PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.      7d 
STAFF BRIEFING 
Date of Meeting      May 17, 2016 
DATE:    May 11, 2016 
TO:     Ted Fick, Chief Executive Officer 
FROM:    R. Borgan Anderson, Director, Aviation Finance & Budget 
SUBJECT:  Aviation Plan of Finance Update 
SYNOPSIS 
Consistent with commission guidance in the May 26, 2015 motion regarding the funding
of the Aviation Division Capital Improvement Plan (2015 Funding Motion), staff is
providing the commission an update on the funding plan and the implications for future
airline rates and passenger airline cost per enplaned passenger (CPE).  In October of
2015, when the 2016 capital budget and plan of finance was presented to the commission,
there was uncertainty over the final cost estimates  of major projects such as the
International Arrivals Facility (IAF) and the North Satellite Expansion (NSAT). This
uncertainty negated the value of future rate analysis at that time.
The Aviation Division's capital program for 2016  2025 anticipates spending $3.4
billion.  The plan includes spending over $2 billion on four projects:  IAF, NSAT,
Baggage Optimization and South Satellite renovation (SSAT). Since the airport sets
airline rates to recover costs (capital and operating costs), there will be cost pressures
driving rates up in the years to come. It should be noted that while the capital plan
includes allowances for as yet unidentified projects, it does not explicitly incorporate
investments needed to implement the Sustainable Airport Master Plan. 
Passenger Facility Charge revenues (PFCs) are an important funding source and a key
tool to manage airline rates because all costs paid with PFCs are excluded from airline
rate bases. The base funding plan assumes that 100% of the revenue bond debt service
associated with the construction of runway 16R/34L (Third Runway, placed in service in
2008, total cost approximately $1 billion) is paid with PFCs to manage the landing fee
rate.   With the planned expenditures on the NSAT and SSAT projects, the projected
terminal rental rate will increase 65% by 2025, while landing fees are expected to
increase by only 5.6%. By shifting the use of PFCs, the Port could moderate the growth
in terminal rents while allowing the landing fee rate to increase.  The attached
PowerPoint presentation shows the future rate impacts for the base case and two
additional scenarios that incorporate such shifts. Staff has begun discussions with the
airlines to determine their preferences. No definitive decision is needed at this time.


