ITEM NO. 7a Supp DATE OF MEETING October 25, 2011 2012-2016 Draft Plan of Finance October 25, 2011 Topics • • • • • Background and Assumptions 2012-2016 Capital Funding Forecasted Debt Service Coverage Seaport Capital Deferrals Refunding Savings Contribution to tax Levy Scenario 2 Draft Plan of Finance 2012-2016 • Each year at the end of the budget process, staff provides a summary five-year Port-wide capital funding plan (The Draft Plan of Finance). The 2012-2016 Plan is based on: - Division capital improvement plans (CIPs) discussed with the Commission on September 27, 2011 - Division operating budgets and forecasts discussed with the Commission on October 4, 2011.  Airport is a self-funding operation  Seaport operating income supports its CIP  Real Estate CIP is supported by the tax levy - The tax levy assumption is $73.5 million per year 2012-2016 3 Debt Service Coverage • The Plan is developed to adhere to the Port's financial management policies for prudent cash reserves and leverage - Operating funds maintain a minimum of:  6 months operating and maintenance (O&M) expenses in the general fund  10 months O&M expenses in the airport development fund - Maximum 75% of tax levy used to pay General Obligation bonds debt service - Net income provides Revenue bonds coverage of:  1.5x debt service for Seaport debt  1.25x debt service for Airport debt 4 Funding Sources • The Draft Plan of Finance includes funding from: - Net operating income - Operating fund balances (above minimum requirement) - Existing and future revenue bond proceeds - Passenger Facility Charges - Customer Facility Charges - Grants - Tax levy 5 Aviation Capital Funding 2012-2016 Aviation Funding Sources Net income Operating funds Tax levy (1) Grants Passenger Facility Charge Customer Facility Charge (2) Existing revenue bond proceeds Future bond proceeds TOTAL Aviation CIP Committed Business Plan Prospective TOTAL 2012-2016 ($mil.) 222 28 10 72 53 57 109 543 1,094 444 651 1,094 (1) Highline capital spending (excludes expense spending by tax levy) (2) Includes proceeds of CFC-paid bonds 6 Seaport Capital Funding 2012-2016 2012-2016 ($mil.) Seaport Funding Sources Net income Operating funds Grants Existing revenue bond proceeds Future revenue bond proceeds TOTAL 40 22 2 5 201 271 Seaport CIP Committed Business Plan Prospective TOTAL 42 254 296 Funding Shortfall (25) 7 Seaport Capital Funding 2012-2016 • Total of $25 million in project spending deferred beyond 2016 - $73 million needs to be deferred over the next three years due to pile cap repairs  Timing and cost of the repair are still uncertain  Changes to the pile cap assumption will affect amount and timing of deferrals - A portion can be funded in 2015 2012 2013 2014 2015 2016 Total Original CIP 31 49 60 76 80 296 Change to CIP (3) (44) (26) 48 0 (25) Final CIP 28 5 34 124 80 271 8 Real Estate Capital Funding 2012-2016 2012-2016 ($mil.) Real Estate Funding Source Tax levy TOTAL 54 54 Real Estate CIP Committed Business Plan Prospective TOTAL 21 33 54 9 Corporate Capital Funding 2012-2016 2012-2016 ($mil.) Corporate Funding Sources Seaport Net Income Real Estate General Fund Airport Net Income TOTAL 17 5 42 64 Corporate CIP Committed Business Plan Prospective TOTAL 25 39 64 10 Port-wide Revenue Bond Debt Service Coverage 2012-2016 - Forecast Revenue Bond Debt Service Coverage Income Available/revenue debt service 2.8 2.58 2.6 2.45 2.4 2.2 2.28 2.01 2.07 2.0 1.8 1.6 1.50 1.44 1.40 2013 2014 1.49 1.48 2015 2016 1.4 1.2 1.0 2012 First Lien All Revenue Bond Debt 11 Seaport 2012-2016 Capital Budget Deferrals • Seaport 2011 Capital Budget presented to Commission on September 27th with follow-up on October 4th. • Funding capacity analysis has determined that ~$73 million in projects must be deferred from 