6b supp
Item No.: 6b_Supp_1 Meeting Date: November 24, 2015 Port of Seattle 2016 Preliminary Budget Second Reading & Final Passage November 24, 2015 Outline 2016 Budget Process Recap 2016 Budget Highlights 2016 Key Budget Drivers Changes made since the first budget reading Proposed 2016 Operating Budget Proposed 2016 Comprehensive Op & Non-Op Budget Proposed 2016 FTEs Summary Proposed 2016-2020 Capital Budget Proposed 2016 Sources and Uses of Funds Proposed 2016 Tax Levy Remaining 2016 Budget Schedule 2 2016 Budget Process May 12 2016 Business Plan and Budget Process Briefing May 26 2016 Aviation Division Business Plan Discussion Jul. 9 2016 Maritime Division Business Plans Discussion Sept. 8 2016 Economic Development Division Business Plan Discussion Sept. 8 2016 Key Budget Assumptions Briefing Sept. 22 2016 Corporate Budget Briefing Oct. 13 2016 Operating Division Budgets Briefing Oct. 20 Preliminary Budget Document to the Commission Oct. 22 Preliminary Budget released to the Public Oct. 27 Preliminary Tax Levy and Draft Plan of Finance Briefing Nov. 10 First Reading & Public Hearing of the Preliminary Budget Nov. 24 Second Reading & Final Passage of the Preliminary Budget Dec. 3 File Statutory Budget with King County Dec. 11 Release the Final Budget and Draft Plan of Finance A long and challenging budget process this year due to re-org and the new NWSA. 3 2016 Budget Highlights Operating revenues are budgeted at $584.6M, $32.8M or 5.9% higher than 2015 budget Operating expenses are budgeted at $336.0M, $3.1M or 0.9% increase from 2015 budget (largely due to transfer of some expenses to the NWSA) Net Operating Income is budgeted at $248.6M, $29.7M or 13.6% above 2015 budget The 2016 capital budget is $408.4M and the 5-year capital spending plan is $2.2 billion The proposed tax levy for 2016 is $72.0M, $1.0M reduction from 2015. The 2016 budget reflects strong growth and continued investments for the region. 4 2016 Key Budget Drivers - Aviation Finalizing the Airport Master Plan (SAMP), initiating environmental review, and planning for new projects Increasing janitorial services due to strong passenger growth Land development to generate additional revenue 5 year capital spending of $2 billion, including NorthSTAR Program, International Arrivals Facility, Baggage Recapitalization/ Optimization, Runway 16C/34C Reconstruction, and the new South Satellite Project The 2016 key initiatives support strong growth at the Airport and continued investments for the region. 5 2016 Key Budget Drivers Maritime & EDD Additional funding for Real Estate Strategic Plan, Opportunity Fund, and Small Business development Expanded Workforce Development initiatives, including Airport Career Pathways, Core Plus, and Small Business Generator program Increased Tourism funding New Storm Water Utility operational model and infrastructure assessment 5 year capital spending of $136 million including expansion of the P66 Cruise Terminal, new restrooms at Shilshole Bay Marina, and $34 million of renewal and replacement projects at Fishermen's Terminal The 2016 key initiatives reflect continued support for the community and investments for the region. 6 2016 Workforce Development Budget $'s Thousands Office of Social Responsibility '16-'15 2015 Budget 2016 Budget Change New Requests 1. Comprehensive Career Pathways - Strategic Investments 0 1,025 1,025 1a. Airport Career Pathways Mapping & Strategy 0 75 75 1b. Airport Career Pathways Implementation (Year 1) 0 100 100 1c. Maritime Workforce Development Initial Strategy 0 150 150 1d. Core Plus (High School to Industry/Post Secondary Transition 0 200 200 1e. Trades Regional Partnership 0 350 350 1f. Manufacturing Industry/Truck Driving 0 150 150 2. Port Jobs Six Month Contract Extension 100 50 (50) Continuing Workforce Development Airport Sector 410 450 40 Workforce Development Construction Sector 200 260 60 Total 710 1,785 1,075 Developing capable employees for key industries. 