Port of Seattle      Item No. 8a_supp
Meeting Date: November 12, 2019
Introduction & Public Hearing of
the Preliminary 2020 Budget
Commission Meeting
November 12, 2019

1

Outline
2020 Budget Process Recap
2020 Key Business Activity Forecasts and Key Initiatives
2020 Operating Budget
2020 Comprehensive Operating & Non-Operating Budget
2020-2024 Capital Plan
2020 Sources and Uses of Funds
2020 Proposed Tax Levy
Remaining 2020 Budget Schedule

2

2020 Budget Process
Jun. 4         2020 Budget Special Meeting with the Commission
Jun. 11        2020 Aviation Business Plan and Budget Development Briefing to the Commission
Jun. 25        2020 Maritime Business Plan and Budget Development Briefing to the Commission
Jul. 9          2020 EDD Business Plan and Budget Development Briefing to the Commission
Aug. 13       2020 Maritime and EDD CIP and Funding Discussion
Sept. 24       2020 Central Services Operating and Capital Budgets Briefing
Oct. 8          2020 Aviation Division Operating and Capital Budgets Briefing
Oct. 8          2020 Maritime and EDD Operating Budgets Briefing
Oct. 22        Maritime and EDD CIP Briefing
Oct. 22        Tax Levy & Draft Plan of Finance Commission Briefing
Oct. 22        Preliminary 2020 Budget Document provided to the Commission
Oct. 22        Preliminary 2020 Budget and 5-Year CIP Open House at Pier 69
Oct. 24        Preliminary 2020 Budget Document released to the public
Oct. 28        Preliminary 2020 Budget and 5-Year CIP Open House at the Airport
Nov. 12       Introduction & Public Hearing of the Preliminary 2020 Budget
Nov. 19       Adoption of the 2020 Budget
Dec. 2         File the 2020 Statutory Budget with King County
Dec. 13       Release the 2020 Final Budget and Draft Plan of Finance
Commission engaged in the budget process
3

2020 Business Activity Forecasts
Aviation Division:
Forecast 3.0% growth in enplaned passenger for 2020 (from the 2019 year-end forecast, which is
expected to be 4.0% higher than 2018)
Enplaned passengers up 42% since 2014 (6.1% compounded annual growth rate)
Major capital projects underway at Sea-Tac will reduce congestion, improve the customer
experience, and add capacity to accommodate future growth
Maritime Division:
8.8% growth in cruise passengers to a record 1.3 million in 2020
16.1% reduction in grain volumes in 2020 due to the current trade climate and tariffs
Recreational Marina occupancy rate of 95%, same as 2019
Fishing and Commercial Operations occupancy rate average of 86%, same as 2019
Economic Development Division:
Commercial Properties target 95% occupancy rate at the end of 2020
2020 budget supports growth in Port businesses
4

2020 Key Initiatives
Serve regional demand and maintain our global gateway.



Serve regional demand       Continue to improve         Support Cruise passenger        Build capabilities through
for air service at Sea-Tac         safety & security                  growth                               process improvement
Support the airport           Continue to improve          Pier 66 BHICC Interior              and innovations
capital improvement           customer service               Modernization                  Operate as a highly
program                                              Advance real estate              effective and equitable
development projects             public agency.
Serving increased demand is a key budget driver
5

2020 Key Initiatives
Create equitable opportunities throughout the region and invest in healthy communities
and environment.


Diversity in Contracting     Workforce Development       Airport Community Ecology    Promote economic
and WMBE             Continue internship program    grants                    development for the region
Equity, Diversity and        Maritime Secondary            South King County Fund        Expand tourism opportunities
Inclusion                      Education                      Energy and Sustainability       Local Community Advertising
Expand Eastside and other   Youth Maritime Initiative        grants                         Program
stakeholders engagement   Career Advancement Center   Sustainable Aviation Fuels
Significant budget resources to support community priorities
6

2020 Budget Highlights
2017       2018      2019      2019      2020     Budget Change
($ in '000s)                Actual         Actual      Budget     Forecast      Budget           $         %
Operating Revenues     632,030      689,390     753,255     762,661     811,181    57,926     7.7%
Operating Expenses     372,976      397,638     454,986     443,487     469,769    14,783     3.2%
Net Operating Income  259,054     291,752    298,269    319,174    341,412    43,142   14.5%

Operating revenues up 7.7% to a record $811.2M from 2019 budget
Operating expenses up 3.2% to $469.8M from 2019 budget
Net Operating Income up 14.5% to $341.4M from 2019 budget
The 2020 capital budget is $640.5M and the 5-year capital spending plan is over $3.4B
The proposed tax levy for 2020 is $76.4M, a 3% increase over the 2019 levy of $74.2M
The 2020 budget reflects the Port's growth and continued investments for the region
7