Template revised May 30, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 11, 2016 
Page 2 of 4 
BACKGROUND 
Consistent with the 2015 Funding Motion, staff has developed a funding plan that aims to
maintain a competitive landing fee, Federal Inspection Services rate (FIS, the
international arrivals fee charged to airlines) and CPE compared to peer airports. While
not mentioned specifically in the 2015 Funding Motion, maintaining competitive terminal
rents is also important. The significant investments the Port will be making in terminal
improvements (approximately $1.1 billion for NSAT and SSAT) will drive up terminal
rents.  Staff is analyzing through scenario analysis the future rate impacts of shifting
PFCs from the airfield cost center to the terminal and FIS cost centers as follows: 
Scenario 1        Scenario 2        Scenario 3
2016    2025  2016-25   2025  2016-25   2025  2016-25
Rate Category    Rate    Rate  % Change   Rate  % Change   Rate  % Change
Landing fee       3.57        3.77       5.6%    4.61       29.1%    4.61       29.1%
Terminal Rents   118.89   196.68   65.4%   178.60   50.2%   180.00   51.4%
FIS              5.76        12.00   108.3%    12.00   108.3%    10.00    73.6%
CPE          11.00   15.40   40.0%   15.44   40.4%   15.44   40.4%
Scenario 1 is the base case, and reflects two key assumptions: 1) 100% of Third Runway
revenue bond debt service is paid with PFCs, and 2) Sufficient PFCs are used to pay
revenue bond debt service on the IAF to achieve a $12 FIS rate (highest projected rate
among peer airports). All remaining PFCs go to terminal projects. Scenario 2 begins
shifting PFCs from the airfield to the terminal cost center in 2019, allowing the landing
fee to grow 3% per year. The PFCs are applied to paying terminal revenue bond debt
service to achieve a reduction in the percent increase in terminal rents from 65% to 50%.
Scenario 3 shows a further shift of some PFCs from the terminal cost center to the FIS
cost center to achieve a $10 FIS rate rather than $12. Since the FIS cost center is small
compared to the terminal, a modest shift of PFCs can reduce the FIS rate increase from
108% to 74%, while causing the terminal rate to change by only 1%. 
In 2015, much of the dialogue with the commission and the airlines relating to funding
focused on specific funding plans for individual projects (e.g., IAF and NSAT). While
project funding plans are the building blocks for future rates, it is the future rates that are
truly important. The following tables show the funding plans for the NSAT and IAF
projects corresponding to Scenario 1 (base case). The shifts in use of PFCs for Scenarios
2 and 3 do not change the project funding plans; rather, the changes are reflected in
alternative uses of PFCs to pay revenue bond debt service by cost center once the projects
are completed, thus altering the costs that are recovered, and the rates charged to airlines.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 11, 2016 
Page 3 of 4 
NSAT Funding plan, Base Case: 
Funding Sources     $000s  Capital Rate Base    2020     2024
Cash/ADF         537  Amortization       36        36 
Revenue Bonds    408,071  Debt Service     11,886   34,164
PFCs          122,493  DS paid w/PFCs    (3,176)   (20,870) 
Total            531,102   Net capital costs     8,746        13,330
Effective percent of PFCs to fund project costs:       43.6%     70.0%
At this time, staff is assuming for planning purposes that 70% of the costs of NSAT will
be eligible for use of PFCs. The actual eligibility percentage will be determined by the
Federal Aviation Administration. In Scenario 1, maximum PFC funding is achieved in
2024. For comparison, under Scenario 2, maximum PFC funding would be achieved in
2022. 
IAF Funding Plan, Base Case:
Funding Sources     $000s  Capital Rate Base    2020     2024
Cash/ADF       200,000  Amortization - - 
Revenue Bonds    308,365  Debt Service     28,932   28,947
PFCs          100,000  DS paid w/PFCs   (18,427)        (19,778) 
Total            608,365   Net capital costs    10,505     9,169 
Effective percent of PFCs to fund project costs:       48.7%     51.1%
Consistent with commission direction, the funding plan for the IAF includes up to $200
million cash (Airport Development Fund) without including an annual amortization
charge in the FIS rate base. For planning purposes, staff has assumed that 80% of the IAF
costs would be eligible for use of PFCs. As with NSAT, the actual eligibility percentage
will be determined by the FAA. Since the funding plan targets a $12 FIS rate, the Port
uses only sufficient PFCs to achieve that rate.
Staff presented these concepts to the airlines at the March 15, 2016 Airport Airline
Affairs Committee (AAAC) meeting. There is a special AAAC meeting scheduled for
May 3, 2016 to discuss the above in greater detail.
Comparisons to peer airports are based primarily on most recent actual data as reported to
Airports Council International (ACI) through a survey.  Future CPE information is
available to the extent that airports publish future financial information in budgets, bond
documents or other publications. This information has been compiled by a consultant.
Future rates are generally not available. In 2015, the Port hired a consultant to derive

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 11, 2016 
Page 4 of 4 
future FIS rates for peer airports. Given the dearth of future rate information, staff has
focused on changes to our own rates as in indication of problems and opportunities. 

The 2015 Funding Motion requests annual updates for the following items: 
Projected final costs of IAF: still $608 million. 
Provisions of new airline lease agreement: current airline lease agreement runs
through 2017, so no change at this time. 
Federal cap on PFCs: still $4.50, no change. 
Relative balance of international and domestic passengers at Sea-Tac: For 
2015, international passengers accounted for 10.3% of total passengers.
ATTACHMENTS TO THIS BRIEFING 
Computer slide presentation. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
October 13, 2015 Aviation Division 2016 Budget Review briefing 
May 26, 2015 Commission Motion on Guidance for funding Airport Capital
Improvement Program