projects that affect safety are of the highest priority for 

airports. In addition to safety, most of these stakeholders also stated that 

many airports are currently focused on projects to rehabilitate aging 

physical infrastructure. Similarly, in our survey of state aviation officials, 

among respondents who anticipated unmet funding needs, safety-related 

projects were the most often identified type of project (14 respondents) 

that would be unlikely or very unlikely to be unfunded or delayed. 

However, 10 respondents reported the converse (i.e., that safety-related 

projects would be likely or very likely to be unfunded or delayed). Four 

respondents specifically cited unsafe conditions that would result from 

unfunded or delayed runway pavement projects. Six respondents cited a 

potential adverse impact on economic growth or on communities served 

by airports from a reduction or delay in funding, and 5 respondents noted 

that project delays would increase future costs, such as repair and 

maintenance costs.

Another method that airports can use to align funding with capital 

development is to borrow money to fund a project. Most commonly, this 

consists of issuing a bond. However, as previously discussed, borrowing 

has traditionally been an option exercised by larger airports. To be able to 

finance projects, an airport’s financial situation must be viewed positively 

enough to be able to borrow money at affordable rates in the bond 

market. Two of the airport financial-consulting firms with whom we spoke 

noted that some airports are already leveraged to a large extent and one 

bond-rating agency stated that taking on additional debt is always a risk. 

In a December 2013 report, one bond-rating agency noted that the rate of 

growth in long-term debt for primary airports over the past decade 

significantly outpaced that of passengers, and that leverage and 

execution of capital programs would remain key rating factors for many 

airports, particularly the large hubs. In an August 2014 report, another 

bond-rating agency noted that increasing leverage was a key 

consideration in the agency’s downgrading the credit rating of four large 

hub airports in the previous 3 years. On the other hand, in a February 

2015 report, a third rating agency noted that leverage fell for more than 

half of the 73 airports rated by the agency, due to either paying down debt 

or limited issuance of new general airport-revenue bonds. Overall, these 

three bond-rating agencies told us that they continue to give most airports 
Page 34 GAO-15-306 Airport Finance

high or stable ratings, and one rating agency representative stated that 

access to capital markets for larger U.S. airports remains strong.

Another method for airports to fund capital development is to try to 

increase airport-generated net income. As mentioned, both FAA and ACINA officials attributed some of the increase in ACI-NA’s estimate of nonAIP-eligible planned projects to efforts by airports to add revenuegenerating infrastructure. We have found in recent prior work that in 

addition to traditional commercial activities to generate non-aeronautical 

revenue, such as parking fees or terminal concessions, some airports 

have developed commercial activities with stakeholders from local 

jurisdictions and the private sector to help develop airport properties into 

retail, business, and leisure destinations.40

40For information on factors that may support airport-centric development (i.e., 

development at and around airports), see GAO, National Airspace System: Airport-Centric 

Development, 

An increasing range of 

developments on airport property have contributed to non-aeronautical 

revenues, including hotels and business centers meant to attract and 

retain business travelers who might otherwise stay off airport property, 

high-end commercial retail and leisure activities, medical facilities, and 

specialized cargo handling and refrigerated storage facilities, among 

other developments (see fig. 11). For example, Dallas/Fort Worth 

International Airport owns a Grand Hyatt hotel inside Terminal D, Denver 

International Airport is building an attached Westin Hotel, and HartsfieldJackson Atlanta International Airport is considering an airport hotel inside 

or connected to its domestic terminal. Airports in Denver, Miami, and 

Indianapolis have built—or plan to build—cold storage facilities on airport 

property in an effort to generate revenue from freight forwarders and 

businesses that transport produce, pharmaceuticals, and other timesensitive or perishable items.

GAO-13-261 (Washington, D.C.: Mar. 28, 2013).
Pages Intentionally Omitted
EXHIBIT 8 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1

THE PORT OF PORTLAND

(OREGON) 

_________ 

ORDINANCE NO. 155 

(ENACTED NOVEMBER 10, 1971, AS

AMENDED AND RESTATED PURSUANT TO

ORDINANCE NO. 368-B WHICH WAS ENACTED OCTOBER 13, 1993, 

ORDINANCE NO. 375-B WHICH WAS ENACTED AUGUST 10, 1994 

AND ORDINANCE NO. 393-B WHICH WAS ENACTED FEBRUARY 10, 1999) 

AUTHORIZING

PORTLAND INTERNATIONAL AIRPORT REVENUE BONDS 

EXCERPT
TABLE OF CONTENTS 

Page 

DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 i

SECTION 1. Findings and Determinations ........................................................................... 1 

SECTION 2. Definitions and Computations ......................................................................... 1 

SECTION 3. Authorization of Bonds and Notes; Payment Thereof; Pledges and 

Assignments to such Payment; Series Ordinances .......................................... 6 

SECTION 4. Authorization of First Series of Bonds and of Additional Bonds 

Hereunder......................................................................................................... 8 

SECTION 5. Refunding Bonds ........................................................................................... 10 

SECTION 6. Payment of Principal, Interest and Premium of Bonds; Cancellation of 

Matured Coupons; Cancellation and Destruction of Bonds and 

Coupons ......................................................................................................... 11 

SECTION 7. Redemption of Bonds .................................................................................... 11 

SECTION 8. Registration, Transfer, Exchange and Ownership of Bonds.......................... 13 

SECTION 9. Execution of Bonds........................................................................................ 15 

SECTION 10. Forms of Bonds, Coupons and Registration and Assignment 

Provisions....................................................................................................... 16 

SECTION 11. Mutilated, Lost, Stolen or Destroyed Bonds or Coupons .............................. 25 

SECTION 12. Airport Construction Fund............................................................................. 26 

SECTION 13. The Airport Revenue Fund; Application of Revenues .................................. 28 

SECTION 14. The Bond Fund; Appointment of Trustee to Administer the Same................. 1 

SECTION 15. Annual Airport Budget .................................................................................. 37 

SECTION 16. Covenant as to Rates, Rentals, Fees and Charges.......................................... 38 

SECTION 17. Additional Covenants of The Port of Portland; Insurance Proceeds and 

Condemnation Awards................................................................................... 39 

SECTION 18. Concerning the Trustee and the Paying Agents............................................. 52 

SECTION 19. List of Bondholders........................................................................................ 56 

SECTION 20. Amendment of This Ordinance...................................................................... 56 

SECTION 21. Certain Bonds Deemed Not Outstanding Hereunder..................................... 59 

SECTION 22. Ordinance to Constitute a Contract with Bondholders; Enforcement of 

Same............................................................................................................... 59 

SECTION 23. Events of Default ........................................................................................... 59 

SECTION 24. Notice to Bondholders and Others Upon Occurrence of an Event of 

Default............................................................................................................ 60 

SECTION 25. Acceleration ................................................................................................... 61 
TABLE OF CONTENTS (cont’d) 

Page 

DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 ii

SECTION 26. Remedies Upon Occurrence of Event of Default; Powers of Trustee 

and Bondholders; Waivers of Event of Default; Termination of 

Proceedings.................................................................................................... 61 

SECTION 27. Consents, etc., of Bondholders ...................................................................... 62 

SECTION 28. Special Obligation Bonds and Net Rent Leases ............................................ 63 

SECTION 29. Discharge of Liens and Pledges; Bonds No Longer Outstanding 

Hereunder....................................................................................................... 66 

SECTION 30. No Personal Liability ..................................................................................... 67 

SECTION 31. Limitation of Rights....................................................................................... 68 

SECTION 32. Laws Governing; Severability ....................................................................... 68 

SECTION 33. Notices ........................................................................................................... 68 

SECTION 34. Effect of Sundays and Legal Holidays........................................................... 68 

SECTION 35. Section Headings; Table of Contents............................................................. 68 

SECTION 36. Publication of Summary and Effectiveness of this Ordinance ...................... 68 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1

ORDINANCE No. 155 

(Amended and Restated Pursuant to Ordinance No. 368-B, Ordinance No. 375-B and Ordinance 

No. 393-B)

AN ORDINANCE AUTHORIZING THE ISSUANCE OF REVENUE 

BONDS OF THE PORT OF PORTLAND TO PAY THE COSTS OF 

ACQUIRING AND CONSTRUCTING AIRPORT AND OTHER PORT 

IMPROVEMENTS; PRESCRIBING THE LIMITATIONS ON AND 

CONDITIONS OF ISSUANCE AND THE FORM OF SUCH BONDS; 

PROVIDING FOR THE DETAILS OF SUCH BONDS; COVENANTING 

AS TO THE REVENUES DERIVED FROM THE PORTLAND 

INTER-NATIONAL AIRPORT AND THE USE AND APPLICATION OF 

SUCH REVENUES; PLEDGING SUCH REVENUES TO THE PAYMENT 

OF THE PRINCIPAL AND INTEREST ON SUCH BONDS AND 

LIMITING SUCH PAYMENT SOLELY TO SAID REVENUES; AND 

MAKING OTHER COVENANTS AND AGREEMENTS IN 

CONNECTION WITH THE FOREGOING. 

BE IT ENACTED BY THE PORT OF PORTLAND: 

SECTION 1. Findings and Determinations. The Board of 

Commissioners of The Port of Portland hereby finds and determines as set forth in this section. 

Under applicable laws of the State of Oregon the object, purposes and occupation of The Port of 

Portland (hereinafter referred to and defined as the “Port”) are to promote the maritime, shipping, 

aviation, commercial and industrial interests of the Port in the manner as the Port is by law 

specifically authorized and empowered. Under such laws, for the purpose of carrying into effect 

all or any of the powers granted to the Port, the Port may from time to time issue and sell 

revenue bonds without the necessity of the voters of the Port authorizing the same, which 

revenue bonds shall not in any manner or to any extent be a general obligation of the Port nor a 

charge upon the tax revenues of the Port nor a charge upon any other revenues or property of the 

Port not specifically pledged thereto. For many years the Port has owned and operated an airport 

located adjacent to the Columbia River in Multnomah County within the boundaries of the Port 

and now known and designated as the “Portland International Airport”. To promote the aviation, 

shipping, maritime, commercial and industrial interests of the Port and for the convenience of the 

public and the convenience of the air transport, shipping, maritime, commercial and industrial 

development of the Port, it is necessary, advisable and desirable that certain additions, 

expansions and improvements be made to said airport and to other Port facilities, including in 

such additions, expansions and improvements the development and reclamation of land 

necessary therefor, additional terminals and buildings and other facilities and aids incident to the 

development, protection and operation of the air transport facilities and other facilities of the 

Port. It is also necessary, advisable and desirable that the Port issue its revenue bonds to provide 

the moneys to pay the costs of such additions, expansions and improvements, and to limit the 

charge of such bonds and the payment of the principal and interest thereof as set forth herein. 

