Opinion ID: 732422
Heading Depth: 2
Heading Rank: 3

Heading: Amortization and Imputed Interest Charges

Text: 36 The costs attributed to the apron and airfield cost centers include amortization of certain capital assets acquired while the residual fee system was in use. The Original Complainants maintain that they are being charged twice for these assets: all the money collected under the residual fee system went into a single pot and the money used to pay for these assets must have come out of that pot. Therefore, so the argument goes, to charge the airlines for amortization would be to charge them again for assets that were bought in the first place with money that they supplied. 37 The Secretary determined that these amortization charges were properly assessed against the airlines because their purchase was never included as a line-item cost during the era of the residual fee: 38 If a cost item was not included in the fee calculation during the period of residual fees, then the airport would not be getting paid twice if it included the cost in the rate base under the compensatory fee system. Thus, if the airport always treated the purchase as capital expenses which would be amortized over a period of time, then the cost of those assets was never included as an expense in the rate base under the residual fee system (except to the extent that part of the cost was amortized during that period), so that no airport user paid those costs. 39 Final Decision at 27. 40 The airlines challenge this determination, arguing that the cost of acquiring these assets was included as a line-item expense in the form of a debt service charge. The airlines explain that in order to ensure that the interests of bondholders were adequately protected, the City of Los Angeles passed an ordinance that required LAX to generate total revenues that exceeded total costs by an amount equal to 25 percent of the airport's annual debt service. The charge, which ensured that this requirement was met, was included as an expense to be covered when setting the landing fee at LAX each year. The debt service charge was thus collected annually but, the airlines maintain, never actually used by the airport to service its debt. The airlines contend that these funds must, therefore, have been used to pay for any capital assets the airport purchased. 41 The airlines have pointed to a stream of revenue that the airport apparently collected each year under the ancien regime, but they have not linked this revenue to any corresponding expenditure for capital assets. Although the airlines have certainly shown that they were charged to provide a level of comfort to bondholders, they have not shown that they were charged for the capital assets for which they are now being charged amortization. The Secretary rightly concluded, therefore, that they have failed to meet their burden of proof. 42 The airlines also claim that the inclusion of imputed interest charges for airfield and apron improvements, facilities, and equipment violates the Policy Statement adopted by the Department in satisfaction of the requirement that the Secretary publish guidelines to be used in determining ... whether [322 U.S.App.D.C. 329] any airport fee is reasonable. § 113(b)(2). The Policy Statement strongly implies that an airport may not include in its rate base imputed interest charges with respect to an asset for which the airlines provided the purchase money. § 2.3.1, 60 Fed.Reg. at 6916. 43 Again, however, the Secretary concluded that the airlines simply did not carry their burden of proof with respect to the source of the funds used to acquire capital assets: 44 [The complainants] are obliged to show that the funds used to purchase the assets came from aeronautical sources, which they have failed to do. In reviewing the record, we found no evidence that aeronautical sources provided the funds at issue. 45 Final Decision at 29. 46 We agree that the airlines failed to carry their burden of proof. The airlines do not even purport to identify any evidence in the record indicating that the funds used to purchase these assets were derived from aeronautical sources. 47