7b Supp
Item No.: 7b_supp Meeting Date: October 7, 2014 Aviation Division 2015 Operating and Capital Budget Briefing October 7, 2014 1 2015 Budget Highlights Activity growth: Cost Containment 2014 Enplanements O&M +3.7% vs. 2014 +7.1% vs. 2013 Budget 2015 Enplanements CPE Down 7% vs. 2014 +4.0% vs. 2014 fcst. budget Non-Aero Revenue Bottom line Growth: Improvement 2014 +9.7% vs. 2013 Net cash flow +$13.2 2015 +6.7% vs. 2014 million vs. 2014 budget forecast D/S coverage 1.40x vs. 2014 budget of 1.30x 2 Enplanement Growth Higher 25.0 2.5% 2.5% 2.5% Enplaned passengers in Millions 2.5% 3.0% 3.0% 3.0% 20.0 3.0% 3.0% 4.0% 7.1% 4.7% 2.7% 4.0% 1.2% 15.0 4.5% -3.0% 1.0% 10.0 5.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Fcst BUD 2015 Budget Forecast 2014 Budget Forecast SAMP Forecast 2015 Budget Forecast 2014 Budget Forecast Sustainable Airport Master Plan 2013 actual: 4.7% 2013 forecast: 4.2% 2014-2018: 3.8% 2014 forecast: 7.1% 2014 budget: 3.0% 2018-20123: 3.2% 2015 forecast: 4.0% 2015 2023: 2.2% 2023-2024: 2.6% 2016 2020: 3.0% 2021 2024: 2.5% 3 2015 Expense Summary Budget approach: in $000's Identify and segregate 2014 Approved Budget 164,028 major non-recurring Less: 2014 exceptions to baseline: (6,008) A costs as exceptions from 2014 Baseline Budget 158,020 baseline budget 2015 Baseline Budget: Cost increases 6,793 B Manage growth of Savings/budget cuts (6,726) C baseline budget Proposed 2015 budget requests 5,152 D Budget based on actual 2015 Proposed Baseline Budget 163,239 3.3% spending needs, not 2015 Exceptions to Baseline Budget 6,820 E prior budget 2015 Proposed Budget 170,059 3.7% Baseline budget growth driven by airport growth 4 2014 Budget Exceptions (A) Sustainable airport master plan is a multi-year study that in $000's 2014 supports the Century Agenda Exceptions to Baseline Budget objective of meeting the Sustainable Airport Master Plan (CA) 2,300 region's air transportation needs at Sea-Tac for the next Regulated Materials 2,356 25 years International Incentive (CA) 902 Regulated material costs are ADR Master Plan & Implementation 450 driven by capital projects Total Exceptions to Baseline Budget 6,008 International incentives are contractual obligations based on an existing program. This supports the Century Agenda objective of doubling the number of international flights and destinations The ADR master plan and implementation is a multiyear program 5 2015 Budget Expense Drivers Baseline Cost Increases (B) 2015 Baseline Cost Increases: in $000's Payroll detail: Payroll Increases (before new FTE requests) Additional FTE's in 2014: (4) Additional FTE's during 2014 298 (4) Firefighters to reduce overtime Other adjustments for existing FTE's 497 2015 Budget - standard payroll increase 2,564 Other payroll increases: Total Payroll Increase (before new FTE's) 3,359 Job evaluation outcomes Contractual Increases (1) FTE transfer from Corporate Janitorial contract 873 Annualized impact of 2014 mid-year FIS Management contract (CISS) 396 hires (new in 2014 budget) Parking System - Scheidt Bachmann 150 Other contract increases 187 Total Contractual Increases 1,606 Utilities: Utility cost increases Natural gas increase Natural Gas increase 623 Projected 9.7% increase in natural Electricity increase 187 gas consumption Garbage disposal increase 237 Expected increase in fixed cost per Other Utility increases 152 therm Total Utility Cost Increases 1,199 Non-Aero costs related to revenue growth B&O tax increase 192 Increase in credit card fees 175 VIP lounge expenses 262 Total Non-Aero Cost Increases 629 Total 2015 Baseline Cost Increases 6,793 6 2015 Budget Expense Drivers Baseline Budget Savings (C) 2015 Baseline Budget Savings: in $000's Other Payroll Savings $1,004 Reverse one-time items