10e. Budget and Tax Levy Presentation
Item No. 10e_supp Meeting Date: November 16, 2021 Port of Seattle Adoption of the 2022 Budget Commission Meeting November 16, 2021 1 Outline 2022 Budget Process Recap 2022 Key Business Activity Forecasts and Key Initiatives 2022 Operating Budget 2022 Comprehensive (Ops & Non-Ops) Budget 2022-2026 Capital Plan 2022 Sources and Uses of Funds 2022 FTEs Summary 2022 Proposed Tax Levy Remaining 2022 Budget Schedule 2 2022 Budget Process Recap Jun. 3 Commission Budget Retreat Jul. 13 2022 Budget Development Briefing Jul. 29 Commission Budget Retreat Sept. 28 2022 Central Services Operating and Capital Budgets Briefing and Port Wide Rollup Oct. 12 2022 Aviation Division Operating and Capital Budgets Briefing Oct. 12 2022 Maritime and EDD Operating and Capital Budgets Briefing Oct. 18 Preliminary 2022 Budget Document provided to the Commission Oct. 20 Preliminary 2022 Budget Document released to the public Oct. 20 Virtual Open House for the Preliminary 2022 Maritime and EDD Budgets and 5-Year CIP Oct. 21 Virtual Open House for the Preliminary 2022 Aviation Budget and 5-Year CIP Oct. 26 Tax Levy & Draft Plan of Finance Commission Briefing Nov. 9 Introduction & Public Hearing of the Preliminary 2022 Budget Nov. 16 Adoption of the 2022 Budget Dec. 1 File the 2022 Statutory Budget with King County Dec. 15 Release the 2022 Final Budget and Draft Plan of Finance 3 2022 Business Activity Forecasts Aviation Division: Forecast a 30% reduction in 2021 and a 6% drop in 2022 compared to the 2019 passenger level. Long-term view on capital planning and projects Maritime Division: Forecast 75% of cruise passengers in 2022 compared to 2019 actuals Expect Grain volume increase of 7% increase from the 2021 budget Recreational Marina occupancy rate of 95%, same as 2021 Commercial Building occupancy rate average of 95%, same as 2021 Economic Development Division: Commercial Properties target 95% occupancy rate at the end of 2022 4 2022 Key Budget Drivers Payroll 6.0% average Pay for Performance increase for non-represented employees Increase for represented groups based on contracts Approved 43.0 new mid-year/unfrozen FTEs in 2021 Added 164.4 new/unfrozen FTEs for 2022 5.0% vacancy factor Non-Payroll Maintenance costs for new facilities (IAF and NSAT) Terminal realignment for airlines Increase in insurance premium and other contractual costs Added resources for customer service and safety & security for the travelling public 5 2022 Community & Sustainability 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 Internship program grants development for the region Equity, Diversity and Maritime High School South King County Expand tourism opportunities Inclusion Maritime Industry Roundtable Community Impact Fund Continue local Community Continue stakeholders' Airport Employment Center Duwamish Valley Community Advertising Program engagement Construction pre-apprenticeship Equity Program (DVCEP) Low Carbon Fuel Standard 6 2022 Total Port Budget Highlights 2019 2020 2021 2022 Inc/(Dec) Proposed Change from 2020 ($ in '000s) Actual * Budget Budget Budge t $ % Operating Revenues 764,174 811,616 680,861 766,854 -44,761 -5.5% Operating Expenses 441,700 469,769 423,412 499,146 29,377 6.3% Net Operating Income 322,474 341,847 257,448 267,708 -74,138 -21.7% * The 2019 Actual includes a $16.5M DRS Pension Plan True-up Expense credit. Operating revenues down 5.5% to $766.8M from 2020 Budget primarily due to application of federal aviation relief grants and lower enplanements Operating expenses up 6.3% to $499.1M from 2020 Budget Net Operating Income down 21.7% to $267.7M from 2020 Budget The 2022 capital budget is $559.5M and the 5-year capital spending plan is $4.4B The proposed tax levy for 2022 is $81.0M, a 3% increase over the 2021 levy of $78.7M 7 2022 Operating Budget for Aviation 2019 2020 2021 2022 Inc/(Dec) Proposed Change from 2020 ($ in '000s) Actual * Budget Budget Budge t $ % Operating Revenues Aeronautical 357,598 401,342 386,668 394,963 -6,379 -1.6% Airport Non-Aero Revenues 269,037 283,167 189,548 240,820 -42,348 -15.0% TOTAL 626,636 684,510 576,215 635,783 -48,727 -7.1% Operating Expenses 355,245 377,306 339,908 397,622 20,316 5.4% Net Operating Income 271,390 307,203 236,308 238,160 -69,043 -22.5% * The 2019 Actual includes a $6.7M DRS Pension Plan True-up Expense credit. 