9c Tax Levy and Plan of Finance Briefing Presentation
Item No. 9c Meeting Date: October 22, 2019 Draft Plan of Finance 2020-2024 and Tax Levy Briefing October 22, 2019 1 Topics Draft Plan of Finance Capital Planning and Funding: Airport Capital Planning and Funding: Non-Airport Tax Levy Background and Update Appendix 2 Draft Plan of Finance 2020-2024 2020 Preliminary Budget October 22, 2019 The Draft Plan of Finance Provided to the Commission to inform the budget process and capital investment decisions Developed based on a sustainable financial model Detailed five-year business forecasts Financial targets that allow the Port to withstand downside risk and maintain strong access to financial markets Debt service coverage targets Minimum operating fund balances 4 Airport and Non-Airport Capital Are Funded Separately Airport Non-Airport Relies on its own operating cash Includes Northwest Seaport flow from airline cost recovery Alliance (NWSA), Maritime and and non-aeronautical businesses Economic Development Unique funding sources: Relies on a combination of: Airport grants Operating cash flow and revenue Passenger Facility Charge (PFC) bonds paid from operating cash flow Customer Facility Charge (CFC) Tax levy after payment of other tax Cost Per Enplaned Passenger levy uses and general obligation bonds paid from the tax levy (CPE) is a critical affordability metric 5 Capital Improvement Plan (CIP) and Funding Airport 2020 Preliminary Budget October 22, 2019 Airport CIP 2020-2024 The Airport is self-funding and is Airport CIP ($ million) prohibited from supporting Non-Airport businesses due to FAA regulations International Arrivals Facility $ 216.1 North Satellite Terminal 250.3 The costs of aeronautical investments that Baggage Optimization 264.3 support the airlines are recovered through airline fees much of the Airport's $2.9 Other Existing Projects 987.6 billion CIP is aeronautical Proposed New Projects 233.2 SAMP Planning/Design (1) 291.5 35% of the CIP is authorized for construction CIP Reserves 680.0 TOTAL $ 2,923.0 CIP does not include SAMP projects Allocated Central Services CIP 35.1 beyond the $291 million for planning and design Total Airport Funded CIP $ 2,958.1 (1) Sustainable Airport Master Plan 7 Airport CIP - $2.9 Billion Investment Many projects support multiple goals Investments to improve capacity and asset stewardship will also improve the customer experience All projects include an environmental framework that enhances outcomes 8 Airport Capital Funding 2020-2024 Operating revenues generated at Aviation Funding Sources ($ million) the Airport and revenue Operating Cash (1) $ 652.4 supported bonds fund 95% of (2) Airport CIP Tax levy 3.5 Grants 111.3 Passenger Facility Charge (PFC) 26.1 Grants, PFCs and CFCs pay the Customer Facility Charge (CFC) 18.2 rest (additional PFCs and CFCs Existing revenue bond proceeds 625.3 pay a portion of revenue bonds) Future bond proceeds 1,521.3 Total Airport Funding $ 2,958.1 (1) Includes airport income available after payment of revenue bond debt service. A small amount of the tax levy is (2) Highline Schools noise insulation. used for capital investment in the Note: totals may not add due to rounding Highline schools 9 Capital Improvement Plan (CIP) and Funding Non-Airport 2020 Preliminary Budget October 22, 2019 Background The Port's Non-Airport businesses include: Maritime Economic Development (EDD) Port's share of the Northwest Seaport Alliance (NWSA) These businesses share funding from: Non-Airport cash flow (after payment of revenue bond debt service) Available tax levy