Item No. 9c
Meeting Date: October 22, 2019

Draft Plan of Finance 2020-2024
and Tax Levy Briefing
October 22, 2019

1

Topics
• Draft Plan of Finance
• Capital Planning and Funding: Airport
• Capital Planning and Funding: Non-Airport
• Tax Levy Background and Update
• Appendix

2

Draft Plan of Finance 2020-2024
2020 Preliminary Budget
October 22, 2019

The Draft Plan of Finance
• Provided to the Commission to inform the budget process
and capital investment decisions
• Developed based on a sustainable financial model
- Detailed five-year business forecasts
- Financial targets that allow the Port to withstand downside risk
and maintain strong access to financial markets
• Debt service coverage targets
• Minimum operating fund balances

4

Airport and Non-Airport Capital Are Funded Separately
• Airport

• Non-Airport

- Relies on its own operating cash
flow from airline cost recovery
and non-aeronautical businesses

- Includes Northwest Seaport
Alliance (NWSA), Maritime and
Economic Development

- Unique funding sources:

- Relies on a combination of:

• Airport grants
• Passenger Facility Charge (PFC)
• Customer Facility Charge (CFC)

- Cost Per Enplaned Passenger
(CPE) is a critical affordability
metric

• Operating cash flow and revenue
bonds paid from operating cash flow
• Tax levy after payment of other tax
levy uses and general obligation
bonds paid from the tax levy

5

Capital Improvement Plan (CIP) and Funding
Airport
2020 Preliminary Budget
October 22, 2019

Airport CIP
Airport CIP
International Arrivals Facility
North Satellite Terminal
Baggage Optimization
Other Existing Projects
Proposed New Projects
SAMP Planning/Design (1)
CIP Reserves
TOTAL
Allocated Central Services CIP
Total Airport Funded CIP

2020-2024
($ million)
$
216.1
250.3
264.3
987.6
233.2
291.5
680.0
$
2,923.0
35.1
$
2,958.1

•

The Airport is self-funding and is
prohibited from supporting Non-Airport
businesses due to FAA regulations

•

The costs of aeronautical investments that
support the airlines are recovered through
airline fees - much of the Airport's $2.9
billion CIP is aeronautical

•

35% of the CIP is authorized for
construction

•

CIP does not include SAMP projects
beyond the $291 million for planning and
design

(1) Sustainable Airport Master Plan

7

Airport CIP - $2.9 Billion Investment
•

Many projects support
multiple goals

•

Investments to improve
capacity and asset
stewardship will also improve
the customer experience

•

All projects include an
environmental framework
that enhances outcomes

8

Airport Capital Funding
Aviation Funding Sources
Operating Cash (1)
Tax levy (2)
Grants
Passenger Facility Charge (PFC)
Customer Facility Charge (CFC)
Existing revenue bond proceeds
Future bond proceeds
Total Airport Funding

2020-2024
($ million)
$

$

652.4
3.5
111.3
26.1
18.2
625.3
1,521.3
2,958.1

(1) Includes airport income available after payment of revenue bond debt service.
(2) Highline Schools noise insulation.
Note: totals may not add due to rounding

•

Operating revenues generated at
the Airport and revenue
supported bonds fund 95% of
Airport CIP

•

Grants, PFCs and CFCs pay the
rest (additional PFCs and CFCs
pay a portion of revenue bonds)

•

A small amount of the tax levy is
used for capital investment in the
Highline schools

9

Capital Improvement Plan (CIP) and Funding
Non-Airport
2020 Preliminary Budget
October 22, 2019

Background
• The Port's Non-Airport businesses include:
- Maritime
- Economic Development (EDD)
- Port's share of the Northwest Seaport Alliance (NWSA)

• These businesses share funding from:
- Non-Airport cash flow (after payment of revenue bond debt service)
- Available tax levy funds
- Bonds paid from:
• Net cash flows - Revenue bonds
• Tax levy - General Obligation (G.O.) bonds

11

Non-Airport CIP
•

$184 million is the Port's 50%
share of NWSA CIP
- Includes T5 and other North
and South Harbor projects

