Preliminary
Tax Levy Discussion
Commission Retreat
August 6, 2020

                      Topics
• Introduction & Background
• Tax Levy Uses
– Capital
– Non-Capital
• Tax Levy Scenarios
• Additional Information

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                   Introduction
• July 29 retreat included preliminary funding information
• Key take-aways impact tax levy discussion
–Negative cash flow in 2020 and anticipated in 2021 and 2022 impact
the ability to fund investments from the general fund
–Tax levy will need to fund all of the Maritime and Economic
Development projects in the near-term
–Tax levy funding includes the use of G.O. bonds (paid from the tax levy)
• The pandemic reality factors into decisions on the 2021 levy
amount and uses
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              Tax Levy Background
• In the budget, Commission sets the tax levy
– Dollar amount up to the maximum allowable
– Budgeted uses
• 2020 levy = $76.4 million (3% increase from 2019)
• 2021 estimated maximum levy is $108.7 million
• Tax levy may be used for any Port purpose except payment of revenue
bond debt service
• Industrial Development District Levy can provide up to $1.8 billion
over 20 years
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                  Tax Levy Uses
• Most significant use has
been capital investments -
both cash and G.O. bonds
• The levy has also been
used for certain non-
capital expenses


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         Criteria for Levy Funding Projects
Current criteria – revised in 2017
Operating Cash            Tax Levy
Asset Renewal & Replacement  Positive net income from    Economic benefit
business unit
Strategic Initiatives                   Short payback/          No or long payback
Self funding
Location                           South Harbor            North Harbor

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          Tax Levy Used at Most Facilities (1)
Consistently Supported             Periodically Supported
– Fishermen’s Terminal                  –Cruise - P66 funded with tax levy
–Cargo Facilities                          –Recreational Marinas – purchase
–T91 docks and infrastructure              of Salmon Bay Marina


(1) Excluding Airport facilities

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                Non-Capital Uses
Consistently Supported             Periodically Supported
• Regional Transportation –        • Real Estate operating losses
interlocal freight mobility         • NWSA Equity – one-time
• Environmental Clean-up –Non-     revaluation of T5
Airport legacy contamination     • Community programs
• Noise Mitigation – Highline
school costs ineligible for
Airport funding

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                Non-Capital Uses



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     Levy Options to Add Funding Capacity 2021-25
Preliminary Tax Levy Scenarios ($ mil)
Additional
Funding (1)
Base Case 3% 2021-2023
10% 2021-2023                   163
20% 2021, then flat                  129
Max 2021, then flat                 344
Max 2021, 3% 2022 & 2023           30
No increase                        (57)
(1) Includes bond proceeds and cash


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                Tax Payer Impacts
2020               Preliminary 2021 Tax Payer Impacts
• Port tax rate is 12                                              Rate ($ per    Median   change from
cents per $1000 of                               Levy ($ mil.)    $1000)      Tax ($)     2020 ($)
assessed value         Base Case 3% 2021-2023          78.7         0.122        73.5         1.8 
• Median King County    10% 2021-2023                 84.0        0.131       78.5        6.8 
home value is           20% 2021, then flat               91.7         0.143        85.6        13.9
$600,000             Max 2021, then flat             108.8        0.169      101.6        30.0
Max 2021, 3% 2022 & 2023        108.8         0.169       101.6         30.0
• Median Port tax is      No increase                     76.4         0.119        71.7         -
about $72
Note: Based on 2020 assessed value and median home value per King County
Assessor


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                 Watch List Items
• Transportation Infrastructure Fund
– New or accelerated spending could reduce the ability to “borrow”
$30 million from future years
• COVID costs
– Potential health screening or other costs related to COVID
management
• Downside risk
– Potential need to support Airport or Non-Airport businesses if
outcomes are worse than projected
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              Recommendations
• Staff Recommendation for next planning iteration
– Allow the tax levy to fund any Non-Airport capital investments
– Plan for continuation of a 3% levy increase 2021-2023
– Adhere to budget guidelines for non-capital levy expenditures
•Amounts above that will be funded with an additional levy increase
•Any new items (e.g. watch list) would also be funded with an additional
levy increase

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              Additional Information


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          2020 Community Programs
Community Programs Summary
2019      2019      2020     2020 Cost      2020    2020 Revised
Program (in $000)                                      Budget    Actual     Budget    Reductions   Additions      Budget
1) Airport Community Ecology (ACE) Fund                     500        260        522             -            -          522
2) Duwamish Valley Community Equity Program                   -          -        292             -            -          292
3) South King County (SKC) Fund                               750          -      1,500             -             -         1,500
4) EDD Partnership Grants                                       960        763        960             -             -           960
5) City of SeaTac Community Relief                           1,400      1,400      1,400             -             -         1,400
6) Airport Spotlight Ad Program                                  354        934       1,148              -             -         1,148
7) Energy & Sustainability (E&S) Fund                           250        283        250         (100)             -           150
8) Maritime Innovation Center                                        -           -        150              -             -           150
9) Tourism Program                                         1,521      1,338      1,536         (194)        1,500         1,342
10) Workforce Development                                 2,920      1,771      3,119         (216)        1,500         2,903
11) Diversity in Contracting (formerly Small Business)            1,197         883       1,520          (188)                        1,331
12) High School Internship Program                               634        629        775           (26)             -           749
13) Equity, Diversity & Inclusion                                  648         565       1,346          (420)                          925
14) Sustainable Aviation Fuels & Air Emissions Program          375           -         40             -             -            40
15) Low Carbon Fuel Standard Support                             -           -        150          (45)             -           105
TOTAL                               11,508    8,826   14,708     (1,190)     3,000     16,519

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               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

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             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

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            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

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      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.

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