funds Bonds paid from: Net cash flows - Revenue bonds Tax levy - General Obligation (G.O.) bonds 11 Non-Airport CIP $184 million is the Port's 50% share of NWSA CIP Includes T5 and other North and South Harbor projects Will be presented to Managing Members on October 29 Port also has "legacy" projects for NWSA facilities, e.g. channel deepening 12 Maritime and Economic Development CIP $440 million Many projects support multiple goals New cruise terminal is the major driver of financial sustainability Habitat restoration and shore power are key investments in environmental sustainability 13 Non-Airport CIP Comparison $ million 2019-2023 2020-2024 Maritime $ 270.9 $ 366.9 Includes new projects, e.g. T46 north berth Economic Development 62.7 73.5 Subtotal $ 333.6 $ 440.4 Allocated Central Service 10.9 8.1 NWSA Port 50% share 273.2 230.9 Major projects at Husky and T-5 will be completed and Port related projects Strategic Reserve (1) 50.0 0.0 No known needs at this time TOTAL $ 667.7 $ 679.3 (1) $16 million (net) membership affirmation payment to NWSA is now accounted for in 2020-2024 tax levy non-capital uses. Note: totals may not add due to rounding 14 Non-Airport Capital Funding Plan Harbor Development Fund assumes an additional $50 million contribution in 2019 Future revenue bonds can be issued beginning in 2023 based on new revenues from capital investments 15 Non-Airport Capital Funding Capacity The current forecast indicates the ability to fully fund the CIP Additional funding is available if the Port maximizes the use of G.O. bonds Staff recommends that additional G.O. bonds be considered only if there are compelling needs Additional G.O. bonds reduces flexibility to adjust the levy policy in the future 16 Port-wide Revenue Bond Debt Service Coverage Forecast Represents net income from Airport and Non-Airport businesses divided by all revenue bond debt service Provides a measure of financial sustainability and is critical to investors and rating agencies Port-wide funding plan supports the Port's strong credit ratings and access to credit markets 17 2020 Finance Initiatives Issue Revenue bonds as needed to fund a portion of the Airport CIP Monitor existing debt for opportunities to refund at lower costs 2010 Revenue Bonds are likely candidates Update Commercial Paper program Manage variable rate debt credit renewals 18 Tax Levy Background and Update 2020 Preliminary Budget October 22, 2019 Tax Levy Washington State ports are permitted to levy a tax on property within the port's district The levy amount must be approved annually by the Commission and is part of the budget process The Port may approve a levy amount up to the maximum allowable within statutory limits The maximum levy for 2020 is $106.3 million The 2019 levy is $74.2 million Proposed 2020 levy is $76.4 million (a 3% increase) 20 Tax levy Uses Investments in maritime infrastructure Environmental sustainability Regional transportation mobility Community: workforce development, partnership grants, Airport communities and tourism 21 Tax Levy Strategy In 2019, the Commission approved a 3% inflationary levy increase to support investments in the Seattle Harbor Funding assumed that the levy would increase 3% per year through 2023, then 0% in 2024 2019 tax levy increased to $74.2 million compared to $72.0 million in 2018 Over the prior decade, inflation reduced the purchasing value of the tax levy 22 Tax Payer Impact 2018 2019 2020 preliminary Tax Levy ($ million) 72.0 74.2 76.4 Estimated millage rate ($/1000) 0.135 0.123 0.120 Median home value ($) (1) 509,000 582,000 611,000 Estimated median home Port tax ($) 68.7 71.6 73.3 (1) 2018 and 2019 per King County Assessor; 2020 based on estimated 5% growth in assessed value Preliminary estimate indicates that the median home owner will see an increase payment of Port property tax of $1.74 in 2020. 