TO: Mayor and City Council
THROUGH: Krishna Namburi, Interim City Manager
FROM: Brian D. Martin, Public Works Director
SUBJECT:
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Update on a Potential Minimum Revenue Guarantee to Recruit Commercial Air Service to the Salem - Willamette Valley Airport.
Ward(s): Ward 2
Councilor(s): Nishioka
Neighborhood(s): SEMCA, SESNA
Result Area(s): Strong and Diverse Economy.
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SUMMARY:
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Community efforts to assemble a Minimum Revenue Guarantee (MRG) have been successful in raising pledged amounts totaling $400,000 per year for three years. A minimum revenue guarantee is an airline industry standard incentive provided to entrants into a commercial airline market to attract and sustain airline operations during an initial start up period. The minimum goal for a viable MRG is $500,000 per year for three years to recruit an airline for commercial air service at Salem-Willamette Valley Airport.
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ISSUE:
Should the City Council reduce the General Fund transfer to the Airport Fund by $100,000 per year, for three years, and assign those funds toward the minimum revenue guarantee (MRG) for commercial air service at the Salem-Willamette Valley Airport?
RECOMMENDATION:
recommendation
Reduce the General Fund transfer to the Airport Fund by $100,000 per year, for three years, and assign those funds toward the minimum revenue guarantee (MRG) for commercial air service at the Salem-Willamette Valley Airport.
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FACTS AND FINDINGS:
A New Minimum Revenue Guarantee
Indications are that an MRG of $500,000 per year, for three years, will bring a low-An MRG of $500,000 per year, for three years, may aid in negotiations for a low-cost carrier to provide commercial air service at the Salem-Willamette Valley Airport. While an MRG of $500,000 per year over three years does not guarantee commercial air service, it is considered the minimum amount needed to begin negotiations with a prospective commercial airline.
At its September 8, 2025, meeting, Council directing staff to return to Council with recommendations for funding options to assemble a new MRG.
Pledged Local Contributions
Representatives from Travel Salem and Fly Salem indicate that up to $400,000 per year, for three years, totaling $1.2 million has been pledged towards a new MRG. The funds have been pledged from Travel Salem, Fly Salem, a board comprised of Salem hoteliers overseeing Salem Tourism Promotion Area funds, Marion County, and private donations. There is still a need for $100,000 to achieve the desired $500,000 per year for three years. We understand that donors are hopeful the City will also contribute to the MRG.
City Participation in a Locally Funded MRG
The City is prohibited by the Federal Aviation Administration (FAA) from using airport revenues that go directly into the Airport Fund for use in air service development (recruiting airline service). The Airport Fund can be used for marketing the airport itself. The use of Transient Occupancy Taxes (TOT) for an MRG is not permitted under the City Charter or Oregon law. Likewise, Urban Renewal funding, is limited to capital improvements and is not permissible for use toward an MRG.
One option to fund an MRG would be to reduce the General Fund transfer to the Airport Fund by $100,000 per year, for three years, and assign those funds instead toward the MRG. This would result in a no-net increase in General Fund support for the airport. Staff believe that a reduction in General Fund support of $100,000 can be accommodated within the airport budget through savings from existing and anticipated position vacancies over the next three years.
Staff will continue to pursue a Federal Small Community Air Service Development (SCASD) grant to defray the City’s $100,000 per year portion of the MRG. The application period for the next round of SCASD grants is anticipated to begin in December 2025, with awards announced in April or May 2026. The entire SCASD program is to be funded at $13 to $14 million nationwide. This is a competitive grant process, with no guarantee of a successful award for Salem-Willamette Valley Airport. If the City is not successful, the City’s commitment will continue to be sourced from savings. If the City is successful, a local match component is required to accept a SCASD grant award. Community pledges can be used as the local match.
Other Financial Incentives
In addition to an MRG, successful air carrier incentive programs often include financial assistance in the form of waived or reduced airport fees and additional advertising support. Examples of fees that can be waived or reduced include aircraft landing and parking fees, fuel taxes, office space rental, and ground support equipment rental. Most low-cost airlines expect additional financial incentives to be part of the package.
BACKGROUND:
Avelo Airlines operated commercial air service out of Salem-Willamette Valley Airport beginning in October 2023 and ending in August 2025, when Avelo decided to phase out all its west coast flight operations to 10 markets. During the 22 months of commercial air service with Avelo, nearly 90,000 passengers traveled through the airport terminal, generating an estimated $32.5 million in economic benefit to the Mid-Willamette Valley. With over 45,000 total enplanements, the airport has qualified for an additional $3.4 million in Federal capital construction funds that can begin to be used in federal FY 2026.
The Transportation Security Administration (TSA) owns the baggage and passenger security equipment at the airport and has given the City until mid-November 2025 to secure a letter of intent from an airline to resume commercial air service or risk having the equipment removed and sent to another airport. Replacement of the equipment could take several months on a waiting list.
City staff provided Council an information report on July 28, 2025, on the cessation of commercial flights, followed by a Council work session on August 18, 2025. An informational report on the likely expectations of a new MRG was provided to Council on September 8, 2025.
Mark Becktel, AICP
Assist. Public Works Director - Operations
Attachments:
None.