## 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 T HE 

## P ORT OF 

## P ORTLAND 

## 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. S PIEGEL 

## & M C 

## D IARMID 

## 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 Februa ry 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 f iled by the Air Transport Association of America,
Inc. d/b/a Airlines for America (“A4A”), and Alas ka Airlines, Inc., American Airlines, Inc., Atlas
Air, Inc., Fedex Express Airlines, Hawaiian Airl ines, 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 Po rtland International Airport (“Airport”),
which is located within the City of Portland (“ City”). The air carriers operating at the Airport
disagree with having to pay certa in stormwater management and environmental fees that the City

## 2 imposes on all ratepayers within its jurisdicti on, including the Port. The stormwater fee in
dispute (“Stormwater Charge”) goe s to cover the City’s costs of managing the stormwater runoff
from the City rights-of-way and other City pr operty. The environmen tal fee relates to a
Superfund investigation associated with City stormwater runoff and se wer overflow (“Superfund
Charge” together with the Stormwater Charge, th e “Water Charges”). Collectively, the fees are
among various utility charges th e Port incurs as a conseque nce of owning and operating the
Airport. As such, the fees c onstitute operating and maintenance expenses of the Airport and the
amounts paid are included in the ai r 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. Th e air carriers would rather not ha ve to pay them. However, the
Port cannot avoid the charges. The City is a third-party gover nmental entity with the legal
authority to impose utility fees on all of its ratepa yers, including the Port, as the owner of Airport
property located within City limits.
The City describes the disputed fees in th e 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 no t 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 form ulations used by municipalities throughout the
country for those types of charges. The fees in questions are neither sp eculative nor imposed to
mitigate new development, but are based on actu al 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 highwa ys) are used by origin
and destination passengers, as well as Airport an d Airport tenant employees, for traveling to and

## 3 from the Airport. The Superfund Charge addr esses an ongoing environmental investigation
related, in part, to the City’s past st ormwater and sewer drainage practices.
The Port is very conscious of its Federal ob ligations, 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 seri ously its corporate respons ibilities and obligations
towards the air carriers that operate at the Air port. For that reason, the Port has worked with
Complainants, the City, and FAA in an attemp t to address Complainants’ concerns. After
reviewing all of the facts, the explanations put forth by the Po rt, 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 us e restrictions. While
the air carriers are clearly di spleased 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 ag ainst the City in the U.S. District Court
for the District of Oregon seeki ng 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 continui ng 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 th e 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 airpor t revenue use restriction: (1) by collecting
contributions to the disputed fees in the operatin g 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 investigati on 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 Fe deral obligations. However, ther e 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 paragr aph numbers below corr espond 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 Co mplainants 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 Signator y Passenger Airline Lease and Operating
Agreement, that it includes in the airline rate base certain util ity charges, including
amounts towards the Stormwater Charge and S uperfund Charge that are paid to the City,

but it denies the characterizati on that there is any revenue di version. 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 th e payments. The Port is without sufficient
knowledge as to the allegations in Para graph 4 concerning the Superfund Charge.

## 5 5. The Port denies Paragraph 5.

6. The Port denies the allegati ons 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 statem ents 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 trad e association. The Port is without sufficient
knowledge as to the remainder of th e facts alleged in the paragraph.

9. Paragraph 9 states a legal conclusion that doe s not require an answer. To the extent a
response is deemed required, th e Port denies Paragraph 9.

10. The Port admits that Alaska Airlines, Inc. c onducted aircraft operati ons at the Airport as
of February 10, 2016, but is without suffici ent knowledge as to the remainder of
Paragraph 10.

11. The Port admits that American Airlines, Inc. conducted aircraft opera tions at the Airport
as of February 10, 2016, but is without suffi cient knowledge as to the remainder of
Paragraph 11.

12. The Port admits that Atlas Air, Inc. conducte d aircraft operations at the Airport as of
February 10, 2016, but is without sufficient know ledge as to the rema inder of Paragraph

12.

## 6 13. The Port admits that Fedex E xpress Airlines conducted aircra ft operations at the Airport
as of February 10, 2016, but is without suffi cient knowledge as to the remainder of
Paragraph 13.

14. The Port admits that Hawaiian Airlines, Inc. conducted aircraft opera tions at the Airport
as of February 10, 2016, but is without suffi cient knowledge as to the remainder of
Paragraph 14.

15. The Port admits that JetBlue Airways, Inc. c onducted aircraft operati ons at the Airport as
of February 10, 2016, but is without suffici ent knowledge as to the remainder of
Paragraph 15.

16. The Port admits that Southwest Airlines, Inc. conducted aircraft opera tions at the Airport
as of February 10, 2016, but is without suffi cient knowledge as to the remainder of
Paragraph 16.

17. The Port admits that United Airlines, Inc. c onducted aircraft operati ons at the Airport as
of February 10, 2016, but is without suffici ent knowledge as to the remainder of
Paragraph 17.

18. The Port admits that United Parcel Servic e 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 suffici ent knowledge as to the remainder of
Paragraph 19.

20. The Port admits Paragraph 20.

## 7 21. Paragraph 21 states a legal conclusion that doe s not require an answer , and the cited cases
speak for themselves. To the extent a re sponse is deemed required, the Port denies
Paragraph 21.

22. The Port admits that Complainants ha ve sought informal resolution and that
Complainants disagree with the results. The Po rt agreed to seek advice from FAA on the
issues raised by Complainants, and FAA twi ce 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 re spective lease and operating agreements
Complainant Airlines contribute towards the Wa ter Charges that the Po rt pays to the City,

but it denies the characterizati on that there is any revenue di version. 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 co llection and treatment system.

28. The Port generally admits Paragr aph 28, but denies that there is no Airport stormwater
that runs into City-controlled stormwater infrastructure.

29. The Port admits that the City adopt ed Ordinance No. 185610 on September 12, 2012.
Ordinance No. 185610 speaks for itself. City ra tepayers have been subject to off-site
stormwater management fees since approximately 1979.

30. The Port admits Paragraph 30. The City’s St ormwater Charge that all ratepayers must
pay has an on-site and an off-site compone nt. 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 di strict receive a 35% discount of the total bill. The off-site
component, which the Port is required to pa y, is intended to cover the City costs of
managing stormwater discharge from City st reets, other City pr operty, 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-contr olled 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 Ai rport’s location in a dr ainage district.

35. The Port admits Paragraph 35.

36. The Port admits that counsel for A4A and Alas ka 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 th e remainder of Paragraph 37.

38. The Port lacks sufficient knowledge and theref ore 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 Colu mbia 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 m eeting took place. Paragraph 44 contains
characterizations of and opinions about thatmeeting 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 th at 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 deni es 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 ma y 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 a nd opinion that do not require a response, and
the cited authorities speak for themselves.

## 10 52. Paragraph 52 contains legal conclusions a nd opinion that do not require a response, and
the cited authorities speak for themselves.

53. Paragraph 53 contains legal conclusions a nd opinion that do not require a response, and
the cited authorities speak for themselves.

54. Paragraph 54 contains legal conclusions a nd opinion that do not require a response, and
the cited authorities speak for themselves.

55. Paragraph 55 contains legal conclusions a nd 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 a nd opinion that do not require a response, and
the cited authorities speak for themselves.

60. Paragraph 60 contains legal conclusions a nd opinion that do not require a response, and
the cited authorities speak for themselves.

61. Paragraph 61 contains legal conclusions a nd opinion that do not require a response, and
the Revenue Use Policy speaks for itself.

62. Paragraph 62 contains legal conclusions a nd 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 requi red, the Port denies Paragraph 64.

65. The Port denies Paragraph 65.

66. The Port admits that the City has taken th e position that the offsite component of the
Stormwater Charge is calculated to establis h equity among ratepayers and that the City
does not own or operate the Airport. The Po rt denies the remai nder 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 remai nder of Paragraph 70.

71. Paragraph 71 contains legal conclusions a nd 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 Po rt denies the remai nder 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 re quire 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 ad mit 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 re ferenced in Paragraph 84 took place.

85. The cited position paper speaks for itself.

86. The Port is without sufficient knowle dge 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 m eeting took place. Paragraph 94 contains
characterizations of and opinions about thatmeeting that do not require a response.

95. The Port admits that the September 16 m eeting 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 m eeting 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 m eeting took place. Paragraph 97 contains
characterizations of and opinions about that me eting that do not require a response.

98. The Port admits that the September 16 m eeting 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 m eeting 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 m eeting 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 m eeting 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 m eeting 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 m eeting took place. Paragraph 103 contains
characterizations of and opinions about that me eting that do not require a response.

104. The Port admits that the September 16 m eeting 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 m eeting 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 m eeting took place. Paragraph 106 contains
characterizations of and opinions about that me eting 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 a nd 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 a nd opinions that require no response, and the
cited authority speaks for itself.

119. Paragraph 119 contains legal conclusions a nd 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 a nd opinions that require no response. The
cited letter speaks for itself. The Port de nies 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 responsibl e party of the Portland Har bor 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 not es that the letter does not say that a factual
record developed in the context of a formal proc eeding “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 revenue s; 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 re venues. The remainder of Paragraph 126 contains legal
conclusions and opinions th at require no response.

127. Paragraph 127 contains legal conclusions th at do not require a response, and the cited
article speaks for itself.

III. ARGUMENT
In addition to the specific answers above, th e Port further and affirmatively answers as

follows.

A. Introduction
The gravamen of the Complaint (¶ 64) is that the Port “has violat ed 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 partic ular underlying basis for Complain ants’ 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 Remediati on Fees.” Complaint ¶ 66. These allegations
do not exist in a vacuum. Complainants have pr eviously presented the same factual and legal
matter to FAA, and FAA has twice found Compla inants’ 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 Of fice 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 it s responsibilities to th e air carriers serving
the Airport, the Port has been working collabora tively with the City, Complainants, and FAA to
resolve Complainants’ concerns related to the Stormwater Char ge 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 juri sdictional boundaries of the City. Pursuant
to its voter-approved charter, th e City operates sewer and stormw ater 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 stormw ater 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 Environmenta l Services to Port identifying
separate utility line item charges for Stormw ater Charge and Superfund Charge, dated June 4,
2014 (“Representative City Bill”)). The City covers th e costs of its stormw ater utility through a

2 

### The Declaration of Ian Whitlock, the Port’s Deputy Genera l Counsel, was filed in supp ort 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 a nd stormwater fees.
The Stormwater Charge is composed of two el ements: an on-site component and an off-site
component. Answer Ex. 3, Portland City C ode (“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-s ite 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 compon ents 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 mana gement service is also provided by drainage
districts, which are independent governmental aut horities. There are th ree drainage districts
located within the City: the Multnomah County Dr ainage 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 Di strict 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 tu rn 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 coll ection mechanism to recove r the full costs of its
stormwater management services. Complaint Ex. 4. On September 5, 2012 the City adopted
Ordinance No. 185610. Complaint Ex. 1. U nder Ordinance No. 185610, the City resumed
direct-billing Drainage Dist rict ratepayers, such as the Port, fo r 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 Stormwat er Charge multiplied by the Portland Harbor

5 

### The Airport also maintains its own system to manage a nd collect airfield stormwater, in cluding 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 Superf und 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 bil ling 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 “agai nst all Portland ratepayers, including both
sanitary sewer customers and storm water custom ers.” Answer Ex. 1 ¶ 24. The City explains
that “EPA [] named the City as a party ‘pot entially responsible’ fo r some of the river’s
contamination by virtue of the BES sewer and stor m 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 ra tepayers 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 acco rdance with the air carriers’
respective lease and operating agreements with th e Port, the Port generates a portion of this
revenue from the rates and charge s 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 paym ent of the Water Charges would not run afoul of
Federal airport revenue use restric tions. At that time, “the City was considering (a) eliminating a
discount on an ‘off-site’ component of the stormwat er charge that had previously been billed by
the [Multnomah District] on behalf of the C ity, 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 ai rport revenues. Complaint Ex. 3. C ontemporaneous with its discussions
with the City, the Port also c ooperated with Complainants in s eeking guidance from FAA as to
whether the Port’s payment of the charges with airport revenue would co mply with the Revenue
Use Policy. Answer Ex. 2 ¶¶ 5-6 (discu ssing Port’s provision of memoranda and
correspondence to FAA, and exchange of emails and participation in te lephone conferences with
FAA regarding the proposed ordinance).
By telephone conference on September 4, 2012, re presentatives of the Office of Airport
Compliance in Washington, D.C. and the We stern Mountain region compliance division:
confirmed that [the] Port’s action would be appropriate. Specifically, the FAA representative s opined that they did not view the payment of the Disputed Charges as prohibited by the federal

7 

### The Amended and Restated Signatory Passenger Airlin e Lease and Operating Agreemen t included as Answer Ex. 6 is substantially similar to the lease and operating agreem ents 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 si milarly-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 doubl e-payment by the Airport (because the Port is exempted from payi ng 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 stormwat er 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 ai rport 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 attach ments thereto). The Port participated in
some of those discussions, incl uding by attending meetings in Washington, D.C. and Portland.
Complaint ¶¶ 84, 93.
The result of these cooperative efforts was the August 5, 2015 Di rector’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 Stormwat er and Superfund Charges are “rat epayer[]” charges; 2) which
“arise[] as a legal obligation incident to the airp ort’s possessory interest in land necessary for the
provision of aeronautical services;” and 3) are “allocated to all ra tepayers within the jurisdiction,
including the Port of Portland, based upon a transparent, uniform, and non-discriminatory ratesetting.” Accordingly, they are proper “operati ng 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 subs tantial effort and a ttention 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 guida nce, including the Director’s
Letter, the Port has been and is paying the Wa ter 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 compor ts 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 cost s 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: “r evenues generated by an airport th at is the subject of Federal
assistance may not be expended for any purpose othe r 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 th e statute. FAA’s Revenue Use
Policy, which implements the requirements of th e airport revenue use statutory provisions and
the Grant Assurances, provides th at “[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, app lies a nearly identical prohibition to recipients of federal Airport Improvement Program grants.

## 23 While the statute does not define the term “ope rating costs,” it is a ba sic 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 servi ces to its ratepayers”).
As evidenced by colloquial and authoritativ e 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 “t he 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 simila rly states that “[O] perating costs . . . include
many components of operating a business including . . . [u]tility expenses.” 10



## Utility charges are also rec ognized operating costs under th e Office of Management and
Budget Circular A-87, Generally Accepted A ccounting 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 categoriz es utility charges as operating costs.

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

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



## Attachment A, the “General Principles for Dete rmining Allowable Costs,” advises, in relevant
part, that allowable costs must m eet 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 provid es that in determining the reasonableness of a
given cost, consideration is give n to whether: “the cost is of a type generally recognized as
ordinary and necessary for the opera tion 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 Wa ter 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 a nd stormwater utilities. Answer Ex. 3, PCC
17.36.050(F), (G); Answer Ex. 1 ¶ 3. Like all BES u tility 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) spea ks directly to “the cost of utilities” and
finds such costs permissible in the circumstances here: “[u]nless prohibite d by law, the cost of

11 

### OMB Circular A-87 may be accessed at: https://www.whitehous e.gov/sites/default/files/omb/assets/agenc yinformation_circula rs_pdf/a87_2004.pdf

.

## 25 utilities . . . are allowable to the extent that they: (1) keep proper ty . . . in an efficient operating
condition, (2) do not add to the pe rmanent 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 co ntest the alleged value of th e Stormwater Charge to the
Airport, the judgment and position of BES, the local utility, is that all ra tepayers in the City

benefit from the removal of stormwater from the City’s public righ ts-of-way, including the
Airport. Answer Ex. 1 ¶ 20. Again, as the City explains, the Air port could not function
“efficient[ly]” if the City streets were routin ely underwater. Complainants provide no evidence
to the contrary, nor could they reasonably do s o. 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 prov ision of sewer and stormwater
services and potentially polluting overfl ow and run-off from both sources. Id. ¶¶ 23-24. It is
undisputed that EPA is investigating the City as a potentially responsib le 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 Acc ounting Principles . . . the City of Portland’s
storm water management charge is an operating cost of the airport”). Su pport for the treatment
of utility costs under GAAP is found in the Fe deral 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 devel opment and application of
Generally Accepted Accounting Principl es 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 hierarch y 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 co st accounting concepts and standards” which
are “aimed at providing reliable and timely in formation on the full cost of programs, their
activities, and outputs.” Id. at SFFAS 4 at 1.
Under the cost accounting standards sect ion 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 generate d from the consumption of resources.”) As
relevant here, the Port’s “outputs” are a func tional airport and the pr ovision 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 FASA B Handbook states that “[d]irect costs are costs that can be
specifically identified with an output . . . Typical direct cost s in the production of an output
include . . . [v]arious costs associated with . . . utilities that are used ex clusively to produce the
output.” Id. at SFFAS 4 at 26-27. In describing indi rect costs, the FASAB Handbook provides

that:

Indirect costs are costs of resour ces 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/pdffile s/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 opera ting and maintenance costs for buildings, equipm ent, and utilities.

Id. at SFFAS 4 at 27. Regardless of whether the sewe r and stormwater fees ar e direct or indirect
costs, just as other utility costs, they are proper ly 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 countr y, the Port uses gene ral airport revenue
bonds to finance major infrastructure developmen t 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 situ ation must be viewed positively enough to be able to borrow
money at affordable rates in th e bond market.” Answer Ex. 7 at 33. The Port’s bond ordinance,
Port Ordinance No. 155 (“Bond Ordinance”) (Answe r Ex. 8), is the foundational document that
provides the Port with the legal authority to issue bonds and the le gal stability necessary to make
the bonds marketable. The Bond Ordinance expre ssly identifies airport revenues and expenses
for purposes of bond compliance. As explaine d by a Transportation Research Board policy

paper: [The] bond ordinance[] pr ovides the legal basis for issuing airport revenue bonds and defines the te rms under which additional bonds might be issued, including the need for revenue-generating projects. The bond indenture defi nes what may or may not be included in the definition and co mputation of airport revenues and expenses. The indenture establishes various funds and accounts for the payment of interest and pr incipal 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 se t rates and charges to produce specified levels of revenues.

Answer Ex. 9 at 6-7.

## 28 Initially enacted on November 10, 1971, and si nce then amended and restated, the Bond

Ordinance directs the Port to create a fund to hol d its Airport revenues (“Ai rport Fund”) and sets
a hierarchy of uses for the conten ts 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 Oper ation and Maintenance in th e 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 pr incipal and interest of the bonds. Id. § 13.2. It is
unlikely that the Port could have successfully mark eted its bonds if invest ors did not regard “the
costs of utility services” as pr oper airport operating expenses. Th e Port has a strong incentive to
ensure that its Airport Operation and Maintena nce expenses are approp riately 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 co sts within FAA’s Revenue Use Policy.
FAA’s policies and guidance resolve any po ssible ambiguity (although there is none)
with regard to whether utility fees are Airpor t-related cost. The Revenue Use Policy explains
that “[e]xpenditures that are dire ctly and substantially related to the operation of the airport
qualify inherently as operating co sts 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 alloca tion 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 “General ly 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 Air port operating expenses
for which airport sponsors may utilize airport re venues. Under the category of “Permitted Uses
of Airport Revenue,” the Complianc e 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 pr inciples and practices that apply to the airport enterprise f unds of state and local government entities.

FAA Order 5190.6b at 15-4. These re quirements 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-stan ding 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 methodol ogies 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 Bl ack & Veatch Corporation affirms the
reasonableness of the City’s previously chos en impervious surface methodology. Answer Ex. 1,
Attachment E. Black & Veatch found that the ap proach 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 prope rties.” 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 poten tial generation of traffic that uses the City’s
streets for transportation purposes.” Answer Ex. 1 ¶ 16.
As discussed above, the stormwater charge ha s 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 no t 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 wate r within the districts and reimbur se each other as necessary for
that shared work.” Answer Ex. 1 ¶ 17 (citi ng 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 prop erty—the Port pays no on-site fee for Airport
property. The Port, like every ot her ratepayer, gets no credit towards the off-site component.
Like the Stormwater Charge, the Superfund Ch arge is assessed on all City ratepayers
under a transparent and, on its face, non-disc riminatory methodology. Answer Ex. 1 ¶ 24;
Answer Ex. 3, PCC 17.36.050(F). Ratepayers are a ssessed part of the Superfund Charge based
on their sewage volume and part based on thei r impervious surface area. Answer Ex. 3, PCC
17.36.050(F). All charges are set by City or dinance 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 air port 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 charge s 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, Complain ants 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 sa me 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 in dependent 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, ch arge LAX such city costs as the city deemed
appropriate as a matter of internal accounting. Th e City is charging the Po rt utility charges as a
common ratepayer. As the Director’s Letter st ates, 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 th e contention that the Po rt can pick and choose
what portions of a utility bill to pay based upon th eir own assessment as to whether the Airport is
receiving adequate benefit for the utility service provided. Th is argument permeates throughout
the Complaint and appears in their “not an operating cost” argument (¶ 123):
The Airport operates independent ly 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 eviden ce (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 Char ges were developed and are allocated in a
transparent manner and charged to a ll City ratepayers—the Airport is charged at the same rate as
all similarly situated customers. The City explains that it has ma de substantial capital
expenditures to manage right-of-way stormwater a nd ameliorate sewer run-off; that it provides
all ratepayers within the City the utility of ma naging stormwater on the City’s rights-of-way, and
indeed to some extent on local po rtions 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 c ould 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 ch arges to airports based upon a federal secondguessing as to the value and benef it 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 histor ic police powers of the States were not to be
superseded by the Federal Act unless that was th e 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 authorit y of local taxing authorities on aviation fuel.
49 U.S.C. § 47133. It did not do so with respec t 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 woul d 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 s hould 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-i n into a network charge, or whether the airport
should bear the cost responsibility for a particular regulatory asse t, 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 jurisdicti on 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 st reets and rendering the streets us eable. It likewi se is charging
ratepayers for Superfund investigation costs trac eable to prior potentially polluting stormwater

runoffs and sewer overflows.
FAA is free to depart from its prior fi ndings based upon a reasoned, considered, and
supported basis. The Director’s Letter sugge sts this possibility based upon “a more robust
factual record developed in the context of a fo rmal proceeding.” Complaint Ex. 12 at 2. But
Complainants’ have not developed a “more robus t record.” They simply introduce the same
factual and legal matter previously presented to FAA, and merely asse rt that the Directors’ Letter
is wrong. That should not be a good and suffici ent basis for FAA to now change course and
reverse its prior guidance. The facts and law suppor t the core findings of th e 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 obl igation incident to the airpor t’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 ai rport’s payment of the Su perfund fee violates the
grant assurances or th e Revenue Use Policy.” Id. at 2 n.1.

