Item Number: _____7b_____ 
Date of Meeting:  April 14, 2015 
Revised April 13, 2014 
International Arrivals Facility
(IAF) Funding Plan Update 
Port Commission 
April 14, 2015

Background/Context 
Sea-Tac's international "front-door" is
unwelcoming and has inadequate capacity 
Port's responsibility is to encourage, not
discourage, international service to serve region 
New IAF will match capacity with demand 
Commission authorized procurement of design-
build contractor 
Key issue now is best, appropriately balanced
funding plan 
2

Purpose of Briefing 
Need commission direction regarding: 
Principles guiding IAF funding plan 
Funding plan assumptions 
Funding plan needed for: 
Bond issue financial forecast 
This bond issue funds 16C, NorthSTAR, etc., not IAF 
Majority-in-interest by airlines for IAF project

Commission guidance will drive update to airport financial plan 
3

January 27 Briefing Highlights 
Because airline rates are based on cost recovery, increased capital
spending will increase airline costs 
Current IAF estimate is $608 million; through design-build process, will
work with all stakeholders to deliver needed scope at lower cost 
Even with $608 million IAF, capital plan is affordable 
Sea-Tac will rank in middle third of peer airports for Cost per Enplanement and Debt
per Enplanement 
Costs funded with Passenger Facility Charges (PFCs) are excluded
from rate base, moderating airline rate impacts of those projects 
IAF/FIS costs treated uniquely in SLOA III 
IAF costs paid exclusively by FIS users 
All other terminal costs (like NSAT expansion) affect rates paid by all airlines 
Federal rules and SLOA provide tools to moderate future FIS (IAF) rates: 
PFCs 
Port can choose not to amortize (charge a fee for use of) cash investments (Section
8.4.4) 

4

Funding Plan and Rates 
Final funding plan will affect FIS rate when facility
opens (2019) 
Significant changes possible prior to 2019: 
Ultimate cost of IAF may be different from current
estimate ($608 million based on zero percent design) 
International service growing faster than domestic 
Congress could increase PFC cap 
The "market" FIS rate at other airports could change 
Recommendation: Port should establish principles for funding and adjust
as circumstances change: 
Maintain competitive CPE 
Maintain competitive rates: landing fee, terminal rents, FIS 
5

Updates Since Last Briefing 
Contracted with consultant to project 2019 FIS rates
at competitive airports 
Contracted with consultant to develop pro-forma for
new entrant 
Modeled two new scenarios 
Calculated cumulative use of PFCs over long time
horizon 
Presented new scenarios to airlines on 3/19 
IAF airline liaison surveyed international airlines re
perspectives on IAF need and fees 

6

Airline Perspectives 
Airline Technical Representative for IAF surveyed
airlines: 
FIS "needs to be replaced as soon as possible." 
An FIS rate in "low to mid-range of West Coast gateways
is preferred." 
Request Port staff to begin planning "to upgrade South
Satellite  as soon as practical." 
Port should develop protocols for future IAF gate
assignments 
Port should consider scope change to "maximize the
eventual number of A Concourse  international gates
available to all." 
7

FIS Rates  Competing Airports 



Conclusion: SEA 2015 FIS rate is now in middle of market 
8

Projected 2019 FIS Rates 
Implications: 
LAX rate is
most
comparable to
SEA, but
subsidized with
revenue sharing 
PDX and DEN
rates are
directly
subsidized 
SFO and YVR do
not charge FIS
fees. FIS rate is
a derived
equivalency 
Conclusion: High end of market range is $12.01 in 2019 
9

Importance of FIS Rate for Potential
New Entrant 
Annual results - Year 3
Revenues ($000s)            81,925
Operating profit ($000)          2,458
Operating Margin              3.0%
FIS rate Scenarios:            Current      Future Rate Scenarios
FIS Rate                     $7.40   $12.00   $24.00   $32.00
Annual FIS cost ($000)             648    1,051    2,102    2,803
FIS cost as % of revenues          0.8%     1.3%     2.6%     3.4%
FIS cost as % operating profit       26.4%    42.8%    85.5%   114.0%
Table shows projections for third year of service for new entrant 
New entrant would have tight operating margins until route is well
established. 
Conclusion: FIS rate could have significant impact on
route profitability, and thus decision to enter market 
10