in 2014 Budget 2,641 $155K lower new hire rates $157K (3) positions eliminated Increased Payroll Charges to Capital (existing FTE's) 1,107 $505K represented employee contract Payroll Savings - repurpose (13.9) FTE's 550 budget corrections Other Payroll savings/cuts (zero based budgeting) 1,004 $168K revised overtime assumptions Reduction in B&O tax (loading bridges) 298 $19K other payroll savings Other Non-Payroll savings/cuts (zero based budgeting) 1,125 Other Non-Payroll Savings - $1,125 Total 2015 Baseline Budget Savings 6,726 $348K reduce RCF expenses to reflect trend in actuals $211K reduced demand for building management services, due to (3) buildings single tenant occupied $167K reduction in Outside Services reflects changing Environmental program needs $150K remove Financial Consultant, revised amount in 2015 Budget Requests $100K remove ADR "Thanks Again" program $60K remove Parking Consultant, revised amount in 2015 Budget Requests 7 2015 Budget Expense Drivers Baseline Budget Requests (D) Budget Request detail: 2015 Baseline Budget Requests: in $000's Capital Program Support: $664K (14) additional FTE's Capital Program Support 664 Safe, Secure Airport: Airport Strategies: $280K (3) additionalramp controllers Safe, Secure Airport 300 Customer Needs/Capacity: $242K (3) additionalFTE Customer Needs/Capacity 423 $100K On-call gate planningsupport $50K Curbside Traffic Mitigation Study Asset Management 1,527 Asset Management: Customer Service 288 $400K Arc Flash phase II study $539K (6) additionalFTE Environmental Innovation 30 $146K manual encoder contract for C60 baggage Airline Cost Management 100 system $442K other Asset Management Non-Airline Revenue Development 1,010 Customer Service: $288K Quality Jobs impact on CISS contract Employee/Organizational Development 172 Non-Aero Revenue Development: Community Partnership 150 $250K Garage Facility Improvements $125K Music Initiative Other 487 $183K parking initiatives (pre-booking, parking Total 2015 Baseline Budget Requests 5,152 consultant,search engine marketing) $200K real estate development: owners liaison costs (reimbursable) $252K other Non-Aero Community Partnership: $150K Noise program (2) feasibility studies (apartment building and church) 8 2015 Budget Expense Drivers Exceptions to Baseline (E) in $000's 2014 2015 Exceptions to Baseline Budget Sustainable Airport Master Plan (CA) 2,300 2,900 Regulated Materials 2,356 2,642 International Incentive (CA) 902 378 ADR Master Plan & Implementation 450 450 Grant funded portion - Burien NERA 3 450 Total Exceptions to Baseline Budget 6,008 6,820 Commitments under international incentive program are less in 2015 2015 budget includes $500K for land development pilot program with FAA. Included as an exception are the amounts to be reimbursed from the FAA and the City of Burien totaling $450K 9 FTE Changes 2015 Proposed Budget FTEs FTEs % 2014 Approved Budget 858.5 Firefighters - Grade D (to reduce overtime) 4.0 Airport Parking Marketing Manager (transfer in from Public Affairs) 1.0 Airport Security Operations Supervisor (position eliminated) (1.0) 2014 Baseline 862.5 0.5% 2015 Budget Changes: Vacant Positions Repurposed in 2015: (13.9) -1.6% New FTE's Driven by Capital Program: 14.0 1.6% New FTE's Driven by Operational and Strategic Needs: 14.4 1.7% Net Change in FTEs: 14.5 1.7% 2015 Budget Proposed FTEs 877.0 Capital program driving increase in FTEs 10 Expense Summary 2013 2014 2014 2015 Budget Change in $000's Actual Budget Forecast Budget $ % Operating Expenses: Payroll 92,998 99,709 96,099 104,191 4,481 4.5% Outside Services 33,996 31,603 32,980 32,534 931 2.9% Utilities 12,937 13,650 14,348 14,796 1,146 8.4% Other Airport Expenses 22,281 18,884 20,325 18,375 (509) -2.7% Airport O&M