Item No.:                  7a_supp_a 
Meeting Date:           January 27, 2015 
Aviation Division 
Update on Capital Budget, Plan of
Finance 
and Allocation of Funding Sources 
January 27, 2015 

1

Outline 
Changes to Capital Plan 
Financing of updated capital budget 
Analysis of allocation of financing tools to
different cost centers for four scenarios 
Funding plan for IAF 
% change in Airline rates 
% change in CPE by cost center 
% change by representative airlines 
Next steps 
2

CHANGES TO CAPITAL BUDGET
AND FINANCING PLAN 
3

Funding Plan Update: Process 
Establish cost for IAF                 October 7 Budget presentation - cost of
IAF uncertain 
December/January cost of IAF = $608
December 2 briefing          million 

Explain proposed changes to 2015  2019
Evaluate total capital and funding plan 
capital budget and airport-wide financial
impacts 
January 27 
Funding allocation scenarios permit
evaluation of rate impacts by cost center 
Present rate and airline cost impacts of funding         Use of PFCs to mitigate rate base
allocation scenarios                     impacts 
Reviewed with airlines in mid-January 
January 27 
4

Policy Issue In IAF Funding Plan 
Major policy issue: 
How does allocation of funding sources (e.g.,
PFCs, cash) affect various rates and charges
and, thus, cost to airlines? 
Sea-Tac likely unique in USA: 
Airline agreement (2013  2017) requires all 
costs of IAF to be paid by users of FIS/IAF 
Other airports have far less rigid cost accounting and
rate requirements and/or explicit rate subsidies 
5

Funding Plan Update Process 
1. Overall Capital Budget changes 

2. Airport-wide plan of finance 

3. Identify scenarios for allocation
of funding sources to cost centers 
4. Calculate changes in rates (e.g.,
landing fee, terminal rents, FIS) 
5. Calculate CPE impact by cost
center for representative airlines 

6

Capital Budget Changes 
2015 capital budget presentation (October 7): 
Cost estimate for IAF was preliminary  design not yet underway 
Added 8 projects totaling $44 million 
Approval of 11 additional projects totaling $47 million put on hold
pending IAF cost update ("contingent projects") 
Goal of recent analysis was to absorb as much as possible
of adjusted cost estimate of IAF within existing capital
budget through project cuts, project savings, deferrals and
reduction of "Allowance" CIPs 
Airport has two Allowance CIPs within capital program that
accommodate future capital spending for currently undesignated
capital projects (either cost increases or new projects) 

7

Projected Capital Increases 
Increased cost estimate
New Capital Needs ($000s)                for IAF to $608 million 
Internat'l Arrivals Facility - increase    264,000          Alaska Airlines' request
to add capacity for NSAT
NSAT Expansion - Bag System      14,400    baggage system 
B2 Expansion for Delta Club         13,200   Contingent projects (3
of 11): 
Central Terminal HVAC Upgrade       4,900      B2 building area is
preferred location for
Fire Dept. Truck                  1,450       new Delta Club 
Total                         297,950             "Inspansion" of terminal
requires HVAC upgrade 
New Fire truck needed
to replace older truck 


8

Projected Capital Cost Reductions 
Do only modest short-term fixes
Sources of Capital ($000s):                    to SSAT; will require major
Cuts:                                   "SouthSTAR" project in future
SSAT HVAC, lights, ceiling         32,543        (2020+) 
Garage Vertical Conveyance         2,941      HVAC improvements will be
Other (3)                       2,507        done by other existing projects 
Total Cuts                  37,990
Recognizing savings on RON
Savings:
hardstand project 
Main Terminal HVAC Upgrades       7,875
Fewer homes to be insulated
Aircraft RON Parking - USPS         5,000
under old Part 150 program 
Single Family Home Insulation        3,000
Other (8)                       6,400      Failure of Highline School
Total savings                22,275        District bond issue will delay
Deferred HSD Insulation            19,335        school noise mitigation projects 
Use of Allowance CIPs           154,350           Allocate Allowances to known
Total                         233,951              project increases 

