 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued February 14, 2019               Decided April 23, 2019

                         No. 18-1157

   AIR TRANSPORT ASSOCIATION OF AMERICA, INC., D/B/A
               AIRLINES FOR AMERICA,
                     PETITIONER

                              v.

            FEDERAL AVIATION ADMINISTRATION,
                      RESPONDENT

                     PORT OF PORTLAND,
                        INTERVENOR


     On Petition for Review of a Final Agency Decision
          of the Federal Aviation Administration


     M. Roy Goldberg argued the cause and filed the briefs for
petitioner. David A. Berg entered an appearance.

    Caroline D. Lopez, Attorney, U.S. Department of Justice,
argued the cause for respondent. With her on the brief were
Alisa B. Klein, Attorney, and Charles E. Enloe, Trial Attorney,
U.S. Department of Transportation.
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     Pablo O. Nuesch, Peter J. Hopkins, and Ian Whitlock were
on the brief for intervenor Port of Portland, Oregon in support
of respondent.

    W. Eric Pilsk and Thomas R. Devine were on the brief for
amicus curiae Airports Council International - North America
in support of respondent. Nicholas A. DiMascio entered an
appearance.

   Before: ROGERS and TATEL, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.

    Opinion for the Court by Circuit Judge ROGERS.

     ROGERS, Circuit Judge: Air Transport Association of
America, Inc., an association of airlines with members that use
the Portland International Airport, petitions for review of the
decision of the Federal Aviation Administration (“FAA”) that
payments of the Airport’s utility charges for off-site
stormwater drainage and Superfund remediation did not
constitute the impermissible diversion of airport revenues or
violate the Anti-Head Tax Act. The Association contends that
the decision is based on erroneous statutory interpretations, its
findings are not supported by substantial evidence, and it is
arbitrary and capricious. We deny the petition. Congress
expressly authorized the use of airport revenues for “operating
costs . . . of the airport” and the FAA has properly determined
that the general expenses of a utility are such “operating costs.”

                                I.

    Airports receiving federal grants for airport development
projects are subject to grant assurances, 49 U.S.C. § 47107(a).
Congress directed the FAA to establish policies and procedures
to enforce the grant assurances and to prohibit unauthorized
                               3
diversion of airport revenues. Id. § 47107(k). Specifically,
Congress instructed in subsection (k)(2) that:

       Policies and procedures to be established pursuant to
       paragraph (1) of this subsection shall prohibit, at a
       minimum, the diversion of airport revenues (except as
       authorized under subsection (b) of this section)
       through--
       (A) direct payments or indirect payments, other than
       payments reflecting the value of services and facilities
       provided to the airport;
       (B) use of airport revenues for general economic
       development, marketing, and promotional activities
       unrelated to airports or airport systems;
       (C) payments in lieu of taxes or other assessments that
       exceed the value of services provided; or
       (D) payments to compensate nonsponsoring
       governmental bodies for lost tax revenues exceeding
       stated tax rates.

Id. § 47107(k)(2) (emphasis added). Subsection (b) referenced
in the parenthetical provides:

       (1) The Secretary of Transportation may approve a
       project grant application under this subchapter for an
       airport development project only if the Secretary
       receives written assurances, satisfactory to the
       Secretary, that local taxes on aviation fuel (except taxes
       in effect on December 30, 1987) and the revenues
       generated by a public airport will be expended for the
       capital or operating costs of--
       (A) the airport;
       (B) the local airport system; or
       (C) other local facilities owned or operated by the
       airport owner or operator and directly and substantially
                               4
       related to the air transportation of passengers or
       property.

Id. § 47107(b) (emphases added). The same restrictions on
revenue use are imposed on any “airport that is the subject of
Federal assistance” under 49 U.S.C. § 47133(a), which tracks
the text of section 47107 in relevant respects. Pursuant to
section 47107(k), the FAA has issued guidance, including the
Policy and Procedures Concerning the Use of Airport
Revenue, 64 Fed. Reg. 7,696 (Feb. 16, 1999) (“Revenue Use
Policy”) and the FAA Airport Compliance Manual, FAA Order
No. 5190.6B (Sept. 30, 2009) (“Compliance Manual”).