C. The Water Charges are not “impact f ees,” 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 th e 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 ci ty . . . 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 ar e impact fees because the Airport allegedly
“receives no services from the City in excha nge for the Offsite Stormwater Management and
Superfund Remediation Fees.” Complaint ¶¶ 66, 69-70. This is a mischa racterization 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 “opera ting 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 se rvices, 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 sc hool district the discreti on to impose school impact
fees on new developments.”). The Revenue Use Po licy 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 deve lopment.” 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 Ch arges are impact fees within the plain
meaning of the term or FAA’s Revenue Use Po licy. The Water Charges are not levied by the
City to mitigate a specific airport activity. Ra ther, they are components of the Airport’s sewer
and stormwater utility fee and are levied by th e City on all jurisdictional ratepayers in a nondiscriminatory manner to pay for costs associat ed with the sewer and stormwater systems.
Answer Ex. 1 ¶¶ 8, 24; see also Complaint Ex. 10.
It bears repeating that the C ity’s sewer and stormwater util ities 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 cust omer fees on the basis of transparent, nondiscriminatory rate methodologies in order to recoup th eir costs for providing energy service, the
City states that it charges all jurisdictiona l 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-jur isdictional ratepayer, and
it is responsible for payment of its sewer and st ormwater fees, includi ng the Water Charges. See
Complaint Ex. 12 at 1 (finding that the charge “arises as a legal oblig ation incident to the
airport’s possessory interest in land necessary for the provision of ae ronautical 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 ca tegorized as “impact fees,” the City has
explained its view that the char ges are proportionate to the value of services received by the
Airport, thus constituting pe rmissible uses of airport reve nue. The Complainants have

introduced no evidence to contra dict 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 stormwat er-related flooding; 3) protection from hazardous
materials spills in the right of way; and 4) pr otection from off-site flows.” Answer Ex. 1 ¶ 19
(citing Answer Ex. 1, Attachment G at 19). The C ity 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 foun d in the Clean Water Act, the City’s National Pollutant Discharge Elimination System and Municipal Separated Storm Sewer System permits, and elsewh ere. 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 se wer 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 investigatio n costs because ratepayers benefit from the
sewer and stormwater system and it is discharge from those facilities that gi ves rise to the City’s
identification as a potenti al 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 tra ffic 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 ma nagement utilities nationwide. Complaint Ex. 1
¶ 13. The Port also understands that the City’s incl usion of these fees in th e 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 consisten tly for other ratepayers and subject to updates
and consideration of the appr opriateness 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. Firs t, 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 Cit y, 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, th is 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 ch arges as a legal obligation 17 

## 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 con cern 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 documentati on and substantiation for the Water Charges
here. In the LAX case, charges for police overhe ad 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 unabl e 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 serv ices provided to the
Airport, not misallocated charges for phantom services. The Airpor t in this case is subject to
charges that are, according to the evidence in record, transp arent 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 actio n for an impact fee payment that is not consistent with this policy, the FAA will cons ider whether the impact fee was imposed by a non-sponsoring governmenta l 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 speculati ve. 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 inappr opriate as adding little or no value to the
projects. Id. at 9, 11. In contrast, FAA’s Revenue Us e 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 th e term), they are not comparab le to the impact fees found in
prior cases that were determined to be inapprop riate uses of airport revenue. The Director’s

Letter found that the cost allocation me thodology is transparent, uniform, and nondiscriminatory, and there is no evidence that th e 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 Air port 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 paymen ts. Based on the facts here, the
Port’s payment of the Water Charge s 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 concl udes 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 orig inal conclusions.

20 

### Similarly, and contrary to the Complainants’ contentio ns, (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 er roneously state that Water Charges “can not 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 prope rty 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 indica tion 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 illust rative, 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 exclusiv e.”); 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 tran sportation 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 th e 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 Air port “CPE and Landing Fees.” Compare Complaint Ex. 10 with
Complaint Exs. 1; 2; 7; 16, Attachment B.
On the basis of that information, the Direct or’s Letter concludes th at the Water Charges
are an operating cost of the Air port, 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 va lue of services and facilities provided to the
airport.” Complaint Ex. 12 at 1. The Directo r’s Letter further explains that because the
Stormwater Charge “is allocated to all ratepayers within the ju risdiction, including the Port of
Portland, based upon a transparent, uniform, an d non-discriminatory rate-setting methodology”
FAA is not prepared to find that the charge exce eds 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 Lett er conclusions are “illogical,” “erroneous[]”
and “circular.” Complaint ¶¶ 122, 124. But Comp lainants introduce no new evidentiary support
that would lead to a contrary finding that the charges are not op erating expenses or that the
charges exceed the value of serv ices 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 factua l record” in the context of a fo rmal “agency proceeding”—as the

Director’s Letter invite d them to pursue—should be enough, in and of itself, to change the
outcome. Complaint ¶ 116. But Complainants ha ve not presented a new and different factual

record that would warrant such a different result. As explaine d above, Complainants have failed
to show that the Water Charges are not operati ng costs within the meaning of the statute and
FAA’s Revenue Use policy, and their attempt to char acterize them as impact fees is unavailing.
The Director’s Letter explains that “[i]n the absence of any indicati on that the airport has
been disproportionately targeted by the city, a non-sponsor of the ai rport, or that the airport has
otherwise been overcharged for these services (e.g., double-billed), we ar e not prepared to find
that the charge exceeds the value of the services provided to the ai rport.” Complaint Ex. 12 at 1.
Nothing in the record supports a find ing that those conditions are present. 22 

## As is evident from
the City Code, the City assesse s the Water Charges against all ratepayers on the same schedule
based on the amount of impervious area on the pr operty (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 conclusi on 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 air line users, the Port
sought guidance from and was advised by FAA th at using airport reve nue to pay the Water
Charges would not violate the Port ’s Grant Assurances. In previ ous Part 16 investigations, FAA

22 

### Complainants bear the burden of proof “to show nonco mpliance 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 reasonablen ess 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 Agri culture]; [and that] it should not be penalized
for such reliance.” FAA Docket No. 16-11-04, Dire ctor's Determination at 52 (Sept. 27, 2012).
Likewise. FAA dismissed a complaint where sp onsor’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 e xpertise 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 Air port 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 conf irmed his earlier conclusion in a letter of July 30, 2015 . . . Specifi cally, 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

# E XHIBITS

## 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. (unex ecuted) (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 Ordina nce No. 155 (Mar. 8, 200 6) (excerpt). Answer Ex. 9 Transp. Research Bd., Airport Coop. Research Program Synthesis 1 , Innovative Finance and Alternative Sources of Revenue for Airports: A Synt hesis of Airport Practice (2007) (excerpt).

# E XHIB IT 

# 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

# A TTACHMENT 

# 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

# A TTACHMENT 

# B4 / 7 / 2 0 1 6 S e c t i o n 2

­ 1 0 5

. C o n t i n u a t i o n o f S p e c i f i c P o

w e r s

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, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 0 3 2 8 5 1 / 5 G E N E R A L I N F O R M A

T I O N : 5 0 3

­ 8 2 3

­ 4 0 0 0 E M A I L : c i t y i n f o @ p o r t l a n d o r e g o n

. g o v M o r e C o n t a c t I n f o ( h t t p : / / w w w

. p o r t l a n d o r e g o n

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/ / c i t y c o d e / a r t i c l e / 1 5 4 7 2 ) 

# C h a r t e r , C o d e a n d P o l i c i e s C i t y o f P o r t l a n d



# S e c t i o n 2

­ 1 0 5

. C o n t i n u a t i o n o f S p e c i f i c P o w e r s

.

T h e C i t y o f P o r

t l a n d b y i t s C o u n c i l h a s p o w e r a n d a u t h o r i t y , s u b j e c t t o t h e p r o v i s i o n s , l i m i t a t i o n s a n d r

e s t r i c t i o n s c o n t a i n e d i n t h i s C h a r

t e r o r i n s t a t u t e , t o e x e r

c i s e a n y p o w e r o r a u t h o r i t y g r

a n t e d t o t h e C i t y b y s t a t u t e , g e n e r a l o r s p e c i a l
, o r b y t h i s C h a r

t e r , a n d m a y d o a n y o t h e r a c t

n e c e s s a r y o r a p p r o p r i a t e t o c a r r

y o u t s u c h a u t h o r i t y , o r e x e r

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( a ) A m o n g s u c h s p e c i f i c p o w e r

s , t h e C i t y h a s p o w e r a n d a u t h o r i t y :

1

. T o e x e r c i s e w i t h i n t h e C i t y a n d C i t y
‐ o w n e d p r o p e r t y , a l l t h e p o w e r

s c o m m o n l y k n o w n a s t h e p o l i c e p o w e r t o t h e s a m e e x t e n t

a s t h e S t a t e o f O r

e g o n h a s o r c o u l d e x e r

c i s e s a i d p o w e r w i t h i n s a i d a r

e a s , a n d t o m a k e a n d e n f o r

c e w i t h i n s a i d a r

e a s a l l

n e c e s s a r y o r a p p r o p r i a t e w a t e r , l o c a l
, p o l i c e , s a n i t a r

y a n d s a f e t y l a w s a n d r

e g u l a t i o n s

.
2

. T o s e c u r e t h e p r o t e c t i o n o f p e r

s o n s a n d p r o p e r t y a n d t o p r o v i d e f o r t h e h e a l t h
, c l e a n l i n e s s , o r n a m e n t
, p e a c e , s a f e t y a n d g o o d

o r d e r o f t h e C i t y

.
3

. T o p r o v i d e f o r e n t e r i n g i n t o c o n t r

a c t s b y t h e C i t y f o r a p e r i o d n o t e x c e e d i n g f i v e ( 5 ) y e a r s a n d t h e e x t e n s i o n o r r

e n e w a l t h e r e o f b y o p t i o n o r o t h e r

w i s e , f o r n o t t o e x c e e d a n a d d i t i o n a l f i v e ( 5 ) y e a r s , e x c e p t a s t o p r

o p e r t y c o n t r a c t s w h i c h m a y e x t e n d f o r m o r

e t h a n f i v e ( 5 ) y e a r

s , o r a s o t h e r w i s e p e r m i t t e d b y t h i s C h a r

t e r o r b y s t a t u t e

.
4

. T o e n t e r i n t o a g r

e e m e n t s w i t h o u t l i m i t a t i o n a s t o t e r m , a s t h e C o u n c i l f i n d s a p p r o p r i a t e , f o r c o o p e r

a t i o n , c o n s o l i d a t i o n o f

s e r v i c e s , j o i n t a c q u i s i t i o n o r o w n e r

s h i p a n d m a i n t e n a n c e o f f a c i l i t i e s o r s e r v i c e s , w i t h a n y o t h e r p u b l i c c o r p o r a t i o n o r u n i t o f g o v e r n m e n t

.
5

. T o e s t a b l i s h
, c o n s t r u c t
, m a i n t a i n , e q u i p a n d a l t e r b u i l d i n g s a n d f a c i l i t i e s f o u n d n e c e s s a r y o r a p p r o p r i a t e f o r a d m i n i s t r

a t i o n o f g o v e r n m e n t o r f o r u s e b y o r f o r t h e p u b l i c

.
6

. T o p u r c h a s e , o r a c q u i r

e b y c o n d e m n a t i o n o r o t h e r

w i s e , o r t o l e a s e , f o r s u c h t e r m a s t h e C o u n c i l m a y f i n d a p p r o p r i a t e , w h i c h

n e e d n o t b e l i m i t e d t o f i v e ( 5 ) y e a r s , s u c h p r o p e r t y , r e a l a n d p e r s o n a l
, a s m a y b e n e e d e d f o r p u b l i c u s e ; i n p u r c h a s i n g p r o p e r t y , t o
e n t e r i n t o l e a s e
‐ p u r

c h a s e a g r e e m e n t s o r o t h e r c o n t r

a c t s o f p u r c h a s e w h i c h m a y e x t e n d f o r m o r

e t h a n a f i v e ( 5 ) y e a r p e r i o d ; t o
o b t a i n o p t i o n s ; a n d t o m o r

t g a g e f o r t h e t e r m o f t h e p u r

c h a s e a s s e c u r i t y f o r t h e p u r

c h a s e p r i c e t h e p r

o p e r t y b e i n g p u r c h a s e d

. I n
e x e r c i s i n g t h i s p o w e r a n d a u t h o r i t y , o n l y t h e p a y m e n t s t o b e m a d e d u r i n g t h e y e a r i n w h i c h t h e p u r c h a s e , c o n d e m n a t i o n , l e a s e , l e a s e
‐ p u r c h a s e , o p t i o n , o r p u r

c h a s e p r i c e m o r

t g a g e i s e n t e r

e d i n t o s h a l l b e c o n s i d e r

e d f o r p u r p o s e s o f a p p l y i n g S e c t i o n 7

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. [ A m

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c h a s e o f p r o p e r t y l e v i e d u p o n u n d e r e x e c u t i o n i n f a v o r o f t h e C i t y

.
8

. T o p u r c h a s e , t a k e a n d h o l d r

e a l o r p e r s o n a l p r o p e r t y w h e n s o l d f o r a d e l i n q u e n t t a x o r a s s e s s m e n t l e v i e d o r i m p o s e d u n d e r t h e
a u t h o r i t y o f t h e C i t y o f P o r

t l a n d
, a n d t o s e l l a n d c o n v e y t h e s a m e

. B u t t h e s u m b i d b y t h e C i t y o n o r f o r a n y s u c h p r o p e r t y s o s o l d f o r a d e l i n q u e n t t a x o r a s s e s s m e n t
, s h a l l n o t e x c e e d t h e a m o u n t o f a l l t a x e s a n d a s s e s s m e n t s p l u s i n t e r e s t a n d p e n a l t i e s , a n d t h e
n e c e s s a r y c o s t s a n d e x p e n s e s

.
9

. T o s e l l b y b i d o r p u b l i c a u c t i o n a b a n d o n e d o r i m p o u n d e d a n d u n c l a i m e d p r o p e r t y , a n d p r o p e r t y f o r w h i c h s t o r

a g e c h a r g e s a n d

r e m o v a l c h a r g e s , i f a n y , h a v e n o t b e e n p a i d

.
1 0

. T o p r o v i d e a s e a l f o r t h e C i t y a n d s e a l s f o r t h e s e v e r a l b o a r d s a n d o f f i c e r s t h e r e o f

.
1 1

. T o e s t a b l i s h a n d r

e g u l a t e t h e f e e s a n d c o m p e n s a t i o n o f a l l o f f i c e r s o f t h e C i t y , a n d f o r a l l o f

f i c i a l s e r v i c e s n o t o t h e r

w i s e p r o v i d e d f o r i n t h i s C h a r

t e r

.
1 2

. T o f i x b y o r d i n a n c e t h e h o u r

s d u r i n g w h i c h a l l o f

f i c e s a n d d e p a r

t m e n t s o f t h e C i t y s h a l l b e k e p t o p e n f o r b u s i n e s s

.4 / 7 / 2 0 1 6 S e c t i o n 2

­ 1 0 5

. C o n t i n u a t i o n o f S p e c i f i c P o

w e r s

. | A r t i c l e 1 T h e C o u n c i l | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 0 3 2 8 5 2 / 5 1 3

. T o a p p r o p r i a t e m o n e y t o p a y t h e d e b t s , l i a b i l i t i e s a n d e x p e n d i t u r e s o f t h e C i t y o r a n y p a r

t o r i t e m t h e r e o f

.
1 4

. T o a p p r o p r i a t e a n n u a l l y t o t h e M a y o r t w o t h o u s a n d d o l l a r s ( $ 2
, 0 0 0 ) a s a n d f o r a d i s c r

e t i o n a r y F u n d a n d s u c h a p p r

o p r i a t i o n
s h a l l b e m a d e

.
1 5

. T o i s s u e C i t y b o n d s a u t h o r i z e d b y t h i s C h a r t e r o r s t a t u t e o r e x p r

e s s l y a u t h o r i z e d b y v o t e o f t h e C i t y e l e c t o r s , c e r t i f i c a t e s , w a r r a n t s , c h e c k s a n d o t h e r e v i d e n c e s o f i n d e b t e d n e s s , b u t o t h e r w i s e t h e C i t y s h a l l n o t h a v e t h e p o w e r t o i s s u e i t s b o n d s f o r a n y i n d e b t e d n e s s o r f o r a n y p u r p o s e , o r t o i n c r e a s e t h e b o n d e d i n d e b t e d n e s s o f t h e C i t y i n a n y a m o u n t o r f o r a n y p u r p o s e
w h a t s o e v e r

.
1 6

. T o f i x f e e s f o r e s t a b l i s h i n g s t r

e e t g r a d e s , s u r v e y i n g a n d m a r k i n g t h e b o u n d a r i e s o f s t r e e t s , l o t s o r b l o c k s , g r

a n t i n g p e r m i t s f o r t h e o p e n i n g o r t e m p o r

a r y u s e o f s t r e e t s u r f a c e s , p l a n n i n g o f i m p r

o v e m e n t s , l a y i n g s i d e w a l k s , v a c a t i n g s t r e e t a r e a , p r o c e s s i n g o f

a l l t y p e s o f a p p l i c a t i o n s , e r

e c t i o n a n d i n s p e c t i o n o f b u i l d i n g s o r f a c i l i t i e s , a n d a n y s p e c i a l s e r v i c e s o r f u n c t i o n s p e r

f o r m e d b y t h e C i t y o r b u r e a u s t h e r e o f

.
1 7

. T o g r a n t l i c e n s e s w i t h t h e o b

j e c t o f r a i s i n g r e v e n u e o r o f r

e g u l a t i o n , o r b o t h
, f o r a n y a n d a l l l a w f u l a c t s , t h i n g s o r p u r p o s e s , a n d t o f i x b y o r

d i n a n c e t h e a m o u n t t o b e p a i d t h e r e f o r , a n d t o p r o v i d e f o r t h e r

e v o k i n g o f t h e s a m e

. N o l i c e n s e s h a l l b e g r a n t e d t o
c o n t i n u e f o r a l o n g e r p e r i o d t h a n o n e y e a r f r o m t h e d a t e t h e r

e o f

.
1 8

. T o p r o v i d e f o r t h e o p e n i n g , l a y i n g o u t
, e s t a b l i s h i n g , a l t e r i n g , e x t e n d i n g , w i d e n i n g , e n l a r g i n g , v a c a t i n g a n d c l o s i n g , o r f o r
e s t a b l i s h i n g a n d c h a n g i n g t h e g r

a d e s , o f s t r e e t s , s q u a r e s , p a r k s o r p u b l i c p l a c e s , a n d t o p r o v i d e f o r t h e i m p r

o v i n g a n d r e p a i r i n g o f

s t r e e t s , s q u a r e s , p a r k s a n d p u b l i c p l a c e s o r o f a n y l a n d o v e r w h i c h a n y r i g h t o f w a y h a s b e e n o b t a i n e d o r g r a n t e d f o r a n y p u r p o s e
o f p u b l i c t r a v e l o r u s e , b y m e a n s o f a n y k i n d o f w o r k
, i m p r o v e m e n t o r r e p a i r w h i c h t h e C o u n c i l f i n d s n e c e s s a r y o r a p p r o p r i a t e

.
1 9

. T o p r o v i d e f o r l i g h t i n g t h e s t r

e e t s , p u b l i c g r

o u n d s , b u i l d i n g s a n d p l a c e s , a n d f u r n i s h i n g t h e C i t y w i t h l i g h t
, h e a t a n d p o w e r , b y
c o n t r a c t o r b y m e a n s o f i t s o w n p l a n t

.
2 0

. T o p r o v i d e f o r s u r v e y i n g t h e b l o c k s a n d s t r

e e t s o f t h e C i t y a n d f o r m a r k i n g t h e b o u n d a r y l i n e s o f s u c h b l o c k s a n d s t r

e e t s ; t o
c h a n g e b y o r d i n a n c e t h e n u m b e r

, l e t t e r o r d e s i g n a t i o n o f a n y l o t
, b l o c k o r t r a c t o f l a n d w i t h i n t h e C i t y w h i c h m a y b e c o n f l i c t i n g o r
o t h e r w i s e u n s u i t a b l e a n d t o g i v e b y o r

d i n a n c e a d e s i g n a t i o n t o a n y t r

a c t o f l a n d w i t h i n t h e C i t y n o t n u m b e r e d
, l e t t e r e d o r d e s i g n a t e d

. A c e r

t i f i e d c o p y o f s u c h o r

d i n a n c e s h a l l b e t r

a n s m i t t e d b y t h e A u d i t o r t o t h e r

e c o r d i n g o f f i c e r o f t h e C o u n t y , w h o s h a l l

r e c o r d t h e s a m e i n t h e r

e c o r d o f p l a t s o f s a i d C o u n t y a n d s h a l l m a k e a r e f e r e n c e t o t h e r e c o r d o f s u c h o r d i n a n c e u p o n t h e
r e c o r d e d p l a t o n f i l e