23 Overall Taxpayer Impact - 2019 Of the $5.6 billion of property taxes paid in King County, 1.3% goes to the Port In 2019, the median homeowner paid $6,687 in total property tax with $72 going to the Port 24 2019 Tax Levy Update ($ million) SOURCES OF TAX LEVY FUNDS 2019 Current estimate: $10.6 million of levy 2019 Beginning Levy Fund Balance $ 51.6 will be available for future funding Annual Tax Levy 74.2 In addition to the tax levy, Environmental Grants & Other Reimbursements 2.8 Commission established: Investment Income 1.3 Total Sources $ 129.9 Harbor Development fund (HDF) for T-5 redevelopment USES OF TAX LEVY FUNDS Staff recommends an additional G.O. bond debt service (Existing) $ 43.4 deposit of $50 million Environmental Remediation Expense 6.9 Community Programs 6.1 Transportation Infrastructure Harbor Development Fund Deposit 50.0 fund (TIF) paid for $6.5 million in Non-Airport Capital Investments 10.9 regional mobility efforts in 2019 Strategic Reserve 2.0 Further details on TIF and HDF can be Total Uses $ 119.3 found in Appendix Projected Ending 2019 Levy Fund Balance $ 10.6 25 Tax Levy Sources and Uses 2020-2024 ($ million) SOURCES OF TAX LEVY FUNDS 2020-2024 Assumes 3% increase 2020-2023, 0% Beginning Balance $ 10.6 in 2024 Tax Levy Collection 403.0 Assumes insurance recoveries for Environmental Receipts 33.3 environmental remediation Total Sources $ 446.9 Assumes the use of $192 million of G.O. bonds to fund capital projects USES OF TAX LEVY FUNDS In addition to $54 million of levy cash G.O. Bond Debt Service $ 240.1 G.O. bond debt service includes the new Non-Capital Uses 152.6 bonds Capital Investments 54.2 Total Uses $ 446.9 2024 Projected Ending Balance $ 0.1 26 2020-2024 Tax Levy Uses Non Capital Investments ($ million) 2020-2024 G.O. Bond Debt Service - $240M G.O. bond debt service (Existing) $ 185.1 G.O. bond debt service (New) 55.0 Environmental Remediation and Total G.O. bond debt service $ 240.1 Improvements Non-Airport Environmental Expense $ 88.4 Membership Interest NWSA Membership Interest Contribution 16.0 Contribution to the NWSA Economic Development Programs 14.3 Environmental Grants (ACE) and Energy and Sustainability 1.0 Port Community Programs Duwamish Valley Community Equity Program 1.5 Workforce development Sustainable Aviation Fuels and Air Emissions Program 5.0 South King County Fund 10.0 South King County Fund Highline Schools Noise Projects 3.5 City of Seatac safety City of SeaTac Safety Enhancements 7.0 Local Community Advertising Program (Spotlight) 6.0 Economic Development Total Other Non-Capital Uses $ 152.6 Partnership grants TOTAL NON-CAPITAL TAX LEVY USES $ 392.7 Additional levy dollars above this total are available for new capital investments 27 2020-2024 Tax Levy Uses Capital Investments ($ million) 2020-2024 Funding from both levy cash and G.O. bond proceeds Tax Levy Cash $ 54.2 G.O. Bond Proceeds 192.0 Investments focus on Maritime Industries TOTAL $ 246.2 Supports investments in Capital Investments: T91 and Fishermen's Terminal Environment and Community $ 39.9 T5 and North Harbor container terminals Fishing and Maritime Industries 109.3 Habitat restoration, shorepower, central T5 and North Harbor 88.5 waterfront amenities CIP Reserves 8.5 New Projects, e.g. T46 North Pier could be TOTAL CAPITAL