SECTION 2. Definitions and Computations. Unless the context shall 

indicate some other meaning, the terms defined in this section shall, for all purposes of this 

Ordinance and of any ordinance, resolution, certificate or other instrument supplemental hereto 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 2

and of any opinion or instrument or document herein or therein mentioned, have the meanings 

herein specified, with the following definitions to be equally applicable to both the singular and 

plural forms of any of the terms herein defined and vice versa. The term: 

(a) “Accountant” means the individual accountant or firm of accountants 

appointed pursuant to paragraph J of Section 17 hereof. 

(b) “Additional Bonds” means any additional Bonds authorized and issued 

pursuant to Section 4 hereof at any time outstanding. 

(c) “Airport” means each and all of the following as defined from time to time 

in master plans filed with the Federal Aviation Administration: (1) the presently existing 

airport owned or operated by the Port known as the “Portland International Airport” and 

(2) the Portland International Airport as enlarged, expanded, changed and improved, 

pursuant to the Airport Capital Improvement Program, as amended from time to time. 

Without limiting the generality of the foregoing, the term “Airport” shall include (i) any 

and all of the following pertaining to the Portland International Airport: lands or water 

areas, rights or interests in land, rights-of-way, approaches, contract rights, air navigation 

facilities, terminal buildings, hangars and other buildings and facilities, runways, 

taxiways, paved areas, access roads, parking lots and structures, furnishings, equipment 

and apparatus, and all other property (real, personal, mixed or otherwise), now or 

hereafter constructed or acquired, of or belonging or pertaining to said Airport; (ii) each 

and every and all and singular, the properties and facilities belonging to or pertaining to 

Portland International Airport and constructed or acquired from the proceeds of Bonds or 

from the proceeds of any other bonds, notes or other evidences of indebtedness payable, 

or the principal or interest or both of which is reimbursable, from the Airport Fund or 

from a fund maintained therefrom, or constructed or acquired from moneys in the Airport 

Fund or from moneys in any other fund maintained therefrom, and (iii) all other 

additions, expansions and improvements of or belonging or pertaining to the Portland 

International Airport, hereafter acquired or constructed howsoever financed. The term 

“Airport” shall not, however, include: (A) properties sold, leased or otherwise disposed 

of or transferred pursuant to the provisions of paragraph M of Section 17 thereof; 

(B) properties subject to a Net Rent Lease, defined in Section 28 hereof, except to the 

extent provided in said Section 28; and (C) General Aviation Airports. 

(d) “Airport Consultant” shall mean the individual consultant or firm of 

consultants appointed pursuant to paragraph K of Section 17 hereof. 

(e) “Airport Fund” means the special fund of the Port created in Section 13 

hereof and designated in that section as “The Port of Portland Airport Revenue Fund”. 

(f) “Airport Capital Improvement Program” prior to June 30, 1986, means the 

capital requirements program scheduled for the Airport for the period from July 1, 1971 

through June 30, 1986, as amended from time to time, as provided in the schedule 

attached as Exhibit 2, as amended from time to time, to the Certificated Airlines 

Operating Agreements, dated as of November 1, 1971, by and between the Port and 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 3

certain certificated air carriers and, after June 30, 1986, means any capital requirements 

which the Port in its discretion deems necessary for the Airport. 

(g) “Airport Construction Fund” means the separate special fund created and 

established by Section 12 hereof, and designated in that section as “The Port of Portland 

Airport Construction Fund”. 

(h) “Bond” or “Bonds” means any Bond, some of the Bonds or all of the 

Bonds at any time outstanding under and pursuant to this Ordinance, including the first 

series of Bonds and Additional Bonds issued pursuant to Section 4 hereof at any time 

outstanding and Refunding Bonds issued pursuant to Section 5 hereof at any time 

outstanding and bond anticipation notes issued pursuant to Section 3 hereof at any time 

outstanding but shall not include any Special Obligation Bonds defined in Section 28 

hereof. 

(i) “Bondholder” or “holder of Bond” means any person who shall be the 

bearer of any Bond not then registered, or the registered owner or his duly authorized 

attorney-in-fact, representative or assigns, of any Bond which at the time shall be 

registered other than to bearer. 

(j) “Bond Fund” means the special trust fund of the Port created pursuant to 

Section 14 hereof, to be designated as provided in that section as “The Port of Portland 

Airport Revenue Bond Fund”. 

(k) “Commercial Airport” means any airport, a major portion of the revenues 

derived from which are realized (i) from the operations of certificated air carriers 

engaged in the public utility business of transporting passengers or freight, or both, by 

air, whether such operations be on a scheduled or non-scheduled basis, and (ii) from the 

supplying by the owner or operator of such airport of goods and services to the 

customers, patrons and passengers of such carriers. 

(l) “Costs of Construction” shall have the meaning given to such term in 

Section 12 hereof. 

(m) “Costs of Operation and Maintenance” shall have the meaning given to 

such term in Section 13 hereof. 

(n) “Debt Service Requirement” means with respect to all the Bonds or a 

series of the Bonds or any particular amount of such Bonds, as the case may be, the total 

as of any particular date of computation and for any particular Fiscal Year, of the 

amounts required pursuant to the provisions of Section 14 hereof to be paid during such 

Fiscal Year into the Bond Fund to provide for the payment of interest on such Bonds, to 

provide for the payment at maturity of any such Bonds issued in serial form and to 

provide for the retirement of any such Bonds issued in term form. 

(o) “Fiscal Year” means the fiscal year for the Port as established from time to 

time by the Port, being on the date of effectiveness of this Ordinance the period from 

July 1 in any year to and including the following June 30. 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 4

(p) “General Aviation Airport” means an airport known in the air transport 

industry as a “general aviation airport”, being an airport, the major portion of the 

revenues derived from which is not realized from the operations of aircraft operated by 

certificated air carriers (except possibly air taxi or air tour operations) and from the 

supplying of goods and services to the people utilizing such aircraft, but is realized from 

the activities of private, nonpublic aircraft, flying schools, the supplying of goods and 

services to the foregoing and similar operations not normally part of a public utility 

business (except possibly air tour or air taxi operations). 

(q) “Investment Securities” means any investments which are legal for the 

Port under the laws of the State of Oregon, provided that such investments are those 

typically permitted for the investment of debt service and reserve funds of revenue bonds 

which have credit ratings similar to the credit ratings then in effect for the Senior Lien 

Bonds. [This paragraph amended pursuant to Section 1.3 of Ordinance No. 393-B]

(r) “Net Revenues” means for any past period the aggregate of the Revenues 

actually paid into the Airport Fund during such past period, and for any future period the 

aggregate of the Revenues estimated to be paid into the Airport Fund during such future 

period, minus for any such past period the aggregate of the Costs of Operation and 

Maintenance of the Airport actually paid or accrued during such past period, or minus for 

any such future period the aggregate of the Costs of Operation and Maintenance of the 

Airport estimated to be paid or accrued during such future period, as the case may be. 

(s) “Ordinance” means this Ordinance, as the same may be amended and 

supplemented from time to time, and, unless the context shall clearly indicate otherwise, 

shall include all Supplemental Ordinances. “Series Ordinance” means an ordinance or 

resolution adopted hereunder providing for the issuance of a series of Bonds hereunder. 

(t) “Outstanding” when used with respect to any Bond shall have the 

construction given to such word in Section 29 hereof, i.e., a Bond shall not be 

outstanding hereunder if such Bond is at the time not deemed to be outstanding hereunder 

by reason of the operation and effect of said Section 29. 

(u) “Paying Agent” means the Trustee as to any Bond of whatever series and 

whatever form, coupon or registered, and, as to Bonds in coupon form of a particular 

series, the additional Paying Agents, if any, for such Bonds of such series appointed in 

the Series Ordinance providing for the issuance of Bonds of such series. 

(v) “Port” means The Port of Portland, or any public body or agency which 

shall hereafter succeed to the powers, duties and functions of the Port. 

(w) “Revenues” means and includes all income, receipts and moneys derived 

by the Port from its ownership or operation and management of the Airport or the 

furnishing and supplying of the services, facilities and commodities thereof, and without 

limiting the generality of the foregoing, shall include (1) all income, receipts and moneys 

derived from the rates, rentals, fees and charges fixed, imposed and collected by the Port 

for the use and services of the Airport, or otherwise derived from or arising through the 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 5

ownership, operation and management of the Airport by the Port, or derived from the 

rental by the Port of all or part of the Airport or from the sale or rental by the Port of any 

commodities or goods in connection with the Airport; (ii) earnings on and the income 

from the investment of moneys held under this Ordinance, to the extent such earnings or 

income are deposited in the Airport Fund or the Bond Fund, but not including any such 

earnings or income credited to the Airport Construction Fund; and (iii) to the extent 

provided in Section 28 hereof), income derived by the Port from a Net Rent Lease 

(defined in Section 28 hereof); provided that (1) the term “Revenues” shall not include 

(a) moneys received as proceeds from the sale of Bonds or as grants or gifts, the use of 

which is limited by the grantor or donor to the construction of capital improvements, 

except to the extent that any such moneys shall be received as payments for the use of the 

Airport, or (b) passenger facility charges or similar charges that are imposed under 

authority of federal law and are limited by federal law to expenditure on specific projects 

or activities and/or on debt service and financing costs related to specific projects or 

activities and (2) in no event shall the term “Revenues” include tax revenues or taxderived revenues. [This paragraph amended pursuant to Section 1.3 of Ordinance 

No. 393-B]

(x) “Supplemental Ordinance” means any ordinance or resolution amending 

or supplementing this Ordinance as originally enacted, adopted under and pursuant to 

Section 20 hereof, and shall include Series Ordinances. 

(y) “Term Bond Principal Account Installment” means the principal amount 

of term bonds subject to mandatory redemption on an annual or a semi-annual date, as 

provided by Series Ordinance. 

(z) “Trustee” means the corporation appointed pursuant to Sections 14 and 18 

hereof to hold and administer the Bond Fund and any successor to such corporation as 

Trustee hereunder. 

Whenever in this Ordinance any governmental unit, including the Port, or any officer, 

director or department of a governmental unit, including the Port, is defined or referred to, such 

definition or reference shall be deemed to include the governmental unit or officer, board, 

agency, commission, body or department succeeding to or in whom or which is vested, the 

functions, rights, powers, duties and obligations of such governmental unit, officer, director or 

department, as the case may be, encompassed by this Ordinance. 