. N o c h a r

g e s h a l l b e m a d e b y t h e r

e c o r d i n g o f f i c e r

.
2 1

. T o s e t a p a r t a s a b o u l e v a r

d o r b o u l e v a r d s a n y s t r e e t o r s t r e e t s , o r p o r t i o n t h e r e o f

.
2 2

. T o r e g u l a t e t h e n u m b e r i n g o f h o u s e s a n d l o t s o n t h e s t r e e t s , b o u l e v a r

d s a n d a v e n u e s a n d t h e n a m i n g o f s t r e e t s , b o u l e v a r

d s
a n d a v e n u e s

.
2 3

. T o r e g u l a t e a n d c o n t r

o l f o r a n y a n d e v e r

y p u r p o s e t h e u s e o f s t r

e e t s , h i g h w a y s , a l l e y s , s i d e w a l k s , p u b l i c t h o r o u g h f a r e s , a n d p u b l i c p l a c e s w i t h i n t h e C i t y a n d C i t y p a r k s a n d p r o p e r t i e s w i t h i n o r w i t h o u t t h e C i t y , a n d t o r e g u l a t e t h e u s e o f s t r

e e t s , r o a d s , h i g h w a y s a n d p u b l i c p l a c e s f o r t r

a n s p o r t a t i o n o r u s e o f e v e r

y d e s c r i p t i o n , a n d f o r i n s t a l l a t i o n o f a n y k i n d

.
2 4

. T o p r o v i d e o r r e q u i r e c o n d u i t s u n d e r t h e s t r

e e t s , l a n e s , a l l e y s a n d p u b l i c p l a c e s o f t h e C i t y o r a n y p a r t o r p a r t s t h e r e o f f o r t h e
u s e o f t e l e p h o n e , t e l e g r

a p h
, e l e c t r i c l i g h t a n d o t h e r w i r

e s , o r f o r o t h e r p u r p o s e s , e i t h e r b y c o n s t r u c t i n g s a i d c o n d u i t s i t s e l f o r
a u t h o r i z i n g o r r

e q u i r i n g t h e i r c o n s t r u c t i o n b y o t h e r s u p o n s u c h t e r m s a n d c o n d i t i o n s a s t h e C o u n c i l m a y i m p o s e , a n d t o r e g u l a t e
a n d c o n t r o l t h e u s e o f s u c h c o n d u i t s , a n d t o p r e s c r i b e a n d e s t a b l i s h r

e a s o n a b l e r e n t a l s t o b e p a i d b y a n y p e r

s o n o r c o m p a n y
u s i n g a n y o f s a i d c o n d u i t s b y w h o m s o e v e r t h e s a m e m a y b e c o n s t r u c t e d f o r t h e u s e t h e r e o f
, a n d t o p r o v i d e f o r t h e c o l l e c t i o n o f

s u c h r e n t a l s , i n a d d i t i o n t o t h e o r

d i n a r y p r o c e s s e s , b y s u c h s u m m a r

y m e t h o d s a s i t m a y d e e m p r

o p e r

. I f a n y s u c h g r

a n t b e m a d e t o a n y p e r s o n , f i r m o r c o r p o r

a t i o n , s u c h g r

a n t e e s h a l l n o t h a v e p o w e r t o s u b l e t t h e s a m e o r t h e u s e o f t h e s a m e t o a n y p e r s o n , f i r m o r c o r p o r a t i o n e n g a g e d i n s e l l i n g , h i r i n g , l e a s i n g o r o t h e r w i s e r e c e i v i n g a n y i n c o m e f r

o m t h e b u s i n e s s o r p u r p o s e f o r w h i c h i t d e s i r e s t o u s e s u c h c o n d u i t s , w i t h o u t s u c h p e r s o n , f i r m o r c o r p o r

a t i o n f i r s t o b t a i n i n g , a s p r

o v i d e d i n t h i s C h a r

t e r , a f r a n c h i s e f o r
s u c h b u s i n e s s , p u r p o s e o r u s e

.
2 5

. T o r e g u l a t e , r e s t r a i n a n d p r e v e n t o b s t r u c t i o n s w i t h i n t h e p u b l i c s t r e e t s , s i d e w a l k s a n d p l a c e s a n d t o m a k e a l l n e e d f u l

r e g u l a t i o n s t o k e e p a n d m a i n t a i n t h e p u b l i c s t r e e t s , s i d e w a l k s a n d p l a c e s i n a c l e a n , o p e n a n d s a f e c o n d i t i o n f o r p u b l i c u s e ; t o p r o v i d e f o r t h e r

e m o v a l
, i m p o u n d i n g a n d s a l e o r o t h e r d i s p o s i t i o n o f s u c h o b s t r u c t i o n s , a n d t o m a k e t h e c o s t o f r e m o v a l a l i e n
u p o n a n y p r o p e r t y f r o m w h i c h s u c h o b s t r u c t i o n o r i g i n a t e d o r t o w h i c h s u c h o b s t r u c t i o n w a s a t t a c h e d
, t o b e p l a c e d u p o n t h e l i e n d o c k e t a n d c o l l e c t e d a s t h e C o u n c i l m a y d i r e c t

.4 / 7 / 2 0 1 6 S e c t i o n 2

­ 1 0 5

. C o n t i n u a t i o n o f S p e c i f i c P o

w e r s

. | A r t i c l e 1 T h e C o u n c i l | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 0 3 2 8 5 3 / 5 2 6

. T o c o n t r o l a n d l i m i t t r a f f i c a n d c l a s s e s t h e r

e o f
, a n d v e h i c l e s a n d c l a s s e s t h e r e o f o n t h e s t r e e t s , a v e n u e s a n d e l s e w h e r

e

.
2 7

. T o p r e v e n t a n d p r o h i b i t p l a n t i n g o f t r

e e s o r s h r u b b e r

y w h i c h m a y b e d e t r i m e n t a l t o s e w e r s , s t r e e t s , s i d e w a l k s , u t i l i t i e s l i n e s , f i r e h y d r a n t s , o r u s e t h e r

e o f
, o r w h i c h m a y i n t e r

f e r e w i t h s a f e t r a v e l o r v i s i o n o r m a y c o n s t i t u t e a n u i s a n c e , a n d t o c a u s e s u c h t r e e s o r s h r u b b e r

y t o b e c u t d o w n o r r

e m o v e d a n d t o m a k e t h e c o s t o f s u c h c u t t i n g o r r e m o v a l a l i e n u p o n t h e p r

o p e r t y , t o b e p l a c e d u p o n t h e l i e n d o c k e t a n d c o l l e c t e d a s t h e C o u n c i l m a y d i r e c t

.
2 8

. T o p r e s c r i b e r a t e s t o b e c h a r

g e d f o r t r a n s p o r t a t i o n o f p a s s e n g e r

s o r p r o p e r t y w i t h i n t h e C i t y a n d a r

e a o u t s i d e t h e C i t y o v e r
w h i c h C i t y j u r i s d i c t i o n i s a u t h o r i z e d o r r e c o g n i z e d b y s t a t u t e , b y m e a n s o f v e h i c l e s o f e v e r y d e s c r i p t i o n

.
2 9

. T o p r o v i d e f o r t h e e s t a b l i s h m e n t o f m a r k e t h o u s e s a n d p l a c e s , a n d t r a n s p o r t a t i o n t e r m i n a l s , a n d t o r

e g u l a t e t h e l o c a t i o n a n d

m a n a g e m e n t t h e r

e o f

.
3 0

. T o p r o v i d e f o r t h e l o c a t i o n , c o n s t r u c t i o n , r e p a i r a n d m a i n t e n a n c e i n o r o u t s i d e t h e C i t y , o f a n y d i t c h
, c a n a l
, p i p e o r o t h e r f a c i l i t y f o r t h e i m p o u n d m e n t
, s t o r

a g e o r c o n d u c t o f w a t e r

, a n d a n y d r a i n , s e w e r o r c u l v e r

t o r o t h e r f a c i l i t y i n o r o u t s i d e t h e C i t y f o r
c o n d u c t
, s t o r a g e o r t r e a t m e n t o f s t o r m o r s a n i t a r

y d r a i n a g e o r b o t h
, a s i t m a y d e e m n e c e s s a r y o r c o n v e n i e n t ; f o r s u c h p u r p o s e t o
e n t e r u p o n a n y l a n d f o r t h e p u r p o s e o f e x a m i n i n g , l o c a t i n g a n d s u r v e y i n g t h e l i n e o r l o c a t i o n o f s u c h w a t e r o r s e w e r f a c i l i t y , d o i n g
n o u n n e c e s s a r

y d a m a g e t h e r

e b y ; t o a p p r o p r i a t e s a i d l a n d o r s o m u c h t h e r

e o f a s m a y b e n e c e s s a r

y f o r t h e c o n s t r u c t i o n o r i n s t a l l a t i o n o f s a i d f a c i l i t y i n a n y m a n n e r p e r m i t t e d b y t h e l a w s o f t h i s S t a t e ; t o a p p r o p r i a t e a n d d i v e r

t f r o m i t s n a t u r a l c o u r s e o r
c h a n n e l t e m p o r

a r i l y o r p e r m a n e n t l y , a n y s p r i n g o r s t r e a m o f w a t e r ; a n d t o c o m p e l t h e e x t e n s i o n o f u t i l i t y c o n n e c t i o n s f r o m t h e
m a i n l i n e o r p i p e t o t h e c u r b l i n e , p r o p e r t y l i n e o r t h e s i d e w a l k s o f a l l p u b l i c s t r e e t s , a s t h e C o u n c i l m a y d e t e r m i n e

.
3 1

. T o p r o v i d e f o r f u r n i s h i n g t h e C i t y a n d i t s r e s i d e n t s w i t h w a t e r

, a n d t o s e l l w a t e r t o o r f o r n o n r

e s i d e n t s

.
3 2

. T o r e g u l a t e t h e p l u m b i n g , d r

a i n a g e a n d s e w e r

a g e o f b u i l d i n g s a n d s t r u c t u r

e s a n d t h e i n s t a l l a t i o n a n d u s e o f a p p l i a n c e s o r f a c i l i t i e s f o r h e a t
, l i g h t
, c o o l i n g a n d e n e r g y ; t o p r o v i d e f o r t h e r

e g i s t r a t i o n a n d q u a l i f i c a t i o n o f s p e c i a l i s t s i n t r a d e s o r i n i n s t a l l a t i o n
o r u s e o f a p p l i a n c e s a n d f a c i l i t i e s ; t o p r o v i d e i n s p e c t i o n f o r s u c h i n s t a l l a t i o n o r u s e

.
3 3

. T o c o m p e l a l l p e r

s o n s e r e c t i n g o r m a i n t a i n i n g p r i v i e s , w a t e r c l o s e t s o r o t h e r t o i l e t s o r c e s s p o o l s , s e p t i c t a n k s o r p r i v a t e
s a n i t a r y s e w e r a g e s y s t e m s w i t h i n o n e h u n d r

e d ( 1 0 0 ) f e e t o r o n e
‐ h a l f b l o c k
, w h i c h e v e r i s g r e a t e r , o f a n y s t r e e t i n w h i c h a p u b l i c
s e w e r h a s o r m a y h e r

e a f t e r b e c o n s t r u c t e d
, t o c o n n e c t t h e s a m e t h e r e w i t h ; a n d w h e r

e a p u b l i c s e w e r i s n o t a v a i l a b l e , t o p r e s c r i b e d i s p o s a l s o a s t o p r

o t e c t t h e p u b l i c , p r

o p e r t y , h e a l t h a n d w e l f a r

e

.
3 4

. T o r e g u l a t e , r e s t r a i n a n d p r o h i b i t u s e o f p u b l i c s e w e r

s f o r a n y s u b s t a n c e w h i c h m a y b e h a r m f u l o r d e t r i m e n t a l t o t h e s e w e r s , t o s e w a g e d i s p o s a l a n d t r

e a t m e n t
, o r h a z a r

d o u s t o w o r k e r

s , t o p r o p e r t y o r t o t h e p u b l i c

.
3 5

. T o r e g u l a t e t h e c o n s t r u c t i o n , c a r

e , u s e a n d m a n a g e m e n t o f b u i l d i n g s a n d s t r u c t u r e s i n t h e C i t y f o r t h e b e t t e r p r

o t e c t i o n o f t h e l i v e s a n d h e a l t h o f p e r

s o n s d w e l l i n g i n o r u s i n g t h e s a m e o r o f t h e p u b l i c , a n d f o r t h e p u b l i c w e l f a r e

.
3 6

. T o r e g u l a t e , r e s t r a i n a n d t o p r o v i d e f o r t h e e x c l u s i o n f r

o m t h e C i t y , o r a n y p a r

t t h e r e o f
, o f t r a d e s , o c c u p a t i o n s o r b u s i n e s s e s
w h i c h a r e o f f e n s i v e o r m a y i n t h e o p i n i o n o f t h e C o u n c i l c r e a t e o r c o n s t i t u t e a n u i s a n c e , a n d t o r e g u l a t e u s e s o f l a n d a n d

s t r u c t u r e s w i t h i n t h e C i t y

.
3 7

. T o p r e v e n t t h e e r e c t i o n o r c a u s e t h e r

e m o v a l
, d e m o l i t i o n o r r

e p a i r o f b u i l d i n g s o r s t r u c t u r

e s w h e r e v e r s i t u a t e d
, f o u n d t o b e
u n s a f e o r d a n g e r

o u s t o t h e o c c u p a n t s , t o p a s s e r

s
‐ b y o r t o o t h e r p r

o p e r t y , o r w h i c h a r

e f o u n d t o o b s t r u c t a s t r

e e t
, a n d t o m a k e t h e
c o s t o f s u c h r

e m o v a l
, t e a r i n g d o w n o r r

e p a i r a l i e n u p o n t h e p r

o p e r t y , w h i c h l i e n s m a y u p o n t h e o r

d e r o f t h e C o u n c i l b e e n t e r

e d i n t o t h e d o c k e t o f C i t y l i e n s a n d t h e r e a f t e r c o l l e c t e d i n s u c h m a n n e r a s t h e C o u n c i l m a y d i r e c t

.
3 8

. T o r e g u l a t e o r p r e v e n t t h e m o v i n g o f b u i l d i n g s o r s t r u c t u r e s o v e r C i t y s t r

e e t s a n d l i m i t t h e l o c a t i o n s t o w h i c h s u c h b u i l d i n g s o r
s t r u c t u r e s m a y b e m o v e d

.
3 9

. T o d e f i n e a n d c l a s s i f y t h e f i r

e l i m i t s a n d t o p r

o h i b i t t h e e r e c t i o n o r r e p a i r o f b u i l d i n g s c o n s t r u c t e d o f p a r t i c u l a r m a t e r i a l s w i t h i n
a l l o r a n y s u c h f i r

e l i m i t s

.
4 0

. T o r e g u l a t e o r l i m i t t h e h e i g h t
, c o n s t r u c t i o n , s i z e , m a t e r i a l s , s e t b a c k s , y a r d s , i n s p e c t i o n a n d r

e p a i r o f a l l p r i v a t e a n d p u b l i c b u i l d i n g s , s t r u c t u r

e s , a n d f e n c e s w i t h i n t h e C i t y a n d t o p r o v i d e C i t y i n s p e c t i o n t h e r

e o f

.
4 1

. T o r e q u i r e a d e q u a t e f i r

e e s c a p e s , a p p a r

a t u s a n d a p p l i a n c e s f o r p r

o t e c t i o n a g a i n s t f i r

e , t o b e p r o v i d e d i n b u i l d i n g s a n d

s t r u c t u r e s , o r i n c o n n e c t i o n w i t h s p e c i f i c u s e s

.
4 2

. T o m a k e r e g u l a t i o n s t o p r

e v e n t t h e i n t r o d u c t i o n o f c o n t a g i o u s d i s e a s e s i n t o t h e C i t y , a n d t o r e m o v e p e r s o n s a f f l i c t e d w i t h4 / 7 / 2 0 1 6 S e c t i o n 2

­ 1 0 5

. C o n t i n u a t i o n o f S p e c i f i c P o

w e r s

. | A r t i c l e 1 T h e C o u n c i l | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 0 3 2 8 5 4 / 5 s u c h d i s e a s e s t o s u i t a b l e h o s p i t a l s w h i c h t h e C i t y m a y d e s i g n a t e o r p r o v i d e f o r t h a t p u r p o s e e i t h e r w i t h i n o r w i t h o u t s a i d C i t y ;
a n d t o r e g u l a t e s u c h h o s p i t a l s

.
4 3

. T o p r o v i d e a s t a n d a r

d o f w e i g h t s a n d m e a s u r

e s a n d t o a u t h o r i z e i n s p e c t i o n o f w e i g h t s , m e a s u r e s , f o o d
, b e v e r

a g e s , a n d f u e l ; t o r e g u l a t e t h e c o m m o d i t y , s i z e , w e i g h t a n d i n g r e d i e n t s o f f o o d o r b e v e r

a g e p r o d u c t s a n d f u e l
, a n d t o p r

e v e n t t h e s a l e o f

a d u l t e r a t e d
, u n h e a l t h f u l o r u n w h o l e s o m e f o o d a n d b e v e r a g e s , a n d t o p r

o v i d e f o r t h e s e i z u r

e a n d f o r f e i t u r e o f f o o d o r f o o d p r

o d u c t s , b e v e r a g e s a n d f u e l o f

f e r e d f o r s a l e o r s o l d c o n t r

a r y t o s a i d r e g u l a t i o n s

.
4 4

. T o p r e v e n t a n d r e m o v e n u i s a n c e s , t o d e c l a r

e w h a t s h a l l c o n s t i t u t e t h e s a m e , t o p u n i s h p e r s o n s c o m m i t t i n g o r s u f

f e r i n g
n u i s a n c e s , t o p r

o v i d e t h e m a n n e r o f r

e m o v a l o f n u i s a n c e s , a n d t o m a k e t h e c o s t o f s u c h r e m o v a l a l i e n u p o n t h e p r

o p e r t y w h e r e
s u c h n u i s a n c e e x i s t e d ; a n d t o f i l l u p o r d r a i n a n y l o t s , b l o c k s o r p a r

c e l s o f l a n d s u b

j e c t t o f l o o d o r w h e r

e a n y s t a g n a n t w a t e r
s t a n d s , t o d e c l a r

e t h e s a m e a n u i s a n c e , a n d t o m a k e t h e c o s t o f f i l l i n g u p o r d r a i n i n g t h e s a m e a l i e n u p o n t h e p r

o p e r t y s o f i l l e d o r d r a i n e d

. L i e n s f o r a b a t e m e n t o f n u i s a n c e s m a y u p o n t h e o r d e r o f t h e C o u n c i l b e e n t e r

e d i n t h e d o c k e t o f C i t y l i e n s a n d t h e r e a f t e r
c o l l e c t e d i n s u c h m a n n e r a s t h e C o u n c i l m a y d i r e c t

.
4 5

. T o r e g u l a t e o r p r e v e n t t h e s t o r

a g e , m a n u f a c t u r

e , s a l e , u s e a n d t r

a n s p o r t a t i o n o f d a n g e r

o u s , e x p l o s i v e , r

a d i o a c t i v e o r
c o m b u s t i b l e m a t e r i a l s o r w e a p o n s , a n d t o p r o v i d e f o r t h e i n s p e c t i o n o f t h e s a m e , a n d t o p r e v e n t b y a l l p r

o p e r m e a n s r i s k s o f i n

j u r y
o r d a m a g e t h e r

e f r o m

.
4 6

. T o r e g u l a t e , p r e v e n t a n d p r o h i b i t l o u d o r u n n e c e s s a r

y n o i s e

.
4 7

. T o p r e v e n t t r e s p a s s i n g a n d p u n i s h t r

e s p a s s e r s u p o n r e a l a n d p e r s o n a l p r o p e r t y

.
4 8

. T o r e s t r a i n a n d p u n i s h i n t o x i c a t i o n , f i g h t i n g a n d q u a r r e l i n g i n t h e C i t y , a n d a n y d i s t u r b a n c e , r i o t o r r i o t o u s a s s e m b l a g e o r p a r t i c i p a t i o n t h e r e i n , o r a n y u n l a w f u l o r i n d e c e n t p r

a c t i c e , a n d t o d e f i n e w h a t s h a l l c o n s t i t u t e t h e s a m e

.
4 9

. T o p r e v e n t a n d s u p p r

e s s g a m i n g a n d g a m b l i n g h o u s e s , l o t t e r i e s o r p l a c e s w h e r e a n y g a m e i n w h i c h c h a n c e p r

e d o m i n a t e s i s p l a y e d f o r a n y t h i n g o f v a l u e , a n d t o p u n i s h a n y p e r s o n w h o e n g a g e s i n s u c h g a m e , o r k e e p s o r f r e q u e n t s s u c h h o u s e s o r s e t s u p
o r p r o m o t e s l o t t e r i e s o r s e l l s l o t t e r

y t i c k e t s ; t o p r

e v e n t a n d s u p p r

e s s b a w d y h o u s e s o r p l a c e s w h e r e f o r n i c a t i o n i s p r

a c t i c e d
, a n d t o p u n i s h a n y i n m a t e , k e e p e r o r f r

e q u e n t e r t h e r e o f ; t o p r e v e n t a n d s u p p r

e s s u s e o f n a r

c o t i c s a n d d a n g e r

o u s d r u g s a n d h o u s e s a n d p l a c e s k e p t t h e r

e f o r , a n d t o p u n i s h a n y k e e p e r o f s u c h h o u s e o r p l a c e , o r p e r s o n w h o f r e q u e n t s t h e s a m e