Changes after the Preliminary Budget Published
Aviation Division
Aeronautical revenues (cost recovery) decreased by $221K primarily due to reduction in
allocated expenses from Central Services.
No changes to Non-aeronautical revenues.
Operating expenses from the Airport increase by $26K due to:
o $28K increase for an FTE from Central Services/Engineering to AV Maintenance (80% charged
to Capital - Baggage Optimization project)
o $2K reduction in B&O tax due to lower Aeronautical revenues.
Maritime Division
Maritime reduced Space Rental Expense for T46 Cruise by $1.9M.
NWSA Joint Venture
Reduced operating revenue by $1.9M due to net of Space Rental Expense for T46 Cruise
Additional refinements made to the budget
8

Changes after the Preliminary Budget Published
Economic Development Division
No changes other than cost allocations from Central Services
Central Services
Added a new FTE in Commission Office
Transferred a FTE from Engineering to AV Maintenance to support the
Baggage Optimization project
Corrected a minor budget entry error for Engineering department
Made some minor adjustments to a few departments' cost allocation

Additional refinements made to the budget
9

Pending Accounting Standard Change
The Governmental Accounting Standards Board (GASB) has changed
the treatment of operating leases starting in 2020
Operating leases will be treated in a manner similar to capital leases
receipts and expenditures will be broken into an operating (rent) and
non-operating (interest) component
The primary impact will be a reduction in operating revenue and
corresponding increase in non-operating revenue, so net operating
income will be lower, although total revenue over expense (change in
net position) will be the same
This standard has not been incorporated into the 2020 budget due to
the large number of leases and complexity of the calculations

GASB 87 will be adopted in 2020
10

2020 Operating Budget for Aviation
2017       2018      2019      2019      2020     Budget Change
($ in '000s)                    Actual         Actual      Budget     Forecast      Budget           $         %
Operating Revenues
Aeronautical             264,114      291,268     365,604     361,493     401,342     35,738     9.8%
Non-Aeronautical        236,803      257,707     259,537     267,528     283,167    23,631     9.1%
TOTAL     500,916   548,975  625,140  629,021  684,510  59,369  9.5%
Operating Expenses       299,114     318,849    366,105    359,710    377,306    11,202    3.1%
Net Operating Income     201,802     230,126    259,036    269,311    307,203    48,168   18.6%

Operating revenues outgrow operating expenses
11

2020 Operating Budget for Non-Aviation
2017       2018      2019      2019      2020     Budget Change
($ in '000s)                 Actual       Actual     Budget    Forecast     Budget          $        %
Operating Revenues
Maritime               54,183      57,575     59,729     59,029     62,938     3,208    5.4%
EDD            17,791    20,705   19,725   20,004   19,110    -615  -3.1%
NWSA Joint Venture   54,953      57,622     43,911     48,911     39,887    -4,023    -9.2%
Stormwater Utility        3,891        4,195       4,564       4,564       4,696       131     2.9%
Central Services           296          318        185       1,131         40      -145   -78.4%
Total                    131,114      140,415    128,115    133,640    126,671     -1,444    -1.1%
Operating Expenses
Maritime               42,164      43,252     50,822     48,749     54,396     3,575    7.0%
EDD            24,868    27,063   30,445   28,282   29,368   -1,078  -3.5%
NWSA Joint Venture    2,974       3,123       501       501       837      336   67.0%
Stormwater Utility        3,028        4,124       3,933       3,933       3,940         7     0.2%
Central Services           827        1,227       3,180       2,312       3,922       742    23.3%
Total                     73,862       78,789      88,881      83,777      92,463     3,582    4.0%
Net Operating Income      57,252      61,626     39,234     49,863     34,208    -5,025  -12.8%
Lower NWSA Distributable Revenue reduces NOI for 2020
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Accounting Impacts on NWSA Financials
NWSA Budget               NWSA Budget
with GASB 87                without GASB 87
($ in millions)                           2019        2020       Change       2019        2020       Change
Operating Revenue                  199.4      149.9     (49.5)      199.4      197.4      (2.0)
Operating Expense                    99.3       98.9      (0.4)       99.3       99.2      (0.1)
Net Operating Income           100.1         51     (49.1)      100.1       98.2      (1.9)
Depreciation                           13.5       15.4        1.9        13.5       15.4        1.9
NOI After Depreciation           86.6       35.6     (51.0)       86.6       82.8       (3.8)
Non-Operating Revenue/Expense        1.1       47.4      46.3        1.1        0.2      (0.9)
Change in Net Assets             87.7       83.0       (4.7)       87.7       83.0       (4.7)
POS Share of Distributable Revenue       41.5
Less: 50% of T46 ILA Revenue       (1.9)
POS Distributable Revenue      39.6