Unless the context shall clearly indicate otherwise, in this Ordinance words importing 

persons include firms, partnerships, associations, corporations (public and private), public bodies 

and natural persons, and also include executors, administrators, trustees, receivers or other 

representatives. 

Unless the context shall clearly indicate otherwise, in this Ordinance (not including in 

such term wherever used in this paragraph any Supplemental Ordinance): (i) references to 

sections and other subdivisions, whether by number or letter or otherwise, are to the respective or 

corresponding sections and subdivisions of this Ordinance, as such sections or subdivisions may 

be amended from time to time; (ii) the terms “herein”, “hereunder”, “hereby”, “hereto”, “hereof’, 
Pages Intentionally Omitted
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 28

(r) the payment and discharge of the principal of and interest and premium, if 

any, on any term or temporary construction financing or loans, including the 

reimbursement to the Port of moneys advanced from its tax revenues, or any other funds 

not held hereunder, for such construction; 

(s) if and to the extent determined by the Port, interest on the Bonds issued to 

finance the construction of any project during the actual period of construction and for 

such period thereafter as the Port may determine; and 

(t) any and all other costs and expenses necessary or desirable and pertaining 

or incident to construction pertaining to the implementation of the Airport Capital 

Improvement Program, as amended from time to time, as estimated or otherwise 

ascertained by the Port. 

[Portions of this Section 12 were amended pursuant to Section 2 of Ordinance No. 368-B]. 

SECTION 13. The Airport Revenue Fund; Application of Revenues. On or before 

the date of delivery of and payments for the first Bonds issued hereunder, the Port shall create 

and establish a special trust fund of the Port, to be known and designated as “The Port of 

Portland Airport Revenue Fund” (herein defined and referred to as the “Airport Fund”) and to be 

held and administered by the Port hereunder so long as any of the Bonds are outstanding. The 

moneys deposited, or to be deposited, in the Airport Fund shall not be commingled with any 

other moneys of the Port; shall be used and applied only in the manner and for the purposes 

hereinafter provided in this section; and shall be withdrawn from said Fund for said purposes 

only if in accordance with such procedure as is provided by law. 

So long as any Subordinate Lien Bonds (as defined in Port Ordinance No. 323, as 

amended and supplemented) are Outstanding, all the Revenues shall be collected by or for the 

account of the Port and shall be set aside as collected and, except as is specifically provided 

otherwise herein, shall be deposited in the Airport Fund. There shall also be deposited in the 

Airport Fund the moneys required to be deposited therein by Section 12; paragraphs M and N of 

Section 17; and Sections 28 and 29 hereof. The moneys in the Airport Fund shall be used and 

applied at the following times, in the following amounts, for the following purposes and in the 

following order of priority: 

1. Operation and Maintenance. The Revenues credited to the Airport Fund shall be

first used and applied by the Port to the payment of the Costs of Operation and Maintenance of 

the Airport. 

For the purposes of this Ordinance, the term “Costs of Operation and Maintenance” shall 

mean the reasonable and necessary current expenses of the Port included as a Cost of Operation 

and Maintenance in the annual Airport budget required by Section 15 hereof for operating, 

maintaining and repairing the Airport. Without limiting the generality of the foregoing, the term 

“Costs of Operation and Maintenance” shall include the following items: 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 29

(a) costs and expenses of general administration of the Port which are 

reasonably and properly allocable to the Airport; 

(b) costs of collecting the Revenues and from making any refunds therefrom 

lawfully due others; 

(c) engineering, audit reports, legal and other overhead expenses directly 

related to the administration, operation, maintenance, and repair of the Airport; 

(d) costs of salaries, wages and other compensation of officers and employees 

and payments to pension, retirement, health and hospitalization funds and other 

insurance, including self-insurance for the foregoing; 

(e) costs of routine repairs, replacements, renewals and alterations occurring 

in the usual course of business; 

(f) taxes, assessments and other governmental charges, or payments in lieu 

thereof, imposed on the Airport or any part thereof or on the operation thereof or on the 

income therefrom or on any privilege in connection with the ownership or operation of 

the Airport or otherwise imposed on the Airport or the operation thereof or income 

therefrom; 

(g) costs of utility services; 

(h) costs of material and supplies used in the ordinary course of business, 

including ordinary and current rentals of equipment or other property; 

(i) contractual services and professional services, including but not limited to, 

legal, engineering, architectural, planning, financial and airport consultants; 

(j) costs of fidelity bonds, or a properly allocable share of the premium of any 

blanket bond, pertaining to the Airport or the Revenues or any other moneys held 

hereunder or required hereby to be held or deposited hereunder; 

(k) costs of carrying out the provisions of this Ordinance, including Trustee’s 

and Paying Agents’ fees and expenses; costs of insurance required hereby, or such other 

insurance as may be deemed necessary by the Port for the proper protection of the 

Airport or the Revenues, or a properly allocable share of any premium of any blanket 

policy pertaining to the Airport or the Revenues; fees and expenses of the Accountant and 

the Airport Consultant; legal fees and expenses; and costs of recording, mailing and 

publication; 

(l) costs of lease payments due under capital leases for items customarily 

used in the operation or maintenance of airport facilities or equipment; and; 

(m) all other costs and expenses of operating, maintaining and repairing the 

Airport arising in the routine and normal course of business; 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 30

PROVIDED, HOWEVER, that the term “Costs of Operation and Maintenance” shall not 

include: (1) any allowance for depreciation or any amounts for capital replacements, 

renewals, repairs and maintenance not recurring annually (or at shorter intervals) or 

reserves therefor; (2) costs of extensions, enlargements, betterments and improvements or 

reserves therefor, other than cost of preliminary planning; (3) reserves for operation, 

maintenance and repairs occurring in the normal course of business; (4) payment 

(including redemption) of bonds or other evidences of indebtedness or interest and 

premium thereof or reserves therefor; and (5) any operation and maintenance expenses 

pertaining to Special Facilities (defined in Section 28 hereof) or expenses incurred by any 

lessee under a Net Rent Lease (defined in said Section 28). 

2. General. There is hereby created and established a separate special account in the

Airport Fund to be known and designated as the “General Account.” On the first business day of 

each month commencing with the month which follows the month in which the first Bonds 

issued hereunder are delivered and paid for and in each month thereafter, the Port after paying 

the Costs of Operation and Maintenance required by subparagraph 1 of this section, shall credit 

the balance of the Revenues then held in the Airport Fund (and not then credited to any account 

therein) to the General Account. The moneys credited to the General Account may be used and 

applied by the Port first, to the SLB Fund as provided in Sections 6 and 7 of Port Ordinance 

No. 323, as amended, and then, without regard to priority and as determined by and in the 

discretion of the Port, only to the following: (1) in the event the moneys credited to the Airport 

Construction Fund are insufficient therefor, to complete payment of the Costs of Construction of 

properties included or to be included in the Airport; (2) to complete the payment of the costs of 

major maintenance, repairs, renewals and replacements to the properties constituting the Airport; 

(3) in the event the proceeds of insurance are insufficient therefor, to pay the costs of 

reconstruction, replacement or restoration of properties destroyed or damaged; (4) to pay the 

principal of and interest and premium, if any, on any subordinate or junior lien evidences of 

indebtedness issued for the Airport as permitted by paragraph L of Section 17 hereof (other than 

Subordinate Lien Bonds authorized by Port Ordinance No. 323, as amended); (5) (a) to 

reimburse the Port for advances made, after the delivery of and payment for the first Bonds 

issued hereunder, by the Port for the principal of and interest and premium, if any, on general 

obligation bonds of the Port issued, after the delivery of and payment for the first Bonds issued 

hereunder, for the Airport; or (b) to reimburse any fund of the Port not held hereunder for 

advances made by the Port, after the delivery of and payment for the first Bonds issued 

hereunder, from such fund to any fund held hereunder; or (c) to reimburse the Port for moneys 

expended, after the delivery of and payment for the first Bonds issued hereunder, by it for the 

Airport from sources other than the Airport or the Revenues derived therefrom, and other than 

the proceeds of general obligation bonds or moneys advanced from any fund not held hereunder 

for which reimbursement may be made pursuant to clauses (a) and (b) of this item (5), provided 

that any amounts paid to the Port pursuant to this item (5) may be applied by the Port to any 

lawful purposes of the Port; (6) to pay the Costs of Construction of additions, expansions, 

improvements and betterments to the Airport, including the acquisition of land in anticipation of 

additions, expansions, improvements and betterments pursuant to the Airport Capital 

Improvement Program, as amended from time to time; (7) to any other lawful use or purpose 

pertaining to the Airport or the aviation or air transport interests of the Port, including without 

limitation General Aviation Airports; and (8) to any other lawful use or purpose necessary to 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 31

carry out this Ordinance, including the making of required payments or credits for the Costs of 

Operation and Maintenance of the Airport and to any fund or account held hereunder. 

Notwithstanding the foregoing provisions of this section, in the event that on the first 

business day of any month the moneys in the Airport Fund are insufficient to make in full the 

foregoing credits and payments as required by and in accordance with the provisions of 

subparagraphs 1 through 5 above in this section, all such moneys and the Revenues thereafter 

derived shall be applied, paid and credited in accordance with said provisions to the satisfaction 

in full of a credit or payment having a higher priority before being applied, paid or credited to a 

credit or payment having a lower priority, including by the making up of any deficiencies in the 

amounts required to satisfy a credit or payment having a higher priority before being applied, 

paid or credited to an item having a lower priority. Without limiting the generality of the 

provisions of the preceding sentence, 

A. In the event that on the first business day of any month the moneys 

in the Airport Fund and not then credited to an account therein are insufficient to 

make the credits and payments required by subparagraphs 1 through 4 above of 

this section, the amount of the insufficiences shall be made up as follows and in 

the following order of priority: (i) if such moneys are insufficient to make the 

payments of the Costs of Operation and Maintenance required by subparagraph 1 

above of this section, the amount of such insufficiency shall be made up, first, 

from any moneys then credited to the General Account; second, from any moneys 

then credited to the Capital Improvement Account; and third, from any moneys 

then credited to the Major Maintenance Reserve Account; (ii) if such moneys are 

insufficient to make the payments of the Costs of Operation and Maintenance and 

also to make the payments to the Trustee required by paragraph 2 above of this 

section, the amount of such insufficiency in the payment to the Trustee shall be 

made up, first, from the moneys then credited to the General Account; second, 

from any moneys then credited to the Capital Improvement Account; and third, 

from the moneys then credited to the Major Maintenance Reserve Account; (iii) if 

such moneys are insufficient to make the credits and payments having a higher 

priority and also to make the credit to the Major Maintenance Reserve Account 

required by subparagraph 3 above of this section, the amount of such 

insufficiency in the credit to the Major Maintenance Reserve Account shall be 

made up, first from any moneys then credited to the General Account, and second, 

from the moneys then credited to the Capital Improvement Account; and (iv) if 

such moneys are insufficient to make the credits and payments having a higher 

priority and also to make the credit to the Capital Improvement Account required 

by subparagraph 4 above of this section, the amount of such insufficiency in the 

credit to the Capital Improvement Account shall be made up from any moneys 

then credited to the General Account; and 

B. If in any month the moneys then on credit to any account are 

insufficient to make the payments to be made therefrom or the moneys on deposit 

in the Bond Fund are insufficient to make the payment to be made therefrom or 

are less than the amount then required to be on deposit therein, such 

insufficiencies shall be made up in the following order of priorities: (i) if the 
DOCSPNW1:57365.3 