2012-2014 into later years. • Required deferral represents 50% of capital dollars budgeted for those years: ▪ Delays projects that will extend the useful life of Seaport assets ▪ Reduces ability to capitalize on opportunities to secure new business ▪ Reduces ability to collaborate with industry to reduce environmental impacts 12 Seaport 2012-2016 Capital Budget Deferrals • Following slides show projects most likely to be deferred as indicated by gray shading. • Actual deferrals likely to vary due to new information and changing circumstances. • Project dollars left in Contingency Renewal and Replace in 2014 to cover projects determined to be most critical. 13 Seaport 2012-2016 Capital Budget Capital Budget Summary - Prior to Deferrals $'s in 000's 2012 2013 2014 2015 2016 2012-16 Commission Authorized/Underway Pending 2012 Authorization Pending Future Authorization Small Projects 11,636 17,538 0 1,400 3,190 2,990 42,070 1,200 1,400 2,300 54,780 1,333 0 3,000 72,100 1,025 0 2,878 76,300 1,000 16,226 28,706 245,250 5,958 Total 30,574 49,450 59,813 76,125 80,178 296,140 14 Seaport 2012-2016 Capital Budget Pending 2012 Authorization - Deferrals $'s in 000's P66 Apron Pile Wrap Container Terml Strm Water Imp (Pilot) T- 86 Grain Facility - Cathodic Protection T104 Site Improvements Total • Priority 2 2 2 3 2012 2013 2014 2015 2016 2012-16 500 1,000 900 1,000 500 300 100 1,000 500 0 0 1,000 500 0 0 0 378 0 0 0 2,378 1,300 1,000 3,000 3,400 1,900 1,500 500 378 7,678 Shaded amounts represent spending deferrals 15 Seaport 2012-2016 Capital Budget Pending Future Authorization - Deferrals $'s in 000's T91 Substation Upgrades Container Support Yd-3.5M TEU's #1 P66 Shore Power Second Gangway per Berth @ T91 T- 91 Railroad Spur Upgrade T-115 Railroad Spur Upgrade New Warehouse at Tank Farm Contingency Renewal & Replace. Total • Priority 2 2 3 3 3 3 3 3 2012 2013 2014 2015 2016 2012-16 0 0 0 0 0 0 0 0 1,000 30,000 1,000 1,000 150 150 0 8,500 1,000 0 7,700 3,500 960 900 10,800 10,000 500 0 5,000 0 0 0 11,100 10,000 0 0 0 0 0 0 0 10,000 2,500 30,000 13,700 4,500 1,110 1,050 21,900 38,500 0 41,800 34,860 26,600 10,000 113,260 Shaded amounts represent spending deferrals 16 Refunding Savings Contribution to Tax Levy - scenario for discussion • • Commission meeting October 11 - request to evaluate the impact of a Seaport contribution of ½ the savings from refunding the Terminal 18 Special Facility bonds to reduce future tax levies - Savings calculated based on current rates plus a cushion - present value savings approximately $20 million - Contribution would be made annually based on ½ the savings amount realized in that year (old debt service minus new debt service) - Contribution would pay costs otherwise funded with the tax levy, so the tax levy can be reduced in those years - Annual savings vary due to restructuring of debt service - Total savings 2012 - 2016 estimate is $8 million; contribution is $4 million Seaport would have to defer an additional $4 million of projects to accommodate the contribution $million Levy reduction 2012 1.1 2013 1.2 2014 1.2 2015 0.4 2016 0.2 17 Seaport 2012-2016 Capital Budget Additional Deferrals $'s in 000's Seaport Green Port Initiative Total • Priority 1 2012 2013 2014 2015 2016 2012-16 470 1,090 800 2,500 2,500 7,360 470 1,090 800 2,500 2,500 7,360 Shaded amounts represent spending deferrals. 18 2012 Planned Finance Activity • Proceed with economic refundings as appropriate - Currently meet savings target  2001 First Lien Revenue bonds - Airport - Other Potential candidates  A portion of 2003 First Lien Revenue bonds - Airport  1999 Sub lien Revenue bonds - Airport • Airport bond issue to fund project spending 2012/2013 • Evaluate options for extending/replacing letters of credit expiring in 2013 19