9

Summary of Proposed Changes 
Capital Spending 2014 - 2019 ($000s)            Total spending up by 3.3% 
October 7, 2014 Presentation         1,926,206    Capital budget Allowances
Savings, cuts, use of allowances        (233,951)            at 29% of previous level,
New capital needs                 297,950           still provides flexibility 
Net increase                     63,999
Will replenish Allowances
Revised spending                1,990,205
with future savings: 
Realized project savings 
Balance of Allowance CIPs
Deferred spending 
Current balance                   217,529 
Proposed uses                 (154,350)             Project cuts 
Revised balance                  63,179

10

Breakout of Capital Budget Changes 
2014 - 2019 Spending ($000s)
As of 10/7/14   As of 1/13/15   Change
IAF                 343,873      608,627   264,754
NSTAR           447,596    464,868   17,272
Baggage Optimization      229,287      229,687      400 
Runway 16C/34C         99,224          106,222    6,998
Other Projects            575,226      517,622    (57,604)
Allowances            231,000       63,179       (167,821)
Total     1,926,206      1,990,205     63,999


11

Financial Implications of Capital
Budget Changes 
Financial Implications measured
by comparison to peer airports for: 
CPE    DPE
2013              $11.90     $141   Cost per enplanement (CPE) 
Peer rank             10 of 22    11 of 19   Debt per enplanement (DPE) 
2015              $11.79     $130   Forecasted high for CPE and DPE
Forecast high - Current     $15.19       $151     in targeted middle third of peer
Year of forecast high        2021       2018     ranking 
Peer rank            12 of 22    11 of 19   CPE and DPE have grown
Forecast high - Oct. 2014   $14.85      $144     moderately compared to October
% Change since Oct. 2014   2.3%      4.9%    2014 forecast 
Forecast high in 2015 $    $13.10      $141   2021 CPE in constant dollars is
only 11.7% above 2015 (CAGR of
1.9%) 

12

Debt Per Enplaned Passenger  
History and Forecast 
Projected
Debt/Enplaned Passenger                        high point in
$200                                                                   2018 ($151)
178
$180           175               173
172        173                                                          well below
165
160                    161
$160                      155        153            151 151                   previous high
148
144
141                       143
$140                                    136   135            137            of $178 in
129 130                                       130                       132
127           2005 
$120
2018 high
$100    95
2                                            point in 2015
$80
72                  0
0                                            constant
$60                5                                                   dollars =
$40                                                                   $141 
$20
$0
1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017   2018   2019   2020   2021   2022   2023   2024                        13

Summary of Capital Budget
Adjustments/Financing 
The International Arrivals Facility (IAF) cost
increase of $264 million, together with other
changes to capital program, resulted in $64
million increase in spending 
Resulting financial impact is modest increase in
airline Cost per Enplanement (CPE) and Debt per
Enplanement (DPE) 
Future CPE and DPE remain within middle third of
peer airports 
14

ALLOCATION OF FUNDING SOURCES
TO VARIOUS COST CENTERS 
15

Background Concepts 
CPE is an industry metric measuring total passenger airline costs
divided by total enplaned passengers. It is not a "rate" that any airline
pays 
Airlines individually have very different CPEs at SEA because their facility
use varies and they have greater or lesser economies of scale 
SLOA III established multiple aeronautical cost centers 
Airline rates are set to recover costs within a particular cost center 
The Federal Inspection Services area (FIS) established as separate cost
center 
Capital costs (direct construction costs or debt service on revenue
bonds) paid with Passenger Facility Charge revenues (PFCs) are
excluded from cost center rate base 
Airlines pay amortization on cash (retained earnings) invested by Port
(rate established at time of investment to have same financial impact
as debt service) 
SLOA III has provision allowing Port to use non-airline revenues to
reduce FIS rate requirements 

16

Background Concepts 
Allocation of PFCs to cost centers directly impacts rate
bases and, thus, rates airlines pay 
Can benefit airlines differently depending on differing use of
facilities (e.g., only international carriers use FIS) 
Airport has discretion to deploy PFCs to FAA approved
projects 
IAF, North Satellite Expansion and Baggage Optimization
projects are all good candidates for use of future PFCs 
Port's goal has been to maintain competitive rates 
throughout the airport 
The Port's agreement in SLOA negotiations to make FIS a
separate cost center was predicated on the assumption that
the plan of finance (use of PFCs) could be used to achieve a
competitive FIS rate. 
17