42936-5 BJ1/BJ1 32

moneys are insufficient to make the payments for the Costs of Operation and 

Maintenance, the amount of the insufficiency shall be made up, first, from the 

moneys then credited to the General Account; second, from the moneys then 

credited to the Capital Improvement Account; third, from any moneys then 

credited to the Major Maintenance Reserve Account; and fourth, from any 

moneys then in the Airport Fund and not yet credited to an account therein; (ii) if 

the moneys on deposit in the Bond Fund are insufficient to make the payments to 

be made therefrom or are less than the amount then required to be on deposit 

therein on credit to the Debt Service Reserve Account therein, the amount of such 

insufficiency shall be made up first, from the moneys then credited to the General 

Account; second, from moneys then credited to the Capital Improvement 

Account; third, from the moneys then credited to the Major Maintenance Reserve 

Account; and fourth, from any moneys then in the Airport Fund and not then 

credited to an account therein; and (iii) if the moneys on credit to the Major 

Maintenance Reserve Account are insufficient to make the payments to be made 

therefrom or are less than the amount then required to be on credit thereto, the 

amount of such insufficiency shall be made up, first, from the moneys credited to 

the General Account; second, from the moneys then credited to the Capital 

Improvement Account; and third, from any moneys then in the Airport Fund and 

not then credited to an account therein; and (iv) if the moneys on credit to the 

Capital Improvement Account are insufficient to make the payments to be made 

therefrom or are less than the amount then required to be on credit thereto, the 

amount of such insufficiency shall be made up, first, from the moneys credited to 

the General Account; and second, from any moneys then in the Airport Fund and 

not then credited to an account therein; 

Moneys in the Airport Fund shall be invested and reinvested by the Port in 

Investment Securities to the extent reasonable and practicable so as to mature in the 

amounts and at the times as determined by the Port so that the respective payments and 

credits to be made from the Airport Fund may be made when due. All investments and 

reinvestments shall be paid from the account from which the investment was made, and 

the Port shall be authorized to sell any investment when necessary to make the payments 

to be made from such account. All earnings on and income from investments of moneys 

in the Airport Fund (regardless of the account from which the investment was made) shall 

be deposited in the Airport Fund, for use and application as are all other moneys 

deposited in that fund. Unless invested as above provided, all moneys in the Airport 

Fund shall be secured in the manner provided by law for the securing of public funds. 

[Portions of this Section 13 were amended pursuant to Sections 5 and 8 of Ordinance 

No. 368-B and Section 1.3 of Ordinance No. 393-B. Pursuant to Section 10 of Ordinance 

No. 368-B, “all references to the Prior Lien Bond Fund, Major Maintenance Account and 

Capital Improvement Account...shall be considered to have no further effect...”.] 

SECTION 14. (1) The Bond Fund; Appointment of Trustee to Administer the 

Same. There is hereby created and established a special trust fund of the Port to be known and 

designated as “The Port of Portland Airport Revenue Bond Fund” (herein defined and referred to 

as the “Bond Fund”). The Port, in the Series Ordinance providing for the issuance of the first 
Pages Intentionally Omitted
EXHIBIT 9 
Innovative Finance 

and Alternative Sources 

of Revenue for Airports

AIRPORT

COOPERATIVE 

RESEARCH ACRP PROGRAM

SYNTHESIS 1

EXCERPT
ACRP OVERSIGHT COMMITTEE*

CHAIR

JAMES WILDING

Independent Consultant

VICE CHAIR

JEFF HAMIEL

Minneapolis–St. Paul Metropolitan 

Airports Commission

MEMBERS

JAMES CRITES

Dallas–Ft. Worth International Airport

RICHARD DE NEUFVILLE

Massachusetts Institute of Technology

KEVIN C. DOLLIOLE

Lambert–St. Louis International Airport

JOHN K. DUVAL

Massport–Boston Logan 

International Airport

STEVE GROSSMAN

Oakland International Airport

TOM JENSEN

National Safe Skies Alliance

CATHERINE M. LANG

Federal Aviation Administration

GINA MARIE LINDSEY

McBee Strategy Consulting

CAROLYN MOTZ

Hagerstown Regional Airport

RICHARD TUCKER

Huntsville International Airport

EX OFFICIO MEMBERS

SABRINA JOHNSON

U.S. Environmental Protection Agency

RICHARD MARCHI

Airports Council International–

North America

JOHN M. MEENAN

Air Transport Association of America

HENRY OGRODZINSKI

National Association of State Aviation 

Officials

ROBERT E. SKINNER, JR.

Transportation Research Board

TOM ZOELLER

American Association of Airport 

Executives

SECRETARY

ROBERT J. REILLY

Transportation Research Board

*Membership as of January 2007. *Membership as of January 2007.

TRANSPORTATION RESEARCH BOARD 2007 EXECUTIVE COMMITTEE*

OFFICERS

Chair: Linda S. Watson, CEO, LYNX–Central Florida Regional Transportation Authority, Orlando 

Vice Chair: Carol A. Murray, Commissioner, New Hampshire DOT, Concord 

Executive Director: Robert E. Skinner, Jr., Transportation Research Board

MEMBERS

J. BARRY BARKER, Executive Director, Transit Authority of River City, Louisville, KY

MICHAEL W. BEHRENS, Executive Director, Texas DOT, Austin

ALLEN D. BIEHLER, Secretary, Pennsylvania DOT, Harrisburg

JOHN D. BOWE, President, Americas Region, APL Limited, Oakland, CA 

LARRY L. BROWN, SR., Executive Director, Mississippi DOT, Jackson

DEBORAH H. BUTLER, Vice President, Customer Service, Norfolk Southern Corporation 

and Subsidiaries, Atlanta, GA 

ANNE P. CANBY, President, Surface Transportation Policy Partnership, Washington, DC

NICHOLAS J. GARBER, Henry L. Kinnier Professor, Department of Civil Engineering, University

of Virginia, Charlottesville 

ANGELA GITTENS, Vice President, Airport Business Services, HNTB Corporation, Miami, FL

SUSAN HANSON, Landry University Professor of Geography, Graduate School of Geography,

Clark University, Worcester, MA

ADIB K. KANAFANI, Cahill Professor of Civil Engineering, University of California, Berkeley

HAROLD E. LINNENKOHL, Commissioner, Georgia DOT, Atlanta

MICHAEL D. MEYER, Professor, School of Civil and Environmental Engineering, Georgia 

Institute of Technology, Atlanta

DEBRA L. MILLER, Secretary, Kansas DOT, Topeka 

MICHAEL R. MORRIS, Director of Transportation, North Central Texas Council of 

Governments, Arlington 

JOHN R. NJORD, Executive Director, Utah DOT, Salt Lake City

PETE K. RAHN, Director, Missouri DOT, Jefferson City

SANDRA ROSENBLOOM, Professor of Planning, University of Arizona, Tucson

TRACY L. ROSSER, Vice President, Corporate Traffic, Wal-Mart Stores, Inc., Bentonville, AR

ROSA CLAUSELL ROUNTREE, Executive Director, Georgia State Road and Tollway Authority,

Atlanta

HENRY G. (GERRY) SCHWARTZ, JR., Senior Professor, Washington University, St. Louis, MO

C. MICHAEL WALTON, Ernest H. Cockrell Centennial Chair in Engineering, University of

Texas, Austin

STEVE WILLIAMS, Chairman and CEO, Maverick Transportation, Inc., Little Rock, AR

EX OFFICIO MEMBERS

THAD ALLEN (Adm., U.S. Coast Guard), Commandant, U.S. Coast Guard, Washington, DC

THOMAS J. BARRETT (Vice Adm., U.S. Coast Guard, ret.), Pipeline and Hazardous Materials 

Safety Administrator, U.S.DOT 

MARION C. BLAKEY, Federal Aviation Administrator, U.S.DOT

JOSEPH H. BOARDMAN, Federal Railroad Administrator, U.S.DOT

JOHN A. BOBO, JR., Acting Administrator, Research and Innovative Technology Administration,

U.S.DOT

REBECCA M. BREWSTER, President and COO, American Transportation Research Institute,

Smyrna, GA

GEORGE BUGLIARELLO, Chancellor, Polytechnic University of New York, Brooklyn, 

and Foreign Secretary, National Academy of Engineering, Washington, DC 

J. RICHARD CAPKA, Federal Highway Administrator, U.S.DOT

SEAN T. CONNAUGHTON, Maritime Administrator, U.S.DOT

EDWARD R. HAMBERGER, President and CEO, Association of American Railroads, 

Washington, DC

JOHN H. HILL, Federal Motor Carrier Safety Administrator, U.S.DOT 

JOHN C. HORSLEY, Executive Director, American Association of State Highway and Transportation

Officials, Washington, DC 

J. EDWARD JOHNSON, Director, Applied Science Directorate, National Aeronautics 

and Space Administration, John C. Stennis Space Center, MS 

WILLIAM W. MILLAR, President, American Public Transportation Association, Washington, DC 

NICOLE R. NASON, National Highway Traffic Safety Administrator, U.S.DOT

JEFFREY N. SHANE, Under Secretary for Policy, U.S.DOT

JAMES S. SIMPSON, Federal Transit Administrator, U.S.DOT

CARL A. STROCK (Lt. Gen., U.S. Army), Chief of Engineers and Commanding General, 

U.S. Army Corps of Engineers, Washington, DC 
TRANSPORTATION RESEARCH BOARD

WASHINGTON, D.C.