- Will be presented to Managing
Members on October 29
•

Port also has "legacy" projects for
NWSA facilities, e.g. channel
deepening

12

Maritime and Economic Development CIP
$440 million
• Many projects support multiple
goals
• New cruise terminal is the major
driver of financial sustainability
• Habitat restoration and shore power
are key investments in
environmental sustainability

13

Non-Airport CIP Comparison
$ million

2019-2023

2020-2024

Maritime

$ 270.9

$ 366.9

62.7

73.5

$ 333.6

$ 440.4

Allocated Central Service

10.9

8.1

NWSA - Port 50% share
and Port related projects

273.2

230.9

Strategic Reserve (1)

50.0

0.0

$ 667.7

$ 679.3

Economic Development

Subtotal

TOTAL

Includes new projects, e.g. T46 north berth

Major projects at Husky and T-5 will be completed
No known needs at this time

(1) $16 million (net) membership affirmation payment to NWSA is now accounted for in 2020-2024 tax levy non-capital uses.

Note: totals may not add due to rounding

14

Non-Airport Capital Funding Plan
• Harbor Development Fund
assumes an additional $50
million contribution in
2019

• Future revenue bonds can
be issued beginning in
2023 based on new
revenues from capital
investments

15

Non-Airport Capital Funding Capacity
• The current forecast indicates the ability to fully fund the CIP
• Additional funding is available if the Port maximizes the use of G.O.
bonds
- Staff recommends that additional G.O. bonds be considered only if there are
compelling needs
- Additional G.O. bonds reduces flexibility to adjust the levy policy in the future

16

Port-wide Revenue Bond Debt Service Coverage Forecast
• Represents net income from Airport and Non-Airport businesses divided by all revenue bond debt service
• Provides a measure of financial sustainability and is critical to investors and rating agencies

Port-wide funding plan supports the Port's strong credit ratings and access to credit markets

17

2020 Finance Initiatives
• Issue Revenue bonds as needed to fund a portion of the
Airport CIP
• Monitor existing debt for opportunities to refund at lower
costs
- 2010 Revenue Bonds are likely candidates

• Update Commercial Paper program
• Manage variable rate debt credit renewals

18

Tax Levy Background and Update
2020 Preliminary Budget
October 22, 2019

Tax Levy
• Washington State ports are permitted to levy a tax on property within
the port's district
• The levy amount must be approved annually by the Commission and
is part of the budget process
• The Port may approve a levy amount up to the maximum allowable
within statutory limits
- The maximum levy for 2020 is $106.3 million
- The 2019 levy is $74.2 million
- Proposed 2020 levy is $76.4 million (a 3% increase)

20

Tax levy Uses
•
•
•
•

Investments in maritime infrastructure
Environmental sustainability
Regional transportation mobility
Community: workforce development, partnership grants,
Airport communities and tourism

21

Tax Levy Strategy
•
•
•
•

In 2019, the Commission approved a 3% inflationary levy increase to support investments in
the Seattle Harbor
Funding assumed that the levy would increase 3% per year through 2023, then 0% in 2024
2019 tax levy increased to $74.2 million compared to $72.0 million in 2018
Over the prior decade, inflation reduced the purchasing value of the tax levy

22

Tax Payer Impact
2018

2019

2020 preliminary

Tax Levy ($ million)

72.0

74.2

76.4

Estimated millage rate ($/1000)

0.135

0.123

0.120

Median home value ($) (1)

509,000

582,000

611,000

68.7

71.6

73.3

Estimated median home Port tax ($)

(1) 2018 and 2019 per King County Assessor; 2020 based on estimated 5% growth in assessed value

Preliminary estimate indicates that the median home owner will see an
increase payment of Port property tax of $1.74 in 2020.

