6d supp 2
ITEM NO: 6c_Supp_2___ DATE OF MEETING: November 8,2016 Port of Seattle 2017 Preliminary Budget First Reading & Public Hearing Commission Briefing November 8, 2016 1 Outline 2017 Budget Process Recap 2017 Budget Overview 5 Year Net Operating Income Forecast 2017 Operating Budget 2017 Comprehensive Op & Non-Op Budget 2017 FTE Summary 2017-2021 Capital Budget 2017 Sources and Uses of Funds 2017 Proposed Tax Levy Remaining 2017 Budget Schedule 2 2017 Budget Process Jun. 14 Strategic Positioning for Growth (SPG) Budgeting Initiative Briefing Jul. 26 Long Range Plan Update and Budget Considerations beyond the Long Range Plan Briefing Aug. 9 Commission approval of Long Range Plan Aug. 19 Memo to Commission regarding key budget assumptions for 2017 Sept. 13 2017 Budget Overview and Key Assumptions Briefing Sept. 27 2017 Corporate Operating and Capital Budgets Briefing Oct. 10 2017 Division Operating and Capital Budgets Briefing Oct. 18 Preliminary Budget document to the Commission Oct. 20 Preliminary Budget document released to the public Nov. 8 Preliminary Tax Levy and Draft Plan of Finance Briefing Nov. 8 First Reading & Public Hearing of the Preliminary Budget Nov. 22 Second Reading & Final Passage of the Preliminary Budget Dec. 2 File Statutory Budget with King County Dec. 15 Release the Final Budget and Draft Plan of Finance Budget driven by Long Range Plan 3 2017 is a Growth Year Port is expanding its efforts to create jobs in line with the Century Agenda: Expanded outreach with cities and counties across the state Meeting with businesses (current and new) to spur additional development Interfacing with community stakeholders to create workforce development opportunities Expanded public outreach, education and awareness regarding Port initiatives Airport is growing: 44% growth, 7.6% compounded annual rate, since 2012 Entering phase of significant capital development Maritime is growing: Expecting 8.8% growth in cruise in 2017 to over 1 million passengers Major capital asset renewal and replacement needs Economic Development is poised for growth: Des Moines Creek Business Park expansion Preparing Lora Lake site for development Real estate strategy will identify significant future development opportunities Planning for growth and expanded outreach in 2017 4 2017 Key Initiatives/Budget Drivers Enhance public outreach to increase awareness of Port contributions to regional economic vitality and workforce development Expand the Port's internship program to increase career opportunities for local students Accommodate the growth of core businesses, improve customer service and meet operational challenges Implement 100% employee screening at the airport Support the airport capital development program Complete the Sustainable Airport Master Plan (SAMP) Strengthen Centers of Expertise to leverage capabilities Portwide 2017 budget is driven by Portwide initiatives and strong growth 5 5 Year Net Operating Income Forecast ($ in 000's) Compound Budget Forecast Budget Forecast Growth OPERATING BUDGET 2016 2016 2017 2018 2019 2020 2021 2017 - 2021 Aeronautical Revenue $ 261,019 253,226 277,379 $ 297,314 $ 343,885 $ 365,489 $ 407,033 9.3% Non-Aeronautical Revenue 275,305 295,271 298,774 $ 309,594 $ 314,991 $ 332,191 $ 340,919 4.4% NWSA Distributable Revenue 51,829 55,136 46,708 46,328 56,359 55,170 51,394 -0.2% SLOA III Incentive Straight Line Adj (3,576) (3,576) (3,576) 0 0 0 0 -100.0% Total Operating Revenues 584,578 600,057 619,285 653,236 715,236 752,849 799,346 6.5% Total Operating & Maintenance Expenses 335,943 338,934 381,581 390,515 405,277 420,040 437,025 5.4% Net Operating Income Before Depreciation 248,635 261,123 237,704 262,722 309,959 332,809 362,321 7.8% Steady growth projected 6 2017 Budget Highlights Operating revenues are budgeted at $619.3M, $34.7M or 5.9% higher than 2016 budget Operating expenses are budgeted at $381.6M, $45.6M or 13.6% increase from 2016 budget Net Operating Income is budgeted at $237.7M, $10.9M or 4.4% below 2016 budget The 2017 capital budget is $651.6M and the 5-year capital spending plan is $2.7 billion The proposed tax levy for 2017 is $72 million The 2017 budget reflects the Port's growth and continued