TAX LEVY USES $ 246.2 levy funded 28 Appendix 2020 Preliminary Budget October 22, 2019 Contents Page 31 Port's Taxing Authority 32 2019 Levy Status (additional detail) 33 2009-2020 Tax Levy & Millage Rate 34 Actual vs. Maximum Allowable Levy 35 Transportation and Infrastructure Fund (TIF) 36 Harbor Development Fund (HDF) 37 Tax Levy Cash Flows for Non-Capital Uses 38 Levy & G.O Bond Funded Capital Investments (2020-2024) 39 Non-Airport Operating Cash Flow Available for Capital 40 Current Credit Ratings 41-43 Industrial Development District Tax Levy 30 Port's Taxing Authority Port taxing limitations: Port is limited by the most restrictive currently the 1% limit 1% limit The maximum levy is increased each year by the 1% limit factor Based on prior year's maximum Increased by the lessor of 1% or inflation plus an addition for new construction The maximum levy for 2020 is estimated to be ~$106.3 million 45 cent limit The amount of the tax levy in any given year is limited to 45 cents per $1000 of assessed value (Port 2020 rate is estimated to be 12 cents based on a $76.4 million levy) For 2020, this limit is ~$286.6 million Excludes the amount needed to pay G.O. bond debt service of $39.8 million 31 2019 Levy Status SOURCES AND USES OF TAX LEVY ($ million) 2019 2019 Budget SOURCES Budget Est./Act Variance 2019 Beginning Fund Balance $ 46.5 $ 51.6 $ 5.2 Annual Tax Levy 74.2 74.2 - Environmental Grants & Other Reimbursements 2.1 2.8 0.7 Investment Income - 1.3 1.3 Total Sources $ 122.7 $ 129.9 $ 7.2 USES G.O. bond debt service (Existing) $ 43.4 $ 43.4 $ (0.0) Environmental Remediation Expense 6.9 6.9 0.1 Capital Expenditures - Maritime 10.7 4.1 6.6 Capital Expenditures - EDD 5.6 1.5 4.1 NWSA North Harbor Spending 16.5 5.3 11.2 Strategic Reserve 20.0 2.0 18.0 Harbor Development Fund Deposit - 50.0 (50.0) Airport Community Ecology (ACE) Fund 0.5 0.3 0.2 Energy and Sustainability Policy Directives 0.3 0.4 (0.1) Workforce Development 1.7 1.7 - Economic Development Partnership Program 1.0 1.1 (0.1) Tourism Grants 0.2 0.2 - Local Community Advertising Program 0.4 0.9 (0.6) Workforce Development Pilot Program - Airport 0.2 0.1 0.1 South King County Fund 0.8 - 0.8 Sustainable Aviation Fuels and Air Emissions Programs 0.4 - 0.4 City of SeaTac Safety Enhancements 1.4 1.4 - Highline Schools Noise Projects 1.1 - 1.1 Total Uses $ 111.0 $ 119.3 $ (8.3) Estimated Ending Tax Levy Fund Balance $ 11.7 $ 10.6 Totals may not foot due to rounding 32 2009-2020 Tax Levy & Millage Rate (1) (1) Millage rate represents the amount per every $1,000 of a assessed valuation 33 Actual vs. Maximum Allowable Levy 34 Transportation and Infrastructure Fund (TIF) TIF ($ million) 2020-2024 Post 2024 Beginning Balance $ 66.7 $ 30.4 Transportation Investments 36.3 29.4 Ending Balance $ 30.4 $ 1.0 Transportation Investments ($ thousand) 2020 2021 2022 2023 2024 2020-2024 Post 2024 Seattle Heavy Haul Network $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 2,000 $ 10,000 $ 8,000 Fast Corridor I 225 225 - Fast Corridor II 345 - 730 1,075 - N Argo Express Access - Pub Ex 200 200 - East Marginal Way Phase 2 250 250 - Safe and Swift 8,500 7,500 16,000 - Highway 509 Contribution - 4,285 4,285 8,570 21,430 TOTAL $ 11,520 $ 9,500 $ 2,730 $ 6,285 $ 6,285 $ 36,320 $ 29,430 35 Harbor Development Fund (HDF) SOURCES AND USES OF HARBOR DEVELOPMENT FUND HDF created in 2017, included initial $65 ($ million) million deposit SOURCES 2019 2020-2024 Staff recommends additional $50 million Beginning Balance $ 66.8 $ 96.2 contribution from tax levy in 2019 2019 Deposit from Tax Levy