23

Overall Taxpayer Impact - 2019
• Of the $5.6 billion of
property taxes paid in
King County, 1.3% goes
to the Port

• In 2019, the median
homeowner paid $6,687
in total property tax with
$72 going to the Port

24

2019 Tax Levy Update
($ million)
SOURCES OF TAX LEVY FUNDS
2019 Beginning Levy Fund Balance
Annual Tax Levy
Environmental Grants & Other Reimbursements
Investment Income
Total Sources
USES OF TAX LEVY FUNDS
G.O. bond debt service (Existing)
Environmental Remediation Expense
Community Programs
Harbor Development Fund Deposit
Non-Airport Capital Investments
Strategic Reserve
Total Uses
Projected Ending 2019 Levy Fund Balance

2019
$ 51.6
74.2
2.8
1.3
$ 129.9

43.4
6.9
6.1
50.0
10.9
2.0
$ 119.3

•

Current estimate: $10.6 million of levy
will be available for future funding

•

In addition to the tax levy,
Commission established:
- Harbor Development fund (HDF)
for T-5 redevelopment
• Staff recommends an additional
deposit of $50 million

$

$

- Transportation Infrastructure
fund (TIF) paid for $6.5 million in
regional mobility efforts in 2019

•

Further details on TIF and HDF can be
found in Appendix

10.6

25

Tax Levy Sources and Uses 2020-2024
($ million)
SOURCES OF TAX LEVY FUNDS
Beginning Balance
Tax Levy Collection
Environmental Receipts
Total Sources
USES OF TAX LEVY FUNDS
G.O. Bond Debt Service
Non-Capital Uses
Capital Investments
Total Uses
2024 Projected Ending Balance

2020-2024
$
10.6
403.0
33.3
$
446.9

$

$

240.1
152.6
54.2
446.9

$

0.1

• Assumes 3% increase 2020-2023, 0%
in 2024
• Assumes insurance recoveries for
environmental remediation
• Assumes the use of $192 million of G.O.
bonds to fund capital projects
- In addition to $54 million of levy cash
- G.O. bond debt service includes the new
bonds

26

2020-2024 Tax Levy Uses - Non Capital Investments
($ million)
G.O. bond debt service (Existing)
G.O. bond debt service (New)
Total G.O. bond debt service

2020-2024
$
185.1
55.0
$
240.1

Non-Airport Environmental Expense
NWSA Membership Interest Contribution
Economic Development Programs
Environmental Grants (ACE) and Energy and Sustainability
Duwamish Valley Community Equity Program
Sustainable Aviation Fuels and Air Emissions Program
South King County Fund
Highline Schools Noise Projects
City of SeaTac Safety Enhancements
Local Community Advertising Program (Spotlight)
Total Other Non-Capital Uses

$

$

88.4
16.0
14.3
1.0
1.5
5.0
10.0
3.5
7.0
6.0
152.6

TOTAL NON-CAPITAL TAX LEVY USES

$

392.7

•
•
•
•

G.O. Bond Debt Service - $240M
Environmental Remediation and
Improvements
Membership Interest
Contribution to the NWSA
Port Community Programs
- Workforce development
- South King County Fund
- City of Seatac safety
- Economic Development
Partnership grants

Additional levy dollars above this total are available for new capital investments
27

2020-2024 Tax Levy Uses - Capital Investments
($ million)
Tax Levy Cash
G.O. Bond Proceeds
TOTAL
Capital Investments:
Environment and Community
Fishing and Maritime Industries
T5 and North Harbor
CIP Reserves
TOTAL CAPITAL TAX LEVY USES

2020-2024
$
54.2
192.0
$ 246.2

$

$

39.9
109.3
88.5
8.5
246.2

•

Funding from both levy cash and G.O.
bond proceeds

•

Investments focus on Maritime Industries

•

Supports investments in
- T91 and Fishermen's Terminal
- T5 and North Harbor container terminals
- Habitat restoration, shorepower, central
waterfront amenities

•

New Projects, e.g. T46 North Pier could be
levy funded

28

Appendix
2020 Preliminary Budget
October 22, 2019

Contents
Page
31
32
33
34
35
36
37
38
39
40
41-43

Port's Taxing Authority
2019 Levy Status (additional detail)
2009-2020 Tax Levy & Millage Rate
Actual vs. Maximum Allowable Levy
Transportation and Infrastructure Fund (TIF)
Harbor Development Fund (HDF)
Tax Levy Cash Flows for Non-Capital Uses
Levy & G.O Bond Funded Capital Investments (2020-2024)
Non-Airport Operating Cash Flow Available for Capital
Current Credit Ratings
Industrial Development District Tax Levy

