I am not really sure what the purview of the Historic Landmarks Commission is in the kerfuffle over the University of Oregon's attempt to rewrite the White Stag Sign to read "University of Oregon." From what I understand they are charged with preserving the historic and architectural heritage of Portland - so I guess this qualifies? I am pretty sure they don't think too much about the economics of this type of decision, so I'll try.
This falls squarely in the 'public goods' realm of economics (what luck - exactly what I am obsessed by). Clearly there is a private goods aspect, U of O would like to advertise both the institution as a whole and their Portland campus. This benefits the U of O. But this is one of the most prominent signs in all of Portland and thus is reflects the city as well - and this is the public goods aspect of the sign. The sign benefits the city and its citizens as well. In allowing the U of O to use the sign for their own purpose it represents both a tacit endorsement of the university and influences how the city is perceived.
To the extent that the fate of the city and the fate of Portland State University are intertwined (and I believe they are), allowing the U of O to use the sign damages both the image of PSU as the city's university and the city itself. There are other institutions of higher ed in Portland as well: Reed, L&C (my alma mater), U of Portland, etc., allowing this aspect of the 'public square' to be co-opted by one (yes, still, out-of-town institution) is a bad idea and violates the spirit under which the sign was preserved and made part of the public goods of the City of Portland.