     Portland International Airport is located in the City of
Portland, Oregon. It is a federally-funded, public airport that
is owned and operated by the Port of Portland. The Port is
subject to the grant assurances required under section 47107,
including that airport revenues must be spent on capital or
operating costs of the airport. The City independently operates
water, sewer, and stormwater utilities for ratepayers within city
limits, including the Port. The Port pays a combined
sewer/stormwater/water bill with multiple line items, including
charges for “Stormwater Off-site Drainage” and the “Portland
Harbor Superfund.” The Port pays for its combined utility
costs using airport revenue.

     On February 10, 2016, the Association filed a complaint
with the FAA alleging that the Port’s payment of the off-site
stormwater and Superfund charges constitutes unlawful airport
revenue diversion under 49 U.S.C. § 47107(b), § 47133, and
Grant Assurance 25 because the charges did not directly benefit
the Airport. It also alleged these charges violate the Anti-Head
Tax Act, 49 U.S.C. § 40116. The off-site stormwater charge
covers the costs of managing stormwater discharge from the
City’s streets and other property. The City calculates this
                                 5
charge uniformly for all ratepayers based on the amount of
impervious surface area on the ratepayer’s property. The
Superfund charge relates to the City’s liability as a potentially
responsible party for hazardous-substance contamination in the
Willamette River, which runs through downtown Portland.
The City charges all ratepayers for the Superfund charge,
calculating the charge based on a sanitary-sewer charge and the
square footage of impervious surface area on the ratepayer’s
property.

     The Director of the Office of Airport Compliance and
Management Analysis found no merit to the Association’s
complaint. Director’s Determination, Air Transport Ass’n of
America v. Port of Portland, Oregon, FAA Docket No. 16-16-
04 (“Determination”). Observing that “[i]t has long been
established that an airport sponsor may use airport revenues to
pay costs directly related to the operation of an airport,” the
Director pointed to the Revenue Use Policy, which “provides
that ‘[o]perating costs for an airport may be both direct and
indirect and may include all expenses and costs that are
recognized under the generally accepted accounting principles
and practices that apply to the airport enterprise funds of state
and local government entities.’” Id. at 12 (quoting Revenue
Use Policy, 64 Fed. Reg. at 7,718). The Director also pointed
to the Compliance Manual, which defines operating costs to
include utility costs, and to the definition of utility costs in the
Federal Accounting Standard Advisory Board Handbook of
Federal Accounting Standards and Other Pronouncements
(June 30, 2015). Id. While “capital or operating costs” are not
defined in the statutes or the Revenue Use Policy, the Director
explained that “the plain meaning of the terms requires that the
costs be related to the operations or capital requirements of the
airport system” and found the two challenged charges are “also
within the scope of the Airport’s operating costs under the FAA
Revenue Use Policy.” Id. at 12–13. Consistent with guidance
                                6
in the Revenue Use Policy, the Director concluded the two
charges are properly classified as operating costs of the Airport
because they are uniformly assessed by the City in a non-
discriminatory fashion and are based on a common cost
allocation method. See Revenue Use Policy, 64 Fed. Reg. at
7,719. The Director found no merit to the Association’s Anti-
Head Tax objection, finding that the City has not levied or
collected a charge on the gross receipts derived from air
commerce or transportation contrary to the Anti-Head Tax Act.

     The Acting Associate Administrator for Airports affirmed,
concluding the Director’s Determination is supported by a
preponderance of reliable, probative, and substantial evidence,
and is consistent with applicable law, precedent, and FAA
policy. Final Agency Decision, Air Transport Ass’n of
America v. Port of Portland, Oregon, FAA Docket No. 16-16-
04 (May 15, 2018) (“Final Agency Decision”).

                               II.

     The Association challenges the FAA’s interpretation of the
relevant statutes on the principal ground that the off-site
stormwater charge and the Superfund charge are not operating
costs of the Airport as defined in the statutory scheme because
the drainage and cleanup services are provided outside the
physical boundaries of the Airport. Although not disputing the
principle that operating costs can include utility costs, the
Association instead contests whether general expenses of
running a utility specifically fall within the scope of operating
costs. In its view, “operating costs of . . . the airport” as used
in 49 U.S.C. §§ 47107(b) and 47133(a) must be “directly and
substantially related to the air transportation of passengers or
property” because that phrase also appears in the same
statutory provisions. Further, even if the charges are operating
costs of the Airport, the Association maintains the charges
                                7
must reflect the value of services provided to the Airport under
49 U.S.C. § 47107(k).