30

Port's Taxing Authority
Port taxing limitations: Port is limited by the most restrictive - currently the 1% limit
• 1% limit
- The maximum levy is increased each year by the 1% limit factor
- Based on prior year's maximum
- Increased by the lessor of 1% or inflation plus an addition for new construction
- The maximum levy for 2020 is estimated to be ~$106.3 million
• 45 cent limit
- The amount of the tax levy in any given year is limited to 45 cents per $1000 of
assessed value
• (Port 2020 rate is estimated to be 12 cents based on a $76.4 million levy)
- For 2020, this limit is ~$286.6 million
- Excludes the amount needed to pay G.O. bond debt service of $39.8 million

31

2019 Levy Status
SOURCES AND USES OF TAX LEVY
($ million)
SOURCES
2019 Beginning Fund Balance
Annual Tax Levy
Environmental Grants & Other Reimbursements
Investment Income
Total Sources
USES
G.O. bond debt service (Existing)
Environmental Remediation Expense
Capital Expenditures - Maritime
Capital Expenditures - EDD
NWSA North Harbor Spending
Strategic Reserve
Harbor Development Fund Deposit
Airport Community Ecology (ACE) Fund
Energy and Sustainability Policy Directives
Workforce Development
Economic Development Partnership Program
Tourism Grants
Local Community Advertising Program
Workforce Development Pilot Program - Airport
South King County Fund
Sustainable Aviation Fuels and Air Emissions Programs
City of SeaTac Safety Enhancements
Highline Schools Noise Projects
Total Uses
Estimated Ending Tax Levy Fund Balance

2019
Budget
$

$

$

46.5
74.2
2.1
122.7

2019
Est./Act
$
51.6
74.2
2.8
1.3
$
129.9

$

$

43.4
6.9
10.7
5.6
16.5
20.0
0.5
0.3
1.7
1.0
0.2
0.4
0.2
0.8
0.4
1.4
1.1
111.0

$

43.4
6.9
4.1
1.5
5.3
2.0
50.0
0.3
0.4
1.7
1.1
0.2
0.9
0.1
1.4
119.3

$

11.7

$

10.6

Budget
Variance
$

$

$

$

5.2
0.7
1.3
7.2

(0.0)
0.1
6.6
4.1
11.2
18.0
(50.0)
0.2
(0.1)
(0.1)
(0.6)
0.1
0.8
0.4
1.1
(8.3)

Totals may not foot due to rounding

32

2009-2020 Tax Levy & Millage Rate (1)

(1) Millage rate represents the amount per every $1,000 of a assessed valuation

33

Actual vs. Maximum Allowable Levy

34

Transportation and Infrastructure Fund (TIF)
TIF ($ million)
Beginning Balance
Transportation Investments
Ending Balance
Transportation Investments ($ thousand)
Seattle Heavy Haul Network
Fast Corridor I
Fast Corridor II
N Argo Express Access - Pub Ex
East Marginal Way Phase 2
Safe and Swift
Highway 509 Contribution
TOTAL

2020
$

2,000
225
345
200
250
8,500
$ 11,520

2020-2024 Post 2024
$
66.7 $
30.4
36.3
29.4
$
30.4 $
1.0
2021

$

2,000

2022
$

-

2,000

2023
$

2,000

$

4,285
6,285

2024

2020-2024 Post 2024

$

2,000

$

$

4,285
6,285

$

730

7,500
$

9,500

$

2,730

10,000
225
1,075
200
250
16,000
8,570
36,320

$

8,000
21,430
$ 29,430

35

Harbor Development Fund (HDF)
SOURCES AND USES OF HARBOR DEVELOPMENT FUND
($ million)

