7d supp
Item No. 7d_supp Date of Meeting May 17, 2016 Aviation Plan of Finance Update May 17, 2016 1 Background Plan of finance discussed extensively in 2015 AAAC briefing in March (commission briefing in April) Port Commission motion on 5/26/2015 90 Day review of International Arrivals Facility (IAF) In fall of 2015, uncertainty on final cost of IAF and the North Satellite expansion ( NSAT) Purpose today is to provide update on funding plan consistent with Commission motion of 5/26/15 Will show scenarios where alternative uses of Passenger Facility Charges (PFCs) by cost center can be used to manage rates Costs paid by PFCs are excluded from airline rate base Current funding plan builds on 2015 plan 2 2016 2025 Capital Program & Funding Plan Projects $000s Funding Source $000 % NSAT 507,984 ADF 633,394 18.4% IAF 595,957 PFC 295,575 8.6% Baggage Optimization 306,507 Grants 174,294 5.1% SSAT 600,000 Rev Bonds 2,323,642 67.7% Allowance CIPs 819,592 Other 6,975 0.2% Other 603,841 Total 3,433,880 100.0% Total 3,433,880 Capital costs are included in forecasted rates, rates set to recover costs per airline lease agreement Most PFCs used to pay debt service Sustainable Airport Master Plan (SAMP) will likely add capital costs Additional capital costs will be funded with revenue bonds Capital program will drive increases to airline rates 3 Capital Funding Strategy Maintain competitive CPE, and competitive airline rates (landing fee, FIS, terminal rents) Per Commission direction, use up to $200 million cash on IAF w/o amortizing cost Use PFCs for direct project funding and to pay revenue bond debt service to manage rate bases Purposely saved PFCs to increase amounts for pay-go for IAF and NSAT Targeting up to 90% of PFCs to pay debt service PFCs are key tool for managing rates 4 Rate Forecast Scenario 1 (Base Case) Rates 2016 2025 % Change Landing Fee $ 3.57 $ 3.77 5.6% Terminal Rents $ 118.89 $ 196.68 65.4% FIS $ 5.76 $ 12.00 108.3% CPE $ 11.00 $ 15.40 40.0% Assumptions: Offset 100% of Third Runway debt service Sufficient PFCs allocated to IAF, allowing FIS rate to grow to match highest among peer airports Terminal receives remaining PFCs Opportunity to shift PFCs from Airfield to moderate Terminal and/or FIS rates 5 Shifting PFCs Impacts Rates Scenario 1 Scenario 2 Scenario 3 2016 2025 2016-25 2025 2016-25 2025 2016-25 Rate Category Rate Rate % Change Rate % Change Rate % Change Landing fee 3.57 3.77 5.6% 4.61 29.1% 4.61 29.1% Terminal Rents 118.89 196.68 65.4% 178.60 50.2% 180.00 51.4% FIS 5.76 12.00 108.3% 12.00 108.3% 10.00 73.6% CPE 11.00 15.40 40.0% 15.44 40.4% 15.44 40.4% Scenarios 2 shifts PFCs from airfield to terminal Scenario 3 shifts PFCs from terminal to FIS PFCs: important tool for managing airline rates, but zero sum game 6 Next Steps Engaging airlines in discussion of funding plan Submit PFC application to FAA to gain authority to use PFCs on NSAT and IAF Monitor landing fees, FIS rates and CPE at other airports Adjust funding strategy as needed to stay competitive No decision on specific use of PFCs needed a this time 7 APPENDIX For Reference 8 Funding Plan for IAF Funding Sources $000s Capital Rate Base 2020 2024 Cash/ADF 200,000 Amortization - - Revenue Bonds 308,365 Debt Service 28,932 28,947 PFCs 100,000 DS paid w/PFCs (18,427) (19,778) Total 608,365 Net capital costs 10,505 9,169 Effective percent of PFCs to fund project costs: 48.7% 51.1% Per funding principles (May 26, 2015 ), amount of PFCs based on targeted $12 FIS rate (current estimate of high end of market rate) Use of PFCs can vary depending on other factors that impact FIS rate base Compared to the July 2015 IAF presentation, the effective use of PFCs has declined from 57.6% due to increased forecast for deplaned international passengers Use of PFCs lower than July 2015 Plan 9 Funding Plan for NSAT Funding Sources $000s Capital Rate Base 2020 2024 Cash/ADF 537 Amortization 36 36 Revenue Bonds 408,071 Debt Service 11,886 34,164 PFCs 122,493 DS paid w/PFCs (3,176) (20,870) Total 531,102 Net capital costs 8,746 13,330 Effective percent of PFCs to fund project costs: 43.6% 70.0% Estimating that approximately 70% of costs are PFC eligible subject to determination by FAA Use of PFCs on NSAT will increase as PFC backed bonds are fully amortized in 2023 Use of PFCs for NSAT will increase after 2023 10 Future CPE Comparison $35.00 SEA Future CPE in 2023 $30.00 Current CPE Future CPE $25.00 Targeted Middle Third $20.00 $15.00 $10.00 $5.00 $0.00 EWR ORD IAD JFK LAX SFO MIA LGA SMF BOS PHL SEA DCA MDW DFW YVR DEN PDX OAK HNL LAS SAN SJC DTW IAH MCO BWI TPA MSP FLL ATL PHX SLC CLT SEA Forecasted CPE is competitive 11 Landing Fee Comparison 2014 Landing Fees For Peer Airports $10.00 Landing fees vary $9.00 based on lease $8.00 agreement $7.00 Targeted Middle Third $6.00 SEA currently in $5.00 middle of range 9.49 $4.00 7.90 7.30 2014 is most recent $3.00 5.85 year of data 4.67 4.59 4.58 4.55 4.47 4.33 4.29 4.15 $2.00 3.72 3.71 3.63 3.33 3.32 3.27 2.85 2.71 2.65 No forecasted 2.39 2.22 $1.00 2.12 1.99 1.75 1.74 1.57 1.46 0.86 0.82 landing fee data $0.00 SEA landing fee is competitive middle of range 12 FIS Rate Comparison Projected 2019 FIS Fee or FIS Equivalent Rate based on 14.00 recovering costs 12.00 Rate sensitive to 10.00 volume of passengers 8.00 Funding plan uses 6.00 12.01 12.00 sufficient PFCs to 9.83 4.00 8.73 7.48 achieve targeted rate 5.96 2.00 Will continue to - LAX (CY 2019) SEA (CY 2019) YVR (CY 2019) SFO (FY 2019) DEN (CY 2019) PDX (FY 2019) monitor rates at other airports SEA FIS rate targeted to high end of market range 13
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