Item No: 8c_supp Meeting Date: November 27, 2018 Port of Seattle 2019 Budget Reading & Final Adoption Commission Meeting November 27, 2018 1 Outline • • • • • • • 2019 Operating Budget 2019 Comprehensive Operating & Non-Operating Budget 2019-2023 Capital Improvement Plan (CIP) 2019 Staffing Summary 2019 Sources and Uses of Funds 2019 Proposed Tax Levy Remaining 2019 Budget Schedule 2 2019 Key Initiatives Serve regional demand and maintain our global gateway. • Serve regional demand for air service at Sea-Tac • Support the airport capital improvement program • Continue to improve safety & security • Continue to improve customer service • Support Cruise passenger growth • Advance real estate development projects • Build capabilities through process improvement • Strengthen the Port's Centers of Expertise Serving increased demand is a key budget driver 3 2019 Key Initiatives Create equitable opportunities throughout the region and invest in healthy communities and environment. • Diversity in Contracting and WMBE • Equity Program • Priority Hire • Expand stakeholder engagement • Workforce development • EPA Grant for work with • Continue internship program near-Port communities and expand career • Energy and Sustainability connected learning grants • Supporting Fair Works • Sustainable Aviation Center at the Airport Fuels • Promote economic development for the region • Expand tourism opportunities Budget resources support community priorities 4 2019 Budget Highlights • • • • • Operating revenues are budgeted at $753.3M, $82.8M or 12.3% higher than 2018 budget, and $67.7M or 9.9% above 2018 forecast Operating expenses are budgeted at $453.9M, $31.0M or 7.3% increase from 2018 budget, and $34.4M or 8.2% above 2018 forecast Net Operating Income is budgeted at $299.4M, $51.8M or 20.9% above 2018 budget, and $33.2M or 12.5% above 2018 forecast The 2019 capital budget is $1.0 billion and the 5-year capital spending plan is over $3.1 billion The proposed tax levy for 2019 is $74.2M The 2019 budget reflects the Port's growth and continued investments for the region 5 Additional Budget Change • As noted in the first budget reading, a Environmental Program Manager position was approved for Public Affairs after we submitted the briefing package. • This is a limited duration hire (for one year and nine months) to support the Airport Community Ecology (ACE) Fund program and nearPort Environmental Justice (EJ) communities stakeholder engagement. • For the 2018 new hire, the total budget is $137K for 2019. Additional change made to the budget 6 2019 Operating Budget - Port wide ($ in '000s) Operating Revenues Operating Expenses Net Operating Income 2016 2017 2018 2018 2019 Actual 598,467 325,285 273,182 Actual 632,031 372,982 259,049 Budget 670,479 422,885 247,594 Forecast 685,592 419,417 266,175 Budget 753,255 453,861 299,395 Budget Change Budget vs Forecast $ 82,776 30,976 51,800 % 12.3% 7.3% 20.9% $ 67,663 34,444 33,220 % 9.9% 8.2% 12.5% A record $753M of operating revenues for 2019 7 2019 Comprehensive Budget 2017 Actual 2018 Budget 2018 Forecast 2019 Budget Budget Change $ % 264,114 367,917 71,702 88,389 25,790 7,000 6,705 30,112 12,174 873,902 301,082 369,398 72,000 91,787 22,161 7,023 5,504 41,379 15,713 926,047 303,769 381,823 72,000 93,095 22,161 7,023 3,000 41,379 25,670 949,920 365,604 387,651 74,160 95,185 23,482 7,022 2,655 49,345 30,903 1,036,007 64,522 18,254 2,160 3,398 1,321 (2) (2,849) 7,966 15,190 109,961 21.4% 4.9% 3.0% 3.7% 6.0% 0.0% -51.8% 19.3% 96.7% 11.9% Cost recovery under SLOA IV. Higher revenue from the Airport, Maritime & EDD businesses. Increased by 3% in 2019. Higher enplanement forecast for 2019. Increase due to more for debt service cost. Essentially the same as 2018. Less state grant in 2019. More TSA grant for the Checked Baggage Screen Project. Slight increase in rates and higher cash balances. Expenses 1. O&M Expense 2. Depreciation 3. Revenue Bond Interest Expense 4. GO Bond Interest Expense 5. PFC Bond Interest