Expenses 162,211 163,846 163,753 169,895 6,049 3.7% Corporate 35,590 42,718 41,996 43,715 996 2.3% Police Costs 16,581 16,982 16,982 17,413 431 2.5% Capital Development/Other Expenses 11,538 15,437 13,982 16,922 1,486 9.6% Costs from other Divisions 63,709 75,137 72,960 78,050 2,913 3.9% Total Operating Expense 225,920 238,983 236,713 247,945 8,962 3.8% 2015 Payroll costs include new FTEs CDD costs include project costs charged to expense, e.g., South Satellite Interior Improvements project 11 Non-Aeronautical NOI 2013 2014 2014 2015 Budget Change in $000's Actual Budget Forecast Budget $ % Non-Aero Revenues Rental Car 39,839 41,167 44,909 44,998 3,831 9.3% Public Parking 52,225 52,138 56,103 58,925 6,788 13.0% Airport Dining and Retail 41,551 43,714 45,489 49,883 6,170 14.1% International Clubs and Lounges 1,051 1,200 1,800 1,966 766 63.9% Ground Transportation 7,958 7,881 7,988 8,481 600 7.6% Employee Parking 5,461 6,292 6,292 7,115 824 13.1% Utilities 6,332 6,891 6,427 8,377 1,486 21.6% Other 6,657 7,170 7,648 8,812 1,641 22.9% Total Non-Aero Revenues 161,075 166,453 176,655 188,558 22,106 13.3% Non-Aero Expenses RCF Operating Expense 7,049 8,506 8,020 8,011 (495) -5.8% Operating Expense 64,204 73,136 71,222 80,280 7,144 9.8% Share of terminal O&M 20,055 22,547 22,225 23,002 456 2.0% Less utility internal billing (17,294) (18,307) (18,307) (20,334) (2,027) 11.1% Operating Expense 74,014 85,882 83,161 90,960 5,079 5.9% Net Operating Income 87,061 80,571 93,495 97,598 17,027 21.1% Less: CFC Surplus 1 (4,594) (4,623) (5,927) (4,309) 314 -6.8% Adjusted Non-Aero NOI 82,466 75,948 87,567 93,289 17,342 22.8% Debt Service 46,434 46,504 45,892 44,035 (2,469) -5.3% Net Cash Flow 2 36,032 29,444 41,675 49,254 19,810 67.3% Note: (1) $3M in commercial paper will be paid down in 2015, which reduces both CFC Operating Revenues and the related CFC surplus. (2) Non-Aero cash flow is the primary source of airline revenue sharing. Strong growth in Non-Aero revenue is reflected in 2015 increase in airline revenue sharing. 12 Aeronautical NOI 2013 2014 2014 2015 Budget Change in $000's Actual Budget Forecast Budget $ % Revenues: Movement Area 77,028 74,590 74,442 78,706 4,117 5.5% Apron Area 7,909 10,214 10,210 11,351 1,136 11.1% Terminal Rents 147,339 144,641 144,668 153,003 8,362 5.8% Federal Inspection Services (FIS) 7,771 8,617 8,726 10,294 1,677 19.5% Total Rate Base Revenues 240,047 238,063 238,047 253,354 15,292 6.4% Commercial Area 8,487 9,517 7,761 8,445 (1,072) -11.3% Subtotal before Revenue Sharing 248,534 247,580 245,807 261,799 14,220 5.7% Revenue Sharing (9,901) (6,136) (11,140) (19,267) (13,131) 214.0% Total Airline Revenues 238,633 241,443 234,667 242,532 1,089 0.5% Operating Expense 151,906 153,101 153,552 156,985 3,884 2.5% Net Operating Income 86,727 88,342 81,115 85,547 (2,795) -3.2% Debt Service Rate Base 80,654 80,631 80,209 83,284 2,653 3.3% Debt Service Exclusion 743 1,604 1,604 1,539 (64) -4.0% Net Cash Flow 5,330 6,108 (697) 724 (5,384) -88.1% 13 Budget Summary 2013 2014 2014 2015 Budget Change in $000's Actual Budget Forecast Budget $ % Operating Revenues: Aeronautical Revenues 238,633 241,443 234,667 242,532 1,089 0.5% SLOA III Incentive Straight Line Adj 14,304 (3,576) (3,576) (3,576) - 0.0% Non-Aeronautical Revenues 161,075 166,453 176,655 188,558 22,106 13.3% Total Operating Revenues 414,011 404,320 407,747 427,514 23,194 5.7% Total Operating Expense 225,920 238,983 236,713 247,945 8,962 3.8% Net Operating Income 188,092 165,337 171,034 179,569 14,232 8.6% CFC Surplus (4,594) (4,623) (5,927) (4,309) 314 -6.8% Net Non-Operating items paid from ADF 1,353 2,331 2,152 1,504 (828) -35.5% SLOA III Incentive Straight Line Adj (14,304) 3,576 3,576 3,576 - 0.0% Debt Service (127,831) (128,738) (127,705) (128,858) (120) 0.1% Adjusted Net Cash Flow 42,716 37,883 43,130 51,482 13,599 35.9% Key Measures Cost per Enplanement (CPE) 11.85 12.68 11.88 11.79 (0.89) -7.0% O&M per Enplanement 13.00 13.42 12.72 12.81 (0.61) -4.5% Non-Aero Revenue per Enplanement 9.27 9.34 9.49 9.74 0.40 4.3% Debt per Enplanement 146.59 133.72 133.72 129.25 (4.47) -3.3% Debt Service Coverage 1.33 1.30 1.34 1.40 0.10 7.8% 14 Capital Budget Overview Four major programs or projects continue to dominate capital budget: NorthSTAR four projects including expanded NSAT Runway 16C construction will start in 2015 Baggage Optimization design progressing International Arrivals Facility (IAF) updating cost estimate Exercising caution until cost of IAF is known: 31 projects presented to AV Investment Committee 12 eliminated or deferred 8 proposed for inclusion in capital budget 11 with compelling justifications, but not included in budget 15 Capital Budget Summary Cash Flows (Figures in $000s) 2015-19 CIP Categories Projects 2014 2015 2016 2017 2018 2019 Total A. Commission Authorized/Underway 96 196,305 278,222 349,630 310,052 211,360 172,274 1,321,538 B. Pending 2014/2015 Authorization 12 1,635 26,135 32,250 8,372 2,515 1,298 70,570 C. Pending Future Authorization 5 70 30 10,110 9,441 6,500 6,500 32,581 D. Small Projects 8 5,468 5,200 5,200 4,000 4,000 4,390 22,790 Total 121 203,478 309,587 397,190 331,865 224,375 184,462 1,447,479 Proposed New Projects 8 350 9,195 22,199 10,705 1,800 - 43,899 Allowance CIPs 2 3,000 10,000 24,000 34,000 43,000 117,000 228,000 Total Proposed CIP 131 206,828 328,782 443,389 376,570 269,175 301,462 1,719,378 "Authorized" line includes total project budgets for projects with at least partial commission authorization Proposing 8 new projects for inclusion in budget Allowance CIPs represent undesignated future spending for future new projects and potential budget increases for existing projects 2015 2019 will have sustained high levels of spending as major projects will be under construction 16 Capital Budget Summary With Major Projects Broken Out $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 2015 2016 2017 2018 2019 Existing projects Four Major Projects New Projects Allowance CIPs 17 Large Projects International Arrivals Facility NorthSTAR 18 Large Projects Baggage Optimization Runway 16C/34C Reconstruction 19 A. Projects Authorized/Underway Cash Flows (Figures in $000s) 2015-19 A. Commission Authorized/Underway CIP 2014 2015 2016 2017 2018 2019 Total NorthSTAR program 5 CIPs 21,583 43,420 72,854 110,025 107,223 92,491 426,013 International Arrivals Facility C800583 8,654 51,748 134,050 123,799 23,683 1,939 335,219 Baggage Recapitalization/Optimization C800612 4,287 20,000 45,000 50,000 60,000 50,000 225,000 Runway 16C/34C Reconstruction C800406 2,046 56,000 37,503 3,675 97,178 SSAT HVAC, Lights, Ceiling C800376 346 220 - 6,000 10,000 16,000 32,220 Highline School Insulation C200007 11,369 7,256 15,681 3,394 26,331 Main Term Low Voltage Sys Upgrade C800061 576 7,500 9,048 2,388 18,936 GSE Electrical Charging Stations C800335 3,140 13,802 13,802 Vertical Conveyance Modernization C800251 1,608 4,986 5,986 2,084 13,056 CCTV Camera/Data Improvement C800642 387 2,000 5,000 3,612 10,612 Airfield Pavement Replacement C102573 4,809 7,874 7,874 Single Family Home Insulation C200093 3,276 3,010 3,183 6,193 Parking Garage Lights C800581 185 2,000 2,000 1,000 550 501 6,051 Aircraft RON Parking USPS C800254 33,027 4,558 4,558 2014-2015 Roof Replacement C800637 145 4,000 270 4,270 Central Plant Preconditioned Air C800238 4,090 3,064 1,000 4,064 Other projects (76) 96,777 46,784 18,055 7,469 6,510 11,343 90,161 Total 196,305 278,222 349,630 310,052 211,360 172,274 1,321,538 Four largest projects (highlighted