.
5 0

. T o p r o h i b i t p e r s o n s f r o m r o a m i n g t h e s t r

e e t s a t u n s e a s o n a b l e h o u r

s

.
5 1

. T o p r o h i b i t a n d p r e v e n t c r u e l t y t o c h i l d r

e n a n d a n i m a l s ; t o a p p r

o p r i a t e s u c h s u m s a s m a y b e p a i d i n t o t h e t r e a s u r y f r o m f i n e s
c o l l e c t e d o n c o n v i c t i o n o f p e r

s o n s c h a r g e d w i t h c r u e l t y t o a n i m a l s o r c h i l d r e n , a n d t o a u t h o r i z e t h e p a y m e n t o f t h e s a m e o r a n y p a r t t h e r e o f t o a n y p e r

s o n o r s o c i e t y t h a t s h a l l h a v e o f

f i c i a l l y a i d e d i n s u c h c o n v i c t i o n

.
5 2

. T o p r o v i d e f o r t h e p u n i s h m e n t b y f i n e o f n o t l e s s t h a n t w e n t y
‐ f i v e d o l l a r s ( $ 2 5 ) n o r m o r

e t h a n o n e t h o u s a n d d o l l a r

s ( $ 1
, 0 0 0 )
, o r b y i m p r i s o n m e n t n o t e x c e e d i n g t w o ( 2 ) y e a r s , o r b o t h
, o f a n y p e r

s o n o r p e r s o n s w h o m a y i n

j u r e , d e f a c e , i n t e r

f e r e w i t h o r d e s t r

o y
a n y p r o p e r t y b e l o n g i n g t o t h e C i t y o r i n w h i c h t h e C i t y h a s a n y i n t e r e s t
, r i g h t o r e s t a t e , a n d t o p r

o v i d e t h a t t h e d i s t r i c t c o u r

t o r t h e
c i r c u i t c o u r t o f t h e S t a t e o f O r

e g o n f o r t h e C o u n t y o f M u l t n o m a h s h a l l h a v e j u r i s d i c t i o n t o e n f o r c e s u c h p u n i s h m e n t o r p u n i s h m e n t s

.
5 3

. T o e s t a b l i s h
, c h a n g e , d i s c o n t i n u e , o r r e
‐ e s t a b l i s h C i t y j a i l s , p r i s o n s , p o l i c e s t a t i o n s , w o r k h o u s e s a n d h o u s e s o f d e t e n t i o n , p u n i s h m e n t
, c o n f i n e m e n t o r r

e h a b i l i t a t i o n , w i t h i n o r w i t h o u t t h e C i t y

.
5 4

. T o r e g u l a t e a n d r e s t r a i n t h e k e e p i n g o f a l l p e t s , b i r

d s , f o w l
, r e p t i l e s , a n d a n i m a l s o f a n y k i n d
, a n d t o p r e v e n t a n y a n d a l l

a n i m a l s f r o m r u n n i n g a t l a r

g e w i t h i n t h e C i t y o r a n y p a r

t t h e r e o f
, a n d t o p u n i s h p e r

s o n s w h o a l l o w a n i m a l s t o r u n a t l a r g e o r t o b e
u n l i c e n s e d ; t o p r

o v i d e f o r i m p o u n d i n g , s a l e a n d d i s p o s i t i o n w h e n f o u n d a t l a r g e , o r w h e n k e p t a g a i n s t C i t y r

e g u l a t i o n s o r w h e n n o l i c e n s e h a s b e e n o b t a i n e d o r t a x p a i d a s p r o v i d e d b y t h e C o u n c i l

.
5 5

. T o r e g u l a t e , p r e v e n t a n d p r o h i b i t t h e e r e c t i o n , m a i n t e n a n c e o r d i s p l a y o f s i g n b o a r d s , b i l l b o a r d s , s i g n s , p o s t e r

s a n d

a d v e r t i s e m e n t s d e s i g n e d t o a t t r

a c t t h e a t t e n t i o n o f p e r

s o n s o n s i d e w a l k s , s t r

e e t s o r p u b l i c p l a c e s

.
5 6

. T o r e g u l a t e a n d p r

o h i b i t t h e e x h i b i t i o n a n d h a n g i n g o f m a t e r i a l i n o r a c r o s s t h e s t r e e t o r f r o m h o u s e s o r o t h e r b u i l d i n g s o r
s t r u c t u r e s

.
5 7

. T o r e g u l a t e a n d c o n t r

o l w a t e r
‐ b o r n e c o m m e r

c e a n d r e c r e a t i o n a l u s e s w i t h i n t h e C i t y , a n d u s e s o f a n d a c t i v i t i e s i n o r u p o n b o d i e s o f w a t e r w i t h i n t h e C i t y

.4 / 7 / 2 0 1 6 S e c t i o n 2

­ 1 0 5

. C o n t i n u a t i o n o f S p e c i f i c P o

w e r s

. | A r t i c l e 1 T h e C o u n c i l | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 0 3 2 8 5 5 / 5 5 8

. T o p r o v i d e f o r t h e r

e m o v a l o f o b s t r u c t i o n s , d e b r i s a n d d e l e t e r i o u s m a t t e r f r o m w a t e r s w i t h i n t h e C i t y l i m i t s a n d t o p r

o h i b i t p u t t i n g o r n e g l i g e n t l y o r w i l l f u l l y s u f f e r i n g t h e s a m e t o b e p u t t h e r

e i n

.
5 9

. T o r e g u l a t e t h e b u i l d i n g o f w h a r

v e s , a n d t h e d r i v i n g o f p i l e s i n a n y b o d y o f w a t e r o r w a t e r c o u r s e w i t h i n t h e l i m i t s o f t h e C i t y
a n d t o e s t a b l i s h l i n e s b e y o n d w h i c h w h a r v e s s h a l l n o t b e b u i l t n o r p i l e s b e d r i v e n

.
6 0

. T o p r o v i d e f o r t h e c o n s t r u c t i o n a n d r

e g u l a t i o n o f p u b l i c f a c i l i t i e s a n d l a n d i n g s a t t h e f o o t o f t h e s t r e e t s t e r m i n a t i n g a t a
w a t e r c o u r s e o r b o d y o f w a t e r w i t h i n t h e C i t y

.
6 1

. T o a p p r o p r i a t e m o n e y f o r t h e d e e p e n i n g , w i d e n i n g , d o c k i n g , c o v e r i n g , w a l l i n g , a l t e r i n g o r c h a n g i n g c h a n n e l s , w a t e r , o r
w a t e r c o u r s e s w i t h i n t h e C i t y , a n d t o p r

o v i d e f o r t h e c o n s t r u c t i o n a n d m a i n t e n a n c e o f c a n a l s , s l i p s , p u b l i c l a n d i n g p l a c e s , w h a r v e s , d o c k s a n d l e v e e s , a n d a l l s u c h o t h e r w o r k a s m a y b e r e q u i r e d f o r t h e a c c o m m o d a t i o n o f c o m m e r c e o r r e c r e a t i o n ; t o c o n t r

o l a n d

r e g u l a t e t h e u s e t h e r

e o f a n d t o p r o v i d e f o r t h e a c q u i s i t i o n b y c o n d e m n a t i o n o r o t h e r w i s e o f a l l s u c h w o r k o r w o r k s b y t h e C i t y , a n d f o r t h e c o n s t r u c t i o n , m a i n t e n a n c e a n d o w n e r s h i p o f t h e s a m e b y t h e C i t y

.
6 2

. T o p r o v i d e f o r e n t e r i n g i n t o c o n t r

a c t s b y t h e C i t y w i t h p u b l i c l y o r p r i v a t e l y o w n e d u t i l i t i e s o r o t h e r g o v e r n m e n t a l a g e n c i e s f o r a p e r i o d n o t e x c e e d i n g f o r

t y ( 4 0 ) y e a r s f o r t h e t r a n s m i s s i o n , s a l e o r e x c h a n g e o f t h e c a p a c i t y o f a n d e l e c t r i c p o w e r g e n e r a t e d b y h y d r o e l e c t r i c p o w e r g e n e r

a t i n g f a c i l i t i e s o w n e d b y t h e C i t y a n d f o r o p e r a t i o n a n d m a i n t e n a n c e o f t h e f a c i l i t i e s

.4 / 7 / 2 0 1 6 S e c t i o n 9

­ 1 0 2 D e f i n i t i o n , " S e

w e r

. " | A r t i c l e 1 G e n e r a l P r o v i s i o n s | T h e C i t

y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 2 1 5 4 3 1 / 1 G E N E R A L I N F O R M A

T I O N : 5 0 3

­ 8 2 3

­ 4 0 0 0 E M A I L : c i t y i n f o @ p o r t l a n d o r e g o n

. g o v M o r e C o n t a c t I n f o ( h t t p : / / w w w

. p o r t l a n d o r e g o n

. g o v

/ / c i t y c o d e / a r t i c l e / 1 5 4 7 2 ) 

# C h a r t e r , C o d e a n d P o l i c i e s C i t y o f P o r t l a n d



# S e c t i o n 9

­ 1 0 2 D e f i n i t i o n , " S e w e r

. "

A s u s e d i n t h i s C h a r

t e r , " s e w e r " i n c l u d e s a l l t r u n k s , m a i n s a n d e x t e n s i o n s t h e r e o f
, p i p e s , d u c t s , l a t e r

a l s , b r a n c h e s , m a n h o l e s , l a m p h o l e s , c a t c h

­ b a s i n s , p u m p i n g s t a t i o n s a n d a p p u r t e n a n c e s , d i t c h e s , c a n a l s , d u c t s , a q u e d u c t s , g a t e s a n d a l l o t h e r a p p a r a t u s , s t r u c t u r e s a n d d e v i c e s
w h i c h t h e c o u n c i l f i n d s r

e a s o n a b l y n e c e s s a r

y o r p r o p e r f o r t h e d i s p o s a l o f s a n i t a r

y s e w a g e , o r f o r d r

a i n a g e i n c l u d i n g s t o r m w a t e r d r

a i n a g e , a n d a l s o t h e r

e l a y i n g , r e p a i r i n g , r e c o n s t r u c t i o n o r r

e n e w a l t h e r e o f

. T h e t e r m i n c l u d e s w i d e n i n g , d e e p e n i n g , s t r a i g h t e n i n g a n d d i v e r

t i n g
c h a n n e l s o f s t r

e a m s , i m p r o v i n g w a t e r f r

o n t s , f i l l i n g o r g r

a d i n g l a k e s , p o n d s o r o t h e r w a t e r

s a n d i n c r e a s i n g o r d i m i n i s h i n g t h e f l o w o f w a t e r s i n n a t u r a l o r a r t i f i c i a l c h a n n e l s , a n d o t h e r a c t s a n d t h i n g s f o u n d n e c e s s a r y o r a p p r o p r i a t e f o r s e w e r

a g e , d r a i n a g e a n d p r o p e r d i s p o s a l t h e r

e o f

. U s e o f t h e t e r m " s e w e r

" s h a l l n o t r e q u i r e t h a t a l l p u r p o s e s s e t f o r

t h a b o v e b e h a n d l e d b y a s i n g l e f a c i l i t y , a n d c o n s t r u c t i o n a n d u s e o f a
s e w e r m a y b e l i m i t e d t o a n y o n e o r a n y c o m b i n a t i o n o f s a i d p u r p o s e s

. [ J u n e 4
, 1 9 1 7
, n e w s e c

. 2 7 5 c ; 1 9 2 8 p u b

. , s e c

. 2 7 5 c ; 1 9 4 2 r e c o d

. , s e c

. 9

­ 5 0 3 ; r e v

. N o v

. 8
, 1 9 6 6

. ]4 / 7 / 2 0 1 6 S e c t i o n 1 1

­ 3 0 1 S e w a g e D i s p o s a l o r P u r i f i c a t i o n S y s t e m

. | A r t i c l e 3 S e w a g e D i s p o s a l o r P u r i f i c a t i o n | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 2 1 7 2 3 1 / 1 G E N E R A L I N F O R M A

T I O N : 5 0 3

­ 8 2 3

­ 4 0 0 0 E M A I L : c i t y i n f o @ p o r t l a n d o r e g o n

. g o v M o r e C o n t a c t I n f o ( h t t p : / / w w w

. p o r t l a n d o r e g o n

. g o v

/ / c i t y c o d e / a r t i c l e / 1 5 4 7 2 ) 

# C h a r t e r , C o d e a n d P o l i c i e s C i t y o f P o r t l a n d



# S e c t i o n 1 1

­ 3 0 1 S e w a g e D i s p o s a l o r P u r i f i c a t i o n S y s t e m

.

T h e C o u n c i l m a y c o n s t r u c t
, r

e c o n s t r u c t
, e n l a r

g e , a l t e r , m o d i f y , e q u i p , o p e r

a t e a n d m a i n t a i n a s e w a g e d i s p o s a l o r s e w a g e p u r i f i c a t i o n
s y s t e m w i t h i n o r w i t h o u t t h e c o r p o r a t e l i m i t s o r b o t h
, i n c l u d i n g b u t n o t l i m i t e d t o : a l l m e t h o d s o f s t o r m d r a i n a g e , i n t e r c e p t i n g s e w e r

s , d i v e r s i o n s e w e r s , r e l i e v i n g o r i n t e r

c o n n e c t i o n s e w e r

s , s e w e r s t o s e p a r a t e s t o r m a n d s a n i t a r

y s e w a g e , p u m p o r e

j e c t o r s t a t i o n s a n d

e q u i p m e n t
, a n d p l a n t s f o r t h e t r

e a t m e n t a n d d i s p o s a l o f s e w a g e

. F o r t h a t p u r p o s e t h e C i t y m a y a c q u i r e b y a n y l a w f u l m e a n s p r

o p e r t y , r e a l o r p e r s o n a l
, i n t e r e s t s i n p r o p e r t y , e q u i p m e n t
, a n d r

e l a t e d f a c i l i t i e s a n d m a y m a k e a l l e x p e n d i t u r e s w h i c h t h e C o u n c i l f i n d s n e c e s s a r y o r
a p p r o p r i a t e t o c a r r

y o u t s u c h p u r p o s e s , e i t h e r w i t h i n o r w i t h o u t t h e c o r p o r a t e l i m i t s

. T h e C i t y m a y s e l l o r o t h e r w i s e d i s p o s e o f a n y o r a l l b y
p r o d u c t s o r s a l v a g e p r

o d u c t s f r o m t h i s o p e r a t i o n

. T h e C i t y a l s o m a y c o n t r

a c t w i t h a n y o t h e r p e r

s o n , p u b l i c o r p r i v a t e , t o f u r

t h e r p u r i f i c a t i o n
o f p u b l i c w a t e r

s o r p r o t e c t i o n o f t h e p u b l i c h e a l t h

. [ N o v

. 8
, 1 9 3 8
, n e w s e c

. 3 4 7 ; 1 9 4 2 r e c o d

. , s e c

. 9

­ 6 0 4 ; r

e v

. N o v

. 8
, 1 9 6 6

. ]4 / 7 / 2 0 1 6 S e c t i o n 1 1

­ 3 0 2 S e r v i c e C h a r g e s

. | A r t i c l e 3 S e w a g e D i s p o s a l o r P u r i f i c a t i o n | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 2 1 7 2 5 1 / 1 G E N E R A L I N F O R M A

T I O N : 5 0 3

­ 8 2 3

­ 4 0 0 0 E M A I L : c i t y i n f o @ p o r t l a n d o r e g o n

. g o v M o r e C o n t a c t I n f o ( h t t p : / / w w w

. p o r t l a n d o r e g o n

. g o v

/ / c i t y c o d e / a r t i c l e / 1 5 4 7 2 ) 

# C h a r t e r , C o d e a n d P o l i c i e s C i t y o f P o r t l a n d



# S e c t i o n 1 1

­ 3 0 2 S e r

v i c e C h a r g e s

.

F o r a l l p u r p o s e s r

e l a t i n g t o d e s i g n , c o n s t r u c t i o n , a c q u i s i t i o n , o p e r a t i o n , m a i n t e n a n c e a n d c o n t r

a c t r e q u i r e m e n t s o f s e w a g e t r

e a t m e n t o r p u r i f i c a t i o n f a c i l i t i e s a n d r

e l a t e d f a c i l i t i e s , t h e C i t y m a y f i x f e e s a n d c h a r g e s f o r c o n n e c t i o n o r u s e o r b o t h o f s e w e r s a n d s e w a g e p u r i f i c a t i o n
o r d i s p o s a l s y s t e m s t o b e p a i d b y p r o p e r t y w h i c h i s s e r

v e d o r i s c a p a b l e o f b e i n g s e r

v e d f o r u s e o f t h e s e w a g e d i s p o s a l s y s t e m

. S e w e r u s e r
s e r v i c e c h a r g e s m a y b e c o l l e c t e d b y t h e W a t e r B u r e a u w h i c h s h a l l b e c o m p e n s a t e d f o r s u c h s e r v i c e a s d e t e r m i n e d b y t h e C o u n c i l

. T h e C i t y m a y e s t a b l i s h p r

o c e d u r e s f o r c o l l e c t i o n a n d m a y p r

o v i d e f o r p e n a l t i e s , i n t e r

e s t a n d c o s t s

. T h e C i t y m a y e s t a b l i s h r e q u i r e m e n t s a n d i m p o s e r e g u l a t i o n s a s i t f i n d s a p p r

o p r i a t e

. S e w e r u s e r s e r

v i c e c h a r g e s s h a l l b e p a i d f o r a l l p r

e m i s e s c o n n e c t e d w i t h C i t y s e w e r s , d i r e c t l y o r i n d i r e c t l y , n o t w i t h s t a n d i n g t h a t s u c h p r e m i s e s m a y h a v e b e e n a s s e s s e d o r m a y i n t h e f u t u r e b e a s s e s s e d f o r c o n s t r u c t i o n o f s e w e r s u n d e r l o c a l i m p r o v e m e n t a s s e s s m e n t p r

o c e d u r e s o r m a y h a v e o t h e r

w i s e p a i d f o r s e w e r

s

.
T h e C i t y m a y e n t e r i n t o c o n t r

a c t s r e l a t i n g t o s e w a g e d i s p o s a l
, t r

e a t m e n t o r p u r i f i c a t i o n o r a l l s u c h f u n c t i o n s

. T h e C i t y m a y i m p o s e c h a r g e s f o r s e w a g e t r a n s p o r t a t i o n , d i s p o s a l
, t r

e a t m e n t o r p u r i f i c a t i o n o r a n y o r a l l s u c h f u n c t i o n s , o n p r o p e r t y o u t s i d e t h e C i t y s e r

v e d t h r o u g h C i t y f a c i l i t i e s , a t r a t e s n o l e s s t h a n t h o s e i m p o s e d f o r s i m i l a r s e r v i c e i n s i d e t h e C i t y t o s i m i l a r c l a s s i f i c a t i o n s

.
P r o c e e d s o f s u c h c h a r

g e s s h a l l b e p l a c e d i n t h e S e w a g e D i s p o s a l F u n d
, a n d m a y b e e x p e n d e d f o r a n y m a t t e r c o n n e c t e d w i t h t h e s e w e r o r
s e w a g e d i s p o s a l o r t r

e a t m e n t s y s t e m o f t h e C i t y , a n d b o n d e d d e b t a n d d e b t s e r v i c e r e l a t e d t h e r e t o

. [ A d d e d N o v

. 8
, 1 9 3 8
, s e c

. 3 4 7 ; 1 9 4 2

r e c o d

. , s e c

. 9

­ 6 0 4 ; N o v

. 8
, 1 9 6 0
, n e w s e c

. 9

­ 6 0 6 ; r e v

. N o v

. 8
, 1 9 6 6 a s s e c

. 1 1

­ 3 0 2 ; a m

. M a y 2 6
, 1 9 7 0

. ]4 / 7 / 2 0 1 6 S e c t i o n 1 1

­ 3 0 3 U s e o f S e w e r s

. | A r t i c l e 3 S e

w a g e D i s p o s a l o r P u r i f i c a t i o n | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 2 1 7 2 7 1 / 1 G E N E R A L I N F O R M A

T I O N : 5 0 3

­ 8 2 3

­ 4 0 0 0 E M A I L : c i t y i n f o @ p o r t l a n d o r e g o n

. g o v M o r e C o n t a c t I n f o ( h t t p : / / w w w

. p o r t l a n d o r e g o n

. g o v

/ / c i t y c o d e / a r t i c l e / 1 5 4 7 2 ) 

# C h a r t e r , C o d e a n d P o l i c i e s C i t y o f P o r t l a n d



# S e c t i o n 1 1

­ 3 0 3 U s e o f S e w e r s

.

