Item 9a Supp1
ITEM NO. 9a Supp-1 DATE OF MEETING October 20, 2009 Seaport and Real Estate Funding Plans October 20, 2009 Topics Background Re-cap of prior meeting Preliminary levy scenario Updated scenario Preliminary Assessor Information Draft Levy Policy Seaport Self-Sufficiency 2 Preliminary Levy Discussion On September 17, 2009 staff provided a preliminary briefing on the tax levy Reviewed historical uses and levy policy Reviewed Century Agenda guidelines from funding panel Outlined a revised approach to levy use based on those guidelines No additional levy support for Seaport Interim levy support for Real Estate capital and operations until longer-term plan developed Provided a preliminary levy scenario for discussion 3 Preliminary Levy Scenario Presented 9/17/2009 $'000 2010 2011 2012 2013 2014 Possible levy scenario LEVY USES G.O. DS 40,426 40,438 40,442 40,444 40,442 based on preliminary information Other uses Sea Pub Exp FAST/mobility 21,644 1,509 Levy is maintained at AV Pub Exp - Highline Noise 9,075 7,650 650 4,880 2009 levy until 2013 Sea Environmental Reserved 5,466 2,630 1,407 500 264 $5 mil. Project deferral PortJobs 46 46 46 46 46 Subtotal Other 36,231 11,835 2,103 5,426 310 No new G.O. debt Real Estate Support RE Capital 44,307 26,575 21,686 20,200 10,756 Assumptions RE Operating Subsidy 3,119 2,790 2,130 2,951 2,930 Subtotal RE Support 47,426 29,365 23,816 23,151 13,686 Port participation in waterfront tunnel has not Total Uses 124,083 81,638 66,361 69,021 54,438 been included in the calculations LEVY SOURCES Available Balance 48,000 (184) (5,923) 3,615 (406) Environmental cash Annual levy 75,899 75,899 75,899 65,000 55,000 flows are based on Total Sources 123,899 75,715 69,976 68,615 54,594 current reserved amounts Projected Ending Fund Balance (184) (5,923) 3,615 (406) 156 4 Changes Updated Environmental Reserve cash flows Updated cash flows for projects currently reserved Added cash flows for projects that will be added to the reserve as part of the 2010 budget Updated Real Estate Division forecast Operating deficit including deferred maintenance needs Capital budget update 5 Updated Levy Scenario Base Case Levy is Sufficient to Meet Existing Needs Base Case 2010 levy of $75.9 million Environmental expenses: Cash expenditures for liabilities $'000 2010 2011 2012 2013 2014 LEVY USES reserved for through 2010 G.O. DS 40,426 40,438 40,442 40,444 40,442 Does not include any future liabilities Other uses Sea Pub Exp FAST/mobility 21,644 2,509 400 AV Pub Exp - Highline Noise 9,075 7,650 650 4,880 Public Expense: Sea & RE Environmental Reserved 8,712 5,587 13,894 4,362 1,589 Includes existing FAST PortJobs 46 46 46 46 46 projects and Highline Noise Subtotal Other 39,477 15,792 14,990 9,288 1,635 mitigation Real Estate Support Does not include any RE Capital 20,966 28,300 21,661 19,925 10,781 participation in the SR99 tunnel RE Operating Subsidy 3,450 3,166 2,988 3,583 3,611 Subtotal RE Support 24,416 31,466 24,649 23,508 14,392 Real Estate Support: Total Uses 104,319 87,696 80,081 73,240 56,469 Assumes existing businesses and facilities continue to LEVY SOURCES operate under their current Available Balance 48,000 19,580 7,783 702 462 business models and are Annual levy 75,899 75,899 73,000 73,000 57,000 Total Sources 123,899 95,479 80,783 73,702 57,462 adequately maintained and renewed Projected Ending Fund Balance 19,580 7,783 702 462 993 Rate per 2010 assessed value (cents) 22.3 22.3 21.4 21.4 16.7 6 Alternative Scenarios Lower Levy Option Base Case: Levy remains at $75.9 million Levy decreases beginning 2013, no need to defer projects Levy to $67 mil. (estimated flat levy rate) Need to increase levy in 2011 and 2012 to $79 million Tax Levy Scenarios 95.0 90.0 85.0 80.0 $ million 75.0 70.0 65.0 60.0 55.0 50.0 2010 2011 2012 2013 2014 maximum levy base case: sufficient levy flat rate 2010 7 King County Assessor Preliminary Information County-wide assessed value decreased 11.5% Methodology changed from 3-yr average to 1-yr decline Preliminary assessed value is $340.8 billion Assessed value on existing property decreased 12.8% New construction equaled $4.7 billion compared to nearly $8 billion in 2009 Maximum levy similar to 2009 - $85.5 million Maximum calculation: prior year maximum increased by the lesser of 1% or inflation plus new construction Negative inflation causes maximum levy to decrease Modest new construction off-sets the decrease Port Commission can set the maximum levy based on 1% increase with a super majority vote (RCW 84.55) This would set the maximum at $87.1 million Preserve $1.6 million of annual levy capacity levy But would not increase the actual levy amount 8 Impact on Home Owners Amount of Port Tax for homeowners depends on the dollar amount of the Port's levy Dollar amount is divided by County-wide assessed value to derive a levy rate Levy rate is only a tool used to calculate an individual's amount Examples: Value of existing home decreased 12.8% At 2009 levy - home owner's payment to Port declines due to new construction 2009 2010 - $75.9 mil 2010 - $67 mil Base Case levy levy House assessed value $400,000 $350,000 $350,000 Levy calculation rate (1) 19.7 cents 22.3 cents 19.7 cents Home Owner pays Port $79 $78 $69 (1) Amount paid per $1000 of assessed value 9 Century Agenda: Funding Policy & Strategy Principles The Port should be primarily funded through the self-sustaining enterprises that are at the core of its mission. Revenues from the Port's tax levy should be used for activities that are not fully self-sustaining and cannot be funded in another manner. These activities should directly support the Port's core mission, provide for critical infrastructure investments, or provide environmental mitigation that cannot be funded through its enterprises. The Port should demonstrate to the public that it has managed its financial resources as a disciplined steward of the public interest, guided by priorities set forth in its strategic plan The Port should foster a culture of partnership and collaboration in pursuing public and private funding partnerships for investments that reap shared benefits to all its partners, and that no single entity can achieve independently. Adopted August 4, 2009 10 Draft Levy Policy For Discussion Based on Century Agenda Guidelines, staff began drafting a levy policy Levy Uses: Public Good Supports a core business, but does not provide a subsidy to a specific customer or tenant Provides a community benefit, and Generates little or no enterprise funding E.g. freight mobility/FAST, environmental expenses Business Support Business is not financially self-sustaining Business is deemed important to the community jobs or other benefits or long- term strategic benefits E.g. Fishermen's Terminal, certain industrial properties Issues for continued discussion: Which environmental costs to include expense, capital How is a business defined function/facility, aggregated How is self-sustaining calculated long-term strategy for Real Estate 11 Seaport Self Sufficient Seaport capital plan (CIP) presented to Commission on 10/6/2009 5-yr CIP is $342 million Seaport business can sustain a CIP of $192 million Funded with operating cash flow and revenue bonds Requires $150 million of projects deferred until (2015-2019) Assumes no need for levy support for new projects 2010-2014 Seaport Capital Plan and Funding (2010-2014) 400 350 - 300 76 Operating cash flow 250 $ million 247 Revenue bonds 200 116 Spending deferal 150 BP Prospective CIP 100 150 Committed CIP 50 95 - - CIP Funding 12 Conclusions and Next Steps Conclusions Seaport self sufficient Income can support its critical new investments No additional tax levy needed Real Estate will receive interim levy support Port will develop long-term financial strategy Next Steps Staff will incorporate Commission direction on levy into 2010 Budget and the Draft Plan of Finance Staff will draft a resolution to set the maximum levy based on 1% increase for Commission consideration on November 11, 2009 13
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