8 2022 Operating Budget for Non-Aviation 2019 2020 2021 2022 Inc/(Dec) Proposed Change from 2020 ($ in '000s) Actual * Budget Budget Budget $ % Operating Revenues Maritime 59,289 62,938 45,280 59,137 -3,801 -6.0% Economic Development 21,151 19,110 13,348 18,769 -341 -1.8% NWSA/Joint Venture 50,986 40,322 40,825 47,899 7,577 18.8% Stormwater Utility 4,499 4,696 5,012 5,079 383 8.2% Central Services 1,614 40 181 186 146 366.0% Total 137,538 127,106 104,645 131,072 3,966 3.1% Operating Expenses Maritime 48,644 54,396 50,243 57,865 3,469 6.4% Economic Development 27,156 29,368 21,413 28,301 -1,066 -3.6% NWSA/Joint Venture 4,699 837 1,377 1,727 890 106.4% Stormwater Utility 3,893 3,940 4,506 4,577 637 16.2% Central Services 2,063 3,922 5,966 9,053 5,131 130.8% Total 86,455 92,463 83,505 101,524 9,061 9.8% Net Operating Income (NOI) 51,084 34,643 21,140 29,548 -5,095 -14.7% * The 2019 Actual includes a $9.8M DRS Pension Plan True-up Expense credit. 9 2022 Community & Sustainability Programs % of the 2022 2022 2022 Proposed Proposed Proposed Budget Funded Budget Funded The successful Opportunity Program (in $000) 2021 Budget Budget by the levy by the levy Youth Initiative (launched in 1) Energy & Sustainability Fund 373 160 160 100% 2) Airport Community Ecology (ACE) Fund 212 135 135 100% 2020) has been added to the 3) South King County Support Program 2,000 2,195 2,195 100% 2022 baseline 4) Duwamish Valley Community Equity Program 275 387 387 100% 5) EDD Partnership Grants 910 1,200 1,200 100% Sustainable Eco-Tourism 6) Tourism Marketing Support Program 2,481 1,750 550 31% Conference and Regional 7) Airport Spotlight Ad Program 382 466 466 100% 8) City of SeaTac Community Relief 1,400 1,400 1,400 100% Small Business Partnerships 9) Maritime Blue (formerly Maritime Innovation Center) 150 150 150 100% have been added to the 2022 10) Workforce Development 2,682 4,390 2,626 60% a. Opportunity Youth Initiative 1 - 1,000 1,000 100% Budget 11) High School Internship Program 500 496 - 0% Increased EDD Partnership 12) Diversity in Contracting 1,510 1,836 260 14% a. Small Bus. Accelarator under SKCF 2 180 250 250 100% Grants and South King 13) Equity, Diversity & Inclusion 1,062 1,366 - 0% County Program 14) Sustainable Aviation Fuels & Air Emissions Program 250 200 200 100% 15) Low Carbon Fuel Standard/GHG Reduction Effort Support 75 110 - 0% Duwamish Valley Community 16) Sustainable Eco-Tourism Conference 3 - 75 75 100% Program includes Facility 17) Regional Small Business Partnerships - 150 150 100% TOTAL 14,081 16,142 9,704 60% costs for Duwamish Valley Community Hub Notes: 1) $2.0M funding for OYI was added in May 2021 (not shown on the table). OYI budget rolls up to Workforce Development total (item 10). 2) $250K Small Business Accelerator under Diversity in Contracting (DC) is included in DC total and South King County Support Program (item 3). 3) $75K Sustainable Eco-Tourism Conference is included in the Tourism Marketing Support Program (item 6). Does not include $483K in payroll charges funded by the tax levy to support Community Programs 10 2022 Comprehensive Budget 2019 2020 2021 2022 Incr (Decr) Proposed Change from 2020 ($ in 000s) Actual * Budget Budget Budget $ % Explanations Revenues 1. Operating Revenues 764,174 811,616 680,861 766,854 (44,761) -5.5% Lower operating revenues from each division 2. Tax Levy 73,801 76,385 78,676 81,037 4,652 6.1% 3% increase each year in 2020 and 2021 3. Passenger Facilities Charges 100,004 99,505 67,990 90,521 (8,984) -9.0% Lower enplanements than the 2020 budget 4. Customer Facilities Charges 22,355 23,914 24,168 24,411 497 2.1% No significant change from 2020 and 2021 5. Fuel Hydrant 6,742 7,022 7,022 7,022 () 0.0% No change from 2020 and 2021 6. Non-Capital