2007

www.TRB.org 

AIRPORT COOPERATIVE RESEARCH PROGRAM

ACRP SYNTHESIS 1

Research Sponsored by the Federal Aviation Administration

SUBJECT AREAS

Aviation and Planning and Administration

Innovative Finance 

and Alternative Sources 

of Revenue for Airports

A Synthesis of Airport Practice

CONSULTANT

CINDY NICHOL

Jacobs Consultancy

Burlingame, California
AIRPORT COOPERATIVE RESEARCH PROGRAM

Airports are vital national resources. They serve a key role in

transportation of people and goods and in regional, national, and

international commerce. They are where the nation’s aviation system connects with other modes of transportation and where federal

responsibility for managing and regulating air traffic operations

intersects with the role of state and local governments that own and

operate most airports. Research is necessary to solve common operating problems, to adapt appropriate new technologies from other

industries, and to introduce innovations into the airport industry.

The Airport Cooperative Research Program (ACRP) serves as one

of the principal means by which the airport industry can develop

innovative near-term solutions to meet demands placed on it.

The need for ACRP was identified in TRB Special Report 272:

Airport Research Needs: Cooperative Solutions in 2003, based on

a study sponsored by the Federal Aviation Administration (FAA).

The ACRP carries out applied research on problems that are shared

by airport operating agencies and are not being adequately

addressed by existing federal research programs. It is modeled after

the successful National Cooperative Highway Research Program

and Transit Cooperative Research Program. The ACRP undertakes

research and other technical activities in a variety of airport subject

areas, including design, construction, maintenance, operations,

safety, security, policy, planning, human resources, and administration. The ACRP provides a forum where airport operators can

cooperatively address common operational problems.

The ACRP was authorized in December 2003 as part of the

Vision 100-Century of Aviation Reauthorization Act. The primary

participants in the ACRP are (1) an independent governing board,

the ACRP Oversight Committee (AOC), appointed by the Secretary

of the U.S. Department of Transportation with representation from

airport operating agencies, other stakeholders, and relevant industry organizations such as the Airports Council International–North

America (ACI–NA), the American Association of Airport Executives (AAAE), the National Association of State Aviation Officials

(NASAO), and the Air Transport Association (ATA) as vital links

to the airport community; (2) the TRB as program manager and secretariat for the governing board; and (3) the FAA as program sponsor. In October 2005, the FAA executed a contract with the National

Academies formally initiating the program.

The ACRP benefits from the cooperation and participation of airport professionals, air carriers, shippers, state and local government

officials, equipment and service suppliers, other airport users, and

research organizations. Each of these participants has different

interests and responsibilities, and each is an integral part of this

cooperative research effort.

Research problem statements for the ACRP are solicited periodically but may be submitted to the TRB by anyone at any time. It is

the responsibility of the AOC to formulate the research program by

identifying the highest priority projects and defining funding levels

and expected products. 

Once selected, each ACRP project is assigned to an expert panel,

appointed by the TRB. Panels include experienced practitioners and

research specialists; heavy emphasis is placed on including airport

professionals, the intended users of the research products. The panels

prepare project statements (requests for proposals), select contractors,

and provide technical guidance and counsel throughout the life of the

project. The process for developing research problem statements and

selecting research agencies has been used by TRB in managing cooperative research programs since 1962. As in other TRB activities,

ACRP project panels serve voluntarily without compensation. 

Primary emphasis is placed on disseminating ACRP results to the

intended end-users of the research: airport operating agencies, service

providers, and suppliers. The ACRP produces a series of research

reports for use by airport operators, local agencies, the FAA, and other

interested parties, and industry associations may arrange for workshops, training aids, field visits, and other activities to ensure that

results are implemented by airport-industry practitioners.

ACRP SYNTHESIS 1

Project 11-03, Topic S01-01

ISSN 1935-9187

ISBN 978-0-309-09783-3

Library of Congress Control Number 2007923932

© 2007 Transportation Research Board

COPYRIGHT PERMISSION

Authors herein are responsible for the authenticity of their materials and for

obtaining written permissions from publishers or persons who own the

copyright to any previously published or copyrighted material used herein. 

Cooperative Research Programs (CRP) grants permission to reproduce

material in this publication for classroom and not-for-profit purposes.

Permission is given with the understanding that none of the material will

be used to imply TRB or FAA endorsement of a particular product, method,

or practice. It is expected that those reproducing the material in this

document for educational and not-for-profit uses will give appropriate

acknowledgment of the source of any reprinted or reproduced material. For

other uses of the material, request permission from CRP.

NOTICE

The project that is the subject of this report was a part of the Airport

Cooperative Research Program conducted by the Transportation Research

Board with the approval of the Governing Board of the National Research

Council. Such approval reflects the Governing Board’s judgment that the

project concerned is appropriate with respect to both the purposes and

resources of the National Research Council.

The members of the technical advisory panel selected to monitor this

project and to review this report were chosen for recognized scholarly

competence and with due consideration for the balance of disciplines

appropriate to the project. The opinions and conclusions expressed or

implied are those of the research agency that performed the research, and

while they have been accepted as appropriate by the technical panel, they

are not necessarily those of the Transportation Research Board, the National

Research Council, or the Federal Aviation Administration of the U.S.

Department of Transportation.

Each report is reviewed and accepted for publication by the technical

panel according to procedures established and monitored by the

Transportation Research Board Executive Committee and the Governing

Board of the National Research Council.

The Transportation Research Board of the National Academies, the National

Research Council, and the Federal Aviation Administration (sponsor of

the Airport Cooperative Research Program) do not endorse products or

manufacturers. Trade or manufacturers’ names appear herein solely because

they are considered essential to the clarity and completeness of the project

reporting.

Published reports of the 

AIRPORT COOPERATIVE RESEARCH PROGRAM

are available from:

Transportation Research Board

Business Office

500 Fifth Street, NW

Washington, DC 20001

and can be ordered through the Internet at

http://www.national-academies.org/trb/bookstore

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology 

and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 

1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences.

The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration 

and in the selection of its members, sharing with the National Academy of Sciences the responsibility for 

advising the federal government. The National Academy of Engineering also sponsors engineering programs 

aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering.

The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the 

services of eminent members of appropriate professions in the examination of policy matters pertaining 

to the health of the public. The Institute acts under the responsibility given to the National Academy of 

Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, 

to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the 

Institute of Medicine.

The National Research Council was organized by the National Academy of Sciences in 1916 to associate 

the broad community of science and technology with the Academy’s purposes of furthering knowledge and 

advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences 

and the National Academy of Engineering in providing services to the government, the public, and the 

scientific and engineering communities. The Council is administered jointly by both the Academies and 

the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. William A. Wulf are chair and vice chair, 

respectively, of the National Research Council.

The Transportation Research Board is a division of the National Research Council, which serves the 

National Academy of Sciences and the National Academy of Engineering. The Board’s mission is to promote 

innovation and progress in transportation through research. In an objective and interdisciplinary setting, 

the Board facilitates the sharing of information on transportation practice and policy by researchers and 

practitioners; stimulates research and offers research management services that promote technical 

excellence; provides expert advice on transportation policy and programs; and disseminates research 

results broadly and encourages their implementation. The Board’s varied activities annually engage more 

than 5,000 engineers, scientists, and other transportation researchers and practitioners from the public and 

private sectors and academia, all of whom contribute their expertise in the public interest. The program is 

supported by state transportation departments, federal agencies including the component administrations of 

the U.S. Department of Transportation, and other organizations and individuals interested in the 

development of transportation. www.TRB.org

www.national-academies.org

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology 

and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 

1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences.

The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration 

and in the selection of its members, sharing with the National Academy of Sciences the responsibility for 

advising the federal government. The National Academy of Engineering also sponsors engineering programs 

aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering.

The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the 

services of eminent members of appropriate professions in the examination of policy matters pertaining 

to the health of the public. The Institute acts under the responsibility given to the National Academy of 

Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, 

to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the 

Institute of Medicine.

The National Research Council was organized by the National Academy of Sciences in 1916 to associate 

the broad community of science and technology with the Academy’s purposes of furthering knowledge and 

advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences 

and the National Academy of Engineering in providing services to the government, the public, and the 

scientific and engineering communities. The Council is administered jointly by both the Academies and 

the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. William A. Wulf are chair and vice chair, 

respectively, of the National Research Council.

The Transportation Research Board is a division of the National Research Council, which serves the 

National Academy of Sciences and the National Academy of Engineering. The Board’s mission is to promote 

innovation and progress in transportation through research. In an objective and interdisciplinary setting, 

the Board facilitates the sharing of information on transportation practice and policy by researchers and 

practitioners; stimulates research and offers research management services that promote technical 

excellence; provides expert advice on transportation policy and programs; and disseminates research 

results broadly and encourages their implementation. The Board’s varied activities annually engage more 

than 5,000 engineers, scientists, and other transportation researchers and practitioners from the public and 

private sectors and academia, all of whom contribute their expertise in the public interest. The program is 

supported by state transportation departments, federal agencies including the component administrations of 

the U.S. Department of Transportation, and other organizations and individuals interested in the 

development of transportation. www.TRB.org

www.national-academies.org
ACRP COMMITTEE FOR PROJECT 11-03

CHAIR

BURR STEWART

Port of Seattle

MEMBERS

GARY C. CATHEY

California Department of Transportation

KEVIN C. DOLLIOLE

Lambert–St. Louis International Airport

BERTA FERNANDEZ

Landrum & Brown

JULIE KENFIELD

Carter & Burgess, Inc.

CAROLYN MOTZ

Hagerstown Regional Airport 

FAA LIAISON

LORI LEHNARD

ACI–NORTH AMERICA LIAISON

RICHARD MARCHI

TRB LIAISON

CHRISTINE GERENCHER

COOPERATIVE RESEARCH PROGRAMS STAFF

ROBERT J. REILLY, Director, Cooperative Research Programs

CHRISTOPHER W. JENKS, Manager, ACRP

EILEEN P. DELANEY, Director of Publications

ACRP SYNTHESIS STAFF

STEPHEN R. GODWIN, Director for Studies 

and Special Programs

JON WILLIAMS, Manager, Synthesis Studies

GAIL STABA, Senior Program Officer

DON TIPPMAN, Editor

CHERYL Y. KEITH, Senior Program Assistant

TOPIC PANEL

GARY C. CATHEY, California Department of Transportation

KEVIN C. DOLLIOLE, Lambert–St. Louis International Airport

BERTA FERNANDEZ, Landrum & Brown

CHRISTINE GERENCHER, Transportation Research Board

JULIE KENFIELD, Carter & Burgess, Inc.