     As a threshold matter, the Association maintains that the
FAA’s statutory interpretations are not entitled to deference by
the court under Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 842–43 (1984), because
the Associate Administrator’s decision was the result of
informal adjudication, rather than a formal adjudication or
notice-and-comment rulemaking. See Pet’r’s Br. at 30–31
(citing United States v. Mead Corp., 533 U.S. 218, 226–27
(2001)). Even if so, under Skidmore v. Swift & Co., 323 U.S.
134, 140 (1944), there can be little doubt that the FAA’s
interpretation of the congressional scheme has the “power to
persuade,” Gonzales v. Oregon, 546 U.S. 243, 256 (2006)
(quoting Skidmore, 323 U.S. at 140).

     Congress did not define “operating costs” and instead
specifically left that determination to the FAA, which has
embraced the commonsense conclusion that the general
expenses of a utility are operating costs. 49 U.S.C. § 47107(k).
The Revenue Use Policy excludes such “capital or operating
costs,” along with certain other “grandfathered” uses, from the
definition of “unlawful revenue diversion.” 64 Fed. Reg. at
7,716. The Policy clarifies that “[o]perating costs for an airport
may be both direct and indirect,” and may include costs
consistent with the Generally Accepted Accounting Principles
(“GAAP”). Id. at 7,718. The Compliance Manual is in accord,
defining operating costs to include “utility costs” as well as
indirect allocated costs for “utility infrastructure.” FAA Order
5190.6B ¶ 18.9(a).

    Because the FAA has decided that indirect utility costs are
properly considered “operating costs,” the allocated general
expenses of running a utility are encompassed within the
                                8
“operating costs . . . of the [A]irport.” The off-site stormwater
charge and the Superfund charge are general expenses of
running the water utility. The off-site stormwater charge
covers the costs of stormwater drainage on public property
throughout the City, which is the responsibility of the utility
and benefits all City ratepayers. The Superfund charge covers
cleanup and management costs that were incurred as a result of
the utility’s past operations. Both charges cover costs to fulfill
the utility’s responsibilities and allow the utility to continue
providing services to all City ratepayers, including the Airport.
Importantly, both of the challenged charges are calculated and
applied uniformly among all ratepayers. The City uses a
common cost allocation method, calculating the off-site
stormwater charge based on a dollar amount multiplied by the
square footage of impervious surface area on each ratepayer’s
property. The City calculates the Superfund charge based on
the ratepayer’s sewage volume and the impervious surface area
on the ratepayer’s property.

    The Association does not contest the allocation method
employed by the City. It also does not maintain that the two
challenged charges assessed against the Airport are
disproportionate. The use of a uniform cost allocation method
guards against concerns that charges unfairly target an airport
as a source of revenue for “other local programs that have
nothing to do with aviation.” H.R. REP. NO. 104-714, at 37
(1996). Hence, this is not a case in which the Association
claims the airlines are being unfairly singled out. Rather, the
Association’s objections are based on a misreading and
misinterpretation of the statutory scheme enacted by Congress.

     Contrary to the Association’s view that airport operating
costs must be “substantially and directly related to air
transportation of passengers or property,” Pet’r’s Br. 43–46
(quoting 49 U.S.C. § 47107(b)(1)(C)), the plain text of section
                                9
47107(b) and section 47133 provides that payments of capital
or operating costs are permissible uses of airport revenue,
rather than unlawful revenue diversion. Section 47107 sets off
the airport’s operating costs in subsection (1)(A). Each
subsection is separated by semicolons, and the word “or”
renders the list disjunctive. The phrase “substantially and
directly related to air transportation of passengers or property”
only modifies the other local facilities described in subsection
(1)(C).