in yellow) account for 82% of total Estimated cost for International Arrivals Facility is under review SSAT HVAC may be delayed/canceled based on master plan outcomes 20 B. Projects Pending 2014/2015 Authorization Cash Flows (Figures in $000s) 2015-19 B. Pending 2014/2015 Authorization CIP 2014 2015 2016 2017 2018 2019 Total Emergency Backup Power C800538 200 15,000 21,080 36,080 ADR Infrastructure C800638 384 2,000 5,000 2,000 1,515 10,515 Main Terminal HVAC Upgrade C800240 500 4,000 3,875 8,375 Passenger Loading Bridges C800653 752 1,250 1,000 1,000 1,000 1,298 5,548 Air Cargo Road Safety Improvements C102162 124 403 1,020 1,497 2,920 Domestic Water Piping C800657 100 1,750 100 1,850 Fuel System Modifications C800692 25 1,075 1,075 Cargo 4 (UAL Freight Bldg.) C800645 1,000 1,000 Security Checkpoint Wayfinding C800388 857 857 IWS Segregation Meters C800655 50 800 50 850 Replace Emergency Power Switch C800587 850 850 Concourse A Bridge Level C800638 650 650 - Total 1,635 26,135 32,250 8,372 2,515 1,298 70,570 21 Proposed New Projects Cash Flows (Figures in $000s) 2015-19 CIP Description Budget 2015 2016 2017 2018 2019 Total 1 C800717 North Loop Interconnect Piping 11,950 200 3,950 6,000 1,800 11,950 2 C800724 New Power Center, Conc. C 9,850 2,238 2,957 4,655 9,850 3 C800699 Automated Electrical Switching 9,600 2,000 7,600 9,600 4 C800688 Construction Logistics Expansion 6,400 3,600 2,400 50 6,050 5 C800702 Roof Replacement, Conc. C 3,820 267 3,553 3,820 6 C800716 Central Term Mezz Stairways 1,250 300 950 1,250 7 C800706 Grease Interceptor 939 250 689 939 8 C800648 Emergency Phones 440 340 100 440 TOTAL 44,249 9,195 22,199 10,705 1,800 - 43,899 1. North loop piping will expand piping for chilled water and steam supply to North Satellite from Central Mechanical plant. Necessary for North Satellite expansion. Helps prevent service outages. 2. Concourse C power supply is at capacity. Can't meet tenant growth needs without upgrade. 3. Automated system allows for remote operation of electric (12.5 kv, 480 v) switch gear to prevent arc flash hazards. Aides employee safety. Required by new electrical code. 4. Construction Logistics Expansion project needed to support major capital projects 5. Concourse C roof must be replaced, skylights also. Roof is 23 years old. 6. Center terminal mezzanine level needs additional stairs to provide required egress to permit leasing currently unoccupied space for which there is customer demand 7. Need additional grease interceptor to allow additional restaurant on Concourse C 8. Emergency phones in garage 22 New Projects Delay Approval Cash Flows (Figures in $000s) 2015-19 CIP Description Budget 2015 2016 2017 2018 2019 Total 1 C800690 B2 Building Expansion 18,200 1,450 9,500 6,900 350 18,200 2 C800697 Restroom Room Upgrades B,C,D 10,750 750 3,700 4,300 2,000 10,750 3 C800722 Central Terminal HVAC Upgrade 4,900 500 2,000 2,400 4,900 4 C800695 C3 Holdroom Expansion 3,300 3,300 3,300 5 C800701 Hardening Serv Tunnel Entrance 1,953 391 781 781 1,953 6 C800727 Cargo Hardstand IWS Improvements 1,850 1,850 1,850 7 C800709 Term Wide Voice Paging System 1,500 1,500 1,500 8 C800705 Fire Dept ARFF Vehicle 1,450 1,450 1,450 9 C800711 A14 Ramp 1,400 1,400 1,400 10 C800708 S. Util. Tunnel Steam Piping Upgrade 1,000 1,000 1,000 11 C800712 Additional APC Kiosks 500 500 500 - TOTAL 46,803 14,091 15,981 14,381 2,350 - 46,803 All projects have compelling justifications Projects will be re-evaluated in Q1 2015 for possible mid-year approval 23 Capital Budget Affordability Affordability determined by two comparative measures with peer airports. Goal is to be within middle third: Cost per enplaned passenger Debt per enplaned passenger Using full budget, cost increases to existing projects to be "managed" within existing program budget through use of Allowance CIPs, savings and deferrals. 