Historical Use of PFCs 
Cost Center                 1992 - 2013     Percent
Airfield (including Noise)         558,726,500          57%
Terminal                  413,462,500        43%
FIS -  0%
Total                       972,189,000

PFCs have been used to pay for 100% of revenue bond
debt service for Third Runway, significantly reducing
the rate impact on the landing fee. 
Major terminal projects benefiting from PFCs include
Concourse A and Satellite Transit System 
18

Funding Plan for IAF 
With separate FIS cost center, use of PFCs to
mitigate rate impact has been key element of
funding plan 
Cash fund construction costs: Port has been
accumulating PFCs to provide ability to cash fund
("pay-go") significant portion of construction cost. 
Pay revenue bond debt service: Port can pay some,
most or all of revenue bond debt service (DS) 
While many different funding plans could be
evaluated, four scenarios highlight policy issue
relating to use of PFCs by cost center 
19

Scenarios  Options for Allocation of
PFCs 
2015 Budget (and plan of finance) 
IAF cost estimate of $344 million, PFCs pay 100% of IAF debt
service 
1.  Continue to use PFCs to pay 100% of IAF debt service 
For 2019  2021 only, shift $14.7 million of PFCs from paying
airfield debt service to IAF debt service 
Sea-Tac FIS rate at high end of projected market rate 
2.  PFCs pay no debt service associated with $264 million IAF cost
increase 
Same amount of PFCs allocated to IAF as with $344 million cost
estimate 
Increased capital cost goes directly to FIS rate base 
FIS rate almost twice as high as highest market rate 

20

Scenarios  Options for Allocation of
PFCs 
3.  All IAF capital costs excluded from rate base 
In addition to large PFC allocation, do not amortize cash
investments in IAF only (offset with non-aero revenues per
SLOA III section 8.4.4, or similar provision in "SLOA IV") 
FIS rate at low end of market range 
4.  Variation on Scenario 1 (pay all IAF debt service with
PFCs): In addition, shift some PFCs used to pay airfield
debt service to pay terminal debt service and, thus,
balance rates throughout airport 
Landing fee stays constant after 2020 rather than
decreases; terminal rent increase moderated 

21

Funding Plans for IAF 
2015 Bud        Scenarios
Plan of Fin.          1, 3, 4          Scenario 2
Funding Source     $000s     %     $000s     %     $000s     %
Cash           68,800   20%   121,673   20%   121,673   20%
PFC - pay go       137,709    40%    157,874    26%    137,709    23%
Revenue Bonds    137,491   40%   328,818   54%   348,983   57%
Total            344,000          608,365          608,365
All scenarios assume 20% of IAF costs are not eligible for PFCs and are
funded with cash (Airport Development Fund) 
Cash investments are amortized in all scenarios except 3 so that rate impact
is effectively the same as debt service 
PFC  pay go contributions do not impact airline rates 
Revenue bonds are paid by either or both of PFCs (not included in rates) and
airline rates and charges 
Scenario 2 matches amount of PFCs used when cost estimate was $344
million 

22

Airline Rate Impacts 
FIS rate: 
Percent Change 2015 - 2022
Landing  Average       Increasing significantly
under all scenarios 
FIS      Fee    Terminal
#2 results in very high FIS
Scenario      Rate     Rate    Rents         rate 
2015 budget     58%     -2%     52%
Landing Fees: 
1       83%     1%    46%
#4 shows impact of
2       219%     1%    37%       shifting PFCs from
3       34%     1%    46%       Airfield to Terminal 
4       80%    13%    41%   Terminal rents: 
2015 Budget: IAF cost = $344 million, PFCs pay            Shift of PFCs from IAF to
100% of IAF debt service                             terminal (#2) softens rate
Scenario 1: Use PFCs to pay 100% of IAF debt               impact on terminal 
service                                     Use of PFCs has greatest
Scenario 2: PFCs pay no debt service associated          impact on FIS rate 
with $264 million IAF cost increase 
Scenario 3: All IAF capital costs excluded from rate
base 
Scenario 4: Scenario 1 plus reduce PFCs allocated
to airfield/landing fee to balance rates throughout
23 
airport