fund 50.0 - Investment Earnings 1.5 - $96 million available to fund much of the Total Sources $ 118.3 $ 96.2 Port's share of T-5 modernization costs Port's share of 2020-2024 T-5 USES modernization costs is ~$131 million T-5 Modernization (Port 50% share) $ (22.0) $ (96.2) Additional amounts not funded with HDF will be paid from tax levy cash or G.O. Ending HDF Balance $ 96.2 $ - Bonds 36 Tax Levy Cash Flows for Non-Capital Uses ($ million) 2020 2021 2022 2023 2024 TOTAL G.O Bond Debt Service $ 39.8 $ 52.3 $ 53.1 $ 53.1 $ 41.8 $ 240.1 NWSA Membership Interest Contribution 5.5 5.5 - 5.0 - 16.0 Environmental Remediation Expense 8.2 6.7 19.6 33.3 20.7 88.4 Energy and Sustainability Fund 0.3 0.3 - - - 0.5 Airport Community Ecology Fund 0.5 - - - - 0.5 Economic Development Programs 2.7 2.7 2.7 2.7 2.7 13.3 Tourism Grants 0.2 0.2 0.2 0.2 0.2 1.0 Duwamish Valley Community Equity Program 0.3 0.3 0.3 0.3 0.3 1.5 Local Community Advertising Program 1.1 1.2 1.2 1.2 1.2 6.0 South King County Fund 1.5 2.1 2.1 2.1 2.1 10.0 Sustainable Aviation Fuels and Air Emissions Programs - 1.3 1.3 1.3 1.3 5.0 City of SeaTac Safety Enhancements 1.4 1.4 1.4 1.4 1.4 7.0 Highline Schools Noise Projects 3.5 - - - - 3.5 Total Non-Capital Tax Levy Uses $ 64.9 $ 73.8 $ 81.8 $ 100.6 $ 71.6 $ 392.7 37 Levy & G.O. Bond Funded Capital Investments ($ million) Status CIP Description 2020 2021 2022 2023 2024 Total Maritime and Economic Development Projects New projects appropriate 5 T117 Restoration (1) - 10.3 0.3 0.3 0.3 11.2 5 P66 BHICC Interior Modernize 10.4 0.0 - - - 10.4 4 FT Gateway Building 1.0 10.0 10.0 0.8 - 21.8 for tax levy/G.O. bonds 4 FT Docks 3,4,5 Fixed Pier Improvements 2.5 - - - - 2.5 4 FT Maritime Innovation Center 0.7 5.0 4.0 0.5 - 10.1 include: 4 T91 Uplands Development 0.8 4.8 14.0 14.0 5.3 38.8 3 T91 Berth 6 & 8 Redevelopment 0.4 10.0 24.6 - - 35.0 T46 North Pier 3 P66 Shore Power 0.7 13.2 3.0 - - 16.9 3 T91 Pier Stormwater Imp Ph 1 - 1.1 - - - 1.1 3 Central Waterfront Bridge Elevator Modernization 0.7 0.8 - - - 1.5 T91 NW Fender 2 Economic Development CIP Reserve 0.5 0.5 0.8 0.8 - 2.5 2 Maritime CIP Reserve 1.0 1.0 2.0 2.0 - 6.0 Jack Block Park Pier Subtotal - Levy Funding MD & EDD CIP 18.5 56.6 58.6 18.3 5.6 157.7 NWSA North Harbor and POS-related (JV) Projects Terminal 5 Modernization (2) - - 19.0 15.5 - 34.5 Other North Harbor Projects (3) 3.7 4.8 4.6 3.8 5.5 22.5 Channel Deepening and other POS-related Projects (JV) 2.5 0.5 0.2 27.3 1.0 31.5 Subtotal - NWSA North Harbor and POS-related (JV) CIP 6.3 5.3 23.8 46.6 6.5 88.5 Total Levy & G.O. Bond Funding of Non-Airport CIP 24.8 61.9 82.4 65.0 12.1 246.2 (1) Net of existing environmental funds (2) Net of funding from Harbor Development Fund (3) Net of TIGER capital grant and general fund funding 38 Non-Airport Operating Cash Flow Available for Capital ($ million) 2020 2021 2022 2023 2024 TOTAL Cash Flow from NWSA $ 44.2 $ 45.0 $ 56.0 $ 58.4 $ 58.4 $ 262.1 Maritime net income 6.3 11.1 13.6 22.1 24.2 77.4 EDD net income (10.1) (9.0) (9.2) (8.6) (7.7) (44.6) Revenue bond debt service and adjustments (1) (33.2) (34.7) (35.2) (33.3) (34.6) (171.0) TOTAL $ 7.3 $ 12.5 $ 25.2 $ 38.6 $ 40.3 $ 123.9 (1) Adjustments include certain non-operating revenues and expenses and reimbursements for tax levy funded EDD expenses 39 Current Credit Ratings Noted Credit Strengths: Diverse asset and revenue base Moody's S&P Fitch Airport's market position and General Obligation Bonds Aaa AAA AA- enplanement levels First Lien Revenue Bonds Aa2 AA- AA Strong balance-sheet liquidity levels Intermediate Lien Revenue Bonds