7b Presentation Tax Levy Draft Plan of Finance 2021-225
Item No. 7b_supp Meeting Date: October 27, 2020 Draft Plan of Finance 2021-2025 and Tax Levy Briefing October 27, 2020 1 Topics Financial Policy Recommendations Draft Plan of Finance Capital Planning and Funding: Airport Capital Planning and Funding: Non-Airport Tax Levy Background and Update Appendix 2 Financial Management Policy Recommendations for Changes to Minimum Operating Fund Balance Targets Purpose of Financial Policies The primary purpose is prudent financial management Provides for financial sustainability to achieve Port's objectives Promotes stewardship of public resources Provides flexibility to withstand adverse circumstances Manages risk A secondary purpose is to maintain the Port's access to capital Policies support the Port's strong credit ratings Enables the Port to get competitive rates on debt (lower costs) 4 Minimum Operating Fund Balance Targets The Port has two primary operating funds that receive and disburse cash: General Fund: any Port purpose, primarily for Non-Airport businesses Airport Development Fund (ADF): restricted for Airport purposes only Minimum balance targets provide a cushion to protect against adverse business events causing negative cash flows Work in tandem with targeted cash flow margins Obligations that cannot be paid from cash flow can be paid from cash balances Cash flow margins are the same as revenue bond debt service coverage ratios 5 Existing Minimum Fund Balance Target Existing Policy Developed in 2005 to provide a cushion against unanticipated financial stress Port-wide minimum of nine months of operating and maintenance (O&M) expense in the two primary operating funds combined Achieved by maintaining a minimum balance of: Six months O&M in the General Fund Ten months O&M in the ADF Difference reflects the different cash flow margins (debt service coverage targets): 1.25x for the Airport, 1.80x for the Non - Airport businesses 6 Lessons From the Pandemic Existing policy did not anticipate a downturn as severe as the pandemic Analysis of "what if" hypothetical balances shows they would have significantly impaired the Port's cash position (1) Includes $25 million environmental settlement 7 Cash Balance Supports O&M and Debt Service Operating cash balance supports debt service as well as O&M obligations Debt service has grown more than O&M, resulting in an existing target that provides less cushion 2004: 9 months of O&M provided 6.2 months of combined obligations 2019: 9 months of O&M provided only 5.5 months (1) Excludes depreciation expense 8 Policy Development Metrics Development Approach Most common metric is days or months Review industry best cash based on O&M practices Easy to understand and to calculate Research Provides transparency to public and Investor reports investors; Port reports O&M every quarter Peer airports and seaports Investors and rating agencies also Analyze of Port data focus on cash coverage Cash on hand divided by debt service 9 Recommended Changes Staff recommends the following fund balance target changes: General Fund Increase minimum balance target to twelve months O&M effective immediately, since surplus cash is available ADF Increase minimum balance to eighteen months O&M and allow for gradual build up by 2025 10 Draft Plan of Finance 2021-2025 2021 Preliminary Budget October 27, 2020 The Draft Plan of Finance Provided annually to the Commission to inform the budget process and long-term capital investment decisions Developed based on a sustainable financial model Detailed five-year business forecasts Financial targets that allow the Port to manage downside risk and maintain strong access to financial markets 12 2020 Approach Operating forecast has a high degree of uncertainty Forecast based on an adverse outcome slow economic and financial recovery Risk of over optimism is greater than risk of pessimism Financial targets