• Tax Levy Background and 2018 Update DRAFT PLAN OF FINANCE 2019-2023 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 – Carefully vetted business forecasting – Financial targets that allow the Port to withstand downside risk and maintain strong access to financial markets • Debt service coverage (revenue cash flow available to pay debt service) • Minimum operating fund balances Airport and Non-Airport Capital Are Funded Separately • Airport – Relies on its own operating cash flow from airline cost recovery and non-aeronautical businesses – Unique funding sources: • Airport grants • Passenger Facility Charge (PFC) • Customer Facility Charge (CFC) – Cost Per Enplaned Passenger (CPE) is a critical affordability metric • Non-Airport – Includes Northwest Seaport Alliance (NWSA), Maritime and Economic Development – Relies on a combination of • Operating cash flow • Tax levy after payment of other tax levy uses Debt is an Important Funding Tool • Types of Debt – Operating cash flow can be used to support revenue bond debt – Tax levy can be used to support General Obligation (G.O) bond debt • Use of Debt – Provides near-term funding capacity with long-term repayment – Appropriate for long-term investments • Debt Management – Financial targets and metrics provide guard rails against over leverage • Debt service coverage targets for revenue bonds – Airport: 1.25x – Non-airport: 1.50x (under review) • Maximum tax levy leverage…Open full document
Notes
We really need to do a deep dive on this because this is one the most confusing aspects of how the Port Of Seattle is structured. Technically, the Port is a ‘public corporation’, akin to a utility. However, it is quite different from other utilities in that it has a taxing authority.
The Port does not use any of these taxes to pay for airport operations. In fact, they are prevented from doing so by FAA law, which specifies that all commercial airports must be 100% funded from operations.
It starts to get confusing fast because the Port can (and does) use some of these taxes to pay for mitigations (noise insulation, windows). This creates the urban myth that the Port uses your taxes to pay for airport operations. Not true.
In recent years, the airport has used the lion’s share of these taxes for one thing: to pay down its bond debt. We object to this because the Port Of Seattle has been running in the black (they are not allowed to be called ‘profitable’) for many years and we believe it to be unfair to take public tax money simply to pay down debt when not absolutely necessary.