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Forum on Seattle-Tacoma International Airport's Future International Arrivals Facility: Introduction to Scoping, Planning and Financing Commission Meeting July 14, 2015 Continuing the 90-day review May 26 commission motion June 23 contract award Today's forum overview Next meeting on July 28 An ongoing effort 2 International Arrivals Facility Metrics and Other Considerations Michael Ehl Director Airport Operations Widebody International Gates 11 18 20 28 Aircraft Holding for Gates 22 0 0 0 Daily International Hardstand Operations 0 0 0 0 Passengers per Hour 1200 1900 2600 # of Claim Devices and Total Max Bags/Hour 4 6 8 6,000 bags 15,600 bags 19,400 bags Passenger Holds/Events 702 0 0 0 events Double Bag Claim Yes No No 0 Connecting Time 90 75 75 60 minutes minutes minutes minutes ASQ (Airport Service Quality Score) 3.96* TBD TBD - (Max score of 5) *Outbound pax only, new survey for arriving pax to be conducted in 2015 Average Wait Time for Immigration 19.5 10 10 (PH/PM peak hours 11AM 2PM / peak month August) minutes minutes minutes Average Maximum Wait Time for Immigration 70 50 50 (Peak Month - August) minutes minutes minutes Bag to Claim w/in 20 Minutes at Customs Yes Yes Yes - 4 SEA LAX ATL DTW DFW MIA 2020 TBIT Terminal Terminal Phase 1 E & F N & S 2014 Widebody International Gates 18 18 19 14 28 56 Aircraft Holding for Gates 0 1500 0 0 ~100 0 Daily International Hardstand Operations 0 Daily 0 0 406 635 3,500 N Passengers per Hour 1,900 2,000 1,300 1,500 2800 1,500 S 6 6 18 9 8 10 - N # of Claim Devices and Total Max Bags/Hour 15,600 bags Very Large Large Large Large 5 S Passenger Holds/Events 0 0 0 0 0 30-40 Connecting Time 75 120 90 60 70 90 minutes minutes minutes minutes minutes minutes Average Wait Time for Immigration 10 26.2 11.6 23.1 13 23 (PH/PM Peak Hours 11AM 2PM / Peak Month August) minutes minutes minutes minutes minutes minutes Average Maximum Wait Time for Immigration 50 91.1 81.1 77.9 87.1 94.8 (Peak Month August) minutes minutes minutes minutes minutes minutes 5 MCT (minutes) Airport International International to to Domestic International ATL 90 90 BOS 90 75 CLT 60 60 ORD 90 90 DFW 70 70 DEN 60 60 DTW 90 60 IAH 60 75 LAX 120 120 MIA 90 90 MSP 60 60 JFK 105 120 EWR 90 60 PDX 70 70 SFO* 105 105 SEA 90 90 YVR 90 90 Source: OAG Source: CBP Database MCT and Wait Time Comparison 6 18 FIS Gates- SSAT (12) & Concourse A (6) 7 Relative ages of Sea-Tac's Six Concourses Concourse Year Built Years old in 2015 A 2004 11 B 1990 25 C 1990 25 D 1990 25 NSAT 1970 (2020) 45 (new in 2020) SSAT 1970 45 (50 years old in 2020) SSAT is the oldest concourse 8 North Satellite Scope Structural Airport Dining and Mechanical Retail Electrical Baggage Plumbing Restrooms Holdrooms South Satellite will have the same scope 9 Preliminary Schedule 2016 Programming (preliminary concepts, scheduling, costing) per current Aviation Business Plan 2017 Complete Programming and initiate design 2018-19 Design 2020-24 Construction Staff will soon request authorization for programming 10 Independent Architectural Review Elizabeth Leavitt Director Aviation Planning and Environmental Services Airport Finance Overview Borgan Anderson Director Aviation Finance and Budget Jim Burchett Vice President, AvAirPros 12 Introduction Background previous IAF funding briefings: January 27 April 14 Motion: May 26 Today Overview of airport finance July 28 Airport funding of recent international facility projects Introduce consultants: Jim Burchett, AV Air Pros Warren Adams, WJ Advisors First of two briefings on IAF finance issues 13 FAA Rates and Charges Policy Five overarching principles 1. Rates, charges and fees must be fair and reasonable 2. Rates and charges cannot be unjustly discriminatory 3. Direct local negotiations between airports and airlines 4. Airports must be financially self-sustaining 5. Airport revenues must be used on the airport Federal policy establishes the framework for airport rates and charges 14 FAA Rates and Charges Policy continued Other provisions Airfield costs must be based on historic costs Non-Airfield rates (i.e., terminal) can be based on any reasonable method Equalized (versus differential) terminal rental rates are allowable Federal policy establishes the framework for airport rates and charges 15 Airline Lease Agreements Governs relationship between airline and airport Defines space leased by airlines Generally defines financial structure for airport through the establishment of "cost centers" Determines how airline rates and charges will be calculated each year Defines what revenues are shared, if any May include capital plan May include