provide resiliency Based on recommended changes Revenue Bond Coverage Minimum Fund Balance Airport 1.25x debt service 18 months (1) Non-Airport 1.80x debt service 12 months (1) To be achieved by 2025 13 Airport and Non-Airport Capital Are Funded Separately Airport Non-Airport Relies on its own operating cash Includes Northwest Seaport Alliance flow from airline cost recovery and (NWSA), Maritime and Economic non-aeronautical businesses Development (EDD) Unique funding sources: Relies on a combination of: Airport grants Operating cash flow and revenue Passenger Facility Charge (PFC) bonds paid from operating cash flow Customer Facility Charge (CFC) Tax levy (after payment of other tax levy uses) and general obligation bonds paid from the tax levy Funds can only be used for Airport purposes 14 Capital Improvement Plan (CIP) and Funding: Airport 2021 Preliminary Budget October 27, 2020 Airport CIP 2021-2025 $3.3 billion Two major projects are winding down CIP includes: Sustainable Airport Master Plan (SAMP) planning Proposed new investments Allocated Central Services 16 Airport Funding 2021-2025 2021-2025 Revenue bonds will provide Aviation Funding Sources ($ million) Operating Cash (1) $ 186.5 90% of Airport funding Tax levy (2) 1.0 Grants 128.7 Passenger Facility Charge (PFC) 10.0 Other funding includes: Customer Facility Charge (CFC) 24.2 Existing revenue bond proceeds 184.5 Passenger Facility and Future bond proceeds 2,803.6 Customer Facility Charges Total Airport Funding $ 3,338.6 Mostly used to pay debt service Aviation CIP 3,308.6 Allocated Central Services CIP 30.0 Table reflects only amounts Total Aviation Funded CIP $ 3,338.6 used to cash fund projects (1) Includes airport income available after payment of revenue bond debt service. Tax levy funding for Highline (2) Highline Schools noise insulation. School noise mitigation Note: totals may not add due to rounding 17 Capital Improvement Plan (CIP) and Funding: Non-Airport 2021 Preliminary Budget October 27, 2020 Non-Airport CIP 2021-2025: $550 million 2021-2025 Maritime and EDD total $312 Non-Airport CIP ($ million) million after deferral of some Maritime & Economic Development CIP $ 312.4 major investments NWSA - 50% Share (North & South Harbor) 177.4 NWSA - Reserve & Port Projects (1) 52.4 TOTAL $ 542.2 NWSA CIP will be reviewed on Allocated Central Services CIP 7.2 Oct. 28 Total Non-Airport Funded CIP $ 549.5 (1) Includes North Harbor channel deepening and other 100% Port legacy costs in North Harbor. Note: totals may not add due to rounding Port is responsible for certain legacy projects related to NWSA facilities, e.g. channel deepening 19 Maritime & EDD CIP Developed Based on Reduced Funding 2021-25 CIP Total CIP goes through an iterative $600 process $531M $500 ($144M) June: Initial 2021-25 CIP $531 $387M $400 ($75M) million $312M $300 Preliminary funding analysis in $200 August: $378 million $100 Updated analysis in September: $0 June Initial August Revision September Revision $312 million In Construction Large Projects Mid-Cap Projects Small Projects Fleet/Technology/TIs Reserve Funding 20 Non-Airport Capital Funding 2021-2025 2021-2025 80% is from tax levy related Non-Airport Funding Sources ($ million) sources: Operating Cash (1) $ 94.7 Tax levy cash Grants 15.0 Harbor Development (for T5) Harbor Development Fund 57.4 G.O. bonds paid by the tax levy Tax levy (2) 99.3 Future G.O. bond proceeds 283.0 Operating cash is after the Total Non-Airport Funding $ 549.5 payment of revenue bond debt (1) Includes non-airport income available after payment of revenue bond debt service. service (2) Assumes 3% annual levy increase from 2021-2023. Note: totals may not add due to rounding NWSA and Port anticipate grants for certain investments 21 Change in Funding from Prior Plan Overall capacity has declined by $130 million Funding has shifted to levy resources ($ million) 2020-2024 2021-2025 Operating Cash 