24 CPE Comparison Most Recent 2013 CPE For 22 Peer Airports $30.00 $25.00 $20.00 $15.00 27.29 26.06 25.46 $10.00 20.39 17.61 16.87 15.68 15.27 13.16 12.37 12.34 11.94 11.90 11.45 11.17 $5.00 10.52 10.16 9.79 7.20 6.76 5.53 3.84 $0.00 IAD JFK EWR MIA SMF LGA SFO ORD BOS PHL LAX SJC SEA DEN PDX IAH SAN DTW DFW MSP PHX SLC 25 Debt/Enpl. Passenger - Most Recent 26 Spending "Cushion" Allowing for New Projects/Cost Increases Five-year capital plans tend to be optimistic. Historically, have not spent above 70% of five year capital budget. Project savings, deferrals or changing customer needs cause project spending to be less than plan. Intent is to absorb any IAF cost increase within existing capital plan limits. $000s 2015-19 Total Calculation of Possible Underspending Capital spending ($000) 1,719,378 Less NSTAR, IAF, 16C (858,410) Subtotal 860,968 Spending reduction factor (10 - 25%) 22% Projected underspending 188,600 Five-Year Theoretical Capacity Projected underspending 188,600 Allowance CIPs 228,000 Total 416,600 27 Financial Forecast In $000's 2014 Bud 2015 Bud 2016 2017 2018 2019 Airline Revenue 241,443 242,532 266,064 288,618 302,236 298,400 Non-Airline Revenue 166,453 188,558 194,046 199,489 203,919 211,242 Total Revenue 407,896 431,090 460,110 488,107 506,155 509,642 Operating Expense 238,983 247,945 255,275 261,799 268,593 275,525 Net Operating Income 168,913 183,145 204,835 226,308 237,562 234,116 Net Non-Operating Income/Expense 2,769 1,504 2,836 2,906 2,988 3,073 CFC Excess* (4,623) (4,309) (3,598) (3,235) (2,734) (2,239) Available for Debt Service 167,059 180,340 204,073 225,980 237,816 234,950 Net Debt Service 128,738 128,858 148,011 168,768 179,261 174,268 Net Cash Flow 38,321 51,482 56,062 57,212 58,554 60,682 Key Measures Debt Service Coverage 1.30 1.40 1.38 1.34 1.33 1.35 Revenue Sharing 6,136 19,267 19,059 15,019 13,739 17,115 Passenger Airline CPE 12.68 11.79 12.58 13.28 13.53 12.94 Debt per Enplaned Passenger 142.0 129.2 136.5 142.4 141.6 143.6 * CFC collections in excess of CFC debt service/O&M are restricted and cannot be used for other revenue bond debt service 28 CPE Comparison - Future $35.00 SEA Future CPE in 2021 $30.00 $25.00 CPE Future CPE $20.00 $15.00 $10.00 $5.00 $0.00 IAD JFK EWR ORD LAX MIA SFO SMF LGA BOS SEA DFW DEN PHL PDX SJC SAN DTW IAH MSP SLC PHX 29 Debt Per Enplanement - Future $400 Blue represents other airports in 2013 $350 343 340 Green represents SEA in 2019 $300 293 249 $250 230 198 $200 170 166 $150 144 129 115 115 115 $100 93 89 88 84 69 $50 $0 0 SJC IAD MIA SMF ORD DFW DEN SFO SEA DTW LAX BOS SAN IAH PHL MSP PDX PHX SLC 2019 30 Past and Future Debt Levels Sea-Tac Airport 31 Balanced Use of PFCs Historical Use of PFCs 1992 - 2013 Percent Airfield (including Noise) 558,726,500 57% Terminal 413,462,500 43% FIS - 0% Total 972,189,000 Total Use of PFCs 1992 - 2049 Percent Airfield (including Noise) 2,037,244,255 43% Terminal 2,212,791,428 47% FIS 464,613,442 10% Total 4,714,649,125 PFCs are used to fund capital improvements and pay debt service on PFC eligible projects. Costs paid by PFCs are excluded from airline rate base. "Balance" in use of PFCs requires long-term view of use by cost center $8.50 PFC level would generate approximately $70 million in additional PFC revenue annually beginning in 2017. Could cash fund capital improvements or pay debt service on approximately $800 million in new capital spending. 