FIS Rates 
FIS Rate
SLIDE                                       Scenario          2015        2022     % Change
SHOWING FIS
RATES UNDER                    2015 budget     7.40    11.70      58%
VARIOUS
SCENARIOS,                          1         7.40     13.57      83%
WITH                            2        7.40    23.61     219%
COMPARISON
TO MARKET                             3         7.40      9.92      34%
OTHER
AIRPORTS                           4        7.40     13.32      80%
INFLATED TO
2022 BY ~3%                       Note: Average FIS rate for peer airports in 2022 is
AND MARKET
AVERAGE                        estimated at $11.00 - $13.00.
2015 Budget: IAF cost = $344 million, PFCs pay 100% of IAF debt
service 
Scenario 1: Use PFCs to pay 100% of IAF debt service 
Scenario 2: PFCs pay no debt service associated with $264 million IAF
cost increase 
Scenario 3: All IAF capital costs excluded from rate base 
Scenario 4: Scenario 1 plus reduce PFCs allocated to airfield/landing
fee to balance rates throughout airport 

24

Landing Fees 
SLIDE
Landing Fee
SHOWING
Scenario      2015     2022   % Change
LANDING
2015 budget     3.48     3.42     -2%
FEES         1    3.48  3.50   1%
UNDER       2   3.48  3.50  1%
VARIOUS       3    3.48  3.50   1%
4       3.48    3.92     13%
SCENARIOS,
WITH
COMPARISO   2015 Budget: IAF cost = $344 million, PFCs
N TO        pay 100% of IAF debt service 
MARKET      Scenario 1: Use PFCs to pay 100% of IAF debt
service 
Scenario 2: PFCs pay no debt service
associated with $264 million IAF cost increase 
Scenario 3: All IAF capital costs excluded from
rate base 
Scenario 4: Scenario 1 plus reduce PFCs
allocated to airfield/landing fee to balance
rates throughout airport 

25

Terminal Rents 
Terminal Rents            Terminal rents
Scenario      2015     2022   % Change   increasing under
2015 budget   109.60   166.59     52%
all scenarios
1      109.60   160.03     46%
reflecting major
2      109.60   149.99     37%
3      109.60   160.10     46%   investments 
4      109.60   155.03     41%  Size of terminal
rate base (cost
2015 Budget: IAF cost = $344 million, PFCs pay
100% of IAF debt service                              of assets)
Scenario 1: Use PFCs to pay 100% of IAF debt
reduces impact
service 
Scenario 2: PFCs pay no debt service associated              of PFCs on rate
with $264 million IAF cost increase 
Scenario 3: All IAF capital costs excluded from               changes 
rate base 
Scenario 4: Scenario 1 plus reduce PFCs allocated
to airfield/landing fee to balance rates
throughout airport                                                       26

CPE By Cost Center 
CPE By Cost Center                Airport CPE will
increase from $11.79
Percent Change 2015 - 2022     Total      in 2015 to between
Scenario      FIS    Airfield  Terminal    CPE      $15.00 and $15.20 in
2022, depending on
2015 Budget     78%      3%     34%     26%     the scenario 
1       108%     4%    36%    28%   Terminal and Airfield
2       260%     3%    27%    29%    are largest cost
3       54%     5%    38%    27%    components of CPE,
4       104%    14%    31%    28%    so change in use of
PFCs has less impact 
2015 Budget: IAF cost = $344 million, PFCs pay            FIS, being a smaller
100% of IAF debt service                             cost component of
Scenario 1: Use PFCs to pay 100% of IAF debt               CPE is more sensitive
service                                           to changes in use of
Scenario 2: PFCs pay no debt service associated             PFCs 
with $264 million IAF cost increase 
Scenario 3: All IAF capital costs excluded from
rate base 
Scenario 4: Scenario 1 plus reduce PFCs allocated
to airfield/landing fee to balance rates
throughout airport 
27

