7a supp 3
ITEM NO. 7a_Supp_3_____ DATE OF MEETING October 23, 2012 Preliminary Tax Levy Funding Plan Discussion October 23, 2012 Topics Tax Levy Overview and background 2012 Tax Levy update Tax Levy 10-year funding uses Tax Levy scenarios and discussion 2 Tax Levy Overview Tax Levy Amount Levy amount established by the Commission each year as part of the budget process Statutory limitations on annual collection Port may set Levy at any amount up to the statutory maximum Maximum increases each year by the lesser of inflation or 1% plus a factor for new construction 10-yr average of 2.5% (range of 1.6%-3.3%) Tax levy may legally be used for general Port purposes, actual use has been guided by Commission policy Payment of General Obligation bond debt service Port policy debt service is no more than 75% of annual levy Currently at 55% 3 Annual Levy vs. Statutory Max Annual levy is well below statutory maximum Preliminary 2013 maximum levy estimate is $91.4 million 4 2012 Tax Levy, Estimate/Actual vs. Budget Budget Est./Act. $'000 2012 2012 LEVY SOURCES Significant Variances Beginning Tax Levy Fund Balance 41,618 39,281 Eastside Rail Corridor Partners Reimbursements 5,000 18,746 Receipt unanticipated Tax Levy Fund Investment Earnings 552 environmental grants Annual levy 73,000 73,000 Total Sources: 119,618 131,579 Approx. $1 million this year netted against spending LEVY USES General Obligation (G.O.) Bonds Debt Service (DS) Lower environmental G.O. Bonds DS - existing debt 40,353 40,353 expenditures Other uses Receipt of unbudgeted Roads and Transportation Projects 3,954 3,728 rail corridor payment from Seaport Capital - Argo Roadway Element 192 Aviation School, and Highline & other Schools NOISE Insulation 650 650 Sound Transit (1) Environmental Remediation Liabilities, Seaport & Real Estate - prelim. 15,889 6,656 Lower Real Estate capital Funding of Transportation & Infrastructure Fund 23,000 23,000 PortJobs 126 126 spending due to project Subtotal Other 43,619 34,352 deferrals Real Estate Support (2) RE Capital Total 14,524 4,213 RE Operating Subsidy 4,922 4,211 Subtotal RE Support 19,446 8,424 Total Uses: 103,417 83,129 Projected Ending Tax Levy Fund Balance 16,200 48,451 Notes: (1) Includes project cash flows for environmental projects already or expected to be expensed and liabilities booked (2) Includes Committed and Business Plan Prospective projects 5 2013- 2022 Uses of the Tax Levy General Obligation bond debt service, existing and new Contribution to the Alaskan Way Tunnel and South Park Bridge Funding of Seaport/Real Estate legacy environmental remediation costs (non-operating): Includes Lower Duwamish/East Waterway Costs are net of payments by potentially liable parties; excludes potential recoveries from grants, insurance or litigation Substantial completion of FAST Corridor initiative & Highline Schools noise mitigation program Partial funding of Seaport Argo Road Element project and Corporate capital allocations to Real Estate PortJobs including Apprenticeship and Transportation Programs Real Estate Capital Improvement Plan Real Estate support for net income deficit 6 Estimated Tax Levy Uses 2013-2022 $ million Baseline Uses previously Existing G.O. Debt Service 339.5 identified Alaskan Way Tunnel 281.0 Reflects current South Park Bridge 2.5 estimated spending Argo Yard 1.7 FAST Corridor 5.4 Assuming an annual levy of $73 million, these Highline Noise Mitigation 10.6 estimates result in a PortJobs (and related programs) 2.1 deficit of $121 million in 2022 Environmental Remediation 169.8 Real Estate CIP 153.5 Corporate CIP - RE allocation 5.1 RE support for operating deficit 86.2 TOTAL 1,057.5 7 Alaskan Way Tunnel Port has agreed to provide up to $300 million to fund the replacement of the Alaskan Way Viaduct with a tunnel $19 million has already been paid $31 million has been set aside in the transportation and infrastructure fund Additional funds may be side aside Increases funding gap, but reduces debt 2012 Available Budget cash only Contributed 19 19 Additional cash 55 31 Bond Proceeds 226 250 TOTAL 300 300 8 Transportation & Infrastructure (T&I) Fund Funds set aside for specific projects identified by the Commission Current projected uses: South Park Bridge - $5 million $2.5 million end of 2012 $2.5 million 2013 Alaskan Way Tunnel - $31 million (of $281 million total) in 2016 Current fund balance is $36 million 9 Other Potential Funding Needs The following are not included in the baseline assumptions: Environmental Remediation Costs Costs of key projects are estimates Other potential liabilities are not included Changes to the Seaport business could result in a need for Seaport tax levy funding Competition could reduce revenues Unanticipated capital upgrades, renewal or property acquisitions Customer support e.g. storm water mitigation Century Agenda goals could require funding beyond operating divisions' resources Sodo traffic mitigation 10 Upside Potential Surplus levy balance due to lower or delayed spending average $24 million 2002-2011 Potential property sales Continue past level of environmental recoveries average $2 million per year 2002-2011 11 Levy Options 2013 Tax Levy Levy assumption for future years Additional deposits to T&I Fund to increase cash for the Alaskan Way tunnel 1. Current 2. #1 plus extra 3. #2 plus 4. #3 plus Projections T&I deposit upside extra costs potential Tunnel funding $31 mil. cash & $55 mil. cash & $55 mil. cash & $55 mil. cash & $250 mil. debt 226 mil. debt 226 mil. debt 226 mil. debt $73 mil. Flat Levy (121) mil. (132) mil. (81) mil. (151) mil. funding gap 2022 Annual increase 2.8% 3.0% 1.9% 3.4% to close gap 2013 Levy ($mil) 75.0 75.2 74.4 75.5 If delay increase 3.4% 3.7% 2.3% 4.1% to 2014 12 Staff Recommendation 2013 Tax Levy 3% increase to $75.2 million Assumption for future 3% increase (1.9%3.4% based on actual experience) Additional deposits to T&I Fund add $24 million for tunnel funding 1. Current 2. #1 plus extra 3. #2 plus 4. #3 plus Projections T&I deposit upside extra costs potential Tunnel funding $31 mil. cash & $55 mil. cash & $55 mil. cash & $55 mil. cash & $250 mil. debt 226 mil. debt 226 mil. debt 226 mil. debt $73 mil. Flat Levy (121) mil. (132) mil. (81) mil. (151) mil. funding gap 2022 Annual increase 2.8% 3.0% 1.9% 3.4% to close gap 2013 Levy ($mil) 75.0 75.2 74.4 75.5 If delay increase 3.4% 3.7% 2.3% 4.1% to 2014 13 Discussion & Next Steps Draft Plan of Finance assumes that the tax levy is sufficient to fund all currently projected uses Other potential options could be employed: Reduce, delay or eliminate some expenditures Increase Real Estate NOI to reduce operating subsidy Consider additional asset sales Staff can provide additional scenarios if desired Commission to provide guidance 14
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