FRANK N. LISLE, Transportation Research Board

CAROLYN MOTZ, Hagerstown Regional Airport 

BURR STEWART, Port of Seattle

LORI LEHNARD, Federal Aviation Administration (Liaison)

RICHARD MARCHI, Airports Council International–North America

(Liaison)
Airport administrators, engineers, and researchers often face problems for which information already exists, either in documented form or as undocumented experience and practice. This information may be fragmented, scattered, and unevaluated. As a consequence,

full knowledge of what has been learned about a problem may not be brought to bear on its

solution. Costly research findings may go unused, valuable experience may be overlooked,

and due consideration may not be given to recommended practices for solving or alleviating the problem.

There is information on nearly every subject of concern to the airport industry. Much of

it derives from research or from the work of practitioners faced with problems in their dayto-day work. To provide a systematic means for assembling and evaluating such useful information and to make it available to the entire airport community, the Airport Cooperative

Research Program authorized the Transportation Research Board to undertake a continuing project. This project, ACRP Project 11-03, “Synthesis of Information Related to Airport Practices,” searches out and synthesizes useful knowledge from all available sources

and prepares concise, documented reports on specific topics. Reports from this endeavor

constitute an ACRP report series, Synthesis of Airport Practice. 

This synthesis series reports on current knowledge and practice, in a compact format,

without the detailed directions usually found in handbooks or design manuals. Each report

in the series provides a compendium of the best knowledge available on those measures

found to be the most successful in resolving specific problems.

FOREWORD

By Staff 

Transportation 

Research Board

This synthesis study is intended to inform airport operators, stakeholders, and policymakers about alternative financing options and revenue sources currently available or that

could be available in the future in the United States. The report provides a brief overview

of common capital funding sources used by airport operators, a review of capital financing

mechanisms used by airports, descriptions of various revenue sources developed by airport

operators, and a review of privatization options available to U.S. airport operators. 

Information used in this study was acquired through a review of the literature and interviews with airport operators and industry experts. 

Cindy Nichol, Jacobs Consultancy, Burlingame, California, collected and synthesized

the information and wrote the report. The members of the topic panel are acknowledged on

the preceding page. This synthesis is an immediately useful document that records the practices that were acceptable within the limitations of the knowledge available at the time of

its preparation. As progress in research and practice continues, new knowledge will be

added to that now at hand.

PREFACE
CONTENTS

1 SUMMARY

5 CHAPTER ONE INTRODUCTION

Purpose of Report, 5

Study Methodology, 5

Report Structure, 5

General Background on Airport Financial Operations, 6

13 CHAPTER TWO FINANCING MECHANISMS—AIRPORT PRACTICES 

AND INNOVATIONS

Airport Access to Credit, 13

Types of Airport Bonds, 13

Other Forms of Airport Financing, 21

Leveraging Future Grants, 22

24 CHAPTER THREE REVENUE SOURCES—AIRPORT PRACTICES 

AND INNOVATIONS

Airport Parking Revenue, 24

Rental Car Revenues, 26

Terminal Concessions, 27

Advertising Programs, 29

Commercial Development and Land Use, 30

Other Innovative Revenue Enhancement Concepts, 33

35 CHAPTER FOUR ALTERNATIVE WAYS OF DOING BUSINESS

Partial Privatization, 35

Full Privatization, 36

38 REFERENCES

39 BIBLIOGRAPHY

41 ACRONYMS

42 APPENDIX A STATE GRANTS AND LOANS FOR AVIATION
Airport capital needs are estimated to exceed $70 billion for federal fiscal year (FFY) 2005

through FFY 2009, or approximately $14.3 billion per year, according to the Capital Needs

Survey conducted by Airports Council International–North America. Although the Airport

Improvement Program (AIP) administered by FAA is at historically high levels, it totaled

just over $3.5 billion in FFY 2006, leaving a gap of $10.8 billion to be funded with local

sources. With costs of construction increasing, airlines filing for bankruptcy, and periodic

economic downturns affecting the industry, airport operators find themselves continually

looking for additional revenue sources to fund capital projects and sustain operations.

This report presents the results of ACRP Project 11-03, S01-01, and is intended to inform

airport operators, stakeholders, and policymakers about alternative financing options and revenue sources that are currently available to airport operators in the United States, or that could

be available in the future if certain developments occur to facilitate them. Information used

for this study has been gathered through a literature review and selected interviews of airport

operators and industry experts.

This report provides: (1) a brief overview of common capital funding sources used by

airport operators, (2) a high-level review of capital financing mechanisms used by airports,

(3) a description of the various revenue sources developed by airport operators, and (4) a review

of privatization options available to airport operators in the United States. Because what is

innovative to one airport operator may be common practice to another, a continuum of

financing mechanisms and sources of revenue is presented, starting with the most common

practices at U.S. airports, and progressing to increasingly innovative practices.

The principal sources of funds for airport capital projects include the following, from

largest to smallest:

• Proceeds of bonds and other forms of debt—Bond proceeds are the largest source of

funds for airport capital needs. Debt service associated with bonds issued for airport

capital needs can be supported by the overall tax base of the issuing entity, general

airport revenues, passenger facility charge (PFC) revenues, revenues generated by

the facility constructed with the bond proceeds, other revenues, or any combination

thereof.

• PFC revenues—A majority of large-, medium-, small-, and non-hub airports impose a

PFC of between $1.00 and $4.50 per enplaned passenger to finance eligible airportrelated projects. Airport operators must obtain an approval from FAA before they begin

the collection and use of such revenues.

• AIP grants from the Airport and Airways Trust Fund and administered by FAA—AIP

grants administered by FAA are funded by aviation user taxes and are available to airport

operators, subject to certain eligibility limitations and assurances.

• Internally generated capital resulting from retained airport revenues—Certain airport

operators are able to retain net operating income from each year to invest in capital

improvements.

• Security grants from the general fund and administered by TSA—TSA grants are available

on a limited basis to airport operators to make terminal modifications to accommodate

explosive detection systems.

SUMMARY

INNOVATIVE FINANCE AND ALTERNATIVE SOURCES 

OF REVENUE FOR AIRPORTS
2

• State grants and local financial support—Certain states provide funding for airport and

aviation-related projects in the form of outright grants or matching share for federal

AIP grants.

Airport operators are major and regular participants in the municipal bond markets. Despite

the financial challenges airports have faced since September 11, 2001, airports have maintained

investment-grade ratings from credit rating agencies. To finance capital projects, airport

operators have:

• Utilized numerous types of bonds—Airport operators have used, among others, general

obligation bonds, general airport revenue bonds, bonds backed by PFCs, bonds backed

by customer facility charges (CFCs; fees paid by rental car customers), bonds to be paid

with future AIP or state grants, and special facility bonds to finance capital projects.

Each type of bond has advantages and disadvantages that are dependent on the structure

and financial capacity of the airport operator. For example, the Port of Seattle, operator

of the Seattle–Tacoma International Airport, issued subordinate and intermediate lien

general airport revenue bonds to finance a $3.4 billion capital improvement program

and reduced projected airline payments.

• Accessed other financial instruments—In addition to bonds, airport operators have used,

among others, commercial paper, bond anticipation notes, grant anticipation notes,

pooled credit programs, and capital leases. For example, the city and county of Denver,

operator of Denver International Airport, entered into capital equipment leases to provide short-term financing at low interest rates for runway, security, and other equipment.

• Minimized interest expenses—Airport operators have reduced interest rates on outstanding bonds and manage interest rate risk by entering into interest rate swaps with

investment banks. For example, the city of Chicago has examined the agreements with

airlines serving Chicago O’Hare International Airport to reduce the bonds subject to the

alternative minimum tax (AMT). Bonds subject to AMT pay a higher interest rate than

bonds not subject to AMT.

Although a majority of these financing mechanisms have been used by large- or medium-hub

airports, greater capital market acceptance can create opportunities for other airports.

Nonairline revenues may be used to reduce airline payments, fund new capital projects,

or develop airport equity and reserves. Airports nationwide have developed creative programs

to maximize revenue sources such as:

• Airport parking revenues—Parking has long been a revenue source for airport operators and further opportunities exist to enhance parking revenues by offering premium

parking services, implementing parking operational enhancements, and collecting offairport privilege fees.

• Rental car revenues—In addition to privilege fees and rentals, a CFC is collected at

some airports by each rental car concessionaire from its customers and used to pay all

or a portion of the operating and capital costs of a consolidated rental car area or structured facility, and may include the cost of transportation to the terminals. For example,

Albuquerque International Sunport imposed a CFC to finance the cost of a new consolidated rental car facility at the airport.

• Terminal concessions—Airport shoppers are recognized as a lucrative market, and

airport retailing is evolving to meet that market. Concession sales have increased dramatically as airlines discontinue meal service and passengers arrive earlier. Airport

operators have been able to maximize revenues through reinventing their terminal concessions programs by recognizing the customer, creating an inviting shopping experience,

providing an accommodating dining opportunity, and branding. For example, Memphis

International Airport’s new concession program balances local favorites with major

brands and provides guests with a sense of the city.
• Advertising programs—With longer dwell times, airport customers now take the time

to read advertisements. Modern airport advertising programs specialize in the sales and

maintenance of advertising sites at airports by using technology, sponsorship opportunities, and nontraditional advertising locations.

• Commercial development and land use—Airport operators have generated revenue

from a variety of revenue-producing leases from nonairline operations including manufacturing, warehousing, freight forwarding, and even farming on available airport land.

Commercial development and land use has been done through coordinated planning

efforts and mindful of FAA restrictions on land development. For example, Dallas/Fort

Worth International Airport is in the process of developing natural gas and oil resources

on airport land.

Most U.S. airports are operated as independent not-for-profit entities with oversight by a

politically appointed authority or as a self-sustaining enterprise of a governmental entity such

as a county, city, or state government. As it applies in the United States, privatization can

refer to a broad range of activities that entail varying levels of private involvement in the

operation of an airport including:

• Partial privatization—Airport operators have explored many ways of doing business

that involve varying degrees of private-sector involvement in the management, capital

investment decision making, financing, and pricing of airport facilities and services. Private involvement at airports nationwide includes airline involvement in capital decision

making, contracting of services to private companies, master concessionaire agreements,

and private terminal development. For example, AMR (American Airlines’ parent company) developed, renovated, and financed Terminal 4 at Los Angeles International Airport with special facility bonds issued by AMR and backed by their lease payments.

• Full privatization—Some airports in the United States have been developed, financed,

and operated privately throughout their entire existence, including various general aviation airports around the country. Congress established an airport privatization pilot program to explore privatization as a means of generating access to sources of private capital

for airport improvement and development. Stewart International Airport is the only airport to be privatized to date. Under the 99-year lease agreement, the New York State

Department of Transportation received an initial payment of $35 million from National

Express Group. The city of Chicago submitted a privatization proposal to FAA for

Midway Airport in September 2006 that was still pending as of January 31, 2007.