•

HDF created in 2017, included initial $65
million deposit

SOURCES
Beginning Balance
2019 Deposit from Tax Levy fund
Investment Earnings
Total Sources

•

Staff recommends additional $50 million
contribution from tax levy in 2019

•

$96 million available to fund much of the
Port's share of T-5 modernization costs

USES
T-5 Modernization (Port 50% share)
Ending HDF Balance

2019
$ 66.8
50.0
1.5
$ 118.3

2020-2024
$
96.2
$
96.2

$

(22.0)

$

(96.2)

$

96.2

$

-

- Port's share of 2020-2024 T-5
modernization costs is ~$131 million

- Additional amounts not funded with HDF
will be paid from tax levy cash or G.O.
Bonds

36

Tax Levy Cash Flows for Non-Capital Uses
($ million)
G.O Bond Debt Service
NWSA Membership Interest Contribution
Environmental Remediation Expense
Energy and Sustainability Fund
Airport Community Ecology Fund
Economic Development Programs
Tourism Grants
Duwamish Valley Community Equity Program
Local Community Advertising Program
South King County Fund
Sustainable Aviation Fuels and Air Emissions Programs
City of SeaTac Safety Enhancements
Highline Schools Noise Projects
Total Non-Capital Tax Levy Uses

2020
2021
2022
2023
2024
$
39.8 $
52.3 $
53.1 $
53.1 $
41.8
5.5
5.5
5.0
8.2
6.7
19.6
33.3
20.7
0.3
0.3
0.5
2.7
2.7
2.7
2.7
2.7
0.2
0.2
0.2
0.2
0.2
0.3
0.3
0.3
0.3
0.3
1.1
1.2
1.2
1.2
1.2
1.5
2.1
2.1
2.1
2.1
1.3
1.3
1.3
1.3
1.4
1.4
1.4
1.4
1.4
3.5
$
64.9 $
73.8 $
81.8 $
100.6 $
71.6

TOTAL
$
240.1
16.0
88.4
0.5
0.5
13.3
1.0
1.5
6.0
10.0
5.0
7.0
3.5
$
392.7

37

Levy & G.O. Bond Funded Capital Investments
($ million)
Status

CIP Description

2020

2021

2022

2023

2024

Total

Maritime and Economic Development Projects
T117 Restoration (1)
5
5
P66 BHICC Interior Modernize
4
FT Gateway Building
4
FT Docks 3,4,5 Fixed Pier Improvements
4
FT Maritime Innovation Center
4
T91 Uplands Development
3
T91 Berth 6 & 8 Redevelopment
3
P66 Shore Power
3
T91 Pier Stormwater Imp Ph 1
3
Central Waterfront Bridge Elevator Modernization
2
Economic Development CIP Reserve
2
Maritime CIP Reserve
Subtotal - Levy Funding MD & EDD CIP

10.4
1.0
2.5
0.7
0.8
0.4
0.7
0.7
0.5
1.0
18.5

10.3
0.0
10.0
5.0
4.8
10.0
13.2
1.1
0.8
0.5
1.0
56.6

0.3
10.0
4.0
14.0
24.6
3.0
0.8
2.0
58.6

0.3
0.8
0.5
14.0
0.8
2.0
18.3

0.3
5.3
5.6

11.2
10.4
21.8
2.5
10.1
38.8
35.0
16.9
1.1
1.5
2.5
6.0
157.7

NWSA North Harbor and POS-related (JV) Projects
Terminal 5 Modernization (2)

-

-

19.0

15.5

-

34.5

3.7
2.5
6.3

4.8
0.5
5.3

4.6
0.2
23.8

3.8
27.3
46.6

5.5
1.0
6.5

22.5
31.5
88.5

24.8

61.9

82.4

65.0

12.1

246.2

(3)

Other North Harbor Projects
Channel Deepening and other POS-related Projects (JV)
Subtotal - NWSA North Harbor and POS-related (JV) CIP
Total Levy & G.O. Bond Funding of Non-Airport CIP

New projects appropriate
for tax levy/G.O. bonds
include:
- T46 North Pier
- T91 NW Fender
- Jack Block Park Pier