214 95 Pandemic reduced revenue forecast Grants 3 15 NWSA and new Port grants added to TIGER Revenue Bonds 115 0 Reduced revenues eliminate bonding capacity Sub total - Revenue based Funding 332 110 Tax Levy Cash 55 99 Anticipated environmental spending shifted later Harbor Development Fund 96 57 Spend-down due to T5 construction G.O. Bonds 197 283 Near maximization of bonding capacity Sub total - levy based funding 348 440 TOTAL Funding 679 549 22 Non-Airport Capital Funding Capacity Operating Revenue Highly Uncertain Tax levy Provides Funding Stability Based on the current adverse economic forecast Tax Levy and G.O. bonds fund 80% of investments in this Plan Capital funding from revenue is limited $303 million investments included in levy/G.O. bond No capacity for new revenue bonds funding The Maritime and EDD CIP requires significant $57 million Harbor Development Fund deferrals of some investments $79 million of General Fund investment to be paid NWSA CIP is fully funded from levy/G.O. bonds in the future By next year the revenue forecast may be Plan assumes maximization of G.O. bonds significantly different A drop in G.O. debt service in 2026 provides future bond capacity for deferred projects 23 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 access to credit markets 24 2021 Finance Initiatives Issue Revenue bonds as needed to fund a portion of the Airport CIP Refund bonds for debt service savings 2010 Revenue Bonds are currently candidates Monitor other potential candidates Manage variable rate debt credit renewals 25 Tax Levy Background and Update 2021 Preliminary Budget October 27, 2020 Tax Levy Washington State ports are permitted to levy a tax on property within the port's district The levy dollar 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 2021 is $108.2 million The 2020 levy is $76.4 million Proposed 2021 levy is $78.7 million (a 3% increase) The 2021 proposed tax levy is consistent with the plan adopted in 2018 to retain purchasing power needed to invest in the waterfront and maritime industries 27 Tax levy Uses Investments in maritime infrastructure Environmental sustainability Regional transportation mobility Community: workforce development, partnership grants, Airport communities and tourism 28 Tax Levy Plan Catch-up on purchasing power: Over the prior decade, inflation significantly reduced the purchasing value of the levy Last year CPI = 2.2%, construction inflation = 5.5% Adopted for 2019: Five-years 2019- 2023, annual 3% inflationary levy increase to support investments in the Waterfront Strategy Reviewed annually 2021 represents the third year of the plan; proposed levy of $78.7M in 2021 $105 mil. lost purchasing power 2008-2020 29 Taxpayer Impact of Proposed 2021 Tax Levy 2020 2021 preliminary Tax Levy ($ million) 76.4 78.7 Estimated millage rate ($/1000) 0.119 0.122 Median home value ($) (1) 600,000 600,000 Estimated median home Port tax ($) 71.67 73.24 (1) 2018-2020 per King County Assessor; 2020 assumes no additional growth in assessed value Preliminary estimate indicates that the median homeowner will see an annual increased Port levy payment of $1.58 in 2021. 30 Overall Taxpayer Impact - 2020 Only 1.2% of King County taxes go to the Of the $5.6 billion of Port property taxes paid in 30.4% King County, 1.2% goes 26.8% to the Port In 2020, the median 15.2% 13.9% homeowner paid $5,961 12.5% in total property tax with $72 going to the Port 1.2% Port County All Other Municipal Local State Schools Schools 31 2020 Tax Levy Update ($ million) Current estimate: $8 million of levy SOURCES OF TAX LEVY FUNDS 2020 available for future investments 2020 Beginning Levy Fund Balance $ 15.1 Annual Tax Levy 76.4 In addition to the tax levy, Reimbursements 0.9 Commission established: Investment Income 0.2 Harbor Development fund Total Sources $ 92.6 (HDF) for T - 5 redevelopment USES OF TAX LEVY FUNDS Transportation Infrastructure G.O. bond