T h e C o u n c i l m a y r

e q u i r e a n y p r o p e r t y l o c a t e d w i t h i n o n e h u n d r

e d ( 1 0 0 ) f e e t o f a r i g h t o f w a y i n w h i c h t h e r e i s a C i t y s e w e r t o c o n n e c t t o t h a t s e w e r

.
T h e C o u n c i l m a y p r

o h i b i t d i s c h a r g e o f s e w a g e o r h a r m f u l m a t t e r o r i m p u r i t i e s i n t o a n y s t r e a m o r r i v e r w i t h i n t h e C i t y

. T h i s p r o h i b i t i o n m a y
e x t e n d t o a n y s o u r

c e w h a t e v e r , i n c l u d i n g s h i p s , h o u s e b o a t s a n d w a t e r c r a f t o f a l l k i n d s

. T h e s e s o u r

c e s m a y b e r e q u i r e d t o c o n n e c t t o t h e C i t y ' s s e w e r s y s t e m w h e n p h y s i c a l l y p o s s i b l e , o r o t h e r w i s e t o c o n s t r u c t a n d u s e a p r

e s c r i b e d s e w a g e o r w a s t e d i s p o s a l s y s t e m

.
T o f a c i l i t a t e s e w a g e t r

e a t m e n t a n d p r

o t e c t t h e C i t y ' s s e w a g e f a c i l i t i e s , t h e C i t y m a y l i m i t t h e c l a s s e s o r k i n d s o f s e w a g e t h a t m a y b e d i s c h a r g e d o r m a y c o n t i n u e t o b e d i s c h a r g e d i n t o p u b l i c s e w e r

s , m a y p r o h i b i t d i s c h a r g e o f w a s t e s o t h e r t h a n d o m e s t i c s a n i t a r y s e w a g e i n t o p u b l i c s e w e r s o r f a c i l i t i e s , a n d m a y r

e q u i r e p r i v a t e p r e t r e a t m e n t b e f o r

e d i s c h a r g e , u p o n t e r m s f i x e d b y t h e C i t y E n g i n e e r

. [ N e w s e c

. N o v

. 8
, 1 9 6 6

. ]

# A TTACHMENT 

# C

## ... .

## SE~!AGE 

# DISPOSAL FUND

RATE STUDY

CITY oF PoRTLAND

PoRTLAND J 

# ORE Goo

l



# t· JANUARY J 

# 1977



# 8 0 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-

# Page s 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

# Page s 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

# Page s 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

# Page s 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

ng to extra strength and cooling water discharge. i 

## subclasses

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
th stem

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

evenred. During FY 79-80 

## rna i 

## ntenance crews wi 11 

## of the
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

# A TTACHMENT 

# 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 SURVEYBLACK & 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 %

3 Tiers 4 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 0.24BLACK & 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 orprotecting 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 5LEGAL NOTICE Please be advised, this Survey was compiled primarily based on information Black & Veatch received from third-parties and Black & Veatch was not requested to independently verify any of this information. Thus, Black & Veatch’s reports’ accuracy solely depends upon the acc uracy of the information provided to us and is subject to change at any time. As such, it is merely provided as an additional reference tool, in combina tion with other due diligence inquiries and the resources of users. Black & Veatch assumes no legal liability or responsibility for the accuracy, completenes s, or usefulness of any information, or process disclosed, nor does Black & Veatch represent that its use would not infringe on any privately owned rig hts. This Survey may include facts, views, opinions and recommendations of individuals and organizations deemed of interest and assumes the reader is sophis ticated in this industry. User waives any rights it might have in respect of this Survey under any doctrine of third-party beneficiary, including the Cont racts (Rights of Third Parties) Act 1999. Use of this Survey is at users sole risk and no reliance should be placed upon any other oral or written agreement, r epresentation or warranty relating to the information herein.

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# A TTACHMENT 

# F

# OIIDINAN C E No. 

# 18 714 5

R e vi se S e w e r and s tonnwater rat es , charg es and f ee s in acc o rdanc e with th e F Y 2 01 5-2 016 S ew e r U ser Rat e 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 servic e, 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 Counci l 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.

Pas se d by 

### the C ouncil, C ommissioner Nick F ish



### Sam Murray Ma y 11
, 2015

C ost o bj e ct

- ord 

# MAY 

# 2 7 20 1 5 Mary Hull Caballero Auditor of the City of Portland By / 

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## 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

COMM I SSIONER APPROVAL 

### Mary Hull Caba ll ero Mayor -Finance and Administration

- Hales 

### . Auditor of the City of Portland

Position 1/Utilities- Fritz

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# Jr I/

# ~ Position 2fflorl<.s

- Fish

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# ~' I I 

### tsy.-

. Position 3/Affairs

- Saltzmal" 

# J 

# .

v Position 4/SafeiY

- Novick ACTION TAKEN:
BUREAU APPROVAL 

# MAY 2 1 2015

# A~~m TO SECON D READING 

# MAY 2 7 2015 Bureau: Environmen tal Services**Bure mes**  

### Hagerman 

## 9:30A.M.

Pr ;p;;e d

# rs**amue l**  M1:1rray Date P r epared: May 11
, 2015
FinanciallmP.act & 

### Public In volvement Statement Completed

### ~ Amends Budget 

# 0

Portland Policd; Docume nt !f**"Yr~~ires** ity Policy paragraph stated
rn

### 9~ t.

### ~ 

### - <7 Ye No ( 

### CityrAuditor Office Approval: required for Code Ordinances 

### City Attorney Approval:

## ~ required for contract, code, easement , franchise como plan charter 

### Counc il Meeting Date 2015 May 21,

AGENDA FOUR-FIFTHS AGENDA COMMISSIONERS VOTED

### ~ AS FOLLOW S: 

### TIME CERTAIN Start time: YEAS NAYS



# -- Total amount of time needed: 15 minutes 1

. Fritz 1

. Fritz 

# v
(for presentation, testimony and discussion) 

# / 2. Fis h 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) Hal es Hales 

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##  187145

# A TTACHMENT 

# 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 

## P 1 • 

## 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

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## 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

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. 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

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## 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

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## 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

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. 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

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### 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

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# A TTACHMENT 

# 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 Opera ting 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 Financ ial Plan, the primary do cument addressing key policy issues related to the provisi on of sanitary sewer and stormwaterdrainage 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 manageme nt tool for the upcoming fiscal year. The budget development process culminates with the budget reque st being submitted to the City Budget Office for review and eventual inclusion in th e 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 fo r the upcoming fiscal year using formal cost of service ratemaking principles adopted by City Co uncil 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 char ges calculated in the rate study are adopted by City Council.
The rate study does not establish the recommended le vel or priority of Bureau services - these are addressed in the Five-Year Financia l 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 ma nner 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 san itary 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 custom er usage, and changes in rate model assumptionsregarding 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) 0.622 $ 0.650 $ 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 re quirements include the recurring co st of providing service plus overhead charges and contingency reserves. Th e Bureau's adopted budget provides a detailed description of these operating costs for the upcomin g 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 desc ribes 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 cont ract revenues and interest earnin gs. 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 re maining net revenue require ment 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 parame ter. As discussed in Section IV, the Bureau uses the service parameters that best represent th e 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 colle ction 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 ma naging the volume and quality of urban stormwater runoff.

There are a variety of approaches for allocating re venue 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 st ation’s function is to tr ansport wastewater – not

### Bureau of Environmental Services June 2015 Sewer System Rate Study Page 4 of 22 

## purify it. Other allocations are less obvious. The co st of maintenance functions within a combined sanitary sewer and stormwater drainage system shoul d be allocated to both sa nitary sewage flow and stormwater drainage. However, it is less appare nt how costs should be divided between these two service parameters. Allocations of this type are ba sed on the best professional judgment of the Bureau personnel responsible for pe rforming 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 dr ainage rates are properly calculat ed to match revenue requirements; and, 3) and how the Bureau's rate making 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 ma nner consistent with industry practices."
Step 4: Assign Units of Meas ure to Each Service Parameter . The fourth step in the rate setting process is to quantify each of the service parameters by a unit of meas ure, which then allows individual unit rates be calculated. The units of service for san itary sewage flow and strength are a direct measure of a customer’s wastewater discha rge and, therefore, a direct measure of the level of service.
Impervious area is currently the only stormwater drai nage service unit of measure used by the Bureau. The precise level of stormwater drainage service pr ovided 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 parame ter, 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, includi ng 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 stormwat er drainage facilities c onstitute $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 th e 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 milli on decrease to the Sewer System Operating Fund balance and a $3.1 million adjustment fo r 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 Sy stem Construction Fund and are used to reduce CIP related borrowing requirements.
Table 3 on the following page presents the Bur eau’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 F und 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 Bu reau provides to its customers.
Basic Sanitary Flow (Flow, or Q ) represents the volume of san itary 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, th e greater the quantity of oxygen required. This service parameter is measured in pounds per hund red cubic feet of sanitary sewage flow.
Total Suspended Solids (TSS) is another measure of sanitary sewage discharge strength. It represents the weight of suspende d particulate matter per unit of sanitary sewage flow. It is also measured in pounds per hundred cubi c feet of sanitary sewage flow.
Basic Impervious Area (IA) represents the responsible reside ntial customer's contribution of stormwater runoff to the City's stormwater draina ge system. It is measured in thousands of square feet.
Commercial/Industrial Impe rvious Area (C/I-IA) represents the responsible commercial/industrial customer's c ontribution of stormwater runo ff to the City's stormwater drainage system. It is also meas ured 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 wate r consumption. Special meter services are measured by the number of special meter billings.

Portland Harbor costs were separately identified on cu stomer bills beginning in FY 2008. This ensures that customers know what these cost s 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 servi ce 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 san itary flow, for example) wi ll define the percentage of indirect costs allocated to that same parameter.
2. Allocation of Capita l 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 previous ly, the capital cost allocations used in this rate study reflect the findings and recommendations ma de in 1998 by Black & Veatch Corporation, updated to reflect current system assets. Black & Ve atch reaffirmed the use of this methodology in its 2005 review of the Bureau's rate model.

3. Allocation of Non-Rate Re venue 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 bran ch charge revenues. The remaining revenues, including cash transfers from other funds, contract revenues, and interest in come, 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 Allo cated 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 ne t revenue requirement by service parameter for FY 2016. All capital expenditures are allocated to sa nitary flow, BOD, TSS, or impervious area. Revenue requirements for other categori es 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 38,699,412 $ 685,926 $ 38,013,486 $ Capital 116,512,878 15,225,348 101,287,530

Total 155,212,290 $ 15,911,275 $ 139,301,015 $

Biochemical Oxygen Demand Operating 18,989,435 $ 2,023,818 $ 16,965,617 $ Capital 14,061,899 1,948,701 12,113,198

Total 33,051,334 $ 3,972,518 $ 29,078,815 $

Total Suspended Solids Operating 15,998,380 $ 1,763,870 $ 14,234,510 $ Capital 12,555,267 1,828,661 10,726,606

Total 28,553,647 $ 3,592,531 $ 24,961,116 $

Basic Impervious Area Operating 57,414,395 $ 2,001,533 $ 55,412,863 $ Capital 57,754,228 7,469,882 50,284,346

Total 115,168,624 $ 9,471,415 $ 105,697,209 $

Commercial/Industrial Impervious Area 3,933,914 $ 149,723 $ 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 340,570,395 $ 33,285,365 $ 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 di scharge strength for each customer class must be forecast. FY 2016 average residential sanitary sewe r 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 san itary sewage strength demand characteristic assumptions for residential a nd 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 in creased to 293 mg/l and 288 mg/l, respectively.
These changes more accurately reflect the true B OD 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 recove red 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 B illed 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 fo recast 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/industria l customers for extra strength sanitary sewage discharg es based upon samples take n and laboratory analysis of their sewage discharges. However, as many as 3,000 other cust omers are believed to ha ve 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 disc harges, 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 Ja nuary 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 fo recast FY 2016 total units of demand by service parameter. Total forecast units of demand, together with the servic e parameter revenue requirements, determine the unit cost of serv ice for each service parameter.

E. FY 2016 Calculation of Unit Cost of Service
Total O&M and capital revenue requirements by serv ice parameter were shown in Table 4. Those costs, net of forecast non-rate revenue offsets, form th e basis for developing cost of service rates. The next step in rate development is to compute the un it cost of service for each service parameter, based on forecast units for each type of service as show n in Table 7. This requires dividing the revenue requirement for each service parameter by its fo recast 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 A nnual 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 reve nue 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 serv ice 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 deve lop rates by customer class. For example, the residential sanitary volum e 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), c onverting 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 lb s/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. Fina lly, rates are adjusted upward by approximately 1.7% to take into account projected uncollectable de bts, 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 stormw ater drainage rates for FY 2016.
This year’s rate structure includes the effects of the CRR. Adopted rates for FY 2016 reflect CRR participation le vels of about 35,800 customers. For reside ntial customers receiving the full (35%) discount on the stormwater charge, the average monthl y 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 san itary 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 comput ed 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 comput ed from adopted sewer rates for FY 2016, as compared to bills under FY 2014 rates in cluding 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 $ 46 $ 3.4% Industrial Laundry 1 2 6,610 104,000 3.35 3.08 60,628 $ 62,709 $ 3.4% Large Nightclub 2 185 4,800 - - 1,710 $ 1,769 $ 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 - - 381 $ 394 $ 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 (S DC), 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 Re vised Statute 223.299. Line and branch charges are not subject to these requirements.
The purpose of the sanitary sewer SDC and the stor mwater 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 draini ng 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 ma de to the Mid County Sewer Project, most of the new collector sewers being constructed in Portla nd 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 constr uction 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 developm ent. 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 stormwat er 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 finan ce 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 fa cilities funded by bond issu ances (essentially all facilities since 1985), replacement costs are pr orated 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 ar e 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 simp le 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 ava ilable 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 co st 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 ty pe of occupancy. The total sy stem treatment capacity is 342,072 EDUs. Dividing the above total cost by this amou nt 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, conveya nce, and treatment of stormwater flows from properties; and, 2) collection, conveyance, a nd treatment of stormwater flows from public rights of way. This service includes ac cess to individual propertie s on local streets and use of arterial streets, unimpeded by flooding. It al so 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 a nd an off-site charge. The on-site charge reflects direct usage of public stormwater drainage faciliti es, 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 bene fits, corresponding to (2) above. The measure of proportionality for this charge is intended to reflec t the relationship between these uses and benefits and the particular characteri stics 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 di vided between on-site and off-site costs. On-site costs represent that portion of total costs for facilities handling stormwater dr ainage flows from individu al 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) protecti on from hazardous materials spills in the right of way; and 4) protection from off-site flows.

The allocation between on-site and off-site cost s 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 receive d from facilities draining the right of way. There are two principal benefits: drainage of arterial st reets, and access to individual prope rties. 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 re sulting 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 r oughly 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 th e 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 = 183.00 u 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 developm ent 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 averag e costs of constructing collector sewers and house branches, adjusted to current dollars. Only projec ts that have been completed since 2001 are included within the computation. Line sewer costs are divided by the net assessable squa re footage to determine a line charge for each project, and an average line ch arge is then calculated. (This calculation excludes the highest and lowest line charge.) Total house bran ch 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 th e large, low unit-cost Mid-County projects from the 1990’s, to a more current cost based on smaller (and more realistic), higher un it-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 steppi ng into the higher rates by setting the rates at a level of 50% of the difference between FY 2015 adopt ed rates, and the projected FY 2016 costs. The application of the above describe d methodology in successive years w ill cause this gap to narrow and eventually disappear.

Table 12 illustrates how the FY 2016 line a nd 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 Charge s 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 fo recast FY 2016 operating for the Sewer System Operating Fund, given the sources of rate revenues, non-rate revenues and cost s discussed above. It shows that FY 2016 adopted rates w ill allow the Bureau to collect su fficient revenues to operate and maintain the sanitary sewer and stormwater draina ge 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

# E XHIBIT 

# 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 a nd 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 airl ines serving Portland
International Airport (“PDX”) and the City of Po rtland, over the City’s “o ff-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 loca ted in the Multnomah
County Drainage District (“MCDD” ), including PDX. Specifica lly, the City was considering
(a) eliminating a discount on an “off-site” comp onent 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 Dis puted Charges on PDX raised concerns
among some of the tenant air carriers serving PD X because the charges would be passed along to
the air carriers, as costs of opera tion, 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 carri er’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 ai r 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 particip ated in a second confer ence call with a group

of FAA officials involved in Ai rport Compliance. The particip ants on the FAA side included:
Kevin Willis, Head of Compliance at FAA in Wa shington, D.C, two of Mr. Willis’s colleagues,
and Ms. Joelle Briggs with the compliance divi sion at the Western Mountain Region in Renton,

WA. Also on the call was Sco tt Lewis of the Anderson & Kreiger law firm, who was then
serving as outside counsel to the Port. I restat ed my understanding of the facts relating to the
Disputed Charges and the air carriers’ concer n, and once again asked for guidance on whether
the Port’s actions ( i.e. , passing along the City charges to th e air carriers) woul d be appropriate
under the applicable fe deral law and policy.

7. The FAA representatives on the call conf irmed 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 fede ral airport revenue-use rules because, as they
understood the situation, (a ) the charges are levied on all sim ilarly-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 w at er
usage); and (c) there is no double payment by the Airport (because the Port is exempted from
paying the "on-site" portion of the cha rge 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. Thereafte r, on September 12
, 2012 the Portland City Counc il passed Ordinance

No. 185610, which had the effect of assessing the Disputed Charges on PDX. Since that time
, as

the Disputed Charges have been assesse d, the Port has passed t hrough a portion of the charges to

tenant air carriers under the Port's agreements with such carriers.

9. After th e 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 Decl ar ation of David
Berg In Support ofPlaintiffs Motion for Preliminary I njunction (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 IA N 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

# E XHIBIT 

# 34 / 1 4 / 2 0 1 6 1 7

. 3 6

. 0 2 0 D e f i n i t i o n s

. | C h a p t e r 1 7

. 3 6 S e w e r U s e r C h a r g e s | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 5 1 2 8 5 6 1 / 2 G E N E R A L I N F O R M A

T I O N : 5 0 3

­ 8 2 3

­ 4 0 0 0 E M A I L : c i t y i n f o @ p o r t l a n d o r e g o n

. g o v M o r e C o n t a c t I n f o ( h t t p : / / w w w

. p o r t l a n d o r e g o n

. g o v

/ / c i t y c o d e / a r t i c l e / 1 5 4 7 2 ) 

# C h a r t e r , C o d e a n d P o l i c i e s C i t y o f P o r t l a n d



# 1 7

. 3 6

. 0 2 0 D e f i n i t i o n s

. ( A m e n d e d b y O r

d i n a n c e N o

. 1 8 6 9 0 2
, e f

f e c t i v e D e c e m b e r 2 6
, 2 0 1 4

. ) T h e f o l l o w i n g d e f i n i t i o n s a p p l y t o t h i s C h a p t e r :

A

. " B i o c h e m i c a l O x y g e n D e m a n d ( B O D ) " m e a n s t h e q u a n t i t y o f o x y g e n u t i l i z e d i n t h e b i o c h e m i c a l o x i d a t i o n o f o r g a n i c m a t t e r p e r G u i d e l i n e s E s t a b l i s h i n g T

e s t P r o c e d u r e s f o r t h e A n a l y s i s o f P o l l u t a n t s , c o n t a i n e d i n 4 0 C F R 1 3 6

.
B

. “ B r a n c h ” m e a n s t h e p u b l i c p o r

t i o n o f t h e h o r i z o n t a l p i p i n g s y s t e m c o n n e c t i n g f r o m t h e p l u m b i n g s y s t e m o f a b u i l d i n g o r b u i l d i n g s t o a p u b l i c o r p r i v a t e s e w e r

.
C

. “ B r a n c h C h a r g e ” m e a n s a c o n n e c t i o n c h a r

g e t h a t r e i m b u r s e s t h e C i t y f o r t h e c o s t s o f d e s i g n i n g a n d c o n s t r u c t i n g a p u b l i c s e w e r
e x t e n s i o n a n d p r

o v i d i n g i n d i v i d u a l s e r

v i c e l a t e r a l s

.
D

. “ C o n n e c t i o n C h a r

g e ” m e a n s a c h a r

g e a s s e s s e d b y t h e C i t y f o r p r

o v i d i n g p u b l i c s e w e r a n d s t o r m w a t e r m a n a g e m e n t s e r v i c e s t o a p r o p e r t y

. A c o n n e c t i o n c h a r

g e m a y i n c l u d e a l i n e c h a r

g e , b r a n c h c h a r g e , s a n i t a r y s e w e r s y s t e m d e v e l o p m e n t c h a r g e , a n d a s t o r m w a t e r
s y s t e m d e v e l o p m e n t c h a r

g e

. C o n n e c t i o n c h a r

g e s a r e f o r u s e o r e x p a n s i o n o f u s e o f C i t y s a n i t a r y o r s t o r m w a t e r m a n a g e m e n t s e r

v i c e s

.
E

. " D i r e c t o r ” m e a n s t h e D i r

e c t o r o f t h e B u r

e a u o f E n v i r o n m e n t a l S e r v i c e s o r t h e D i r

e c t o r ’ s d e s i g n e e

.
F

. " E q u i v a l e n t D w e l l i n g U n i t ( E D U ) " m e a n s t h e e s t i m a t e d a v e r a g e s a n i t a r y f l o w f r o m a s i n g l e
­ f a m i l y d w e l l i n g c h a r

g e d t o a s e w e r a c c o u n t

. G

. “ E x t r a S t r e n g t h C h a r g e ” m e a n s t h e a d d i t i o n a l c h a r

g e t o w a s t e w a t e r d i s c h a r

g e r s w h o h a v e c o n s t i t u e n t d i s c h a r

g e s a t c o n c e n t r

a t i o n s
a b o v e l e v e l s n o r m a l l y e x p e c t e d i n d o m e s t i c w a s t e w a t e r , a s d e t e r m i n e d b y t h i s C h a p t e r a n d g e n e r a l o r d i n a n c e

.
H

. “ G r o u n d w a t e r ” m e a n s s u b s u r

f a c e w a t e r t h a t o c c u r

s i n s o i l s a n d g e o l o g i c a l f o r m a t i o n s t h a t a r e f u l l y s a t u r a t e d

. G r o u n d w a t e r f l u c t u a t e s
s e a s o n a l l y a n d i n c l u d e s p e r

c h e d g r o u n d w a t e r

.
I

. “ G r o u n d w a t e r D i s c h a r

g e ” m e a n s a d i s c h a r

g e o f w a t e r p u m p e d o r d i r

e c t e d f r o m t h e g r o u n d

. G r o u n d w a t e r d i s c h a r

g e s i n c l u d e b u t a r

e n o t l i m i t e d t o s u b s u r

f a c e w a t e r f r o m s i t e r e m e d i a t i o n a n d i n v e s t i g a t i o n s , w e l l d e v e l o p m e n t
, B r o w n f i e l d d e v e l o p m e n t
, d i s c h a r

g e s f r o m f o o t i n g
a n d f o u n d a t i o n d r

a i n s , a n d s u b s u r

f a c e w a t e r a s s o c i a t e d w i t h c o n s t r u c t i o n o r p r o p e r t y m a n a g e m e n t d e w a t e r i n g a c t i v i t i e s