Grants and Donations 2,884 2,551 40,908 130,345 127,794 5009.6% Mainly due to more federal grant (ARPA) in 2022 7. Capital Contributions 17,736 48,010 74,911 39,121 (8,889) -18.5% Less grants reimbursement from FAA & TSA 8. Interest Income 54,078 27,669 13,158 10,928 (16,741) -60.5% Lower interest rates than 2020 and 2021 Total 1,041,775 1,096,672 987,694 1,150,239 53,568 4.9% Expenses 1. Operating Expenses 441,700 469,769 423,412 499,146 29,377 6.3% Higher operating expenses from each division 2. Depreciation 174,903 179,053 176,509 196,757 17,703 9.9% More assets coming to service in 2022 3. Revenue Bond Interest Expense 105,601 157,231 155,990 154,036 (3,194) -2.0% Assume $634M new bond issuance & $310M refunding 4. GO Bond Interest Expense 12,493 12,003 11,268 14,701 2,698 22.5% No significant change from 2020 and 2021 5. PFC Bond Interest Expense 3,547 2,740 2,539 - (2,740) -100.0% PFC bonds were fully refunded in 2021 6. Non-Op Environmental Expense 118 5,000 10,200 10,700 5,700 114.0% Mainly for ERL for EWW or LDW 7. Public Expense 12,986 19,233 10,144 14,073 (5,160) -26.8% Winding down of the Flight Corridor Safety Program 8. Other Non-Op Rev/Expenses 19,536 2,905 2,413 2,247 (658) -22.7% No significant change from 2020 and 2021 Total 770,885 847,935 792,475 891,660 43,725 5.2% Revenues over Expenses 270,890 248,737 195,219 258,579 9,842 4.0% * The 2019 Actual includes a $16.5M DRS Pension Plan True-up Expense credit. 11 2022-2026 CIP Summary ($ in 000's) 2022 2022-2026 Budget CIP Committed Capital Projects Aviation Division $ 543,725 $ 2,630,479 Maritime Division 25,478 212,023 Economic Development Division 13,069 68,486 Central Services 6,444 21,506 Other 1,619 31,833 Total Committed $ 590,335 $ 2,964,327 Business Plan Prospective Projects $ 82,252 $ 1,471,215 CIP Cashflow Adjustment Reserve $ (113,039) $ - Total CIP $ 559,548 $ 4,435,542 12 2022 Sources of Funds Operating Revenues 38.7% 38.7% of funding Proceeds from Bond Issues 38.3% sources come from operating revenues Grants and Capital Contributions 8.0% Passenger Facility Charges 5.0% 38.3% of funding sources come from Tax Levy 4.4% bond proceeds NWSA Distributable Cash 3.3% The tax levy makes up Rental Car Customer Facility Charges 1.3% 4.4% of total funding Interest Receipts 0.6% sources in 2022 Fuel Hydrant Receipts 0.4% Total Sources: $1,852 million Other Receipts 0.1% 13 2022 Uses of Funds Capital Expenditures 35.4% Plan to spend about 35.4% of Total Operating Expenses 31.6% total funds on capital projects Bond Redemptions 14.8% in 2022 Interest Payments 12.7% 31.6% of total Payment to NWSA for Capital Expenditures expenditures on 3.6% operating Other Expenses 0.9% expenses Public Expense 0.9% Total Uses: $1,579 million 14 2022 FTE Summary Central Aviation Maritime Econ Dev. Services Total 2021 Approved FTE's 1,246.8 262.5 36.0 845.5 2,390.8 43.0 FTEs were approved Mid Year Approval 6.0 1.0 - 16.0 23.0 mid-year Eliminated - (2.0) - - (2.0) o 23.0 New/20.0 Frozen Adjusted 2021 FTE's 1 1,252.8 261.5 36.0 861.5 2,411.8 164.4 FTEs are proposed 2022 Budget for 2022 Eliminated (31.5) (2.0) (1.0) (8.7) (43.2) o 94.0 New/70.4 Frozen New FTE's 45.0 16.0 - 33.0 94.0 A total of 29.2 FTEs remain Total 2022 Changes 2 13.5 14.0 (1.0) 24.3 50.8 frozen/unfunded for 2022 Proposed 2021 FTE's 1,266.3 275.5 35.0 885.8 2,462.6 o 19.2 Aviation o 10.0 Central Services Notes: 1) Includes FTEs from Stormwater Utility in Maritime Division. 2) Total includes frozen/unfunded positions for 2022 Budget. 15 2009-2022 Tax Levy & Millage Rate (1) Propose a 3% levy increases from $78.7M in 2021 to $81M in 2022 The millage rate drops from $0.119 in 2021 to $0.112 in 2022 Median homeowner pays an estimated $72 based on median KC home value of $640K (no change from 2021) (1) Millage rate represents the dollar amount per every $1,000 of assessed valuation 16 Remaining 2022 Budget Schedule File the Statutory Budget with King County Dec. 1, 2021 Release the 2022 Final Budget Document Dec. 15, 2021 17
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