investments for the region 7 Budget Changes Since 10/10/16 Aviation Division Aeronautical revenues reduced by $721K due to lower operating expenses. Non-aeronautical revenues increased by $77K due to $100K additional revenue from Employee Parking, slightly offset by lower revenue from Ground Transportation. Operating expenses reduced by $1.4M due to $1.2M refinement of Full Employee Screening costs and a $100K reduction of a maintenance contract in the Fire Department. Maritime Division Cruise revenue reduced by $48K due to a cancelled sailing. Economic Development Division Added $257K for elevator work at Bell St Garage. Corporate Expenses increased by a net $54K due to additional Commission Office FTEs and removal of ICT Risk Assessment outside services by Internal Audit. Storm Water Utility refined internal charge calculation resulting in a $128K expense reduction. NWSA Distributable Revenue decreased by $199K to $46.7M. The net change is a $418K increase in NOI 8 2017 Operating Budget 2015 2016 2016 2017 Budget Change Budget vs Forecast ($ in '000s) Actual Budget Forecast Budget $ % $ % Operating Revenues Aeronautical 229,624 261,019 253,226 277,379 16,360 6.3% 24,153 9.5% SLOA III Incentive Adj. -3,576 -3,576 -3,576 -3,576 - 0.0% - 0.0% Non-Aeronautical 196,844 208,321 225,702 226,681 18,361 8.8% 979 0.4% Aviation 422,892 465,764 475,352 500,484 34,720 7.5% 25,132 5.3% Maritime 47,268 49,314 49,801 51,830 2,516 5.1% 2,029 4.1% Economic Development 18,164 13,745 15,409 16,030 2,285 16.6% 621 4.0% NWSA Distributable Revenue 61,401 51,829 55,136 46,708 -5,122 -9.9% -8,428 -15.3% Stormwater Utility 2,808 3,581 4,014 3,845 264 7.4% -169 -4.2% Other 491 345 345 388 44 12.6% 44 12.6% Total 553,023 584,578 600,057 619,285 34,707 5.9% 19,228 3.2% Operating Expenses Aviation 238,140 267,791 271,683 301,796 34,005 12.7% 30,113 11.1% Maritime 33,443 42,467 41,052 46,469 4,001 9.4% 5,417 13.2% Economic Development 19,206 23,446 24,176 28,939 5,493 23.4% 4,763 19.7% Licensed NWSA Assets 18,077 121 300 1,128 1,007 833.6% 828 275.9% Stormwater Utility 2,440 1,759 1,378 2,882 1,123 63.9% 1,504 109.2% Corporate 543 359 345 367 8 2.1% 22 6.5% Total 311,850 335,943 338,934 381,581 45,638 13.6% 42,647 12.6% Net Operating Income 241,173 248,635 261,123 237,704 -10,931 -4.4% -23,419 -9.0% A record $619M of operating revenues for 2017 9 2017 Budget for Tourism Economic Development Tourism Initiatives ($721K total): $245K for UK Marketing Core Communication $165K for Other International/Visit Seattle $150K for Tourism Grant program $50K for World Trade Market & Familiarization Trips $39K for Consultant Services related to tourism events $35K for Program Marketing Cruise & Stay $37K for Advertising and other Tourism Development Department Office expenses $564K for staffing and other expenses in 2017 Maritime Tourism Initiatives: $300K for Best in Class $157K for Destination Awareness $1.7 million budgeted to support Tourism program 10 2017 Budget for Interns Human Resources budgeted for 82 new high school intern positions and a High School Internship Program Manager. Workforce Development budgeted for 30 intern positions in the High School Career Exploration and Intern Program Development Program (public private partnership). Individual departments budgeted 44 college and graduate interns. A total of 156 intern positions in the 2017 budget. Internship program provides career opportunities for local students 11 2017 Comprehensive Budget Summary 2015 2016 2016 2017 Budget Change Budget vs Forecast ($ in '000s) Actual Budget Forecast Budget $ % $ % Revenues 1. Aeronautical Revenues 229,624 261,019 253,226 277,379 16,360 6.3% 24,153 9.5% 2. SLOA III Incentive (3,576) (3,576) (3,576) (3,576) - 0.0% - 0.0% 3. Other Operating Revenues 326,975 327,135 350,407 345,482 18,348 5.6% (4,925) -1.4% 4. Tax Levy 72,819 72,000 72,000 72,000 - 0.0% - 0.0% 5. PFCs 79,209 84,650 85,586 89,087 4,437 5.2% 3,501 4.1% 6. CFCs 23,540 24,963 24,963 26,300 1,337 5.4% 1,337 5.4% 7. Fuel Hydrant 6,957 7,098 7,098 7,024 (74) -1.0% (74) -1.0% 8. Non-Capital Grants and Donations 5,358 3,566 3,566 8,595 5,028 141.0% 5,028 141.0% 9. Capital Contributions 22,804 23,406 18,531 15,000 (8,406) -35.9% (3,531) -19.1% 10. Interest Income 9,091 8,537 12,535 10,822 2,285 26.8% (1,712) -13.7% Total Revenues 772,801 808,799 824,336 848,113 39,314 4.9% 23,777 2.9% Expenses 1. O&M Expense 311,850 335,943 338,934 381,581 45,638 13.6% 42,647 12.6% 2. Depreciation 163,338 162,451 164,451 166,300 3,849 2.4% 1,849 1.1% 3. Revenue Bond Interest Expense 110,128 121,423 116,476 122,026 603 0.5% 5,550 4.8% 4. GO Bond Interest Expense 10,490 14,726 9,808 17,714 2,988 20.3% 7,906 80.6% 5. PFC Bond Interest Expense 5,584 5,302 5,302 4,985 (317) -6.0% (317) -6.0% 6. Non-Op Environmental Expense 2,888 5,000 5,000 5,441 441 8.8% 441 8.8% 7. Public Expense 5,023 8,898 8,898 2,488 (6,410) -72.0% (6,410) -72.0% 8. Other Non-Op Rev/Expense 23,498 3,319 10,335 (257) (3,577) -107.7% (10,592) -102.5% Sub-Total 632,800 657,064 659,204 700,278 43,215 6.6% 41,074 6.2% Revenues over Expenses 140,001 151,736 165,132 147,835 (3,901) -2.6% (17,297) -10.5% 9. Special Item 120,000 147,700 147,700 - (147,700) -100.0% (147,700) -100.0% 10. Retro Adj to Net Position 77,342 - - - - n/a - n/a Total Expenses 830,142 804,764 806,904 700,278 (104,485) -13.0% (106,626) -13.2% Change In Net Assets (57,341) 4,036 17,432 147,835 143,799 3563.3% 130,403 748.1% A strong financial position for the Port in 2017 12 10 Year Comparison of FTEs to Revenues The annual compound growth rate is 1.0% for FTEs compared to 3.1% for operating revenues from 2007 to 2016. Moderate FTE growth for the past 10 years 13 FTE Summary for 2017 Aviation Maritime Econ Dev Corporate Total 2016 Approved FTE's 892.8 184.3 33.8 745.4 1,856.3 Mid Year Approval - - 1.0 9.0 10.0 Eliminated (0.3) - (1.0) (2.0) (3.3) Net Transfers (note 1) (50.2) (30.3) 0.7 79.7 (0.0) Adjusted 2016 FTE's 842.4 154.0 34.5 832.1 1,863.0 2017 Budget Eliminated (5.0) - - (1.3) (6.3) Transfer - - (1.5) - (1.5) New FTE's (note 2) 117.5 7.3 3.0 37.9 165.7 Total 2017 Changes 112.5 7.3 1.5 36.6 157.9 Proposed 2017 FTE's 954.9 161.3 36.0 868.7 2,020.8 Notes: 1) Net transfers include all the FTE transfers resulted from Phase II re-org. 2) Includes 85 new FTEs for the Screening Function in Aviation and 82 (or 16.4 FTEs) for new High School Interns positions in HR. FTEs driven by budget priorities and growth initiatives 14 Capital Budget Summary Capital Budget Summary by Division $'s in 000's 2017 2018 2019 2020 2021 2017-2021 Aviation 590,498 663,351 498,316 354,778 294,193 2,401,136 Maritime 35,020 44,340 48,775 14,862 21,638 164,635 Economic Development 15,950 23,952 33,465 4,120 4,130 81,617 Stormwater Utility 2,140 1,650 1,650 2,150 2,150 9,740 Corporate and Other 7,969 9,152 9,002 9,511 9,692 45,326 Total 651,577 742,445 591,208 385,421 331,803 2,702,454 The Port continues to invest in the region with a 5-year capital plan of $2.7 billion 15 Sources of Funds The Port has diversified funding sources 16 Uses of Funds Capital spending comprises nearly half of Port expenditures 17 2017 Tax Levy Tax Levy Amount: Levy amount established by the Commission each year as part of the budget process The proposed levy for 2017 is $72 million The maximum allowable levy for 2017 is estimated to be $98.7 million Projected rate change from $0.1704 to $0.1544 The Port has managed the tax levy prudently 18 2008-2017 Tax Levy & Millage Rate The Port has gradually reduced tax levy amount since 2009 19 2017 Tax Levy Proposed 2017 Tax Levy Uses: General Obligation (G.O.) Bond Debt Service Regional Transportation projects Environmental remediation Capital improvements at Pier 66 Capital projects in support of the fishing industry Other capital projects and initiatives meeting specified criteria endorsed by the Commission Economic development initiatives including workforce development and Economic development partnership program Tax levy uses include strategic initiatives 20 Remaining Budget Schedule Second Budget Reading Nov. 22, 2016 File Statutory Budget with King County Dec. 2, 2016 Release the Final Budget Document Dec. 15, 2016 Statutory budget to be filed with the County on December 2 21 Port of Seattle 2017 Preliminary Budget First Reading & Public Hearing Commission Briefing November 8, 2016 22
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