CPE as Indicator of Domestic Rates
and Costs 
CPE Components - 2015     $000s     %
Landing fees             72,304    29%
Apron fees              8,542        3%
Terminal              155,858   63%
FIS                     10,360     4%
Passenger airline costs      247,064
Overall CPE is within middle third of peer airports (see Appendix) 
Landing fee is within middle third of peer airports (see Appendix) 
FIS and apron fees represent very small percentage of total 
Airport terminal rent structures are highly individualized and hard to compare; however,
because CPE and Landing Fee are in middle third, terminal costs must also be in middle of
range 
Conclusion: Costs and rates for domestic carriers must be within "market" 
11

Summary of what we have Learned 
Current and forecasted CPE at Sea-Tac are within
middle third of peer airports 
Current rates for landing fee, terminal rents and FIS
are within "market" range of peer airports 
Methodologies to set FIS rates vary significantly 
Best estimate of high end of FIS market rate in 2019
(year IAF will open) is $12 
Airport costs matter for prospective new entrant for
international route. FIS is one cost that stands out
since it is uniquely paid by international carriers 
Conclusion: Maintaining market CPE and market rates is critical to retaining service
and attracting new service. 

12

Scenario Descriptions 
Previously Presented Scenarios 
1. Use PFCs to pay 100% of revenue bond debt service 
$157 million PFCs used for IAF construction costs
2. PFCs pay no debt service related to IAF cost increase ($264M) 
$138 million PFCs used for IAF construction costs 
3. All IAF capital costs excluded from FIS rate base 
$157 million PFCs used for IAF construction costs 
$122 million cash used for IAF construction costs, amortization
excluded from rate base (paid by non-aero revenues per SLOA
section 8.4.4) 
4. Variation on #1 (not included going forward) 
Decisions on shifting PFCs between airfield and terminal cost
centers to achieve market rates will be part of annual funding plan
updates. 
New scenarios will be analyzed with scenarios 1, 2 and 3. 

13

Scenario Descriptions 
New Scenarios 
5. Alaska's proposal: PFCs allocated to IAF limited to
10% of annual PFC collections for construction costs
and debt service 
$39 million PFCs used for IAF construction costs 
Generates high FIS rate 
6. Increase use of cash:
$100 million PFCs allocated to IAF construction costs.
$200 million Port cash investment, with amortization
excluded from rate base (paid by non-aero revenues, per
SLOA section 8.4.4) 


14

Scenario Funding Plans and FIS Rates 
Scenarios
1       2       3       5       6
Construction Funding
Cash (ADF)            121,673         121,673         121,673         121,673         200,000 
PFC Pay Go           157,874         137,709         157,874         39,156   100,000 
Revenue bonds        328,818        348,983        328,818        447,536        308,365 
Total                 608,365          608,365          608,365          608,365          608,365 
2020 FIS Rate Base Costs
Baseline FIS costs         15,952     15,386     15,980     14,830     15,740
Amortization IAF          8,087     8,087     8,087     8,087    13,292
Debt service IAF          30,867     32,760     30,867     42,011     28,947
Rate base             54,906    56,233    54,934    64,928    57,979
DS paid with PFCs        (30,867)   (12,907)   (30,867)    (8,550)        (23,513)
Excluded amortization - -      (8,087) -     (13,292)
Adjusted rate base        24,039    43,326    15,980    56,378    21,174
FIS Rate                13.62     24.55      9.06         31.95     12.00
FIS rate base reduced if use more PFCs for construction 
Adjusted rate base reduced by using PFCs and non-aeronautical revenues
to offset annual debt service costs 
Scenario 6 achieves market FIS rate while freeing up PFCs for other projects.
15

Financial Implications of Scenarios 
Scenarios
1       2       3       5       6
Key Measures in 2020
CPE               14.89    14.98    14.70    15.05    14.62
Debt service coverage       1.32         1.33         1.30         1.34         1.29 
Revenue sharing ($000)     15,848    17,533    11,805    19,207     8,856
Debt/Enplanement       146.6    146.5    146.8    146.5    147.1
Debt outstanding ($000)   3,289,098   3,287,356   3,293,950   3,258,600   3,300,962
Scenario 6, by excluding amortization on $200 million
of Port cash, results in lowest CPE, but also lowest
debt service coverage, revenue sharing and highest
debt and debt per enplanement 
Represents significant commitment of Port resources 
Scenario 6 impacts Port's financial performance but achieves market
rate objectives 
16