7 2016 Key Budget Drivers - Corporate High Performance Organization/Operational Excellence Purchasing optimization initiative Increased resources for LEAN/CPI program Talent Management initiative, implementation of new ePerformance System Expanded Strategic communications and outreach The 2016 budget includes key initiatives for high performance organization and The 2016 budget reflects strong growth and continued investments for the region. operational excellence. 8 Changes from the First Budget Reading Updated the budget to reflect the 6 month extension of the Port Jobs contract for the Apprenticeship Opportunity Program ($100K). Revised funding of Workforce Development initiatives to the Tax Levy, resulting in lower cost allocations to other divisions. Reduced the tax levy from $73.0M to $72.0M for 2016. Reduce tax levy to $72M per Commission direction. 9 2016 Operating Budget 2014 2015 2015 2016 Budget Change ($ in '000s) Actual Budget Forecast Budget $ % Operating Revenues Aeronautical 228,864 242,352 232,534 261,019 18,667 7.7% SLOA III Incentive Adj. -3,576 -3,576 -3,576 -3,576 0 0.0% Non-Aeronautical 180,791 188,465 194,832 208,321 19,855 10.5% Aviation 406,079 427,242 423,790 465,764 38,522 9.0% Maritime 43,790 47,264 44,864 49,314 2,050 4.3% Economic Development 16,267 16,108 17,029 13,745 -2,363 -14.7% Licensed NWSA Assets 68,413 60,812 66,712 0 -60,812 -100.0% NWSA Distributable Revenue 0 0 0 51,829 51,829 N/A Other 389 340 3,159 3,926 3,586 1056.0% Total 534,938 551,766 555,554 584,578 32,812 5.9% Operating Expenses Aviation 230,704 248,141 239,564 268,216 20,075 8.1% Maritime 31,854 36,683 34,661 42,261 5,577 15.2% Economic Development 23,546 21,188 20,078 23,309 2,120 10.0% Licensed NWSA Assets 22,840 26,562 27,262 121 -26,441 -99.5% Other 389 340 2,040 2,103 1,764 519.4% Total 309,334 332,914 323,605 336,010 3,096 0.9% Net Operating Income 225,605 218,852 231,949 248,568 29,716 13.6% NOI in the proposed 2016 budget is $29.7M or 13.6% higher than 2015 budget. 10 2016 Comprehensive Budget Summary 2014 2015 2016 Budget Change ($ in '000s) Actual Budget Budget $ % Explanations Revenues 1. Aeronautical Revenues 228,864 242,352 261,019 18,667 7.7% Cost recovery under SLOA III. 2. SLOA III Incentive (3,576) (3,576) (3,576) () 0.0% 3. Other Operating Revenues 309,650 312,989 327,135 14,145 4.5% Mainly due to higher revenues from the Airport. 4. Tax Levy 72,801 73,000 72,000 (1,000) -1.4% Reduced to $72M per the Commission's direction. 5. PFCs 69,803 73,752 84,650 10,898 14.8% Higher enplanements in 2016. 6. CFC Non-Op Revenue for Debt Service 19,889 23,614 24,963 1,349 5.7% Driven by increased debt service on 2009B bond. 7. Fuel Hydrant 6,935 7,202 7,098 (104) -1.4% 8. Non-Capital Grants and Donations 10,158 6,263 3,566 (2,697) -43.1% Lower grants for Clean Truck Program in 2016. 9. Capital Contributions 16,746 40,949 23,406 (17,543) -42.8% Lower due to the $25M 16C LOI will be fully claimed in 2015. 10. Interest Income 11,202 7,094 8,537 1,443 20.3% Total 742,473 783,639 808,799 25,160 3.2% Expenses 1. O&M Expense 309,334 332,914 336,010 3,096 0.9% New initiatives and average pay increase. 2. Depreciation 166,337 162,082 162,451 370 0.2% 3. Revenue Bond Interest Expense 108,910 133,468 121,423 (12,045) -9.0% 2015 revenue bond interest expense budgeted conservatively. 4. GO Bond Interest Expense 9,475 14,706 14,726 20 0.1% 5. PFC Bond Interest Expense 5,906 5,633 5,302 (331) -5.9% 6. Non-Op Environmental Expense 9,142 5,600 5,000 (600) -10.7% 7. Public Expense 6,854 9,572 8,898 (674) -7.0% Driven by final year of Clean Truck Program. 8. Other Non-Op Rev/Expense (2,110) 3,657 3,319 (338) -9.2% Subtotal 613,849 667,632 657,130 (10,502) -1.6% 9. Special Item - - 147,700 147,700 n/a Second installment for AWV contribution. Total 613,849 667,632 804,830 137,198 20.5% Change In Net Assets 128,624 116,007 3,969 (112,039) -96.6% 2016 budget includes a $147.7M second installment for AWV contribution. 