Expense 6. Non-Op Environmental Expense 7. Public Expense 8. Other Non-Op Rev/Expense Total 372,982 165,021 97,748 13,891 4,931 4,464 4,588 10,441 674,066 422,885 163,309 122,544 13,501 4,437 2,250 10,794 473 740,193 419,417 163,309 105,000 13,501 4,437 40,147 11,200 1,200 758,212 453,861 168,676 129,429 12,689 3,606 5,000 21,009 1,415 795,685 30,976 5,367 6,886 (812) (831) 2,750 10,215 942 55,492 7.3% 3.3% 5.6% -6.0% -18.7% 122.2% 94.6% 199.4% 7.5% New budget initiatives and average pay increase. More new assets come into service in 2019. More bond issuance assumed in 2019 increased interest expense. Decreased debt service on GO bonds through amortization. Decreased debt service on PFC bonds through amortization. Revise costs estimates for ERL balance and superfund sites. Safe & Swift, Seattle Heavy Haul, Vanderlande Screening Lanes. Revenues over Expenses 199,836 185,854 191,709 240,322 54,468 29.3% ($ in 000s) Revenues 1. Aeronautical Revenues (Net) 2. Other Operating Revenues 3. Tax Levy 4. PFCs 5. CFCs 6. Fuel Hydrant 7. Non-Capital Grants and Donations 8. Capital Contributions 9. Interest Income Total Explanations A strong financial position for the Port in 2019 8 Capital Plan Summary Capital Plan Summary by Division $ in 000's 2018 Fcst 2019 2020 2021 2022 2023 2019-2023 Aviation Maritime Economic Development Stormwater Utility Central Services and Other 574,425 28,638 3,777 1,913 11,848 935,454 33,455 8,221 1,800 22,507 576,576 70,415 29,796 2,550 10,917 515,061 149,853 21,350 2,319 11,872 394,108 12,713 3,960 2,150 11,740 278,868 14,936 3,830 2,150 33,813 2,700,067 281,372 67,157 10,969 90,849 Total 620,601 1,001,437 690,254 700,455 424,671 333,597 3,150,414 • Capital projects have been prioritized by staff. • The capital plan does not include Port share of the NWSA capital spending between 2019 and 2023. The Port continues to invest in the region with a 5-year capital plan of over $3 billion 9 FTE Summary Aviation Maritime 2018 Approved FTE's Mid Year Approval Eliminated Net Transfers Adjusted 2018 FTE's (note 1) Econ Dev. Central Services Total 1,040.4 8.0 3.0 1,051.4 171.0 1.0 172.0 36.0 1.0 (2.0) 35.0 907.1 13.0 (1.5) (4.0) 914.6 2,154.5 22.0 (3.5) 2,173.0 2019 Budget Eliminated Transfer New FTE's (note 2) Total 2019 Changes 54.4 54.4 (1.0) (1.0) 3.0 1.0 1.0 1.0 (0.8) 1.0 25.5 25.8 (1.8) 83.9 82.1 Proposed 2019 FTE's 1,105.8 173.0 36.0 940.4 2,255.1 Notes: 1) Includes 1.0 FTE for Stormwater Utility in Maritime Division. 2) Includes 1.0 new FTE for Stormwater Utility in Maritime Division. FTEs driven by Commission priorities and growth initiatives 10 Sources of Funds Passenger Facility Charges 6.1% Rental Car Customer Facility Charges 1.5% Fuel Hydrant Receipts 0.5% Other Receipts 0.2% Tax Levy 4.8% • Grants and Capital Contributions 3.3% Operating Revenues 48.3% • Proceeds from Bond Issues 33.4% Interest Receipts 2.0% 82% of funding sources come from bond proceeds and operating income. The tax levy makes up less than 5% of the funding sources in 2019. Total Sources: $1,559.2M The Port has diversified funding sources 11 Uses of Funds Operating Expenses 23.4% • Capital Expenditures 51.6% Bond Redemptions 9.8% Interest Payments 9.5% Payment to NWSA for Capital Expenditures 4.2% • Plan to spend more than half of our funds on capital projects in 2019. Operating expenses are less than a quarter of total expenditures in 2019. Other Expenses 0.5% Public Expense 1.1% Total Uses: $1,941.9M Capital spending comprises more than half of Port expenditures 12 2010-2019 Tax Levy & Millage Rate The Port has gradually reduced the tax levy amount from 2010 to 2018 13 Actual vs. Maximum Allowable Levy The Port has forgone $521M in tax revenue since 1991 14 Remaining Budget Schedule • File Statutory Budget with King County Dec. 3, 2018 • Release the 2019 Final Budget Document Dec. 14, 2018 Statutory budget to be filed with the County on December 3 15 Port of Seattle 2019 Budget Reading & Final Adoption Commission Meeting November 27, 2018 16