debt service (Existing) $ 39.8 fund (TIF) for regional mobility Environmental Remediation Expense 7.9 participation Community Programs 13.0 NWSA Membership Interest Contribution - net 5.5 Further details on TIF and HDF Non-Airport Capital Investments 18.3 can be found in Appendix Total Uses $ 84.5 Ending balance rolls forward as Projected Ending 2020 Levy Fund Balance $ 8.1 part of 5- year funding plan 32 Tax Levy Fund Sources and Uses 2021-2025 ($ million) Tax Levy Fund - Assumptions SOURCES OF TAX LEVY FUNDS 2021-2025 Beginning Balance $ 8.1 Continuation of planned 3% increase Tax Levy Collection 410.1 2021-2023, 0% in 2024 and beyond Environmental Receipts 26.8 Future insurance recoveries for Transfer from TIF 30.0 environmental remediation Total Sources $ 475.0 $30 million moved from TIF to levy repay post 2025 USES OF TAX LEVY FUNDS G.O. Bond Debt Service $ 252.4 Additional G.O. bond debt service Non-Capital Uses 121.9 payments Capital Investments 100.3 G.O. bonds can fund $283 million of Total Uses $ 474.6 investments in addition to the $99 million paid by tax levy cash 2025 Projected Ending Balance $ 0.4 33 Tax Levy and G.O. Bond Uses Capital Investments ($ million) 2021-2025 Funding from both tax levy cash and Tax Levy Cash $ 100.3 G.O. bond proceeds G.O. Bond Proceeds 283.0 Investments focus on Maritime TOTAL $ 383.3 Industries Supports investments in Capital Investments: T91 and Fishermen's Terminal Environment and Community $ 28.8 T5 and North Harbor container terminals and Fishing and Maritime Industries 140.6 channel deepening T5 and North Harbor 130.9 Habitat restoration, shore power, central waterfront amenities Unspecified investments to change funding 79.4 CIP Reserves 3.5 Funding forecast requires $79 million TOTAL CAPITAL TAX LEVY USES $ 383.3 investments moved from General Fund to tax levy/G.O. bonds beginning 2022 34 2021-2025 Tax Levy Uses Non Capital Investments ($ million) 2021-2025 G.O. bond debt service (Existing) $ 173.3 G.O. Bond Debt Service - G.O. bond debt service (New) 79.1 $252M Total G.O. bond debt service $ 252.4 Environmental Remediation Non-Airport Environmental Expense $ 69.9 and Improvements Pier 86 - Public Expense 1.0 NWSA Membership Interest Contribution - net 10.5 Membership Interest Workforce Development 6.3 Contribution to the NWSA EDD Grants/Programs 8.1 Environmental Grants (ACE) and Energy and Sustainability 0.6 Port Community Programs Duwamish Valley Community Equity Program 1.4 Levy funded portion Sustainable Aviation Fuels and Air Emissions Program 5.0 Included in 2021 operating and South King County Fund 8.5 non - op budget City of SeaTac Safety Enhancements 7.0 Local Community Advertising Program (Spotlight) 3.6 Total Other Non-Capital Uses $ 121.9 TOTAL NON-CAPITAL TAX LEVY USES $ 374.3 35 Tax levy Summary Important resource for achieving the Port's goals Provides financial stability during a time of unprecedented uncertainty Lost revenues require greater use of the levy in order to support the Port's mission Modest increases help maintain purchasing power 36 Appendix 2021 Preliminary Budget October 27, 2020 Contents Pages 39-40 Policy Research 41-50 Additional Tax Levy Information 51-53 Industrial Development District Levy Information 54 Credit Ratings 38 General Fund Minimum Balance Policy Research Recommended General Fund Target Based on standards for Seaports Twelve months O&M Wide range of O&M targets: Within the range, but above average Six to twenty months of O&M Equates to 2.7x cash coverage Average is ten plus Within range, but at the lower end Wide range of cash coverage: 1.4x 22.4x Average 8.2x 39 Airport Development Fund Minimum Balance Policy Research Recommended ADF Target Wide range of balances: Eighteen months O&M Eight to seventy two months of O&M Within range of peer airports Average is twenty four months Equates to 2.5x debt service in Recent survey of large airports 2024 Average