GASB 87 and Joint Venture Accounting Affect NWSA Financials
13

Community Programs Summary
2019      2020      2019 to 2020
Program (in $000)                                      Budget     Budget     Budget Change       Added new programs for 2020:
1) Airport Community Ecology (ACE) Fund                        500          522        22       4.5%        o   Duwamish Valley Community Equity
Program
2) Energy & Sustainability Fund                                    250          250          -            -
o  Maritime Innovation Center
3) South King County Fund                                        750        1,500       750     100.0%
o  Low Carbon Fuel Standard Support
4) Duwamish Valley Community Equity Program                     -          292       292        0.0%      Increased the budget for South King
5) Low Carbon Fuel Standard Support                                -          150       150            -        County Fund.
6) Sustainable Aviation Fuels & Air Emissions Program           375           40     (335)     -89.3%      Workforce Development eliminated K-12
7) Economic Development Partnership Grants                     960          960          -            -        Career Connected Learning, and added
8) Tourism Program                                              1,521        1,536        15       1.0%        new items, which include Maritime
9) Airport Spotlight Advertising Program                           354        1,148       794     224.5%        Secondary Education, Engagement and
Strategic Plan, and Career Advancement
10) City of SeaTac Community Relief                           1,400        1,400         -           -       Center.
11) Maritime Innovation Center                                     -         150      150           -     Diversity in Contracting added 2 new
12) Diversity in Contracting                                     1,657        2,059      402      24.3%       FTEs in 2019.
13) Equity, Diversity & Inclusion                                  648        1,586      938     144.9%     For 2020, Equity, Diversity and Inclusion
14) Workforce Development                                    2,920        2,879      (41)      -1.4%       included 3 new FTEs and additional
15) High School Internship Program                              634         775      141      22.2%       resources to implement EDI strategy.
TOTAL                           11,968   15,247  3,279   27.4%
Adding new FTEs and resources to advance community programs
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2020 Comprehensive Budget
2018      2019      2020    Change   Change
($ in 000s)                       Actual    Budget    Budget      $        %                           Explanations
Revenues
1. Aeronautical Revenues            291,268     365,604    401,342     35,738   9.8%    Cost recovery under SLOA
2. Other Operating Revenues         398,122     387,651    409,839     22,187   5.7%    Mainly due to higher revenues from the Airport, Maritime & EDD.
3. Tax Levy                       71,771      74,160     76,385     2,225   3.0%    Assume a 3% increase from 2019.
4. PFCs                          94,070      95,185     99,505     4,320   4.5%    Higher enplanement forecast for 2019.
5. CFCs                          21,802      23,482     23,914       432    1.8%    Higher non-op revenue for CFC debt service
6. Fuel Hydrant                      6,942       7,022      7,022             0.0%    No change from 2019.
7. Non-Capital Grants and Donations     1,711       2,655      2,551      (104)   -3.9%    Less non-capital grants from state.
8. Capital Contributions               43,650      49,345     48,010    (1,335)   -2.7%    Increase grants reimbursement from FAA and TSA.
9. Interest Income                  26,287      30,903     27,669    (3,234)   -10.5%   Decrease in rates, partially offset by higher fund balances.
Total                         955,623   1,036,007  1,096,237    60,230   5.8%
Expenses
1. O&M Expense                  397,638     454,986    469,769     14,783   3.2%    New budget initiatives and average pay increase.
2. Depreciation                    164,362     168,676    179,056     10,379   6.2%    More new assets coming into services.
3. Revenue Bond Interest Expense     100,443     129,429    157,231     27,801   21.5%    Assume $600M new bond issuance & $150M refunding in 2020.
4. GO Bond Interest Expense          13,414      12,689     12,003      (686)   -5.4%    Amortization of outstanding GO debts and no new issuance assumed.
5. PFC Bond Interest Expense          4,368       3,606      2,740      (865)  -24.0%   Decreased debt service on PFC bonds through amortization.
6. Non-Op Environmental Expense      10,600       5,000      5,000         -    0.0%    No change from 2019.
7. Public Expense                    5,269      21,009     19,233    (1,776)   -8.5%    Safe and Swift, Heavy Haul, Checkpoint Screening Equipment.
8. Other Non-Op Rev/Expense          3,217       1,415      2,905      1,490  105.3%   Spotlight Advertising Program increase from $353K to $1,148K.
Total                         699,310    796,810    847,937    51,127   6.4%
9. Special Item                     34,923          -          -         -    0.0%    T25 NRD restoration project special item.
10. Retro Adjust to Net Position          2,721                              -    0.0%    Net of GASBs 75 and 86 adjustments.
Revenues over Expenses       218,669    239,197    248,300     9,103   3.8%
A strong financial position for the Port in 2020
15