(1) Net of existing environmental funds
(2) Net of funding from Harbor Development Fund
(3) Net of TIGER capital grant and general fund funding

38

Non-Airport Operating Cash Flow Available for Capital

($ million)
Cash Flow from NWSA
Maritime net income
EDD net income
Revenue bond debt service and adjustments (1)
TOTAL

2020
2021
2022
2023
2024
TOTAL
$
44.2 $
45.0 $
56.0 $
58.4 $
58.4 $
262.1
6.3
11.1
13.6
22.1
24.2
77.4
(10.1)
(9.0)
(9.2)
(8.6)
(7.7)
(44.6)
$

(33.2)
7.3 $

(34.7)
12.5 $

(35.2)
25.2 $

(33.3)
38.6 $

(34.6)
40.3 $

(171.0)
123.9

(1) Adjustments include certain non-operating revenues and expenses and reimbursements for tax levy funded EDD expenses

39

Current Credit Ratings
Noted Credit Strengths:
Moody's
General Obligation Bonds
Aaa
First Lien Revenue Bonds
Aa2
Intermediate Lien Revenue Bonds
A1
Subordinate Lien Revenue Bonds
A2
Passenger Facility Charge Revenue Bonds
A1
Fuel Hydrant Special Facility Bonds
A1

S&P
AAA
AAA+
A+
A+
A

Fitch
AAAA
AAAAA+

• Diverse asset and revenue base
• Airport's market position and
enplanement levels
• Strong balance-sheet liquidity levels
• Conservative debt structure and healthy
debt service coverage ratios
• Strong governance and management
• Long-range strategic and sustainability
plans
• Vibrant and resilient area economy

40

IDD Levy - Background
• Port can levy property tax within an Industrial Development District (IDD)
- In addition to regular property tax
- A port can form multiple districts
• Coextensive with port district, or
• Smaller area within the Port district
- The Port already has two Industrial Development Districts
• Port can implement the levy twice - Port of Seattle implemented first round in 1963
• Purpose is to provide for harbor improvements or industrial development of marginal lands
- Broadly defined
- Includes areas of poor planning or declining tax receipts

41

IDD Levy - Implementation
• Port may implement a second round based on a new formula
- Maximum of $1.8 billion over a period of up to 20 years
• Average amount = $88 million (for 20 years)
• Maximum annual amount = $287 million (45 cents for 6 years)
- Port can establish a smaller IDD or collect a lesser amount, but cannot bank the
unused capacity

• Process to implement
- Publish notice by April 1 to begin collecting the next year
- If within 90 days a petition of 8% of voters (voting in the most recent gubernatorial
election) opposes, the Port must hold a special election to approve the levy

42

IDD Levy Information: "Marginal lands" are defined to include property
subject to the following (RCW 53.25.030) conditions:
1. An economic dislocation, deterioration, or disuse resulting from faulty planning.
2. The subdividing and sale of lots of irregular form and shape and inadequate size for proper usefulness and development.
3. The laying out of lots in disregard of the contours and other physical characteristics of the ground and surrounding
conditions.
4. The existence of inadequate streets, open spaces and utilities.
5. The existence of lots or other areas which are subject to being submerged by water.
6. By a prevalence of depreciated values, impaired investments, and social and economic maladjustment to such an extent
that the capacity to pay taxes is reduced and tax receipts are inadequate for the cost of public services rendered.
7. In some parts of marginal lands, a growing or total lack of proper utilization of areas, resulting in a stagnant and
unproductive condition of land potentially useful and valuable for contributing to the public health, safety and welfare.
8. In other parts of marginal lands, a loss of population and reduction of proper utilization of the area, resulting in its
further deterioration and added costs to the taxpayer for the creation of new public facilities and services elsewhere.
9. Property of an assessed valuation of insufficient amount to permit the establishment of a local improvement district for
the construction and installation of streets, walks, sewers, water and other utilities.
10. Lands within an industrial area which are not devoted to industrial use but which are necessary to industrial
development within the industrial area.

43