target of fifteen months O&M Up from nine months in 2015 Narrower range of cash coverage: 1.5x 4.0x Average 2.7x 40 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 2021 is estimated to be ~$108.2 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 2021 rate is estimated to be 12 cents based on a $78.7 million levy) For 2021, this limit is ~$290.0 million Excludes the amount needed to pay G.O. bond debt service of $38.5 million 41 2020 Levy Status SOURCES AND USES OF TAX LEVY ($ million) 2020 2020 Budget SOURCES Budget Est./Act Variance 2020 Beginning Fund Balance $ 12.6 $ 15.1 $ 2.5 Annual Tax Levy 76.4 76.4 - Environmental Grants & Other Reimbursements 13.3 0.9 (12.5) Investment Income - 0.2 0.2 Total Sources $ 102.3 $ 92.6 $ (9.7) USES G.O. bond debt service (Existing) $ 39.8 $ 39.8 $ - Environmental Remediation Expense 8.2 7.9 0.3 Capital Expenditures - Maritime 3.3 2.4 0.8 Capital Expenditures - EDD 11.3 8.2 3.1 NWSA North Harbor Spending 12.1 7.6 4.5 NWSA Membership Interest Contribution 5.5 5.5 - Airport Community Ecology (ACE) Fund 0.5 0.5 (0.0) Energy and Sustainability Policy Directives 0.3 0.1 0.1 Workforce Development 1.4 2.9 (1.5) Economic Development Partnership Program 1.0 1.0 - Tourism Grants 0.2 0.5 (0.3) Local Community Advertising Program 1.1 1.1 - Workforce Development Pilot Program - Airport 0.3 0.2 0.1 Duwamish Valley Community Equity Program 0.3 0.3 - South King County Fund 1.5 1.5 - City of SeaTac Safety Enhancements 1.4 1.4 - Highline Schools Noise Projects 3.5 3.5 - Total Uses $ 91.5 $ 84.5 $ 7.1 Estimated Ending 2020 Tax Levy Fund Balance $ 10.8 $ 8.1 Totals may not foot due to rounding 42 2009-2021 Tax Levy & Millage Rate (1) (1) Millage rate represents the amount per every $1,000 of assessed valuation 43 Actual vs. Maximum Allowable Levy 44 Transportation and Infrastructure Fund (TIF) TIF ($ million) 2021-2025 Post 2025 Beginning Balance $ 70.2 $ 5.3 Transportation Investments (below) (34.9) (22.8) Transfer (to) from Tax Levy (30.0) 17.4 Ending Balance $ 5.3 - Transportation Investments ($ million) 2021 2022 2023 2024 2025 2021-2025 Post 2025 Seattle Heavy Haul Network $ 0.1 $ 4.0 $ 4.0 $ 2.0 $ 2.0 $ 12.1 $ 7.8 Fast Corridor I 0.2 - - - - 0.2 - Fast Corridor II 0.3 - - 0.7 0.1 1.1 - N Argo Express Access - Pub Ex 0.2 - - - - 0.2 - East Marginal Way Phase 2 0.3 - - - - 0.3 - Safe and Swift 3.5 2.5 - - - 6.0 - Puget Sound Gateway (SR 509) - - - 15.0 - 15.0 15.0 TOTAL $ 4.6 $ 6.5 $ 4.0 $ 17.7 $ 2.1 $ 34.9 $ 22.8 45 Harbor Development Fund (HDF) SOURCES AND USES OF HARBOR DEVELOPMENT FUND HDF created in 2017 in anticipation of ($ million) investment in T5 SOURCES 2020 2021-2025 $57 million projected balance available Beginning Balance $ 109.6 $ 57.4 to continue funding Investment Earnings 2.0 - Port's share of remaining (2021-2025) T- Total Sources $ 111.6 $ 57.4 5 modernization costs is ~$81.5 million USES HDF projected to be depleted in 2022. T-5 Modernization (Port 50% share) $ (54.2) $ (57.4) Additional amounts not funded with HDF will be paid from tax levy cash or G.O. Ending HDF Balance $ 57.4 $ - Bonds 46 Tax Levy Cash Flows for Non-Capital Uses ($ million) 2021 2022 2023 2024 2025 TOTAL G.O Bond Debt Service $ 38.5 $ 59.1 $ 59.1 $ 47.8 $ 47.8 $ 252.4 NWSA Membership Interest Contribution 5.5 - 5.0 - - 10.5 Environmental Remediation Expense 11.4 6.7 13.8 24.3 13.8 69.9 Pier 86 - Public Expense - 1.0 - - - 1.0 Energy and Sustainability Fund 0.4 - - - - 0.4 Airport Community Ecology Fund 0.2 - - - - 0.2 Economic Development Programs 2.5 1.3 1.4 1.4 1.5 8.1 Workforce Development 1.3 1.3 1.3 1.3 1.3 6.3 Duwamish Valley Community Equity Program 0.3 0.3 0.3 0.3 0.3 1.4 Local Community Advertising Program 0.7 0.7 0.7 0.7 0.8 3.6 South King County Fund 1.5 2.3 2.3 2.3 - 8.5 Sustainable Aviation Fuels and Air Emissions Programs - 1.7 1.7 1.7 - 5.0 City of SeaTac Safety Enhancements 1.4 1.4 1.4 1.4 1.4 7.0 Total Non-Capital Tax Levy