Capital Plan Summary
Capital Plan Summary by Division
$ in 000's                       2019 Fcst    2020       2021       2022       2023      2024     2020-2024
Aviation                        660,834    656,204    577,314    471,143    547,039   671,262    2,922,962
Maritime                       14,934     42,566     97,112    156,325     41,782    29,079     366,864
Economic Development          5,059    15,801    12,497    19,171    16,735     9,255      73,459 
Stormwater Utility                 1,619      2,104        650        650        650       650        4,704
Central Services and Other       12,003    (76,213)    40,469     25,673     58,116    26,992       75,037 
Total                       694,449   640,462   728,042   672,962   664,322  737,238   3,443,026
Capital projects have been prioritized by staff.
The capital plan does not include Port share of the NWSA capital spending between 2020 and 2024.
The Port continues to invest in the region with a 5-year capital plan of over $3.4 billion
16

Sources of Funds

Almost half of
funding sources
comes from
operating revenues.
35% of the funding
sources comes from
bond proceeds.
The tax levy makes
up 4.5% of the
funding sources in
2020.
Total Sources : $1,699 million
The Port has diversified funding sources
17

Uses of Funds
Plan to spend about
40% of the funds on
capital projects in
2020.
29.2% of total
expenditures on
operating expenses.
25.3% of the total
spending on debt
services.

$1.6 billion total expenditures for 2020
18

Tax Levy Strategy
In 2019, the Commission approved a 3% inflationary levy increase to support
investments in the Seattle Harbor
Funding assumed that the levy would increase 3% per year through 2023, then flat in
2024
2019 tax levy increased to $74.2 million compared to $72.0 million in 2018
Over the prior decade, inflation reduced the purchasing value of the tax levy




19

Taxpayer Impact
2018         2019      2020 preliminary
Tax Levy ($ million)                                          72.0            74.2               76.4
Estimated millage rate ($/1000)                        0.135         0.123            0.120
Median home value ($) (1)                                509,000        582,000          611,000
Estimated median home Port tax ($)                     68.7           71.6             73.3

(1) 2018 and 2019 per King County Assessor; 2020 based on estimated 5% growth in assessed value

Preliminary estimate indicates that the median home-owner will see an increase
payment of Port property tax of $1.74 in 2020.
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Remaining Budget Schedule
Adoption of 2020 Budget                    Nov. 19, 2019
File Statutory Budget with King County        Dec. 2, 2019
Release the 2020 Final Budget Document      Dec. 13, 2019

Statutory budget to be filed with the County on December 2
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APPENDIX


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FTE Summary
Central
Aviation  Maritime    Econ Dev.     Services       Total
2019 Approved FTE's                   1,105.78     173.00              36.00            940.30          2,255.08 
Mid Year Approval                    27.25             -            2.00            26.25           55.50 
Eliminated                               (42.75)             (1.50)                -             (2.00)            (46.25) 
Net Transfers                            64.00            21.00              (3.00)             (83.00)             (1.00) 
Adjusted 2019 FTE's (note 1)              1,154.28              192.50               35.00             881.55           2,263.33 
2020 Budget
Eliminated                                  -           (3.00)                -             (2.20)             (5.20) 
Transfer                                  -           1.00               -            (1.00)              - 
Conversion of Emergency Hires            -          24.00               -             -          24.00 
New FTE's                            53.00            8.50             0.60            36.00           98.10 
Total 2020 Changes (note 2)                  53.00            30.50               0.60             32.80           116.90 
Proposed 2020 FTE's                   1,207.28     223.00              35.60            914.35          2,380.23 

Notes:
1) Includes 3.0 FTE for Stormwater Utility in Maritime Division.
2) All F&B and ENV COEs, including a total of 7.5 new FTEs, roll up to Central Services.
FTEs driven by operating needs and growth initiatives
23

Tax Levy Sources and Uses 2020
($ million)                                                                              The $76.4 million tax levy is
SOURCES OF TAX LEVY FUNDS                      2020               sufficient to fund the uses
Prior Year Tax Levy Fund Balance                    $        10.6
Projected Tax Levy Collection                                 76.4              identified for 2020
Environmental Grants & Other Reimbursements              13.3
Total Sources                   $      100.3         Current projections assume
the issuance of General
USES OF TAX LEVY FUNDS
G.O. bond debt service (Existing)                      $        39.8               Obligation bonds in 2021
Non-Airport Capital Investments                              24.8
Environmental Remediation Liability (Non-Aviation)            8.2
NWSA Membership Interest Contribution                     5.5
Community Programs                                  11.4
Total Uses                     $       89.7
Projected Ending 2020 Levy Fund Balance      $       10.6

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Port of Seattle
Introduction & Public Hearing of
the Preliminary 2020 Budget
Commission Meeting
November 12, 2019

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