.
J

. “ I m p e r v i o u s A r e a ” m e a n s t h e a r

e a o f a p r o p e r t y t h a t d o e s n o t a l l o w r

a i n w a t e r t o p e r

c o l a t e n a t u r a l l y i n t o t h e g r

o u n d

. T h e C i t y c l a s s i f i e s t h e f o l l o w i n g a s i m p e r

v i o u s a r e a s f o r b i l l i n g p u r p o s e s : r

o o f s ; p a v e d a r

e a s s u c h a s d r i v e w a y s , p a r k i n g l o t s , o r w a l k w a y s ; a n d a r e a s o f p r o p e r t y t h a t a r e c o v e r e d b y p o r o u s p a v e m e n t

. T h e C i t y d o e s n o t b i l l f o r t h e f o l l o w i n g i m p e r v i o u s a r e a s : p u b l i c r i g h t s
­ o f

­ w a y ; o u t d o o r
r e c r e a t i o n a r e a s t h a t a r e a v a i l a b l e t o t h e g e n e r

a l p u b l i c w i t h o u t c o n d i t i o n o r r

e s t r i c t i o n ; a n d a r

e a s c o v e r e d b y c o m p a c t e d s o i l s a n d

c o m p a c t e d g r

a v e l s

.
K

. “ I T E M a n u a l ” m e a n s t h e m a n u a l u s e d p e r S e c t i o n 1 7

. 1 5

. 0 2 0 t o d e t e r m i n e t r a n s p o r t a t i o n s y s t e m d e v e l o p m e n t c h a r

g e s

.
L

. “ L i n e C h a r

g e ” m e a n s a c o n n e c t i o n c h a r

g e t h a t r e i m b u r s e s t h e C i t y f o r t h e c o s t s o f d e s i g n i n g a n d c o n s t r u c t i n g s a n i t a r y s e w e r l i n e s t h a t

s e r v e m u l t i p l e c o n n e c t i n g p r

o p e r t i e s

.
M

. “ N e t N e w I m p e r

v i o u s A r e a ” m e a n s t h e d i f

f e r e n c e b e t w e e n e x i s t i n g i m p e r

v i o u s a r e a o n a p r o p e r t y , a n d a n y i n c r

e a s e i n i m p e r v i o u s a r e a t h a t r e s u l t s f r o m a p r o p o s e d u s e ( s ) o f t h e p r

o p e r t y

.
N

. “ N e t N e w V

e h i c u l a r T r i p s ” m e a n s t h e d i f

f e r e n c e b e t w e e n t h e v e h i c u l a r t r i p s g e n e r a t e d b y t h e e x i s t i n g u s e o f a p r

o p e r t y , a n d a n y i n c r e a s e d n u m b e r o f t h e v e h i c u l a r t r i p s g e n e r a t e d f r o m a p r o p o s e d u s e ( s ) o f t h e p r

o p e r t y

.
O

. “ N o n
­ R o u t i n e D i s c h a r

g e ” m e a n s a d e f i n a b l e / e x p l a i n a b l e u n c o n t r o l l e d r e l e a s e o r s p i l l t o t h e s a n i t a r

y s e w e r s y s t e m t h a t i s n o t

r e p r e s e n t a t i v e o f t h e n o r m a l o r e x p e c t e d c h a r a c t e r i s t i c s o f a f a c i l i t y ’ s w a s t e w a t e r d i s c h a r g e a n d t h a t m a y i n c l u d e d i s c h a r

g e s d e f i n e d a s
s l u g l o a d s u n d e r C h a p t e r 1 7

. 3 4

.
P

. “ R a t e ” m e a n s t h e m u l t i p l i c a t i o n f a c t o r u s e d t o g e n e r a t e a c o n n e c t i o n o r u s e r c h a r

g e b a s e d o n c o s t

­ p e r

­ u n i t p r o x i e s s u c h a s g a l l o n s o f4 / 1 4 / 2 0 1 6 1 7

. 3 6

. 0 2 0 D e f i n i t i o n s

. | C h a p t e r 1 7

. 3 6 S e w e r U s e r C h a r g e s | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 5 1 2 8 5 6 2 / 2 d i s c h a r g e , s q u a r e f e e t
, o r f e e t o f r

o a d f r o n t a g e

. R a t e s c a n b e m u l t i p l i e d b y o t h e r f a c t o r s
Q

. “ R a t e p a y e r

” m e a n s a p e r

s o n w h o h a s t h e r i g h t t o p o s s e s s i o n o f a p r o p e r t y a n d :

1

. W h o c a u s e s o r p e r m i t s t h e d i s c h a r g e o f s a n i t a r y s e w a g e i n t o t h e p u b l i c s e w e r s y s t e m , o r

2

. W h o s e u s e o f t h e p r

o p e r t y d i r e c t l y o r i n d i r e c t l y b e n e f i t s f r

o m s t o r m w a t e r m a n a g e m e n t s e r

v i c e s p r o v i d e d b y t h e C i t y

.
R

. " R o l l i n g A v e r

a g e " m e a n s t h e a v e r

a g e o f t h e 1 0 m o s t r

e c e n t m o n t h l y a v e r

a g e s o f r e p r e s e n t a t i v e C i t y
­ a n d / o r s e l f

­ m o n i t o r i n g e v e n t s f o r t h e p u r p o s e o f c a l c u l a t i n g a n e x t r

a
­ s t r e n g t h s e w a g e c h a r

g e r a t e , u n l e s s a n o t h e r p e r i o d i s a p p r

o v e d b y t h e D i r

e c t o r

.
S

. “ S a n i t a r y S e w a g e ” m e a n s w a s t e w a t e r d i s c h a r g e d t o t h e p u b l i c s e w e r s y s t e m b y p e r m i t o r o t h e r a p p r o v a l o f t h e D i r

e c t o r a n d i n c l u d e s , b u t i s n o t l i m i t e d t o , d o m e s t i c w a s t e w a t e r , i n d u s t r i a l a n d c o m m e r

c i a l p r o c e s s w a s t e w a t e r a n d c o n t a m i n a t e d s t o r m w a t e r

.
T

. “ S a n i t a r y S e w e r C o n v e r

s i o n C h a r g e ” m e a n s t h e c h a r

g e t o c o n v e r t a n o n c o n f o r m i n g s e w e r

, a s t h a t t e r m i s d e f i n e d i n C h a p t e r 1 7

. 3 3

. T h i s
c h a r g e i s a s s e s s e d i n l i e u o f l i n e a n d b r a n c h c o n n e c t i o n c h a r

g e s

.
U

. “ S a n i t a r y S y s t e m D e v e l o p m e n t C h a r

g e ( S D C ) ” m e a n s a c o n n e c t i o n c h a r g e f o r n e w o r i n c r

e a s e d d e m a n d o f t h e p u b l i c s e w e r s y s t e m

. T h i s c h a r g e r e i m b u r s e s t h e C i t y f o r a n e q u i t a b l e p o r

t i o n o f t h e c o s t s o f m a

j o r s e w e r f a c i l i t i e s s u c h a s w a s t e w a t e r t r e a t m e n t f a c i l i t i e s , p u m p
s t a t i o n s a n d i n t e r

c e p t o r s e w e r s

.
V

. “ S e e d ” m e a n s a p o p u l a t i o n o f m i c r o o r g a n i s m s c a p a b l e o f o x i d i z i n g b i o d e g r a d a b l e o r g a n i c m a t t e r t h a t i s a d d e d t o a w a s t e w a t e r s a m p l e a s p a r t o f t h e a n a l y s i s o f b i o c h e m i c a l o x y g e n d e m a n d ( B O D )

. O n l y s e e d p r e p a r e d u s i n g p r i m a r

y e f f l u e n t f r o m t h e C i t y ’ s C o l u m b i a B o u l e v a r

d W a s t e W a t e r T r

e a t m e n t P l a n t m a y b e u s e d f o r t h i s a n a l y s i s

.
W

. “ S t o r m w a t e r M a n a g e m e n t F a c i l i t y ” m e a n s a f a c i l i t y o r o t h e r t e c h n i q u e u s e d t o r e d u c e v o l u m e , f l o w r

a t e , o r p o l l u t a n t s f r

o m s t o r m w a t e r
r u n o f f

. S t o r m w a t e r f a c i l i t i e s m a y r

e u s e , c o l l e c t
, c o n v e y , d e t a i n , r

e t a i n , o r p r o v i d e a d i s c h a r

g e p o i n t f o r s t o r m w a t e r r u n o f

f

.
X

. “ S t o r m w a t e r M a n a g e m e n t S e r

v i c e s ” m e a n s s e r

v i c e s a n d a c t i o n s u s e d t o c o l l e c t
, c o n v e y , d e t a i n , r e t a i n , t r e a t o r d i s p o s e o f s t o r m w a t e r

. T h e s e s e r v i c e s i n c l u d e m a n a g i n g s t o r m w a t e r r u n o f f f r o m p u b l i c s t r e e t s , m i t i g a t i n g f l o o d i n g , p r

e v e n t i n g e r o s i o n , i m p r o v i n g w a t e r q u a l i t y o f

s t o r m w a t e r r u n o f

f
, c o l l e c t i n g a n d c o n v e y i n g s t o r m w a t e r r u n o f f f r o m p r i v a t e p r o p e r t i e s w h e n r u n o f

f e x c e e d s t h e c a p a c i t y o f p r i v a t e f a c i l i t i e s t o m a n a g e s t o r m w a t e r o n s i t e , m i t i g a t i n g i m p a c t s t o n a t u r a l h a b i t a t s c a u s e d b y s t o r m w a t e r r u n o f f
, a n d p r o t e c t i n g p r o p e r t i e s a n d n a t u r

a l h a b i t a t s f r o m h a z a r d o u s s o i l s a n d m a t e r i a l s t h a t a r

e d i s c h a r g e d f r o m p r i v a t e p r o p e r t i e s a n d p u b l i c r i g h t s
­ o f

­ w a y

.
Y

. “ S t o r m w a t e r S y s t e m D e v e l o p m e n t C h a r g e ( S D C ) ” m e a n s a c o n n e c t i o n c h a r g e f o r n e w o r i n c r

e a s e d d e m a n d o f t h e p u b l i c s t o r m w a t e r
a n d d r a i n a g e s y s t e m

. T h i s c h a r

g e r e i m b u r s e s t h e C i t y f o r a n e q u i t a b l e p o r

t i o n o f t h e c o s t s o f p u b l i c s t o r m w a t e r m a n a g e m e n t f a c i l i t i e s s u c h

a s c o l l e c t i o n a n d c o n v e y a n c e f a c i l i t i e s , d e t e n t i o n a n d d i s p o s a l f a c i l i t i e s , a n d w a t e r p o l l u t i o n r e d u c t i o n f a c i l i t i e s

.
Z

. " T e m p o r a r y C o n n e c t i o n " m e a n s a c o n n e c t i o n t o t h e s a n i t a r y s e w e r s y s t e m w h e r

e t h e d u r a t i o n o f t h e c o n n e c t i o n i s l e s s t h a n t h r e e y e a r s
a n d c o n n e c t i o n a n d d i s c o n n e c t i o n o c c u r o n l y o n c e

. C o n n e c t i o n s m a d e t o t h e p u b l i c s e w e r , s t o r m w a t e r o r d r

a i n a g e s y s t e m m a d e f o r t h e p u r p o s e o f e n v i r

o n m e n t a l r e m e d i a t i o n w i l l n o t b e c o n s i d e r

e d a t e m p o r a r y c o n n e c t i o n u n l e s s a p p r

o v e d b y t h e D i r

e c t o r

.
A A

. " T e m p o r a r y S t r u c t u r e " m e a n s a s t r u c t u r

e t h a t i s s e p a r

a t e a n d d i s t i n c t f r

o m a l l o t h e r s t r u c t u r

e s a n d i s c r e a t e d a n d r e m o v e d i n i t s
e n t i r e t y w i t h i n 3 y e a r

s , i n c l u d i n g a l l i m p e r

v i o u s a r e a a s s o c i a t e d w i t h t h e s t r u c t u r

e

.
B B

. " T o t a l S u s p e n d e d S o l i d s ( T S S ) " m e a n s t h e t o t a l s u s p e n d e d m a t t e r t h a t e i t h e r f l o a t s o n t h e s u r f a c e o r i s s u s p e n d e d i n w a t e r o r
w a s t e w a t e r a n d t h a t i s r

e m o v a b l e b y l a b o r

a t o r y f i l t e r i n g i n a c c o r

d a n c e w i t h 4 0 C F R 1 3 6 T

a b l e B

. C C

. “ T r a n s p o r t a t i o n S D C S t u d y ” m e a n s t h e t r

a n s p o r t a t i o n s y s t e m d e v e l o p m e n t m e t h o d o l o g y e s t a b l i s h e d b y C h a p t e r 1 7

. 1 5

.
D D

. “ U s e r C h a r

g e ” m e a n s a c h a r

g e p a i d b y a r

a t e p a y e r f o r t h e u s e o f p u b l i c s a n i t a r y o r s t o r m w a t e r m a n a g e m e n t s e r

v i c e s

. U s e r c h a r

g e s
a r e c a l c u l a t e d o n a r

o u t i n e b a s i s s u c h a s m o n t h l y o r a n n u a l l y

.4 / 1 3 / 2 0 1 6 1 7

. 3 6

. 0 5 0 U s e r C h a r g e s

. | C h a p t e r 1 7

. 3 6 S e w e r U s e r C h a r g e s | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 3 5 1 5 8 1 / 3 G E N E R A L I N F O R M A

T I O N : 5 0 3

­ 8 2 3

­ 4 0 0 0 E M A I L : c i t y i n f o @ p o r t l a n d o r e g o n

. g o v M o r e C o n t a c t I n f o ( h t t p : / / w w w

. p o r t l a n d o r e g o n

. g o v

/ / c i t y c o d e / a r t i c l e / 1 5 4 7 2 ) 

# C h a r t e r , C o d e a n d P o l i c i e s C i t y o f P o r t l a n d



# 1 7

. 3 6

. 0 5 0 U s e r C h a r g e s

.
S e w e r u s e r c h a r

g e s a r e e s t a b l i s h e d a n d m a d e e f

f e c t i v e a s f o l l o w s :

A

. T i m i n g

. U s e r c h a r

g e s a r e c a l c u l a t e d o n a r

o u t i n e b a s i s , s u c h a s m o n t h l y , q u a r t e r l y o r a n n u a l l y

.
B

. S a n i t a r y S e w e r S e r v i c e s

. T h e C i t y c a l c u l a t e s a n d c o l l e c t s u s e r c h a r g e s f o r s a n i t a r

y s e w e r s e r v i c e s f r o m r a t e p a y e r s w h o c a u s e o r p e r m i t t h e d i s c h a r

g e o f s a n i t a r y s e w a g e f r o m a p r o p e r t y i n t h e i r p o s s e s s i o n i n t o t h e p u b l i c s e w e r s y s t e m

. C h a r g e s f o r s a n i t a r

y s e w e r
s e r v i c e s m a y i n c l u d e s a n i t a r

y s e w e r v o l u m e c h a r

g e s , a c c o u n t s e r

v i c e c h a r g e s a n d p e n a l t i e s f o r n o n
­ p a y m e n t o r l a t e
­ p a y m e n t o f s e w e r
c h a r g e s a n d o t h e r c h a r

g e s :

1

. R e s i d e n t i a l d w e l l i n g s

. R e s i d e n t i a l d w e l l i n g u n i t s a r e a s s e s s e d b a s e d o n t h e v o l u m e o f s e w a g e d i s c h a r g e d t o t h e s a n i t a r

y s e w e r
s y s t e m

. T h e D i r

e c t o r m a y e l e c t t o u s e w a t e r c o n s u m p t i o n a s t h e b a s i s o f t h i s c a l c u l a t i o n

. T o a v o i d i n c l u d i n g i r r i g a t i o n w a t e r u s a g e i n t h i s c a l c u l a t i o n , t h e D i r

e c t o r w i l l e s t a b l i s h a p r

o c e d u r e t h a t a l l o w s f o r i r r i g a t i o n c r

e d i t

. W h e n a w a t e r m e t e r r

e a d i n g i s n o t a v a i l a b l e , a
s a n i t a r y s e w e r d i s c h a r

g e e s t i m a t e w i l l b e m a d e b a s e d o n t h e r a t e p a y e r c l a s s o f c h a r

a c t e r i s t i c s p e r a d m i n i s t r

a t i v e r u l e

.
2

. N o n
­ r e s i d e n t i a l o c c u p a n c i e s

. T h e C i t y c a l c u l a t e s c h a r g e s f o r c o m m e r

c i a l
, i n d u s t r i a l
, a n d a l l o c c u p a n c i e s b a s e d o n t h e a m o u n t o f i n c o m i n g w a t e r v o l u m e a s m e a s u r e d b y t h e C i t y w a t e r m e t e r

, i n f o r m a t i o n f r

o m t h e w a t e r d i s t r i c t s e r

v i n g t h e p r o p e r t y , o r b y a n
a p p r o v e d m e t e r t h a t m e a s u r

e s a c t u a l s a n i t a r

y d i s c h a r g e v o l u m e

.
3

. C o m b i n e d d w e l l i n g u n i t s a n d o t h e r

. W h e r e d w e l l i n g u n i t s a n d o t h e r o c c u p a n c i e s u s e t h e s a m e w a t e r s u p p l y , t h e C i t y c a l c u l a t e s
c h a r g e s f o r s a n i t a r

y s e w e r s e r v i c e i n t h e s a m e m a n n e r a s t h o s e f o r c o m m e r c i a l
, i n d u s t r i a l
, a n d a l l o c c u p a n c i e s o t h e r t h a n r e s i d e n t i a l

.
4

. E s t i m a t i n g w a s t e w a t e r d i s c h a r g e s f o r m o b i l e d i s c h a r

g e r s

. U s e r c h a r g e s a r e a p p l i c a b l e t o a l l w a s t e w a t e r d i s c h a r g e s t o t h e C i t y
s e w e r s y s t e m r

e g a r d l e s s o f t h e s o u r

c e

. I n u n u s u a l c i r

c u m s t a n c e s w h e r

e t h e w a s t e w a t e r i s n o t f r

o m a f i x e d l o c a t i o n , s u c h a s s h i p s , b a r g e s , h o u s e b o a t s a n d o t h e r m o v a b l e f a c i l i t i e s o r d w e l l i n g u n i t s , a m e t h o d o f d e t e r m i n i n g t h e v o l u m e p r o v i d e d b y t h e u s e r m a y b e
u s e d i f a p p r o v e d b y t h e D i r

e c t o r

. O t h e r w i s e , t h e D i r e c t o r e s t i m a t e s t h e v o l u m e o f w a t e r t o w h i c h u s e r c h a r g e s a p p l y a n d t h i s d e t e r m i n a t i o n i s f i n a l

.
5

. I n a r e a s s e r v e d b y s e p a r a t e d s t o r m a n d s a n i t a r

y s e w e r s y s t e m s , t h e C i t y m a y a c c e p t t h e d i s c h a r g e o f c o n t a m i n a t e d s t o r m w a t e r i n t o t h e s a n i t a r

y s e w e r

. T h e d i s c h a r

g e v o l u m e s w i l l b e d e t e r m i n e d b y t h e a m o u n t o f i m p e r v i o u s a r e a p r o d u c i n g t h e c o n t a m i n a t e d

s t o r m w a t e r p l u s t h e a v e r

a g e r a i n f a l l o r a d i s c h a r

g e m e t e r

. T h e d i s c h a r

g e w i l l b e c h a r

g e d b a s e d o n s a n i t a r

y s e w e r v o l u m e r

a t e s

. C

. I n c a s e s w h e r

e w a t e r i s s u p p l i e d s o l e l y f r

o m a p r i v a t e s o u r

c e o r s o u r c e s s u c h a s w e l l s , s p r i n g s , r i v e r

s o r c r e e k s , o r f r o m a p a r t i a l

s u p p l y i n a d d i t i o n t o t h a t f u r n i s h e d b y t h e C i t y , r e s i d e n t i a l r a t e p a y e r s a r e a s s i g n e d t h e c l a s s a v e r

a g e v o l u m e f o r t h e i r a l t e r n a t i v e s o u r c e
w a t e r u s e

. C o m m e r

c i a l r a t e p a y e r s m u s t m e t e r t h e p r i v a t e s u p p l y e i t h e r a s a n i n f l o w o r a d i s c h a r g e i n c o n f o r m a n c e t o t h e p r

o v i s i o n s o f t h i s C h a p t e r

.
D

. M e t e r s r e q u i r e d

. A n y m e t e r o r m e t h o d u s e d f o r c a l c u l a t i o n o f a a d j u s t e d c h a r g e o r c r e d i t i s s u b j e c t t o t h e a d m i n i s t r

a t i v e o r s p e c i a l

m e t e r c h a r g e f o r e a c h s u c h m e t e r o r m e t h o d

. T h e p r o p e r t y o w n e r i s r e s p o n s i b l e f o r p u r

c h a s i n g , i n s t a l l i n g , m a i n t a i n i n g , a n d c a l i b r a t i n g t h e p r i v a t e m e t e r a n d m u s t c o m p l y w i t h a l l p r o v i s i o n s i n t h i s T i t l e