3
5

This report presents the results of ACRP Project 11-03, 

S01-01, ACRP Synthesis of Airport Practice 1: Innovative

Finance and Alternative Sources of Revenue for Airports. This

introductory chapter describes the purpose of the report, presents the methodology used to develop the report, provides

general background information, and outlines the organization of the report.

PURPOSE OF REPORT

This synthesis topic was identified by a 10-member panel of

industry experts charged with overseeing syntheses of information related to airport problems and was initiated out of concern

about challenges to airport operators’ ability to finance operations and needed capital improvements in the context of:

• Increasing air traffic volumes nationwide and emerging

congestion at certain airports necessitating investment in

future capacity and other measures.

• Uncertainty about the financial health of the airline

industry and the actual or potential affect airline bankruptcies may have on air service decisions and airport

finances.

• Concerns regarding how willing the U.S. Congress will

be to appropriate funds to aviation given the wars in

Iraq and Afghanistan, the status of the federal budget,

and other federal priorities.

• The potential effect that reauthorization of FAA, the

Airport and Airway Trust Fund, and TSA may have

on various funding sources for airports, including

passenger facility charges (PFCs), Airport Improvement Program (AIP) grants from FAA, and grants

from TSA.

• Construction inflation owing to post-hurricane rebuilding efforts and the increasing demand for construction

materials by growing economies elsewhere in the world,

particularly by China and India.

Given these and other financial challenges, the panel

believed it would be prudent for airport operators to consider

innovative finance mechanisms and alternative sources of revenue. This study is therefore intended to inform airport operators, stakeholders, and policymakers about alternative financing options and revenue sources that are currently available to

airport operators in the United States, or that could be available

in the future if certain developments occur to facilitate them.

Because what is innovative to one airport operator may be

common practice to another, no attempt is made in this report

to stipulate where certain “traditional” financing mechanisms

or sources of revenue become “innovative.” Rather, a continuum is presented, starting with the most common practices

at U.S. airports, and progressing to increasingly innovative

practices.

STUDY METHODOLOGY

Information used in this study has been acquired through a

literature review and selected interviews of airport operators

and industry experts.

Literature and Data Search

A comprehensive search of literature and data sources was

conducted to document financing trends and innovative ideas

explored by airport operators, FAA, TSA, and other transportation agencies. The research had three primary areas of

focus: (1) nontraditional revenue sources airport operators

could explore, (2) innovative financing mechanisms, and

(3) new ways for airports to operate financially.

Interviews

Various interviews have been conducted to gather information

on innovative financial alternatives for airports. Although airport operators have the most thorough knowledge of innovative financial alternatives used at their airports, rating agency

analysts, investment bankers, and financial advisors have also

been valuable resources in identifying those airports implementing innovative structures.

REPORT STRUCTURE

The remainder of this report includes the following:

• Chapter one concludes with a general background section to provide a brief overview of common capital

funding sources used by airport operators.

• Chapter two provides a high-level review of capital

financing mechanisms used by airports to obtain the

most flexibility and/or capital funding from its revenue

sources.

CHAPTER ONE

INTRODUCTION
• Chapter three describes the various revenue sources airport operators have developed to date and new revenues

that some airports are starting to use or that could be

realized in the future.

• Chapter four reviews financing options available to

airport operators in the United States that would fundamentally change the way they operate. The two main

topic areas of this section include (1) privatization of airports and airport assets and (2) third-party development

and capitalization.

GENERAL BACKGROUND ON AIRPORT

FINANCIAL OPERATIONS

Airport Legal and Financial Structure

This section provides an overview of the legal organization

of most U.S. airports, a discussion of the factors governing

U.S. airport financial operations, and a discussion of the sources

of funding for projects at U.S. airports.

Legal Organization of U.S. Airports

Most U.S. airports are operated as independent, not-for-profit

entities with oversight by a politically appointed authority, or

as self-sustaining enterprise funds of a governmental entity

such as a county, city, or state government. The form of governance for the 100 busiest airports in the United States is

as follows (the top 100 airports were determined based on

numbers of enplaned passengers in 2005):

• Authority 39%

• City 33%

• Regional 5%

• County 13%

• State 7%

• Other 3%

Airports operated as enterprise funds of governmental

entities may be overseen by boards or commissions structured

as decision-making entities, operating within the legal and

political framework of the sponsoring jurisdiction.

Airport authorities exist in a variety of forms and their

specific powers and responsibilities are established by their

enabling legislation. Some airport authorities are independent public bodies created by state legislation; others are

municipal corporations or agencies created by one or more

local jurisdictions under general state statutes governing

the establishment of independent authorities. Many airport

authorities sponsored by state or local legislation operate

relatively independently of their governmental sponsors,

while remaining responsive to political concerns and priorities. In other cases, the sponsoring jurisdiction retains some

oversight of airport operation, such as approval of operating

budgets and bond issues.

6

Factors Governing Airport Financial Operations

Most of the sources of capital available to finance airport

improvements have either direct or indirect external restrictions on their use (i.e., federal or contractual restrictions). This

section describes those external restrictions and provides the

context for airport access funding from different sources, as

will be discussed later.

Figure 1 reflects the typical factors that govern airport

financial operations. Those factors include: (1) federal regulations and policies and grant assurances made by airport

sponsors, (2) the airport operator’s authorizing legislation,

(3) the bond indenture for the airport, and (4) the airport’s

airline use and lease agreement(s). The airport’s concession

agreement(s) also affects the airport operator’s net revenue

and financial capacity.

Federal Regulations and Policies

Since 1982, the U.S. Congress has passed various legislation (1) establishing the AIP that provides federal grant funding, (2) creating the authority for airport operators to levy

PFCs, and (3) governing how airport revenue is generated

and used. U.S.DOT and FAA have established regulations

and issued policy guidance to provide specific direction to

airport operators regarding the eligibility and use of AIP

funds, PFC revenue, and airport revenue. U.S.DOT/FAA

regulations and policies regarding airport rates and charges,

which relate to how airport revenue is generated, have also

been issued.

Authorizing Legislation

Airport operators that are independent entities or enterprise funds of a city, county, or state government typically

are governed by authorizing legislation or a local charter

that establishes the airport operator’s organizational structure, responsibilities, and powers. The authorizing legislation may specify facilities that the airport operator is

responsible for developing and/or maintaining, such as airport access roads.

Bond Indenture

The bond indenture (also called a bond resolution or bond

ordinance) provides the legal basis for issuing airport revenue

bonds and defines the terms under which additional bonds

might be issued, including the need for revenue-generating

projects. The bond indenture defines what may or may not be

included in the definition and computation of airport revenues and expenses. The indenture establishes various funds

and accounts for the payment of interest and principal on the

bonds from airport revenues, establishes the priority of payments for all of the airport operator’s obligations, and sets
7

forth various covenants between the issuing entity and the

bondholders, including a rate covenant requiring the airport

operator to set rates and charges to produce specified levels

of revenues. Some airport bond indentures may also include

principles to guide the establishment of rates and charges for

the use of airport facilities.

Airline Agreements

An airport–airline agreement generally stipulates the rights,

privileges, and obligations of the airport operator and the airlines serving the airport, and sets forth the manner in which

the rentals, fees, and charges paid by the airlines for use of

the airport are calculated and adjusted. Parties to a use and

lease agreement are called Signatory Airlines.

Many airline agreements contain provisions that require

a certain number or percentage of the Signatory Airlines to

approve or disapprove certain decisions of the airport operator, most often those involving airport capital expenditures.

These provisions are known as Majority-in-Interest provisions and are designed to give the Signatory Airlines some

control over long-term financial obligations undertaken by the

airport operator.

Some airports, however, are not governed by such agreements, and instead rates are established by ordinance or regulation. In those instances, the airport operator typically

adopts a policy setting forth the procedures to be used in

calculating user rentals, fees, and charges, and applies those

procedures consistently from year to year in enacting the rate

ordinance and calculating airport charges. The FAA’s “Policy

Regarding Airport Rates and Charges” (1996) broadly governs

airport rate setting in the absence of an airline agreement and

dispute resolution.

Concession Agreements

Many airport operators also enter into various agreements with

providers of nonaeronautical services, such as parking garage

operators; rental car agencies; and merchants and vendors of

food, news items, and gifts on airport premises. These agreements are often the largest source of nonairline revenues at

most airports. The agreements do not, however, govern how

an airport operator can use those revenues.

Airport Capital Needs

The capital requirements of airports are significant today, and

are expected to increase in the future. The capital needs of

airports are principally driven by:

• Traffic growth and the need to expand facilities;

• Normal wear and tear of facilities as a result of use and

age; and

• Changing technology, particularly aircraft technology

that over time can render older facilities obsolete.

FIGURE 1 Factors governing airport financial services.
According to the Capital Needs Survey, airport capital

needs are estimated to exceed $70 billion for the 5-year period

from federal fiscal year (FFY) 2005 through FFY 2009 conducted by Airports Council International–North America

(ACI–NA). The survey reflected capital investments of approximately $14.3 billion per year, a figure that is to be updated

early in 2007.

According to the National Plan of Integrated Airport Systems (NPIAS) for FFY 2007 through FFY 2011, airport operators will have $41.2 billion (or $8.24 billion per year) in

capital projects eligible for federal aid as shown in Figure 2.

However, even though AIP has been at historic levels, it

totaled just over $3.5 billion in FFY 2006 (the FFY 2007

appropriation was pending at this time), leaving a funding

gap of just over $4.7 billion annually for airport projects eligible for federal aid. It is important to note that overall capital needs for airports are higher than the NPIAS estimate:

projects eligible for federal aid that are paid for by other local

sources (including airport bonds and PFCs) are not included

in the NPIAS estimate, nor are capital projects ineligible 

for federal aid (e.g., revenue-producing parts of the terminal or parking garages). According to the most recent ACI–

NA Capital Needs Survey, once capital projects that are to be

funded from sources other than federal grants are included,

such as bonds, the total increases significantly.

Airport Sources of Funding

As indicated earlier, increasing capital investments will be

required for airport operators to provide needed infrastructure. The principal sources of funds for airport capital projects

include the following, cited from largest to smallest:

• Proceeds of bonds and other forms of debt

• PFC revenues

• AIP grants from FAA

• Internally generated capital resulting from retained airport revenues

• Security grants from TSA

• State grants and local financial support

The distribution of airport sources of capital is shown in

Figure 2.