32 Next Steps IAF scope and cost estimate will be updated Will analyze forecasted rate impacts by cost center, determine optimal deployment plan for PFCs "Delayed" new projects will be reviewed and proposed for approval in 2015 if prudent Funding plan will require revenue bond issue in early 2015 Will develop PFC application to FAA in 2015 for future use on IAF and North Satellite 33 APPENDIX SUPPLEMENTARY SLIDES 34 Non-Aeronautical Key Indicators 2013 2014 2014 2015 Budget Change Actual Budget Forecast Budget $ % Revenues per Enplanement Parking 3.01 2.93 3.01 3.04 0.12 4.0% Rental Cars (excludes CFCs) 1.64 1.61 1.67 1.69 0.08 4.9% Ground Transportation 0.46 0.44 0.43 0.44 0.00 -1.0% Airport Dining and Retail 2.39 2.45 2.44 2.58 0.12 5.0% Other 1.78 1.91 1.94 1.99 0.08 4.3% Total Revenues 9.27 9.34 9.49 9.74 0.40 4.3% Primary Concessions Sales / Enpl 11.23 11.52 11.65 11.88 0.37 3.2% Revenues per enplanement for all major categories increasing in 2015, reflecting real growth in passenger spending 35 Aeronautical Cost Drivers 2013 2014 2014 2015 Budget Change $ in 000's Actual (1) Budget Forecast Budget $ % O&M 147,209 146,068 146,623 152,932 6,864 4.7% Debt Service 77,909 77,791 77,414 80,863 3,072 3.9% Amortization 18,959 20,001 20,029 24,393 4,392 22.0% Space Vacancy (3,734) (4,529) (4,693) (4,118) 410 -9.1% TSA Grant & Other (296) (1,269) (1,326) (715) 553 -43.6% Total Rate Base Revenue Requirement 240,047 238,063 238,047 253,354 14,738 6.2% (1) Based on 2013 financial statements, not revenue requirement in the final 2013 settlement. Operating Expenses: Terminal - $1.4m increase in utilities expenses, $0.7m increase in janitorial services, $0.7m increase in ERL, $0.6m increase in small works construction services (mostly SSAT renovation project), $0.6m increase in divisional & corporate allocations, $0.5m increase due to non-aero space allocation percentage decrease. FIS -$1m increase in contracted services. Debt Service: Increase to existing debt service amortization Amortization (use of ADF): FIMS/FIDS $1.2M, PeopleSoft Financial Upgrade $0.6M, SharePoint $0.5M Vacancy - less publicly-accessible vacant space. 36 Operating Budget Summary Airport growth driving growth in capital program Expense growth and FTE growth are moderate in comparison All key measures trending positive (see following slides) 37 Airport FTEs - Trend Growth in FTEs since 2011 driven by Rental Car busing and capital program Baseline FTEs essentially flat since 2012 38 FTE Growth due to Operational & Strategic Needs 2015 Proposed Budget FTEs FTEs New FTE's Driven by Operational and Strategic Needs: Ground Transportation Controller 1.0 Airline Systems Resource Coordinator 1.0 Baggage Operations Systems Specialist 1.0 Lean Practioner - Continuous Process Improvement (CPI) 1.0 Call Research Field Worker Position - increased hours 0.3 Financial Analyst III - Finance & Budget 1.0 Facility Master Record Drawing Manager 1.0 Senior Infrastructure System Engineers (4 yr limited duration) 2.0 Lease Administration Specialist 1.0 Aviation Property Manager 2 1.0 Airport Dining & Retail Specialist 1.0 Electronic Technicians 3.0 Community Partnerships Highschool Interns - increased hours 0.2 Total Operational and Strategic FTEs 14.4 Less Repurposed FTE's (currently vacant) (13.9) Incremental Increase to Operational and Strategic FTEs 0.5 Non-capital FTEs are largely absorbed in existing head count by repurposing open positions 39 FTE Growth due to Capital Program 2015 Proposed Budget FTEs FTEs New FTE's Driven by Capital Program: Capital Project Liaison Manager, Baggage Optimization 1.0 Maintenance Manager - Capital Program Support 1.0 Operating Maintenance Engineer - Capital Program Support 1.0 Conveyance System - Capital Program Support 1.0 Electricians - Capital Program Support 2.0 Electronic Technicians - Capital Program Support 2.0 Maintenance - Capital Support Specialist 1.0 Art Program Coordinator 1.0 Architect 4 1.0 Building Department Assistant Manager 1.0 Operations