Rate Changes: 2015 - 2022 
Scenarios
COST CENTER      1     2     3     5     6
Landing Fee
2015            3.48    3.48    3.48    3.48    3.48
2022            3.50    3.50    3.50    3.50    3.51
Percent Change      0.5%    0.5%    0.5%    0.5%    0.8%
Terminal Rents
2015           109.60   109.60   109.60   109.60   109.60
2022           160.65   149.34   160.72   142.81   153.83
Percent Change     46.6%   36.3%   46.6%   30.3%   40.4%
FIS
2015            7.40    7.40    7.40    7.40    7.40
2022            13.76       23.83        9.50   30.49       12.00 
Percent Change     85.9%  221.9%   28.3%  311.9%   62.1%
After Runway 16C reconstruction, no major airfield investments 
By 2022, full cost of NSTAR in terminal rate base 
FIS rate expected to increase significantly under all scenarios 
Scenario 6 achieves better balance of rate increases for Terminal and FIS 
Following slides show Scenario 6 funding plan in greater detail 
17

Scenario 6: Uses of PFCs 2015 - 2022 
2015    2016    2017    2018    2019    2020    2021    2022
SOURCES
Beginning balance      76,927   93,715   22,780    9,136           0  - - - 
Collections & interest    74,359    77,370    78,585    80,728    83,009    85,499    87,636    89,827
USES - Debt Service
PFC Backed Bonds
Third Runway         5,695        5,695       18,915   20,129   20,128   18,768   18,766   18,770
Conc A & STS         13,076   13,073     - - - - - - 
Revenue Bonds
Third Runway        25,262   26,394   28,741   28,742   28,931   28,931   28,586   22,699
Conc A, STS, Baggage     8,538        7,406        5,059        5,058        4,869        5,738        7,858        14,555
IAF - - - - -   23,513 23,663 23,749
NSAT - - - - - - -    1,072 
USES - PAY GO
IAF -  20,000 30,000 30,000 20,000  - - - 
NSAT -  70,738 4,515 -  4,080   1,410 - - 
Airfield/Noise - - -      935   - 2,140      2,140 - 
Other Terminal        5,000        5,000        5,000        5,000        5,000        5,000        6,624        8,983 
Ending balance        93,715   22,780    9,136           0  - - - - 
Built up PFC balance to reduce debt on major upcoming projects: IAF and NSAT 
In 2020 and beyond, use 90% of PFCs to pay debt service 
PFCs used to benefit airfield, terminal and FIS cost centers 
18

Percent of Eligible Debt Service Paid
with PFCs 
Budget   Forecast   Forecast   Forecast   Forecast   Forecast   Forecast   Forecast     Total
2015      2016      2017      2018      2019      2020      2021      2022     2015-2022
1. PFC-Backed Bonds:
Eligible Amount                 18,770,100  18,767,100  18,914,600  20,128,600  20,128,375  18,767,500  18,765,500  18,770,000    153,011,775 
Less: Usage                 (18,770,100) (18,767,100) (18,914,600) (20,128,600) (20,128,375) (18,767,500) (18,765,500) (18,770,000)  (153,011,775)
Remaining - - - - - - - -      -
% of DS Covered by PFCs             100%      100%      100%      100%      100%      100%      100%      100%       100%
2. Airfield (3rd Runway):
Eligible Amount                 25,261,628  26,393,649  28,741,445  28,741,573  28,930,995  28,930,638  28,586,392  22,699,057    218,285,377 
Less: Usage                 (25,261,628) (26,393,649) (28,741,445) (28,741,573) (28,930,995) (28,930,638) (28,586,392) (22,699,057)  (218,285,377)
Remaining - - - - - - - -      -
% of DS Covered by PFCs             100%      100%      100%      100%      100%      100%      100%      100%       100%
3. Terminal (Existing + NSAT)
Eligible Amount                 13,547,453  14,582,052  13,269,843  13,135,298  32,877,884  32,879,387  32,877,018  34,298,942    187,467,878 
Less: Usage                 (8,538,372)         (7,406,351)         (5,058,555)         (5,058,427)         (4,869,005)         (5,737,558)         (7,857,932)         (15,626,497)   (60,152,696)
Remaining                   5,009,081   7,175,702   8,211,288   8,076,870  28,008,880  27,141,830  25,019,086  18,672,446   127,315,181 
% of DS Covered by PFCs              63%      51%      38%      39%      15%      17%      24%      46%        32%
4. FIS (IAF):
Eligible Amount - - - - -   28,946,858 28,946,858 28,946,858  86,840,575
Less: Usage - - - - -   (23,513,221) (23,662,817) (23,748,902) (70,924,939)
Remaining - - - - -   5,433,637 5,284,042 5,197,956  15,915,636
% of DS Covered by PFCs                                                          81%      82%      82%        82%
Note: Figures in table based on Scenario 6 
PFC backed bonds are first priority 
100% of Third Runway debt paid with PFCs 
IAF debt service paid by PFCs as needed to achieve market FIS rate 
19

