Winners and Losers at PDX

Today the Port of Portland voted unanimously to enter into an Air Service Development Agreement with Delta Airlines. Under the terms of the agreement, the Port of Portland will pay Delta a service retention fee in the amount of $3.5 million in exchange for Delta’s commitment to continue daily nonstop service between PDX and Tokyo, Japan, from September 1, 2009 through May 31, 2010. This program is also available to any other air carrier willing to commence new daily nonstop service between PDX and Asia, so it creates an open-ended liability for the Port. If 7 other airlines sign up for the same deal, then presumably the Port would have to pay out $24.5 million, regardless of whether it actually has the money and regardless of whether PDX needs the service.

The FAA prohibits the use of airport revenues for such subsidies, so the money will come from the Port’s general fund. Port executive director Bill Wyatt told the Board that FAA considers the practice of taking money paid by other airlines and giving it to one airline as a subsidy to be a bad idea. He did not explain why doing the same thing with taxpayer funds is a good idea.

Coincidentally, the Port this morning also approved a property tax rate applicable to all properties within the Port’s jurisdiction (most of the tri-county region) that will raise more than $8.8 million for the Port’s general fund in the next fiscal year. So I think we know who is paying for this giveaway.

According to the Port, “This agreement has been developed on the premise that maintaining daily nonstop air service between PDX and Asia is critical to the economic vitality of the region and central to the Port’s mission.” Apparently, the concept of “too big to fail” applies to Wall Street investment firms, mismanaged auto companies, and (now) international air carriers servicing Portland.

My comment to the Board was that this was classic Portland behavior, namely, some group of politicians thinks that a pro sports franchise, or suburban commuter train, or aerial tram, or convention center hotel, or free transit service in downtown, or something else would be a wonderful idea that would generate lots of money and prestige for Portland, even though private investors are unwilling to put their own money at risk. So taxpayers are forced to become “silent partners” in these ventures, except that we don’t share in any of the profits, just the losses. I said that propping up money-losing ventures time after time is not the mark of a “sustainable economy.”

No one from the Port responded to any of my comments; and, of course, the motion passed unanimously (it would not have been on the agenda if the votes were not there in the first place).

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research center.