. M e t e r

s m u s t b e a p p r

o v e d b y t h e D i r

e c t o r a s t o t y p e , m a i n t e n a n c e , c a l i b r a t i o n
s c h e d u l e , s i z e a n d l o c a t i o n b e f o r

e i n s t a l l a t i o n

.
1

. A l l m e t e r s m u s t r e g i s t e r i n c u b i c f e e t

.
2

. M e t e r s i n s t a l l e d o n w a t e r s y s t e m s s u p p l i e d f r o m p r i v a t e o r p u b l i c s o u r

c e s a n d u s e d t o m e a s u r

e c o o l i n g , i r r i g a t i o n , e v a p o r

a t i o n o r p r o d u c t w a t e r f o r t h e p u r p o s e o f o b t a i n i n g r e d u c e d s e w e r c h a r

g e s m u s t b e c o n n e c t e d i n s u c h a m a n n e r a s t o r e g i s t e r o n l y t h a t p o r

t i o n
o f t h e w a t e r s u p p l y u s e d f o r t h a t p u r p o s e

.
3

. M e t e r s p l a c e d b e l o w t h e g r

o u n d o r p a v e m e n t s u r

f a c e m u s t h a v e t h e t o p o f t h e m e t e r n o t m o r e t h a n 8 i n c h e s b e l o w t h e s u r

f a c e a n d

m u s t b e e n c l o s e d i n a s t a n d a r

d w a t e r m e t e r b o x a n d c o v e r a s u s e d b y t h e P o r t l a n d W a t e r B u r

e a u

. M e t e r s l o c a t e d a b o v e t h e g r

o u n d o r f l o o r l e v e l m u s t n o t b e m o r

e t h a n 3

­ 1 / 2 f e e t a b o v e t h e g r

o u n d o r f l o o r l e v e l

.4 / 1 3 / 2 0 1 6 1 7

. 3 6

. 0 5 0 U s e r C h a r g e s

. | C h a p t e r 1 7

. 3 6 S e w e r U s e r C h a r g e s | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 3 5 1 5 8 2 / 3 4

. A l l m e t e r s m u s t b e l o c a t e d i n a n a r

e a t h a t i s f r e e l y a c c e s s i b l e a t a l l t i m e s a n d t h a t
, i n d e t e r m i n a t i o n o f t h e D i r e c t o r , d o e s n o t p r e s e n t a d a n g e r t o C i t y e m p l o y e e s

.
5

. T h e o w n e r o f a m e t e r m u s t i m p l e m e n t a p r o g r a m t o e n s u r e m e t e r a c c u r

a c y

. T h e p r o g r a m s h o u l d c o n s i d e r t h e m a n u f a c t u r e r ’ s p e r i o d i c m a i n t e n a n c e a n d c a l i b r

a t i o n r e q u i r e m e n t s

. A l l m a i n t e n a n c e a n d c a l i b r a t i o n r e c o r d s m u s t b e r e t a i n e d a n d a v a i l a b l e f o r r

e v i e w b y C i t y p e r s o n n e l

.
6

. F a i l u r e o f t h e o w n e r

, t h e o w n e r ’ s l e s s e e , o r o t h e r

s a c t i n g u n d e r t h e o w n e r t o m a i n t a i n t h e m e t e r i n g o o d w o r k i n g o r d e r c o n s t i t u t e s a
v i o l a t i o n o f t h i s C h a p t e r

. D u r i n g t h e p e r i o d o f t h e m e t e r ’ s n o n
­ o p e r a t i o n a n d p e n d i n g t h e p r

o p e r r e p a i r a n d r e i n s t a l l a t i o n o f t h e m e t e r

, t h e a c c o u n t m a y b e b i l l e d o n t h e b a s i s o f t h r e e t i m e s t h e n o r m a l w a t e r u s a g e o r i n s u c h a n a m o u n t a s d e e m e d p r o p e r b y t h e D i r

e c t o r

.
E

. C r e d i t s

. A r a t e p a y e r m u s t s u b m i t a w r i t t e n r

e q u e s t f o r e s t a b l i s h i n g r

e d u c e d c h a r g e s o r c r e d i t f o r w a t e r n o t s u b

j e c t t o s e w e r u s e r
c h a r g e s

. R e q u e s t s m u s t b e r

e c e i v e d p r i o r t o a n y u s e o f w a t e r t h a t m a y b e s u b j e c t t o r e d u c e d o r s p e c i a l c h a r

g e s , a n d p r i o r t o i n s t a l l a t i o n o f

a n y m e t e r

. A r e q u e s t f o r c r e d i t m u s t i n c l u d e a m e t e r m a i n t e n a n c e p l a n a n d a m e c h a n i c a l p l a n s h o w i n g t h e p r o p o s e d m e t e r l o c a t i o n , a c c e s s
r o u t e t o t h e m e t e r

, t h e w a t e r s u p p l y o r s o u r

c e , t h e c o o l i n g o r o t h e r w a t e r

­ u s i n g e q u i p m e n t
, a n d t h e d i s c h a r

g e p o i n t

. R e d u c e d c h a r

g e s o r
c r e d i t s w i l l n o t b e g i v e n f o r a n y p e r i o d p r i o r t o t h e d a t e o f a p p r o v a l

. N o r e d u c e d s e w e r c h a r

g e m a y b e g i v e n u n t i l t h e D i r

e c t o r h a s a p p r

o v e d t h e r e q u e s t

.
1

. W a t e r n o t s u b

j e c t t o s e w e r u s e r c h a r

g e s

. T h e D i r e c t o r m a y e x e m p t f r

o m s e w e r u s e r c h a r

g e s w a t e r t h a t i s u s e d i n a m a n u f a c t u r e d p r o d u c t s u c h a s i c e , c a n n e d g o o d s o r b e v e r a g e s ; o r f o r w a t e r l o s t b y e v a p o r

a t i o n o r u s e d i n i r r i g a t i o n

. T

o c a l c u l a t e t h e q u a n t i t y o f

e x e m p t w a t e r

, a m e t e r m u s t b e i n s t a l l e d t o t h e s a t i s f a c t i o n o f t h e D i r e c t o r

.
2

. C l e a n w a t e r d i s c h a r

g e s

. W h e n a n o n
­ r

e s i d e n t i a l r a t e p a y e r r e q u e s t s a p p r o v a l f o r a t e m p o r

a r y o r p e r m a n e n t d i s c h a r

g e o f c l e a n
w a t e r t o a p u b l i c s e w e r s y s t e m , t h e d i s c h a r g e r m u s t i n s t a l l m e t e r

s o r p r o v i d e o t h e r v e r i f i a b l e a n d q u a n t i f i a b l e i n f o r m a t i o n u s i n g a
m e t h o d a p p r o v e d b y t h e D i r

e c t o r t o d e t e r m i n e t h e v o l u m e o f w a t e r t o b e d i s c h a r g e d

. W a t e r s u c h a s t h a t u s e d f o r r e f r i g e r a t i n g o r
c o o l i n g p u r p o s e s o r c o n d e n s e d f r

o m s t e a m a n d t h a t h a s b e e n p u t t o n o o t h e r u s e m a y b e d i s c h a r g e d i n t o t h e s a n i t a r

y s y s t e m a s c l e a n
w a t e r

.

a

. C l e a n w a t e r t o s t o r m s e w e r o r o t h e r p u b l i c d r a i n a g e s y s t e m s

. C h a r

g e s a r e c a l c u l a t e d b a s e d o n t h e c l e a n w a t e r d i s c h a r g e
­ t o
s t o r m r a t e m u l t i p l i e d b y t h e m e a s u r

e d o r e s t i m a t e d v o l u m e o f w a t e r d i s c h a r g e d t o a p u b l i c s t o r m s e w e r o r o t h e r p u b l i c d r a i n a g e
s y s t e m

.
b

. C l e a n w a t e r t o s a n i t a r

y o r c o m b i n e d s e w e r s y s t e m s

. C h a r g e s a r e t h e s a m e f o r o t h e r s e w e r u s e s a n d a r e c a l c u l a t e d b a s e d

o n t h e n o n
­ r e s i d e n t i a l s e w e r s e r

v i c e s r a t e m u l t i p l i e d b y t h e m e a s u r

e d o r e s t i m a t e d v o l u m e o f w a t e r d i s c h a r g e d t o a p u b l i c s a n i t a r

y
o r c o m b i n e d s e w e r

.
3

. C o n d i t i o n s f o r r

e v o k i n g r e d u c e d c h a r g e s o r c r e d i t s

. T h e f o l l o w i n g c o n d i t i o n s w i l l n u l l i f y d i s c o u n t s a n d r e i n s t a t e f u l l u s e r c h a r

g e s
u n t i l s u c h t i m e a s t h e o w n e r o r p e r s o n i n c h a r g e o f t h e p r e m i s e s f o r m a l l y n o t i f i e s t h e D i r

e c t o r t h a t t h e s i t u a t i o n h a s b e e n r

e c t i f i e d

.

a

. D e f e c t i v e d i s c h a r

g e m e t e r s

. D u r i n g t h e p e r i o d o f t h e m e t e r ’ s n o n
­ o p e r a t i o n a n d p e n d i n g t h e p r

o p e r r e p a i r a n d r e i n s t a l l a t i o n o f t h e m e t e r , t h e a c c o u n t m a y b e b i l l e d f o r t h e f u l l a m o u n t o f w a t e r p a s s i n g t h r o u g h t h e s u p p l y m e t e r a n d u p t o t h r e e t i m e s t h e
s u p p l y f l o w p r

o v i d e d b y n o n
­ C i t y r

e s o u r c e s

. A t n o t i m e m a y a r

e d u c e d c h a r g e o r c r e d i t b e a l l o w e d r

e t r o a c t i v e l y , o r f o r a p e r i o d i n
w h i c h t h e m e t e r i s d e f e c t i v e

.
b

. F a i l u r e t o r e p o r t

. F a i l u r e t o r e p o r t o n q u a n t i t i e s o f w a t e r s u b

j e c t t o r e d u c e d c h a r g e o r c r e d i t f o r 2 c o n s e c u t i v e m o n t h s i s a
v i o l a t i o n o f t h i s C h a p t e r

. U s e r c h a r g e s m u s t b e p a i d o n t h e f u l l a m o u n t o f w a t e r p a s s i n g t h r o u g h t h e s u p p l y m e t e r a n d u p t o t h r e e t i m e s t h e s u p p l y f l o w p r

o v i d e d b y n o n
­ C i t y r

e s o u r c e s d u r i n g t h e s e 6 0 d a y s

. A t n o t i m e m a y a r e d u c e d c h a r g e o r c r e d i t b e a l l o w e d

r e t r o a c t i v e l y , o r f o r a p e r i o d i n w h i c h n o r e p o r t s w e r e s u b m i t t e d

.
F

. S t o r m w a t e r M a n a g e m e n t S e r

v i c e s

. R a t e p a y e r

s w h o r e c e i v e a d i r e c t o r i n d i r e c t b e n e f i t f r o m C i t y s t o r m w a t e r m a n a g e m e n t s e r v i c e s a r e
s u b j e c t t o t h e u s e r c h a r

g e

. T h e r a t e p a y e r i d e n t i f i e d o n t h e C i t y u t i l i t y b i l l i n g a c c o u n t i s a s s u m e d t o b e t h e u s e r o f s t o r m w a t e r m a n a g e m e n t

s e r v i c e s a n d r e s p o n s i b l e f o r t h e u s e r c h a r

g e

. I f t h e p r o p e r t y i s n o t s u b j e c t t o o t h e r C i t y u t i l i t y c h a r

g e s , t h e D i r e c t o r w i l l d e t e r m i n e t h e
r a t e p a y e r r e s p o n s i b l e f o r t h e u s e r c h a r

g e

.
1

. B i l l i n g C o m p o n e n t s

. T h e u s e r c h a r g e c o n s i s t s o f t h e f o l l o w i n g c o m p o n e n t s :

a

. S t o r m w a t e r O n
­ S i t e

. T h e u s e r r a t e f o r t h e o n
­ s i t e c o m p o n e n t i s 3 5 p e r c e n t o f t h e s t o r m w a t e r m a n a g e m e n t s e r v i c e s r a t e

.
b

. S t o r m w a t e r O f

f

­ S i t e

. T h e u s e r r

a t e f o r t h e o f f

­ s i t e c o m p o n e n t i s 6 5 p e r

c e n t o f t h e s t o r m w a t e r m a n a g e m e n t s e r v i c e s r a t e

.
2

. B a s i s f o r c h a r

g e

. U s e r c h a r

g e s a r e c a l c u l a t e d b a s e d o n t h e u s e r ’ s p r o p o r t i o n a t e s h a r e o f C i t y s t o r m w a t e r m a n a g e m e n t s e r v i c e s4 / 1 3 / 2 0 1 6 1 7

. 3 6

. 0 5 0 U s e r C h a r g e s

. | C h a p t e r 1 7

. 3 6 S e w e r U s e r C h a r g e s | T h e C i t y o f P o r t l a n d
, O r e g o n

h t t p s : / / w w w

. p o r t l a n d o r e g o n

. g o

v / c i t y c o d e / a r t i c l e / 4 3 5 1 5 8 3 / 3 a s e s t i m a t e d b y t h e a m o u n t o f i m p e r v i o u s a r e a o n t h e u s e r ’ s s i t e

. U n l e s s t h e s i t e h a s b e e n m e a s u r e d t o t h e s a t i s f a c t i o n o f t h e D i r e c t o r , i m p e r v i o u s a r e a i s a s s u m e d t o b e t h e a v e r

a g e i m p e r v i o u s a r e a f o r t h e u s e r ’ s c l a s s

.
3

. D w e l l i n g u n i t s

. T h e C i t y u s e s t h e f o l l o w i n g c l a s s a v e r a g e s o f i m p e r

v i o u s a r e a s f o r c a l c u l a t i n g u s e r c h a r

g e s f o r d w e l l i n g u n i t s l o c a t e d o n a s i n g l e p r

o p e r t y o r t a x l o t :

a

. O n e a n d T

w o D w e l l i n g U n i t s
­ 2
, 4 0 0 s q u a r

e f e e t

b

. T h r e e D w e l l i n g U n i t s
­ 3
, 0 0 0 s q u a r

e f e e t

c

. F o u r D w e l l i n g U n i t s
­ 4
, 0 0 0 s q u a r e f e e t

4

. P r o p e r t i e s o t h e r t h a n d w e l l i n g u n i t s o r w i t h f i v e o r m o r e d w e l l i n g u n i t s

. T h e C i t y c a l c u l a t e s t h e r a t e p a y e r ’ s u s e o f s t o r m w a t e r d r a i n a g e s y s t e m s e r

v i c e s b a s e d o n t h e a m o u n t o f i m p e r v i o u s a r e a o n t h e s i t e

.
5

. C l e a n R i v e r R e w a r

d s

. C l e a n R i v e r R e w a r

d s d i s c o u n t s a r

e o f f e r e d t o i n c r e a s e r a t e p a y e r c o n t r

o l o v e r s t o r m w a t e r m a n a g e m e n t

c h a r g e s a n d t o a d v a n c e C i t y e n v i r

o n m e n t a l g o a l s

. T h e p r

o g r a m p r o v i d e s e c o n o m i c i n c e n t i v e s , t e c h n i c a l a s s i s t a n c e , a n d

e n v i r o n m e n t a l e d u c a t i o n t o r

a t e p a y e r s w h o c o n t r o l a n d m a n a g e t h e q u a l i t y a n d q u a n t i t y o f s t o r m w a t e r r u n o f f o n t h e i r p r i v a t e p r

o p e r t y

. G

. P o r t l a n d H a r b o r S u p e r

f u n d C h a r g e

. T h e C i t y c a l c u l a t e s a n d c o l l e c t s u s e r c h a r g e s f o r t h e P o r

t l a n d H a r b o r S u p e r

f u n d P r o g r a m

. I f t h e p r o p e r t y i s n o t s u b j e c t t o o t h e r C i t y u t i l i t y c h a r

g e s , t h e D i r e c t o r d e t e r m i n e s t h e r

a t e p a y e r r e s p o n s i b l e f o r t h e P o r

t l a n d H a r b o r S u p e r

f u n d

c h a r g e

. T h i s u s e r c h a r

g e a p p e a r s a s a l i n e i t e m o n t h e C i t y u t i l i t y b i l l
, a n d i s t h e s u m o f t h e f o l l o w i n g t w o r a t e c a l c u l a t i o n s :

1

. S a n i t a r y V o l u m e

. T h i s p o r

t i o n o f t h e c h a r

g e i s t h e s a n i t a r

y s e w e r s e r v i c e u s e r c h a r

g e m u l t i p l i e d b y t h e P o r

t l a n d H a r b o r S u p e r

f u n d S a n i t a r y V o l u m e r a t e

.
2

. I m p e r v i o u s A r e a

. T h i s p o r t i o n o f t h e c h a r

g e i s t h e s t o r m w a t e r m a n a g e m e n t s e r v i c e s c h a r g e m u l t i p l i e d b y t h e P o r

t l a n d H a r b o r S u p e r f u n d I m p e r v i o u s A r e a r a t e

.

# E XHIBIT 

# 4INTRODUCEDBYCalendarNo.CommissionerDickBogleORDINANCENo.159085jNOTEDBYTHECOMMISSIONERlHECOMMISSIONERSVOTEDASFOLLOWS:TitleAffairsFinanceandAdministrationYeasNaysAnOrdinanceamendingTitle17,ChaptersBOGLE(/17.36and17.34oftheCodeoftheCitybyinsertinganewChapterLINDBERG17.36,tomakehousekeepingchangesandtoclarifythelanguageoftheSCHWAB-/Code.STRACHANI;OCT21986CLARKIT""-,';!.'-91986..,..Ivr"JH.'INVFOUR·FIFTHSCALENDARBOGLELINDBERGSCHWABSTRACHANCLARKFilecLd_..:...:S__JEWELLANSINGAuditoroftheCRYOFPORTLANDDeputySafetyUtilitiesIl-e--:1/7-'Works....­//BUREAUBureau:EnvironmentalServicesPreparedBy:O'Jte:RonHouston9/23/86BudgetImpactReview:oCompletedoNotrequiredBureau Head:JohnLangb.,JrCALENDARConsentIRegularNOTEDBYCityAttorneyCityAuditorCityEngineerEXCERPT

# Pages Intentionally Omitted

## 159{)8~

17.36.0 1 0 Sewer User Service 1 1

.

### ~:.**.** 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 thf 2 

### City. Except c: \s 

### 1 97 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 • 

### 1 Except 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 er 1 d 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

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### i-s- in-

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. 7! 

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### B.**Char~ges** 

### fot"**stot"TtlWatet ~**  

### rnanagement and control. Except as 

### otherwise provided tJ 

### y t h 

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### i t 1 

### e, t t1 e 

### t"' at 

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### 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 

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### y • 1 • 

## rn 1 d 

### we 1 1 i n 

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### 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~** 

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### Q Q
-:::; h i"\ l 1 b F· C
, ·,1 l C:: IJ .l E \ t**C~** d .1. 1**~500 ,:~'**  

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### 7, 

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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:; 

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.,**~.;,** 

### 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

# E XHIBIT 

# 5

# 2015-16 Adopted Budget EXCERPT

# Page s Intentionally Omitted

### 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)

### 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%

### 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.)

### 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

### 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

### 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.

### 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

# Page s Intentionally Omitted

### 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 op

erating divisions as allocated support service expense.

### 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, Ore

gon) 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.

### 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.

# E XHIB IT 

# 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 Ear ly 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 N on -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 FACIL ITIES .................................................................................... 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 AIRCRAF T .......................................................................................... 18

7. GROUND RUN

- UP ENCLOSURE ................................................................................. 19

8. PARKING/STORAGE OF AIRCRAFT; GROUND SUPP ORT EQUIPMENT; LIMITATIONS ............................................................................................................................. 19

9. REMOVAL OF AIRCRAFT ............................................................................................ 19

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## 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 Sig nage ................................................................................ 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 Oth er 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 ARRIVA LS FACILITY (IAF) ........................................................ 27

16. EMPLOYEE PARKING .................................................................................................. 27

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## 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 A ircraft 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

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## 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 P assenger Facility Charges ................................................................................ 45 21.2 Miscellaneous Charge to Passengers ................................................................. 45

22. REVENUE SHARING ..................................................................................................... 45 22.1 Dis tribution Formula .......................................................................................... 45 22.2 Discontinuation of Revenue Sharing ................................................................. 46 22.3 Additional Revenue Sharing .............................................................................. 46

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## 23. OPERATING AND MAINTENANCE EXPENSE REBATE PROGRAM .................... 46

24. AIRPORT CAPITAL IMPR OVEMENTS ....................................................................... 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 Eme rgency/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 Rents 51

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 PROPERTIE S .......................................... 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

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## 26.8 Damage From Airline Negligence ..................................................................... 54

27. INDEMNIFICATION AND INSURANCE ..................................................................... 54 27.1 Indemnification .................................................................................................. 54 27.2 Air line 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 Act ions that Impact Coverage ............................................................................ 58 27.5 Airline's Risk ...................................................................................................... 58 27.6 Waiver of Subrogation ....................................................................................... 58

28. SECURITY DEPOSIT ...................................................................................................... 58 28.1 Sec urity 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

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## 30.2 Affirmative Action ............................................................................................. 63 30.3 Contractor Compliance ...................................................................................... 63 30.4 Default in Compliance ....................................................................................... 64

31. DEFAULT AND TERMINAT ION .................................................................................. 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 AIRLIN E 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 AGRE EMENTS .......................... 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

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## 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 Cal culation 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 Me diation ........................................................................................................... 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

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## 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

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## 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

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## 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 Revenue s .................................................................................................................................. 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

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## 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

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## 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

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## 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. T he 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 appro ved 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 part ies, 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 condition s. 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), und er 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 o f 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. A n 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 Oper ating 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 gr eater authority than any other a irline 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.

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## " 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

mu st 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 deliver y of baggage fro m the aircraft into the Terminal, and is shown, as currently configured, on Exhibit G

.

" Baggage Consortium " means a consortium formed by a irlines 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 th ose areas of the Terminal and those devices used to sort out-bound baggage for delivery to departing aircraft.

" Baggage Make

- up Overflow Are as " 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 purpose s 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 Prog ram " or " CIP " means the Port ' s Capital Improvement Program for capital projects opened between July 1, 2010, and June 30, 2025, funded through th e Airline Cost Centers and the A irline allocated portions of th e 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.

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## " 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 as sociated 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 eq uipment 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.

" Concessionai re " means a ny 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 transpor t ation of passengers, guests and employees based at the Airport in a ccordance with Port O rdinances, 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 service s, 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

- Sig natory 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 Contra cting 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.

