What are airports prohibited from factoring into the rate base?

• A. Improvements or Noise Mitigation Programs funded by private donations
• B. Improvements or Noise Mitigation Programs paid for with federal funds
• C. Routine maintenance costs
• D. Salaries of airport staff

Answer: (B)

Rate base represents the part of an airport’s capital investment that is recoverable from users through charges. Money that comes from the federal government as grants is not treated as part of the airport’s own financed capital for rate-base purposes. Grants are external funds with specific terms, and including them would effectively let ratepayers reimburse assets funded by the federal government, potentially duplicating recovery. So, those federal funds are not included in the rate base.

Routine maintenance costs and salaries are operating expenses, not capital investments, so they aren’t carried in the rate base at all. Improvements funded by private donations are typically treated as contributed capital and reduce the amount that must be recovered through rates, rather than being added to the rate base. That’s why federal funds are the item airports are prohibited from factoring into the rate base.