11 FTEs Summary Aviation Seaport Real Estate Corp&CD Total 2015 Budget 877.0 59.7 166.0 750.7 1,853.4 A. Reorganization - External Transfers To NWSA - (19.0) - (1.0) (20.0) Internal Transfers (2.0) 144.5 (135.5) (7.0) - Subtotal 875.0 185.2 30.5 742.7 1,833.4 Adjusted Organizational Structure Aviation Maritime EDD Corp&CD Total 875.0 185.2 30.5 742.7 1,833.4 B. Mid Year Changes in 2015 1 Mid Year Approvals 16.0 4.5 1.0 6.2 27.7 2 Eliminated FTE's (10.2) (6.1) (1.0) (2.0) (19.3) Subtotal 5.8 (1.6) - 4.2 8.4 C. 2016 Changes 1 Eliminated FTE's (2.0) (1.0) - (11.0) (14.0) 2 New FTE's 14.0 1.0 3.3 9.5 28.8 Subtotal 12.0 - 3.3 (1.5) 14.8 2016 Budget* 892.8 183.6 33.8 745.4 1,856.6 *Note: The 2016 proposed budget includes one new FTE for Stormwater Utility. Moderate FTEs growth driven mainly by the strong traffic growth at the Airport. 12 Capital Budget Summary Capital Budget Summary by Division $'s in 000's 2016 2017 2018 2019 2020 2016-20 Aviation 360,064 456,890 453,575 416,085 363,074 2,049,688 Maritime 27,480 21,112 24,621 24,637 13,796 111,646 Economic Dev. 12,458 3,650 2,285 2,104 4,104 24,601 Corporate 8,443 8,686 8,707 8,307 8,230 42,373 Total 408,445 490,338 489,188 451,133 389,204 2,228,308 The Port continues to invest in the region with a 5-year capital plan of $2.2 billion. 13 Capital Budget Summary Capital Budget Summary by Category $'s in 000's 2016 2017 2018 2019 2020 2016-20 Commission Authorized/Underway 319,638 382,542 396,504 334,148 182,714 1,615,546 Pending 2015/2016 Authorization 28,017 17,669 8,030 250 - 53,966 Pending Future Authorization 4,956 13,148 24,358 28,343 18,880 89,685 Small Capital Projects 15,062 13,753 11,997 11,662 12,650 65,124 Total 367,673 427,112 440,889 374,403 214,244 1,824,321 Allowance CIPs and Other* 40,772 63,226 48,299 76,730 174,960 403,987 Total 408,445 490,338 489,188 451,133 389,204 2,228,308 * Allowance CIPs represent undesignated future spending for future new projects and potential budget increases for existing projects in Aviation division. 14 Sources of Funds Rental Car Customer Fuel Hydrant Receipts Passenger Facility Other Receipts Facility Charges 0.8% Charges 0.1% 2.8% 9.4% Grants and Capital Contributions Tax Levy 3.0% 8.0% Proceeds from Bond Issues 10.0% Operating Revenues 65.0% Interest Receipts 0.9% Tax Levy is 8.0% of the $900 million total sources of funds in 2016 budget. 15 Uses of Funds Capital Expenditures 32.2% Total Operating Expenses 26.5% Interest Payments 12.1% Special Item 11.7% Bond Redemptions 13.0% Public Expense 0.7% Total Uses : $1,266.8M NWSA Contributions Other Expenses 3.1% 0.7% The Port continues to invest in capital projects and infrastructure for the region. 16 Net Operating Income Comparison A record high of $248.6M Net Operating Income in the 2016 budget. 17 2016 Tax Levy Tax Levy Amount: Levy amount established by the Commission each year as part of the budget process The maximum allowable levy for 2016 is estimated to be $96.4 million The levy for 2016 is proposed to be $72.0 million Projected rate change (from $0.1891 to $0.1704) Tax levy was flat at $73M for 4 years and proposed to lower it to $72M for 2016. 18 2016 Tax Levy Proposed 2016 Tax Levy Uses: General Obligation (G.O.) Bonds Debt Service Legacy Environmental Remediation Highline School NOISE Mitigation Pier 66 Redevelopment for cruise growth Capital projects in support of the fishing industry Additional Deposit to the Transportation & Infrastructure Fund for Regional Transportation & Freight Mobility projects - $21.3 million Heavy Haul Corridor projects Other regional transportation initiatives (FAST II, E. Marginal Way, Argo Access) Workforce Development funding - $1.5 million in 2016 Tax levy uses include strategic initiatives 19 2016 Tax Levy Sources & Uses 2016 Tax Levy Sources & Uses ($ mil.) Sources 2016 Budget Beginning Balance 57.7 Annual Levy 72.0 Tsubota Sale 8.0 Total 137.7 Uses G.O. Debt Service - existing 34.5 G.O. Debt Service - SR99 Tunnel 3.6 Environmental Remediation 7.0 Transportation & Infrastructure Contribution 21.3 Workforce Development 1.5 Highline Schools Noise Mitigation - Approved CIP - P66 Cruise 12.0 Proposed CIP - Fishing Industry 4.0 Total 83.9 Ending Fund Balance 53.8 Tax levy is reduced to $72 million in 2016 20 Remaining Budget Schedule Statutory Budget Filed with King County Dec. 3, 2015 Release the Final Budget Document Dec. 11, 2015 21 Port of Seattle 2016 Preliminary Budget Second Reading & Final Passage November 24, 2015
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