Proceeds of Bonds and Other Forms of Debt

Four basic types of bonds are issued to fund airport capital

improvements, including (1) general obligation bonds supported by the overall tax base of the issuing entity (the airport

sponsor); (2) general airport revenue bonds (GARBs) secured

by the revenues of the airport and other revenues as may be

defined in the bond indenture; (3) bonds backed either solely

by PFC revenues or by PFC revenues and airport revenues

generated by rentals, fees, and charges; (4) special facility

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bonds backed solely by revenues from a facility constructed

with proceeds of those bonds; and (5) other debt instruments.

Bonds and other debt instruments are discussed in greater

detail in chapter two.

Passenger Facility Charges

In 1990, Congress enacted legislation to provide airports with

an additional source of funding for capital projects, subject to

FAA approval, in the form of PFCs. The Aviation Safety and

Capacity Expansion Act of 1990 required U.S.DOT to issue

regulations under which a public agency may be authorized

to impose a PFC of $1.00, $2.00, or $3.00 per enplaned passenger at commercial airports it controls. Under this act, airport-related projects that preserve or enhance safety, capacity, or security of the national air transportation system;

reduce noise from an airport that is part of the system; or furnish opportunities for enhanced competition between or

among air carriers are eligible.

The Wendell H. Ford Aviation Investment and Reform

Act for the 21st Century (AIR-21) included authorization to

charge a PFC at the $4.00 and $4.50 levels that meet specific

eligibility requirements. One such requirement, which applies

only to large- and medium-hub airports, is that a project must

make a “significant contribution” to improving air safety and

security, increasing competition, reducing congestion, or

reducing noise (in comparison with the “adequate justification” requirement for projects at a lower level). For operators

of large- and medium-hub airports that are approved to collect

a $4.00 or $4.50 PFC, passenger entitlement grants are reduced

by 75% (rather than the 50% associated with lower PFC

levels). Figure 3 shows:

FIGURE 2 Sources of airport capital (2001–2004,

average). Source: Thomson Financial, FAA, and

ACI–NA.
9

• The number of airports charging PFCs, and the level

being charged by hub size compared with the total number of airports of that hub size. It shows that the number

of airports by category and the number charging a PFC

increases as one moves from large- to medium-, smalland non-hub airports, although the highest percentage of

airports charging PFCs are in the large-, medium- and

small-hub categories.

• The amount of PFC revenue collected by airport hub

size, which are orders of magnitude larger for large-hub

airports than for the other hub sizes.

More than $2.2 billion in PFC revenues are collected by airport operators each year. PFC revenues are: (1) used on a “payas-you-go” basis, where PFC collections and interest earnings

are spent directly on capital projects, and/or (2) leveraged; that

is, used to pay debt service on bonds or to repay other forms

of debt. These forms of financing will be discussed in greater

detail in chapter two.

AIP Grants from Airport and Airway Trust Fund

Administered by FAA

Federal AIP grants administered by FAA are funded by aviation user taxes. AIP grants are made available to airport

operators in numerous forms:

• Entitlement funds, which are apportioned to primary airports based on levels of passenger traffic and to cargo service airports based on levels of cargo aircraft landed

weight, subject to certain minimum and maximum levels.

• Small airport funds, which are apportioned to general

aviation (including reliever) and non-hub commercial

service airports.

FIGURE 3 (a) Passenger facility charge levels by hub size; (b) total PFC revenue by

hub size. Source: FAA, PFC Branch, Feb. 2006.

a

b
• Set aside funds, which are dedicated to noise compatibility planning and implementation, the Military Airport

Program, and reliever airports.

• State apportionments, which are principally apportioned

for nonprimary commercial service, general aviation,

and reliever airports based on an area/population formula among the 50 states, the District of Columbia,

Puerto Rico, and insular areas. In Alaska, Hawaii, and

Puerto Rico these amounts may be used at any primary

or nonprimary airport in addition to other designated

entitlements.

• Nonprimary apportionments, which are apportioned

based on the needs for a particular nonprimary airport

in the most recently published NPIAS, subject to overall caps.

• Discretionary funds, which are distributed based on the

ranking of the airport’s projects in relation to others

deemed most important for improving the national airspace system.

There are two important steps in the federal policy making

process.

• An authorization provides the legal authority for the

federal government to undertake a program. The length

of an authorization is typically between 3 and 5 years,

with Vision 100 running the period between FFY 2004

through FFY 2007. The next authorization bill will run

from October 1, 2007, to the end of the authorization

period, for which the duration is to be determined.

• An appropriation must be separately enacted by Congress

each FFY for funding actually to be spent on a program.

Confusion often occurs when Congress authorizes a program at a particular level and then either does not provide any

funding or does not appropriate monies to the authorized

level. As shown in Figure 3, this has happened frequently,

although the differences, if any, have been slight since 2001.

FAA has issued AIP grants as multiyear letters of intent

(LOIs) as well as 1-year grants. Airport operators must conduct

benefit–cost analyses to obtain discretionary grants for more

than $5 million or for multiyear LOIs to fund capacity projects.

Airport operators must give certain assurances to FAA to

receive federal grants. More than 30 assurances must be certified by the sponsor as a condition of grant approval depending

on the type or scope of the project for which the grant is being

sought. Examples of assurances that directly affect the legal

and financial structure of airports are:

• Economic nondiscrimination—Ensures that the airport

will be operated for public use on fair and reasonable

terms, and that those engaged in aeronautical activities

at the airport are providing services on a fair, equal,

and not unjustly discriminatory basis and charging fair,

10

reasonable, and not unjustly discriminatory prices for

those services.

• Nonexclusive right of use—Ensures that the airport operator will not permit exclusive use of its aeronautical

facilities by those providing aeronautical services.

• Fee and rental structured to provide airport financial selfsufficiency—Ensures that the airport fee and rental structure will be set so as to make the airport as self-sustaining

as possible.

• Nondiversion of airport revenues—Ensures that all revenues generated by the airport and local taxes on aviation fuel will be expended on the operating and capital

costs of the airport or other facilities, directly and substantially related to aeronautical activity, owned and

operated by the operator of the airport.

Through FFY 2003, AIP grants were used to fund explosives detection system (EDS) infrastructure at airports. Beginning in FFY 2004 through FFY 2006, U.S.DOT’s annual

appropriation acts have prohibited spending AIP funds for

baggage screening infrastructure. This prohibition is expected

to continue through FFY 2007 and possibly beyond.

Internally Generated Capital Resulting from

Retained Airport Revenues

Airport operators charge and collect rentals, fees, and charges

for the lease and use of facilities to passenger and cargo airlines, concessionaires, and other entities providing airport support services. Rentals, fees, and charges collected from airlines

cover a portion of the operating expenses and debt service

incurred by airport operators. Rentals, fees, and charges collected from tenants of airport facilities are also often the primary source of funds for repayment of principal and interest

on bonds. Airport sources of revenue are discussed in detail

in chapter three.

Total revenues, less total operating expenses incurred by

the airport operator, equal the net operating income generated by the airport operator. Net operating income (1) can be

used to fund debt service (along with the portion recovered

from airline rentals, fees, and charges), (2) can be invested as

cash in capital improvements (this constitutes slow forming

equity because it typically takes years to retain significant

retained earnings), and/or (3) can be returned to the airlines

in the form of revenue-sharing or credits in the calculation of

rentals, fees and charges.

Security Grants from the General Fund

Administered by TSA

Since FFY 2003, TSA grants have been available to airport

operators on a limited basis to make terminal modifications

to accommodate EDS. TSA grants have been issued as
11

multiyear LOIs as well as 1-year grants, called other transaction agreements (OTAs), to fund baggage screening

infrastructure. Through FFY 2004, TSA executed eight

LOIs to provide grant funding to each of nine airports over

a 3- or 4-year period, with the last payments to be made in

FFY 2007 providing the funding is appropriated. Figure 4

reflects the budget for EDS installation and integration

since FFY 2003.

Owing to concerns about making multiyear commitments

without the safeguards of a trust fund or other form of guaranteed future year funding, and because the funding stream has

not supported additional long-term grant agreements, TSA has

provided only 1-year grants since FFY 2004 through OTAs.

To date, approximately 33 OTAs have been issued by TSA

(see Figure 5).

State Grants and Local Financial Support

Certain states provide funding for airport and aviation-related

projects in the form of outright grants or matching share

for federal AIP grants. States fund such grants or local matching funds from a variety of sources—registration and licensing

fees and dedicated or special taxes such as fuel taxes. Support

from local governments generally takes the form of general

FIGURE 4 AIP funding levels.

FIGURE 5 Current TSA obligated funding levels. Source: TSA Finance

and Administration staff, Aug. 2006.
taxes. State or local grants may be provided to fund capital

improvements at an airport, such as roadway and access projects. As shown in Appendix A, 30 states levy aviation fuel

taxes and 10 states have aircraft sales or use taxes. State grants

are used as the local match to AIP funds or as direct grants

for various types of projects as shown. Certain states also

provide lower or no interest loans.

Using Sources of Funding Strategically

Aligning the sources of capital funds with allowable and optimal uses is essential for airport operators to maximize the

impact of each dollar. Certain funding sources such as PFCs

12

and AIP grants have restrictions in how they can be used. In

addition, sources such as revenue bonds are more effective

when targeted to projects having a direct income stream,

especially when airline approvals are required.

After maximizing the use of federal AIP grants and PFC

revenues for major capacity-enhancing projects, airport operators can fund capital projects from a combination of debt and

equity. Private and/or third-party funding may also make sense

for certain types of facilities, such as maintenance facilities,

flight kitchens, and cargo facilities. Figure 6 summarizes the

strategic use of capital sources among the competing uses to

optimize financial capacity.

FIGURE 6 Strategic targeting of airport funding sources.
Pages Intentionally Omitted
CERTIFICATE OF SERVICE
Certificate of Service 

I hereby certify that I have today, the 15th day of April, 2016, caused the foregoing 

Answer of the Port of Portland to be served electronically by or via email, on the following: 

David Berg, Esq. 

Vice President & General Counsel 

Doug Mullen, Esq. 

Assistant General Counsel 

Air Transport Association of America, Inc. 

d/b/a Airlines for America 

1275 Pennsylvania Avenue, N.W. 

Suite 1300 

Washington, D.C. 20004 

(202) 626-4234 

Email: dberg@airlines.org 

dmullen@ airlines.org 

Counsel for Complainants 

Roy Goldberg, Esq. 

Steptoe & Johnson LLP 

1330 Connecticut Avenue, N.W. 

Washington, D.C. 20036 

(202) 429-8028 

Email: rgoldberg@ steptoe.com 

Pablo 0. Ntiesch