     Looking to section 47107(k)(2), the Association maintains
that all payments made by the Airport, including for operating
costs, must reflect the “value of services and facilities provided
to the airport.” 49 U.S.C. § 47107(k)(2)(A). This overlooks
that section 47107(k)(2) excepts the use of airport revenue “as
authorized under subsection (b).”           Thus, all payments
authorized under subsection (b), including under (b)(1) for
capital or operating costs and the grandfathered revenue
diversions, plainly fall outside the scope of section 47107(k).
Because the payment of capital or operating costs is not
revenue diversion at all, payments of operating costs clearly
cannot fall within the scope of section 47107(k)’s limitations
on revenue diversion. The two challenged utility charges are
airport operating costs under section 47107(b)(1), and so the
limitations of section 47107(k)(2)(A) do not apply. The court
therefore need not consider whether the two charges reflect the
value of services provided to the Airport and the Association’s
related contentions.

    In sum, the Association has offered no ground on which
the court can conclude that, under the statutory scheme, the
FAA failed to persuasively determine that the off-site
stormwater charge and the Superfund charge for utility services
provided within the City, as calculated and assessed uniformly
based on a common cost allocation method, are properly
                               10
treated as the “operating costs . . . of the Airport” that may be
paid using airport revenues.

                               III.

    The Association’s challenges to the FAA’s factual
determinations and reasoning are unpersuasive. The court can
overturn the FAA’s decision only if it is arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.
City of Santa Monica v. FAA, 631 F.3d 550, 554 (D.C. Cir.
2011). The FAA’s factual findings are conclusive if supported
by substantial evidence. 49 U.S.C. § 46110(c).

     The Associate Administrator and the Director provided an
adequate explanation of their reasoning. For example, the
Director pointed out that when an airport is owned by a
government entity, the Revenue Use Policy, 64 Fed. Reg. at
7,719, permits the government to allocate general government
expenses and central service costs to the airport if the costs are
allocated by a reasonable, transparent, and not unjustly
discriminatory methodology. If indirect charges are permitted
in those circumstances, the Director reasoned, no less should
be true when an airport is independently owned. Thus, general
expenses of running a utility must also be permissible as long
as the expenses are allocated using a “reasonable, transparent,
and not unjustly discriminatory” methodology. Determination
at 13. The Associate Administrator agreed, finding that the
charges are permissible because “there is ample evidence to
support the argument that payment of the [charges] is necessary
for the City to provide water and sewer services to the Airport,”
and the City “allocat[es] these costs to the ratepayers in a fair
and transparent way.” Final Agency Decision at 7–8.

     The FAA did not, contrary to the Association’s assertion,
fail to consider the expert declarations presented by the
                              11
Association. Both the Determination and the Final Agency
Decision make this clear. The FAA instead disagreed with the
experts’ statutory interpretations because they did not conform
with the statutory text or FAA guidance. Because the experts
proceeded on the unsubstantiated factual assumption that
utility services are not provided to the Airport in exchange for
the charges, the FAA properly gave their declarations little
weight. The FAA’s decision also is not, as the Association
maintains, inconsistent with prior decisions finding incidents
of unlawful airport revenue diversion at the Los Angeles
International Airport and the Dade County Aviation
Department in Miami, for neither of those involved uniformly
allocated utility costs.

    Because the FAA does not need to address whether the
Airport received “value” under section 47107(k), we need not
address the Association’s remaining contentions.

                              IV.

     Finally, the Association’s Anti-Head Tax contention that
the challenged utility charges constitute impermissible taxes,
because no services are provided to the Airport in exchange for
the charges, fails.

     The Anti-Head Tax Act, 49 U.S.C. § 40116(b), bars a State
from collecting a tax or other charge on “(1) an individual
traveling in air commerce; (2) the transportation of an
individual traveling in air commerce; (3) the sale of air
transportation; or (4) the gross receipts from that air commerce
or transportation.” The two challenged charges are imposed in
exchange for the utility’s services provided to the Airport. Cf.
Norfolk S. Ry. Co. v. City of Roanoke, 916 F.3d 315, 319–22
(4th Cir. 2019). Thus, they are not on airline passengers or air
                              12
transportation in any form. The charges are imposed for use of
water and sewage services, not for air transportation.

     Accordingly, because the FAA properly defined the
operating costs of an airport to include the general expenses of
a utility, and the Port’s payment of the off-site stormwater and
Superfund charges therefore does not constitute impermissible
revenue diversion, we deny the petition for review.
