Template revised September 22, 2016.

DATE: April 20, 2018

TO: Stephen Metruck, Executive Director

of the Port of Seattle authorizing the issuance and sale of intermediate lien revenue bonds in

one or more series in the aggregate principal amount of not to exceed $700,000,000, for the

purpose of financing or refinancing capital improvements to aviation facilities; setting forth

certain bond terms and covenants; and delegating authority to approve final terms and

conditions and the sale of the bonds.

EXECUTIVE SUMMARY

Commission authorization is requested to issue fixed rate intermediate lien revenue bonds (the

“Bonds”) in the principal amount of not to exceed $700,000,000 (including a reserve fund

deposit, capitalized interest and cost of issuance) to fund the costs of capital improvements at

issuance of the Bonds. The Bonds will be secured by all of the net operating revenues of the

Port after the payment of First Lien Revenue Bond obligations. The actual debt service

(principal and interest) payments will be made from Airport net revenues. Debt service

payments will be included in the airlines rates and charges per SLOA IV as appropriate. The cost

per enplaned passenger forecast presented in the 2018 budget included this debt service.

The major projects that will receive some or all of their funding from the Bonds include the

International Arrivals Facility, North Satellite Improvements, restroom upgrades, Safedock, and a

variety of other projects to improve the efficiency and safety of the Airport; a list of projects

currently identified for 2018 Bond funding is provided in Exhibit A. If project spending is delayed,

Template revised September 22, 2016.

proceeds can actually be spent on any projects without the appropriate project authorization.

The total Bond amount will also include proceeds sufficient to pay costs of issuance, to fund the

required debt service reserve and to pay a portion of the interest on the Bonds during

construction (capitalized interest) as appropriate.

The Port’s debt management program takes a conservative approach of issuing primarily fixed

rate bonds. This approach allows for predictable debt service payments, but interest rates are

based on higher long-term rates. To help reduce debt service costs, the Port also issues a

modest amount of variable rate debt – targeting no more than 25% of the Port’s total debt.

DETAILS

The Bonds are being issued pursuant to the Intermediate Lien Master Resolution No. 3540 and

this Resolution No. 3749. The Bonds will be issued in two series of private activity bonds

exempt from regular federal income tax, but subject to the Alternative Minimum Tax (AMT) or

as taxable bonds if taxable interest rates are favorable. Most of the projects have long asset

lives appropriate for long-term bonds, and those projects are expected to be funded with one

series of bonds having a final maturity estimated to be 25 years. Approximately $88 million of

the projects have shorter asset lives and therefore may be funded with a series of bonds that

have a shorter final maturity estimated to be ten years.

rates, maturity dates, redemption rights, interest payment dates, and principal maturities for

the Bonds (these are generally set at the time of pricing and dictated by market conditions at

that time). Commission parameters that limit the delegation are a maximum bond size,

maximum interest rate and expiration date for the delegated authority. If the Bonds cannot be

sold within these parameters, further Commission action would be required. The

recommended delegation parameters are:

Maximum size: $700,000,000

Maximum interest rate: 5.25%

Expiration of Delegation of Authority: six months

Template revised September 22, 2016.

Executive Director or the Chief Financial Officer) to approve the Bond Purchase Contract, the official

statement, pay the cost of issuance and take other action appropriate for the prompt execution and

delivery of the Bonds. The Bonds will be sold through negotiated sale to J.P. Morgan Securities LLC;

Barclays Capital Inc.; Goldman Sachs & Co. LLC; Morgan Stanley and Co. LLC.; and two small firms,

Drexel Hamilton, LLC (a disabled veterans firm); and Siebert Cisneros Shank & Co., LLC (a minority

firm). Piper Jaffray is serving as Financial Advisor, K&L Gates LLP is serving as bond counsel and

Pacifica Law Group is serving as disclosure counsel on the transaction.

Cons:

(1) A number of projects are under contract and spending quickly. By delaying a portion

(2) Exposes the Port to the risk of rising long-term interest rates.

This is not the recommended alternative.

Alternative 2 – Issue a combination of fixed rate and variable rate bonds in 2018.

Pros:

(1) Adds additional variable rate debt. The Port currently has about 7% of its debt in

This is not the recommended alternative.

Alternative 3 – Issue fixed rate Intermediate Lien bonds.

Pros:

(1) Provides sufficient funding for projects under contract.

(2) Takes advantage of current favorable long-term rates.

(3) Preserves variable rate capacity for a higher interest rate environment.

Cons:

(1) Leaves the Port at the low end of it variable rate debt target.

Template revised September 22, 2016.

October 24, 2017 – The Commission was briefed on the 2018-2022 Draft Plan of Finance

Template revised September 22, 2016.

Service Tunnel Renewal/Replace

Ground Service Equipment Electrical Charging Stations

Airfield Pavement Program

NS NSAT Renovation NSTS Lobbies

International Arrivals Facility-IAF

Checked Bag Recap/Optimization

Concessions Infrastructure

Concourse C New Power Center

SSAT Narrow Body Configuration

Passenger Loading Bridge Renew & Replace Phase 2

SSAT Structural Improvements

Security Exit Lane Breach Ctrl-Ph2

Surface Area Management System

Safedock Upgrade & Expansion

Replace Variable Frequency Drive

ASL Conversion at Checkpoints

CDD & CPO Office Relocation