Program Development Manager, Runway 16C 1.0 Operations Program Development Manager, IAF & NorthStar 1.0 Total Capital Program FTEs 14.0 Capital program support requires additional staff for design reviews and coordinating construction around operations 40 O&M Expense per Enplanement 41 O&M Expense Per Enplanement vs. Peer Airports - 2013 42 Non-Aero Revenue Per Enplanement 43 CPE Trends 44 Debt per Enplanement 45 Debt Service Coverage New Airline Agreement in 2013 with Revenue Sharing 46 Projects Driven by Century Agenda Triple air cargo volume to 750,000 metric tons: Will complete Cargo 2 and 6 facility improvements in late 2014 Make Sea-Tac Airport the west coast "Gateway of Choice" for international travel and double the number of international flights and destinations: South Satellite Interior Renovations (ongoing) New International Arrivals Facility (ongoing) Meet the region's air transportation needs for the next 25 years Baggage Recapitalization/Optimization (ongoing) Expand North Satellite to add gates (ongoing) 47 Projects Driven by Century Agenda Meet all increased energy needs through conservation and renewable sources: Stage 3 Mechanical Infrastructure Improvements (ongoing) Parking Garage Area Lighting Improvements (ongoing) Meet or Exceed Agency Requirements for Storm Water: IWS Segregation Meters (ongoing) Reduce air pollutants and carbon emissions: Pre-conditioned Air project (ongoing) Electrical ground service infrastructure and charging stations (ongoing) 48 Projects Driven by Airport Strategies 1. Operate a World Class Airport a. Safe and Secure o CCTV Camera/Data Improvements (ongoing) b. Anticipate/meet needs of airlines, tenant, travelers o NorthSTAR program (ongoing) c. Manage our Assets to Minimize Long Term Costs o Reconstruct Runway 16C/34C (ongoing) o Service Tunnel renewal and replacement (ongoing) o Roofing Project (New) 2.Top 10 Customer Service Airports o SSAT Interior Renovations (ongoing) 49 Projects Driven by Airport Strategies 3. Lead in Environmental Innovation o IWS Segregation Meters(ongoing) o Garage Area Lighting (ongoing) 4. Reduce Airline Costs o Mechanical Energy Conservation (ongoing) 5. Maximize Non-aero operating income o Concessions Infrastructure (ongoing) 6. Invest in Employee Development, Organizational Improvement, and Business Agility o 2015 items within operating budget 7. Develop Community Partnerships o Complete existing noise insulation projects 50 C. Projects Pending Future Authorization Cash Flows (Figures in $000s) 2015-19 C. Pending Future Authorization CIP 2014 2015 2016 2017 2018 2019 Total Airfield Ramp Pavement Replacement C800483 30 5,900 6,500 6,500 6,500 25,400 Vertical Conveyance - Garage C800398 2,941 2,941 Fire Station Improvements C800425 2,280 2,280 South Access Property Acquisition C800143 1,500 1,500 Water Rights Supply Development C800493 40 30 430 460 - Total 70 30 10,110 9,441 6,500 6,500 32,581 Airfield pavement replacement project succeeds existing CIP for airfield pavement replacement 51 D. Small Projects Cash Flows (Figures in $000s) 2015-19 D. Small Projects CIP 2014 2015 2016 2017 2018 2019 Total Aviation Small Capital C100157 2 190 190 Aviation Small Jobs C800017 2,388 2,086 2,086 Aviation Small Capital C800018 929 131 131 AV/IT Small Capital C800066 1,249 1,200 1,200 2,400 Aviation Small Capital C800099 900 1,369 1,500 1,500 731 5,100 Aviation Small Jobs C800100 - 414 2,500 2,500 2,500 2,086 10,000 Aviation Small Jobs C800751 514 514 Aviation Small Capital C800752 769 1,600 2,369 - Total 5,468 5,200 5,200 4,000 4,000 4,390 22,790 Small capital is primarily for vehicles and equipment under $300,000 Small jobs is for construction projects less than $300,000 52
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