PFCs by Cost Center 2015 - 2022 
Uses - $000          2015     2016     2017     2018     2019     2020     2021     2022    2015-22
Airfield              30,956    32,088    47,656    49,805    49,059    49,838    49,492    41,469    350,364
Terminal           26,614   96,217   14,574   10,058   13,949   12,147   14,482   24,609    212,650
FIS -  20,000 30,000 30,000 20,000 23,513 23,663 23,749 170,925
57,570   148,305   92,230   89,864   83,009   85,499   87,636   89,827    733,939
Percent
Airfield                54%      22%      52%      55%      59%      58%      56%      46%       48%
Terminal             46%     65%     16%     11%     17%     14%     17%     27%      29%
FIS                    0%      13%      33%      33%      24%      28%      27%      26%       23%
Note: figures in table based on Scenario 6 
Uses include pay-go and debt service 
Highest use of PFCs will be for Airfield (Third Runway) 
Use for FIS (IAF) will range between 0% - 33% annually,
total 23% during this period 
20

Cumulative Uses of PFCs: 1992 - 2049 
Uses $000       1992-2014  2015 - 2022  2023 - 2049  1992-2049
Cost Center
Airfield             585,075     350,364     383,180    1,318,619 
Terminal          443,839    212,650   2,535,898         3,192,387 
FIS -  170,925 482,077 653,002
Total             1,028,913            733,939    3,401,155          5,164,007 
Percent
Airfield                57%        48%        11%        26%
Terminal             43%      29%      75%      62%
FIS                   0%       23%       14%       13%
Note: figures in table for 2015  2049 based on Scenario 6 
Majority of PFCs through 2014 devoted to Airfield (Third Runway) 
Future PFCs will be focused on terminal development needs per master
plan 
Strategic use of PFCs allows airport to moderate rate impacts 
Based on long-term view, use of PFCs by cost center is "balanced" 
21

Funding Plan Recommendation 
Construct IAF funding plan based on principles: 
Maintain competitive CPE 
Maintain competitive rates throughout airport: landing
fee, terminal rents, FIS 
Target FIS rate for new IAF at no more than the
highest rate of competitor airports 
Use PFC funding and Port cash contribution to achieve
targeted FIS rate 
Build IAF funding plan based on Scenario 6; be prepared to adjust to changing 
conditions (e.g., IAF cost, SLOA IV provisions, FIS market rates, PFC level) 

22

Next Steps 
Adjust as needed based on commission
feedback 
Use in preparation for airport bond issue 
Submit IAF project to airlines for MII
(majority-in-interest) vote  May 

23

APPENDIX 

24

Appendix Overview 
Other than the first slide, which provides
background on FIS rate methodologies, the
remaining slides in the Appendix were
included in January 27 presentation to
Commission 
Included again for background 

25

Airports Use Different Methods to
Develop FIS Rates 



26

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 

27

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. 
28

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
29 
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      30 
2018

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                        31

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
32

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 

33

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   34