ITEM NO. 7a Supp DATE OF MEETING October 25, 2011 Preliminary Tax Levy Funding Plan for 2012 Budget and Draft Plan of Finance October 25, 2011 Topics • Tax Levy Overview • 2011 Tax Levy update • Preliminary Tax Levy 5-year funding plan 2 Tax Levy Overview • Tax Levy Amount - Levy amount established by the Commission each year as part of the budget process - Statutory limitations on annual collection  Port may set Levy at any amount up to the statutory maximum  Maximum increases each year by the lesser of inflation or 1% plus a factor for new construction • Tax levy may legally be used for general Port purposes, actual use has been guided by Commission policy • Payment of General Obligation bond debt service - Port policy - debt service is no more than 75% of annual levy 3 Annual Levy vs. Statutory Max • Annual levy is well below statutory maximum • Commission guidance has been to maintain flat dollar amount for planning purposes Tax Levy Levy Amount vs. Estimated Maximum Actual 2006-2011, Preliminary 2012, Projections 2013-2016 100.0 95.0 90.0 85.4 $ million 95.7 80.4 78.1 75.9 75.9 75.0 73.5 73.5 73.5 73.5 73.5 73.5 73.5 2010 2011 2012 2013 2014 2015 2016 68.8 70.0 65.0 91.3 94.2 82.6 85.0 80.0 87.2 90.1 88.7 92.7 62.8 60.0 2006 2007 2008 2009 Maximum levy Tax levy 4 2011 Tax Levy, Actual vs. Budget Budget 2011 $'000 LEVY SOURCES Beginning Tax Levy Fund Balance 2011 G.O. Bond Proceeds less repayment of General Fund loan Environmental Remediation Grants & Revenues Reimbursements Eastside Rail Corridor Partners Reimbursements Tax Levy Fund Investment Earnings Annual levy Total Sources: 26,634 Est./Act. 2011 73,500 100,634 26,322 30,007 (30,766) 6,459 13,700 842 73,500 120,064 40,438 40,165 9,100 650 7,694 650 11,559 46 21,355 11,211 140 19,695 Subtotal RE Support 20,357 5,372 25,729 13,214 5,372 18,586 Total Uses: 87,522 78,446 Projected Ending Tax Levy Fund Balance 13,112 41,618 LEVY USES General Obligation (G.O.) Bonds Debt Service (DS) G.O. Bonds DS - existing debt Other uses Roads and Transportation Projects Aviation School, and Highline & other Schools NOISE Insulation Environmental Remediation Liabilities, Seaport & Real Estate - prelim. PortJobs Subtotal Other (2) • • Projected ending balance exceeds budget Significant variances - - - Receipt of environmental reimbursements Expected receipt of rail corridor payment from Sound Transit Lower Real Estate capital spending  Spending deferred from 2011 Real Estate Support (3) RE Capital Total RE Operating Subsidy Notes: (2) Includes project cash flows for environmental projects already or expected to be expensed and liabilities booked (3) Includes Committed and BP Prospective projects 5 2012-16 Funding Plan - Revenues • Flat Levy at $73.5 million annually • Receipt of $31 million of additional Eastside Rail Corridor partner reimbursements - ($30 million of short term G.O. notes issued in February, 2011 for rail corridor acquisition mature 2014-15) • Does not include some potential reimbursements for environmental costs - too uncertain to budget  Grants  Insurance/litigation payments 6 2012-16 Funding Plan - Uses • Existing General Obligation bond debt service • $20.5 million for substantial completion of FAST Corridor initiative & Highline Schools noise mitigation program • Funding of Seaport/Real Estate environmental remediation costs (nonoperating): - $67.6 million of projected cleanup costs over five years - Includes Lower Duwamish/East Waterway early action items-bulk of cleanup costs projected to occur after 2016 - Costs are net of payments by potentially liable parties; excludes potential recoveries from grants, insurance or litigation 7 2012-16 Funding Plan • Plan sets aside an additional $42 million of levy funds into the Transportation and Infrastructure Fund - Commission priority to build reserves for critical future projects - $13 million set aside in 2010 - Proposed $23 million addition in 2012 made possible by unbudgeted reimbursements received in 2011 - $5 million for South Park Bridge contribution 2012-13 - Fund balance grows to $55 million by 2016, proposed to partially fund SR99 tunnel contribution to reduce borrowing needs Projected TIF Balance ($' 000) Beginning of year Transfer from Tax Levy Fund Fund Investment Earnings South Park Bridge SR 99 Tunnel End of year Est./Act. 2011 13,250 248 13,498 2012 13,498 23,000 239 (2,500) 2013 34,236 0 332 (2,500) 2014 32,068 19,250 1,270 2015 52,588 0 1,602 2016 54,189 0 813 34,236 32,068 52,588 54,189 (55,000) 2 5 Years 2012-2016 13,498 42,250 4,255 (5,000) (55,000) 2 8 2012-16 Funding Plan • Levy continues to fund annual Real Estate Division NOI shortfall and 100% of capital expenditures • Projected Real Estate support increases from 2016-2019 due to temporary spike in revenue bond debt service • Proposed new funding of $54 thousand for non-Airport share of Port Jobs apprenticeship program in 2012 (total program in is $150 thousand, formerly funded through $0.20/hour contractor fees) • Proposed SR99 Funding - $300 million total commitment to be funded 2016-18 per MOA with State - $19 million credit for in-kind contributions towards freight mobility projects - $55 million cash reserves from Transportation & Infrastructure Fund - $226 million of long-term G.O. bonds issued in 2016 9 Preliminary Tax Levy 5-Yr Funding Plan $'000 LEVY SOURCES Beginning Tax Levy Fund Balance Eastside Rail Corridor Partners Reimbursements Annual levy Total Sources: 2012 5 Years 2012-2016 41,618 5,000 73,500 120,118 41,618 31,000 367,500 440,118 40,353 211,437 G.O.Bonds DS - new (SR99 Tunnel) Subtotal G.O. Bonds DS 40,353 17,944 229,381 Other uses Roads and Transportation Projects Aviation School, and Highline & other Schools NOISE Insulation 3,954 7,160 9,189 11,282 Environmental Remediation Liabilities, Seaport & Real Estate - prelim. (2) Funding of Transportation & Infrastructure Fund PortJobs Port Jobs Apprenticeship Program Subtotal Other 15,889 23,000 72 54 50,129 67,597 42,250 486 342 131,146 Subtotal RE Support 14,524 4,922 19,446 54,031 22,355 76,386 Total Uses: 109,927 436,913 Projected Ending Tax Levy Fund Balance 10,190 3,204 LEVY USES General Obligation (G.O.) Bonds Debt Service (DS) G.O. Bonds DS - existing debt (1) Real Estate Support RE Capital Total (3) RE Operating Subsidy Notes: (1) Assumes bond issue of $226 million for 25 yrs at 6%. (2) Includes project cash flows for environmental projects already or expected to be expensed and liabilities booked (3) Includes Committed and BP Prospective projects 10 Key Considerations • Eastside Rail Corridor partner reimbursements - uncertain of amounts and timing of receipts • Environmental Costs - Total amount and timing of Lower Duwamish/East Waterway cleanup costs after 2016 remain uncertain-POS, King County and City of Seattle discussing a range of options with EPA - Other potential environmental liabilities exist • Depending on the above, funding shortfalls may exist after 2016 under current flat levy assumption 11