A1 A+ AA- Conservative debt structure and healthy Subordinate Lien Revenue Bonds A2 A+ AAPassenger Facility Charge Revenue Bonds A1 A+ A+ debt service coverage ratios Fuel Hydrant Special Facility Bonds A1 A Strong governance and management Long-range strategic and sustainability plans Vibrant and resilient area economy 40 IDD Levy - Background Port can levy property tax within an Industrial Development District (IDD) In addition to regular property tax A port can form multiple districts Coextensive with port district, or Smaller area within the Port district The Port already has two Industrial Development Districts Port can implement the levy twice - Port of Seattle implemented first round in 1963 Purpose is to provide for harbor improvements or industrial development of marginal lands Broadly defined Includes areas of poor planning or declining tax receipts 41 IDD Levy - Implementation Port may implement a second round based on a new formula Maximum of $1.8 billion over a period of up to 20 years Average amount = $88 million (for 20 years) Maximum annual amount = $287 million (45 cents for 6 years) Port can establish a smaller IDD or collect a lesser amount, but cannot bank the unused capacity Process to implement Publish notice by April 1 to begin collecting the next year If within 90 days a petition of 8% of voters (voting in the most recent gubernatorial election) opposes, the Port must hold a special election to approve the levy 42 IDD Levy Information: "Marginal lands" are defined to include property subject to the following (RCW 53.25.030) conditions: 1. An economic dislocation, deterioration, or disuse resulting from faulty planning. 2. The subdividing and sale of lots of irregular form and shape and inadequate size for proper usefulness and development. 3. The laying out of lots in disregard of the contours and other physical characteristics of the ground and surrounding conditions. 4. The existence of inadequate streets, open spaces and utilities. 5. The existence of lots or other areas which are subject to being submerged by water. 6. By a prevalence of depreciated values, impaired investments, and social and economic maladjustment to such an extent that the capacity to pay taxes is reduced and tax receipts are inadequate for the cost of public services rendered. 7. In some parts of marginal lands, a growing or total lack of proper utilization of areas, resulting in a stagnant and unproductive condition of land potentially useful and valuable for contributing to the public health, safety and welfare. 8. In other parts of marginal lands, a loss of population and reduction of proper utilization of the area, resulting in its further deterioration and added costs to the taxpayer for the creation of new public facilities and services elsewhere. 9. Property of an assessed valuation of insufficient amount to permit the establishment of a local improvement district for the construction and installation of streets, walks, sewers, water and other utilities. 10. Lands within an industrial area which are not devoted to industrial use but which are necessary to industrial development within the industrial area. 43
Limitations of Translatable Documents
PDF files are created with text and images are placed at an exact position on a page of a fixed size.
Web pages are fluid in nature, and the exact positioning of PDF text creates presentation problems.
PDFs that are full page graphics, or scanned pages are generally unable to be made accessible, In these cases, viewing whatever plain text could be extracted is the only alternative.