CPE by Cost Center for
Representative Airlines 
CPE By Cost Center for Representative Domestic & Int'l Airline
Percent Change 2015 - 2022                  Terminal Cost Components of CPE
FIS             Airfield           Terminal            2015             2022
Scenario    Domest.    Int'l    Domest.   Int'l    Domest.    Int'l    Domest.   Int'l    Domest.   Int'l
2015 budget     0%     81%      3%     3%     36%     45%    6.68    12.53     9.06    18.14
1        0%    111%     3%     3%    37%    50%    6.69    12.54    9.19    18.79
2        0%    264%     2%     3%    28%    40%    6.69    12.54    8.59    17.57
3        0%    56%     4%     4%    39%    51%    6.69    12.54    9.29    18.98
4        0%    106%    13%    14%    32%    44%    6.69    12.54    8.85    18.10
Assumed each airlines share of airport costs will be the same in 2022 as in 2013 
Individual airlines can have different financial interests for the use of PFCs 
Domestic airlines don't pay FIS fees 
Airfield costs paid proportionately by both domestic and international airlines 
Terminal cost increases impact representative international carrier
comparatively more than domestic airline due to volume efficiencies 

28

Conclusion & Next Steps 
As long anticipated, major investments will cause airport costs (CPE) to
increase from 2015  2022. 
Achieving a balanced approach to rate impacts requires strategic use of
PFCs and consideration of not charging amortization fee for use of cash 
Staff recommends that Port develop funding allocation plan that is
based on: 
FIS rate within market 
Airline input on allocation of PFCs between terminal and airfield cost
centers 
Next steps: 
More detailed analysis will be undertaken and reviewed with airlines
before returning to Commission for policy guidance (February 27) 
Seek airline approval for IAF through MII vote (March, 2015) 
Seek FAA approval to use PFCs for IAF, NSAT and Baggage Optimization
projects (Q2, 2015) 

29

APPENDIX 

30

Peer Airport FIS Rates 
Current
Airport          2013-2014             Comments
Denver            6.65 Not cost recovery. Increase 2-3% per year
Rate is a step function based on the number of
Portland            6.00 passengers. The derived rate would be $4.00 -
$8.00 per passenger
Derived average cost per passenger. Part of
San Francisco          8.96
Int'l facility joint use fee (80/20).
Los Angeles          9.50 Signatory rate
Terminal fee based on # of seats, with
Vancouver         12.42 differential for domestic and int'l. Also a turn
fee for int'l. FIS fee derived.
SeaTac (2015)          7.40 Signatory rate, full cost recovery
Difficult to forecast FIS rates for other airports. $12 - 
$14 likely at high end of "market" in 2019-2022 
31

Peer Airport Landing Fees 
2013 Landing Fees Rate For Peer Airports
$8.00

$7.00

$6.00

$5.00

$4.00
$7.83

$6.64
$3.00           $6.05
$5.44
$4.37
$4.34 $4.23 $4.23
$2.00                                       $4.01
$3.38 $3.27 $3.14
$2.91 $2.85 $2.73
$2.59
$2.22
$1.00                                                                                $1.91 $1.83 $1.75

$0.00
LGA  EWR  ORD  JFK  LAX  BOS  DEN  IAD  SFO  SEA  PDX  DTW  PHL  IAH  DFW MSP  SJC  SLC  SAN  MIA   32

Future CPE  Comparison to Peer
Airports 
$35.00
SEA Future CPE in 2021
$30.00
CPE   Future CPE
$25.00

Targeted Middle Third
$20.00

$15.00

$10.00

$5.00

$0.00
33 
IAD JFK EWR ORD LAX MIA SFO SMF BOS LGA SEA DFW PDX DEN PHL SJC SAN IAH DTW MSP SLC PHX

Future Debt Per Enplanement  
Comparison to Peer Airports 
$400
Blue represents other airports in 2013
$350  343  340
Green represents SEA in 2018 (forecast
high point)
$300          293

249
$250
230
Targeted Middle Third
198
$200
170  166
151
$150
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      34 
2018

Debt Level  History and Forecast 
$3,500
Figures in $millions
Existing Debt   New Debt
$3,000


$2,500


$2,000


$1,500
2         2       2           2
0         0       0           0
0         1       1           2
$1,000                       5                0             4                   0


$500


$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
35