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## " 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 administrativ e 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 pag e 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 thei r 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, s tate of Oregon and local laws, regulations, rules, permit terms, administrative orders issued pursuant to federal and state laws
, B est 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, 202 5, the date on which the Signatory Agreement expires.

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## " 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 designat ed 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 vio lation 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 R evenues 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 Safe ty, 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.

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## " 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

o ther 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 w hich 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 th ose 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 Airpo rt 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.

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## " 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 an d 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 Po rt 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. 393 B, 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. 375 B, 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 allocat ed. The Port Cost Center shall include a portion of the Indirect Cost Centers, as specified on Exhibit E

.

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## " 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, loung e 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

concou rse areas, including: (a) all concourse corridors and connectors; (b) concession areas; (c) ticket lo bby; 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 thi s 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 Landing s " 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 f rom 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 perform ance 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.

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## " 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 Dat e, 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 ai r 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 P rocess 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 Termin al 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 Re nts " 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 with in 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 i ncludes, 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, excludin g 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 discr etion, may elect to reject space changes that result in uneconomic remnants of space.

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# Pages Intentionally Omitted

## 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 b ridge 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 fir st 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 in creased 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, N INETEEN 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 ($7,6 32.00), 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 Adj ustments 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 Y ear 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 Mont h- 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 Bag gage 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 Bag gage Make -up Overflow Area for Airline. The rate per bag shall be equal to the cost of all Bag gage Make -up Areas before any reduction for Revenue Sharing
, divided by the number of out

- bound bags processed by the baggage sorting sys tem. 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 follow s: (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 T erm 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 calcul ated 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 sh all 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 Ai r 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 c alculated 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 acc ordance 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 a nd 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 s hall be calculated assuming six (6) hourly uses daily. There is no maximum charge for Common Use Tic ket 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 r ates 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 o f 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 Yea r 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 t he 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 p ercent (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 Pa ssenger 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 a nd 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 f or 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 calcul ation 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 c osts 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 th e 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 (collec tively, " 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 pa y 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 n on- 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 (1 st 

## ) day of each calendar month. For ease of payment and administration, the Airline and the Port have agreed to the pa yment 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), employe e 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 acc ording 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 Hold room, 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 n ot 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 o f 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 th e 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 provi de 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 Suppli ed by the Port Not later than the twentieth (20 th 

## ) 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 Pass engers 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 th e 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 con tinues 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 dat a 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 o f 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 acc uracy 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 Air line ' 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 HUNDR ED 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 a ccounting 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 Agreeme nt. 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 s ystems 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 elec trical 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 su pport 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 representati ves 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 DOLL ARS 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 Po rt. 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) Air line 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 Airlin e' 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 accordin g 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 Requireme nt 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 K iosk fees; (g) Aircraft Apron f ees; (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 minim izes new construction. Accordingly, to encourage the efficient use of space, the Terminal Rent s 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 Pas senger Airlines, unless its Rent is computed per Section 18.11.2 ; the portion of Non

- Preferential Ground Load Holdrooms used by Signatory Passenger Airlines; Comm on 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 No n- 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 (2 5 %).
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 Fac ility 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 p ortion of the International Arrival Facility used by Signatory Passenger Airlines, unless its Rent is computed per Section 18.11.2 ; the portion of N on

- Preferential Ground Load Holdrooms used by Signatory Passenger Airlines; Comm on 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

- Pre ferential 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 u sed 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 valu es 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-Signator y 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 mul tiplying 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 e ach 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 Ope rating 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 co nformance with the methods described in Section 19 . Within thirty (30) calendar days after the forwarding of the proposed schedule for Rent, the Po rt 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 addition al 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
Withi n 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 th e 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 P ort 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 an d 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 Continu ation 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 S ource 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 Agreeme nt 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, mai ntenance, 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 k ept 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 veri fy 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 ne cessary 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 an d/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 statemen ts 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 P ort 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, howev er, in response to the Signatory Airlines ' request, the Port has agreed to share SIXTY MILLION DOLLARS AND NO CENTS ($ 6 0,000,000.00) of Port Cost Center Revenue with the Signatory Airlines. The Revenue Sharing will be divided into annual installments of S IX 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
Reve nue 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 fall ing 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 expire s, 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 S ection 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 requi red 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 b e reduced as calculated below.

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## 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 IMPR OVEMENTS 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 Im provements 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 fund ing 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

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# 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

# E XHIBIT 

# 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 

# EXCERPTU nited 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

R oughly 3,3 00 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. C ommercial service airports

— if they choose and subject to federal approval

— are also authorized to collec t local PFCs from passengers, which are also used to fund capital development projects.
G AO 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 201 5 through 201 9
, (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 repo rts on airports’ development plans
, assessed changes included in the President’s fiscal year 201 6 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)

, **•** f ederal Airport Improvement Program (AIP) grants ($3. 3 billion)
,
**•** l ocal passenger facility charges (PFC) ($1.8 billion)

, **•** ai rport sponsor or owner capital contributions ($644 million) , an d

**•** s tate grants ($477 million)

. L ar ger airports (large and medium hubs) obtained more than half of their capital development funding from a irport

- generated net income
, while smaller airports (small and non hubs and general aviation airports) relied on AIP gr ants for 69 percent of their funding. Airports’ p lanned capital development costs for fiscal years 201 5 through 201 9 are estimated at $13 billion annually (in 2013 dollars)

. L arger 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 m illion). Airports’ planned capital development exceeds past funding levels, but a irports 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

. Th is inflation

- adjusted amount of funding

— $10. 3 billion per year

— would still fall short of the $13 billion in planned capital development costs b y $ 2.7 billion per year. Airports have several options for trying to align capital funding and the costs of planned development, including prioritiz ing 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 a irport financial consulting firms
w ith 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 indi cate s 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, wh ich 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, the ir AIP decreases. View GAO

- 15

- 306 . For more information, contact Gerald L. Dillingham , Ph.D., at (202) 512

- 2834 or dillinghamg@gao.gov

.

# Page s Intentionally OmittedP age 30 GAO

- 15

- 306 Airport Finance 

### increase from its 2013

- 2017 estimate of $4.2 billion. 36 

### A n 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 non

eligible development. Although this could affect the proportion of AIP

eligible 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 t hose same costs to FAA, our estimate of total planned

development costs is not affected.

After ad justing 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 nat ional 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 gener al rate of economy
- wide inflation. 37

36 As 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,

37 Specifically, 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 ProjectsPage 31 GAO

- 15

- 306 Airport Finance 

### the inflation

- adjusted average annual funding level is still $2.7 bi llion 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 fund ing 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 c osts for larger airports is $1.6 billion and for smaller airports is $1.1 billion;

38 Average annual funding is in fiscal year 2013 dollars and planned development is in
ca lendar year 2013 dollars; the difference between these dollar bases likely has a minimal impact on the comparison of average annual funding and planned development.P age 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 fundi ng 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. Congre ss 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 abo ut 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 t erminal

- 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 resp ondents (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.

39 Larger 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.P age 33 GAO

- 15

- 306 Airport Finance 

### security

- related infrastructure projects including perimet er 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 f inancial

- 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 agi ng 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
un funded 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

- cons ulting 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 gro wth 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 airportsP age 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 ACI

NA officials attributed some of the increase in ACI

- NA ’ s estimate of non

AIP

- eligible planned projects to efforts by airports to add revenue

generating infrastructure. We have found in recent prior work that in addition to t raditional 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

40 For information on factors that may support airport

- centric development (i.e., dev elopment 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 Inte rnational Airport owns a Grand Hyatt hotel inside Terminal D, Denver International Airport is building an attached Westin Hotel, and Hartsfield

Jackson 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 time

sensitiv e or perishable items.

GAO

- 13

- 261 (Washington, D.C.: Mar. 28, 2013).

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# E XHIBIT 

# 8DOCSPNW1:57365.3 42936-5 BJ1/BJ1 

# T HE 

# P ORT OF 

# P ORTLAND 

# (O REGON 

# )

_________

O RDINANCE 

# N O 

# . 155 (E NACTED 

## N OVEMBER 

## 10, 1971, AS AMENDED AND RESTATED PURSUANT TO 

## O RDINANCE 

## N O 

## . 368-B WHICH WAS ENACTED 

## O CTOBER 

## 13, 1993, O RDINANCE 

## N O 

## . 375-B WHICH WAS ENACTED 

## A UGUST 

## 10, 1994
AND 

## O RDINANCE 

## N O



## . 393-B WHICH WAS ENACTED 

## F EBRUARY 

## 10, 1999)

A UTHORIZING



## 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 a nd Notes; Payment Thereof; Pledges and Assignments to such Payment; Series Ordinances .......................................... 6 SECTION 4. Authorization of First Se ries 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 a nd 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 C ontract with Bondholders; Enforcement of Same............................................................................................................... 59 SECTION 23. Events of Default ........................................................................................... 59 SECTION 24. Notice to Bondholders and Ot hers 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 Headi ngs; Table of Contents............................................................. 68 SECTION 36. Publication of Summary and Effectiveness of this Ordinance ...................... 68DOCSPNW1:57365.3 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 POR TLAND 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 DERI VED FROM THE PORTLAND INTER-NATIONAL AIRPORT AND THE USE AND APPLICATION OF SUCH REVENUES; PLEDGING S UCH REVENUES TO THE PAYMENT OF THE PRINCIPAL AND INTEREST ON SUCH BONDS AND LIMITING SUCH P AYMENT SOLELY TO SA ID 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 th e 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 empowe red. Under such laws, for the pu rpose of carrying into effect all or any of the powers granted to the Port, th e Port may from time to time issue and sell revenue bonds without the necessity of the vote rs of the Port authorizing the same, which revenue bonds shall not in any ma nner or to any extent be a gene ral obligation of the Port nor a charge upon the tax revenues of the Port nor a charge upon any ot her 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 w ithin the boundaries of the Port and now known and designated as th e “Portland International Airpor t”. To promote the aviation, shipping, maritime, commercial and industrial intere sts of the Port and fo r 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 desi rable that certain additions, expansions and improvements be made to said airp ort 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 a nd aids incident to the development, protection and operation of the air transport facilities and other facilities of the Port. It is also necessary, advi sable and desirable that the Port issue its revenue bonds to provide the moneys to pay the costs of such additions , expansions and improve ments, and to limit the charge of such bonds and the payment of the prin cipal 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 sh all, for all pur poses of this Ordinance and of any ordinance, resolution, certificate or other instrument supplemental heretoDOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 2 and of any opinion or instrum ent or document he rein or therein menti oned, 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 here in defined and vice versa. The term:
(a) “Accountant” means the individual accountant or firm of accountants appointed pursuant to paragr aph J of Section 17 hereof.
(b) “Additional Bonds” means any additional Bonds authorized and issued pursuant to Section 4 here of at any time outstanding.
(c) “Airport” means each and all of the following as de fined 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 Por tland International Airport: lands or water areas, rights or interests in la nd, rights-of-way, approaches, c ontract 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, mi xed or otherwise), now or hereafter constructed or acquired, of or belonging or pertai ning to said Airport; (ii) each and every and all and singular, the properties a nd facilities belonging to or pertaining to Portland International Airport and constructed or acquired fro m 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 reimbursa ble, from the Airport Fund or from a fund maintained therefrom, or construc ted or acquired from m oneys in the Airport Fund or from moneys in any other fund main tained 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, in clude: (A) properties sold, leased or otherwise disposed of or transferred pursuant to the provisions of paragrap h 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 i ndividual 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 Nove mber 1, 1971, by and between the Port andDOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 3 certain certificated air carri ers and, after June 30, 1986, mean s 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 secti on 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 Or dinance, 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 Secti on 5 hereof at any time outstanding and bond anticipation not es issued pursuant to Sec tion 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 f und of the Port created pursuant to Section 14 hereof, to be desi gnated as provided in that sec tion as “The Port of Portland Airport Revenue Bond Fund”.
(k) “Commercial Airport” means any air port, 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 tr ansporting 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 fo r 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 fis cal year for the Port as established from time to time by the Port, being on the date of effec tiveness of this Ordi nance the period from July 1 in any year to and in cluding the following June 30.DOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 4 (p) “General A viation Airport” means an airport known in the air transport industry as a “general aviation airport”, be ing an airport, the major portion of the revenues derived from which is not realized from the operations of aircraft operated by certificated air carriers (excep t possibly air taxi or air tour operati ons) and from the supplying of goods and services to the people ut ilizing 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 operati ons not normally part of a public utility business (except possibly air t our or air taxi operations).
(q) “Investment Securities” means any i nvestments 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 pe riod the aggregate of the Revenues actually paid into the Airport Fund during such past period, a nd for any future period the aggregate of the Revenues estimated to be pa id 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 actu ally 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 dur ing 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 provi ding for the issuance of a se ries of Bonds hereunder.
(t) “Outstanding” when used with re spect 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 B ond 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, fo r 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 in come, receipts and moneys derived by the Port from its ownership or operati on and management of the Airport or the furnishing and supplying of the services, faci lities and commodities thereof, and without limiting the generality of the foregoing, shall in clude (1) all income, receipts and moneys derived from the rates, rental s, fees and charges fixed, impos ed and collected by the Port for the use and services of the Airport, or otherwise derived from or arising through theDOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 5 ownership, operation and m anagement of the Ai rport 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 Ai rport; (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 “Revenue s” 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 granto r or donor to the constructi on of capital improvements, except to the extent that any such moneys shal l be received as paymen ts 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 fede ral law to expenditure on specific projects or activities and/or on debt service and financing costs rela ted to specific projects or activities and (2) in no event shall the te rm “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 or dinance 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 Instal lment” means the principal amount of term bonds subject to mandatory redemp tion on an annual or a semi-annual date, as provided by Series Ordinance.
(z) “Trustee” means the corporation appoin ted pursuant to Se ctions 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 govern mental unit, including the Port, is defined or referred to, such definition or reference shall be deemed to in clude 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 othe rwise, in this Ordinance words importing persons include firms, partnershi ps, 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 an y Supplemental Ordinance): (i) references to sections and other subdivisions, wh ether by number or letter or otherwise, are to the respective or corresponding sections and subdivisi ons of this Ordinance, as such sections or subdivisions may be amended from time to time; (ii) the terms “herein”, “hereunder”, “hereby”, “hereto”, “hereof’,

# Page s Intentionally OmittedDOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 28 (r) the paym ent and discharge of the princi pal of and interest and premium, if any, on any term or temporary constructi on 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 duri ng 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 f und of the Port, to be known and designated as “The Port of Portland Airport Revenue Fund” (h erein defined and refe rred to as the “Air port 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 Ai rport 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 th is section; and shall be withdraw n 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 (a s 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 co llected and, except as is specifically provided otherwise herein, shall be deposited in the Air port 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 paymen t 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 th e 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 Maintenanc e” shall include the following items:DOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 29 (a) costs and expenses of general adm inistration of the Port which are reasonably and properly allo cable to the Airport;
(b) costs of collecting the Revenues and from making any refunds therefrom lawfully due others;
(c) engineering, audit report s, legal and other overhe ad expenses directly related to the administrati on, operation, maintenance, a nd repair of the Airport;
(d) costs of salaries, wages and other co mpensation of officers and employees and payments to pension, retirement, h ealth and hospitalization funds and other insurance, including self-insurance for the foregoing;
(e) costs of routine repairs, replacements , renewals and alte rations occurring in the usual course of business;
(f) taxes, assessments and other government al 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 c onnection with the ownership or operation of the Airport or otherwise imposed on the Ai rport 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 rental s of equipment or other property;
(i) contractual services and professional services, including but not limited to, legal, engineering, archit ectural, planning, financial and airport consultants;
(j) costs of fidelity bonds, or a properly a llocable 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 Ordina nce, 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 e xpenses of the Accountant and the Airport Consultant; legal fees and e xpenses; and costs of recording, mailing and publication;
(l) costs of lease payments due under cap ital leases for items customarily used in the operation or maintenance of airport facilities or equipment; and;
(m) all other costs and expenses of oper ating, maintaining and repairing the Airport arising in the routine a nd normal course of business;DOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 30 PROVI DED, HOWEVER, that the term “Costs of Operation and Maintenance” shall not include: (1) any allowance fo r depreciation or any amounts for capital replacements, renewals, repairs and maintenance not recurr ing annually (or at shorter intervals) or reserves therefor; (2) costs of extensions, enlargements, betterments and improvements or reserves therefor, other than cost of pre liminary planning; (3) reserves for operation, maintenance and repairs occurring in the normal course of business; (4) payment (including redemption) of bonds or other ev idences 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 (d efined 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 “G eneral 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 Ai rport Fund (and not then cr edited to any account therein) to the General Account. The moneys cr edited to the General Account may be used and applied by the Port first, to the SLB Fund as pr ovided 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 co mplete payment of the Costs of Construction of properties included or to be included in the Airport; (2) to co mplete 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 pr operties destroyed or damaged; (4) to pay the principal of and interest and premium, if any, on any subordinate or j unior 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 th e delivery of and payment for the first Bonds issued hereunder, by the Port fo r the principal of and interest and premium, if any, on general obligation bonds of the Port issu ed, after the delivery of and pa yment 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 hereunde r; 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 deri ved therefrom, and other than the proceeds of general obliga tion 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 Co sts of Construction of additions, expansions, improvements and betterments to the Airport, in cluding the acquisition of land in anticipation of additions, expansions, improvements and bette rments 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 th e Port, including without limitation General Aviation Airports; and (8) to any other lawful use or purpose necessary toDOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 31 carry out this Ordinance, including the m aking 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 Ai rport 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 su ch moneys and the Re venues thereafter derived shall be applied, paid and credited in accordance with sa id provisions to the satisfaction in full of a credit or payment having a higher prio rity before being applied, paid or credited to a credit or payment having a lowe r priority, including by the making up of any deficiencies in the amounts required to satisfy a credit or payment ha ving a higher priority before being applied, paid or credited to an item having a lower prio rity. Without limiting the generality of the provisions of the preceding sentence,

A. In the event that on the first bu siness 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 paymen ts required by subparagraphs 1 through 4 above of this section, the amount of the insufficien ces 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 a nd 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; seco nd, from any moneys then credited to the Capital Improvemen t 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 th e Costs of Operation and Maintenance and also to make the payments to the Truste e 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 cr edited to the General Account; second, from any moneys then credited to th e Capital Improvement Account; and third, from the moneys then credited to the Ma jor 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 Majo r Maintenance Reserve Account shall be made up, first from any moneys then cred ited 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, th e amount of such insufficiency in the credit to the Capital Improvement Acc ount shall be made up from any moneys then credited to the General Account; and
B. If in any month the moneys th en 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 insuffi cient to make the payment to be made therefrom or are less than the amount then requi red to be on deposit therein, such insufficiencies shall be made up in the fo llowing order of priorities: (i) if theDOCSPNW1:57365.3 42936-5 BJ1/BJ1 

## 32 moneys are insufficient to m ake 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 De bt Service Reserve Account th erein, the amount of such insufficiency shall be made up first, from the moneys then credited to the General Account; second, from moneys then cr edited to the Capital Improvement Account; third, from the moneys then cred ited to the Major Maintenance Reserve Account; and fourth, from any moneys then in the Airport Fund and not then credited to an account ther ein; and (iii) if the mone ys 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 m oneys then credited to the Capital Improvement Account; and third, from any moneys then in th e Airport Fund and not then credited to an account therein; and (iv) if the moneys on credit to the Capital Improvement Account are insufficien t 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 reasonabl e 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 ma y 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 inve stment 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 provide d 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, Ma jor 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 Por tland Airport Revenue Bond Fund” (h erein defined and referred to as the “Bond Fund”). The Port, in the Series Ordinance providing for the issuance of the first

# Page s Intentionally Omitted

# E XHIBIT 

# 9

# Innovative Finance and Alternative Sources

of Revenue for Airports AIRPORT COOPERATIVE RESEARCH PROGRAM 

# ACRP

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, O rlando 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 **S UBJECT**  **A REAS**  Aviation and Planning and Administration 

# Innovative Finance and Alternative Sources of Revenue for Airports

A Synthesis of Airport Practice

**C ONSULTANT**  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, andinternational 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 andoperate 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 fromairport operating agencies, other stakeholders, and relevant industry organizations such as the Airports Council International–NorthAmerica (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 linksto 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 andselecting 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 otherinterested 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

Printed in the United States of AmericaThe 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 in1863, 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 programsaimed 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 andadvising 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 in1863, 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 programsaimed 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 andadvising 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 ofit 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 CooperativeResearch 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 onthe 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 informairport 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 oper ators 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 premiumparking 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 allor 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 andmaintenance 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, capitalinvestment 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. Thisintroductory chapter describes the purpose of the report, presents the methodology used to develop the report, providesgeneral background information, and outlines the organization of the report.

**PURPOSE OF REPORT**


### This synthesis topic was identified by a 10-member panel ofindustry experts charged with overseeing syntheses of information related to airport problems and was initiated out of concernabout 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, includingpassenger 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 considerinnovative 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 mechanismsor 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 ideasexplored 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 informationon 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 alsobeen 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 maintopic 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 entitysuch 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 theirenabling 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 airportimprovements 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 airportfinancial 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 charterthat establishes the airport operator’s organizational structure, responsibilities, and powers. The authorizing legislation may specify facilities that the airport operator isresponsible 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 beincluded 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 thebonds 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 toapprove 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 offood, 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 periodfrom 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 fundinggap 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 ineligiblefor federal aid (e.g., revenue-producing parts of the terminal or parking garag es). 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 berequired 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 capitalimprovements, 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 8



### 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 authorizedto 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, orreducing 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 PFCincreases 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 airportin 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 othersdeemed 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 toreceive 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 a irport fee a nd ren tal 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 capitalcosts 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 chargesfor 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 bythe 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 commitmentswithout 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 thro ugh 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 sharefor 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 capitalimprovements 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 PFCrevenues 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.

# Page s Intentionally Omitted

# C ERTIFICATE OF 

# S ERVICE

## 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