Uses $ 63.6 $ 75.8 $ 86.9 $ 81.2 $ 66.7 $ 374.3 47 Levy & G.O. Bond Funded Capital Investments ($ million) Status CIP Description 2021 2022 2023 2024 2025 Total Maritime and Economic Development Projects Projects identified for 5 T117 Restoration (1) 3.3 4.7 0.3 0.3 0.3 8.8 5 P66 BHICC Interior Modernize 0.1 - - - - 0.1 levy/G.O. bond funding 5 T91 Northwest Fender 7.7 0.2 - - - 7.9 4 T91 Uplands Development 0.8 17.0 26.0 3.9 - 47.7 4 T91 Berth 6 & 8 Redevelopment 1.2 1.0 11.7 26.0 - 39.9 Additional projects 4 FT Maritime Innovation Center 0.5 5.0 4.0 0.8 - 10.3 4 P66 Shore Power (2) 1.0 12.6 - - - 13.5 appropriate for tax 4 FT Gateway Building 1.0 - - - - 1.0 4 Central Waterfront Bridge Elevator Modernization 1.3 0.4 - - - 1.7 levy/G.O. bonds: 3 Jack Block Park Pier Replacement 0.4 0.2 1.5 1.7 - 3.8 3 T91 P91W Slope Stabilization - - - 1.0 - 1.0 3 T46 Replace N Pier Structure - - 1.0 5.2 20.0 26.2 T46 North Pier 3 Salmon Bay Fire Suppression 0.2 0.5 - - - 0.7 2 FT C-14 Downey Bldg Improv 0.5 2.5 0.1 - - 3.1 T91 NW Fender 2 FT ADA Compliance Project 0.9 0.5 0.0 - - 1.4 2 FT C15 Bldg Misc Improv - - - 0.1 1.2 1.3 Jack Block Park Pier 2 Maritime/Economic Development CIP Reserve - 1.5 2.0 - - 3.5 Subtotal - Levy Funding MD & EDD CIP 18.7 46.2 46.6 39.0 21.5 171.9 An additional $79 NWSA North Harbor and POS-related (JV) Projects Terminal 5 Modernization (3) - 14.6 9.4 - - 24.0 million of projects will Other North Harbor Projects (4) 4.3 7.0 12.0 16.5 27.0 66.9 Channel Deepening and other POS-related Projects (JV) 3.5 0.8 13.3 19.3 3.0 40.0 be moved from General Subtotal - NWSA North Harbor and POS-related (JV) CIP 7.9 22.4 34.8 35.8 30.0 130.9 Aviation - Highline School Insulation - - - - 1.0 1.0 Fund to levy/G.O. Total Levy & G.O. Bond Funding of Non-Airport CIP (5) 26.6 68.6 81.4 74.8 52.5 303.8 bonds beginning in (1) Net of existing environmental funds 2022 (2) Net of capital grant funding (3) Net of funding from Harbor Development Fund (4) Net of NWSA capital grants (Port share) (5) Additional tax levy/G.O. bond funding capacity identified in the 2021-2025 Draft Plan of Finance; currently general funded but may need levy funding. 48 Non-Airport Operating Cash Flow Available for Capital ($ million) 2021 2022 2023 2024 2025 TOTAL Cash Flow from NWSA $ 42.9 $ 45.7 $ 49.4 $ 49.1 $ 48.2 $ 235.3 Maritime net income (5.1) 3.3 2.3 2.5 8.1 11.2 EDD net income (8.1) (6.4) (6.7) (6.5) (5.4) (33.1) Revenue bond debt service and adjustments (1) (36.4) (38.5) (28.5) (28.2) (28.1) (159.6) TOTAL $ (6.5) $ 4.2 $ 16.6 $ 16.9 $ 22.8 $ 53.9 (1) Adjustments include certain non-operating revenues and expenses and reimbursements for tax levy & other funded EDD and Corporate expenses 49 Commission Established Levy Use Criteria for Capital Investments Uses: Established in 2015, updated in 2018 Operating Cash Tax Levy Asset Renewal Business income sufficient to Economic benefit support investments Strategic Initiatives Short payback/ No or long payback Self funding Location South Harbor North Harbor 50 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 51 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 = $89 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 52 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. 53 Current Credit Ratings Noted Credit Strengths: Diverse asset and revenue base Moody's S&P Fitch Airport's market position and General Obligation Bonds Aaa AAA AA- enplanement levels First Lien Revenue Bonds Aa2 AA- AA Intermediate Lien Revenue Bonds A1 A+ AA- Strong balance-sheet liquidity levels Subordinate Lien Revenue Bonds A2 A+ AA- Conservative debt structure and healthy Passenger Facility Charge Revenue Bonds A1 A+ A+ debt service coverage ratios Fuel Hydrant Special Facility Bonds A1 A- Strong governance and management Long-range strategic and sustainability plans Vibrant and resilient area economy 54
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