majority-in-interest (MII) clause Rates by resolution are permitted under FAA rates and charges policy agreements not necessary Airline agreements define cost centers and costs paid by airlines 16 Sea-Tac's Airline Agreement: SLOA III Airline rates and charges are based on cost-recovery principles Full Cost Recovery Areas Airfield Movement area and Airfield Apron area are residual cost centers Partial Cost Recovery Areas Airfield Commercial area is compensatory Terminal is hybrid commercial compensatory Equalized terminal rent averages costs across all terminal space Federal Inspection Services area (FIS) for international arrivals is a separate cost center (cost-recovery paid by users) Revenue sharing: 50% of Airport net revenues above 125% of annual debt service Capital project disapproval (majority-in-interest) results in 12 month delay FIS is separate cost center paid by users of that area 17 Capital Funding Sources Airline Funding Source Use Restrictions Rate Base Equity/net income Use on-airport Yes Revenue Bonds AMT/non-AMT Yes Passenger Facility Charges (PFCs) FAA approved projects No Customer Facility Charges (CFCs) Rental Car Facility N/A Grants FAA approved projects No Tax Levy Port Policy Yes Equity/net income (cash) is most flexible source, followed by bonds Tax levy has only been used at Airport to pay for noise costs not eligible for use of airport revenues Projects funded with PFCs and Grants are excluded from airline rate base 18 Passenger Facility Charges Enacted by Congress in 1991 to provide airports a source of capital funding- capped at $3.00 passenger Cap raised to $4.50 in 2001 PFCs can only fund airport projects that: Enhance safety, security or capacity Reduce noise, or Increase air carrier competition Can be used to directly fund capital costs or leveraged to pay debt service on PFC eligible projects Under federal law, cannot pay operating and maintenance costs PFCs can be used for eligible capital costs for FAA approved projects 19 PFC Process Airport application, airline consultation, FAA approval 20 PFCs Used by Most Airports Airport Airports Airports Category Airports Collecting PFCs at $4.50 Large Hub 30 30 29 Medium Hub 31 31 29 Small Hub 71 67 65 Non-Hub 249 197 188 Other 128 36 31 Total 509 361 342 All large and medium hubs impose PFCs SEA has charged $4.50 since 2001 Sea-Tac charges the same level of PFC as 29/30 large hubs 21 Approved PFC Charges- All Airports Through 2014: $90.8 billion Terminal 57% Airfield 26% Roads/Access 9% Noise 5% Denver Airport 3% Other 0% 0% 10% 20% 30% 40% 50% 60% PFCs used predominantly for terminal and airfield projects 22 Funding & Rate Base Impacts Construction Airline Funding Rate Base Higher Airline Costs Equity/net income $50 Amortization $4 Revenue bonds 450 Debt service 42 PFCs 0 0 Total $500 $45 Lower Airline Costs Equity/net income $50 Amortization $4 Revenue bonds 200 Debt service 18 PFCs 250 No rate base 0 Total $500 $22 Funding source has pronounced impact on airline costs 23 PFC Uses at Sea-Tac Airport 2015 Landing fee For Third Runway, 100% of Current rate $3.48 revenue bond debt service has been paid with PFCs to lower Rate if no PFCs on 3rd Runway $5.50 landing fee rate PFC uses 1992 - 2014 Amounts include debt service on 1998 PFC-backed bonds and Cost Center Total (000s) % payment of revenue bond debt Airfield $585,075 57% services for: Third Runway Terminal 443,839 43% Concourse A FIS 0 Satellite Transit System Baggage systems Total $1,028,913 Sea-Tac has used PFCs to manage rate impacts and CPE 24 Airport Funding Decisions An airport's choice of funding sources is influenced by external stakeholders factors and management considerations External Stakeholder Factors Management Considerations FAA--PFC project eligibility and Current and future capital needs approval Forecast CPE and current and Rating AgenciesFuture cash forecast airline rates (e.g. landing balances and debt levels fees, terminal rents) Airline industryForecast CPE Existing and future cash on hand levels and specific airline rates Existing and future PFCs FAA/State -- Availability of grants Project funding decisions are influenced by many factors 25 Preview of Next Finance Briefing Focus on recent examples of airport funding plans for new international facilities Criteria for inclusion: Large hub airport USA Since 2000 Funded by airport (not airlines or third party) Questions? July 28 will focus on how airports fund international facilities 26 Forum Wrap-up and Next Meetings Next meeting on July 28 Technical discussions on July 15 and 29 Airline Roundtable on August 11 An ongoing effort 27
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