Below are the Certified Audited Financial Reports (CAFR) for the Port of Seattle over the past fifteen years. Before you embark on your light reading for the day, some generalities, including Why would I want to read a CAFR?.
Port Finance 101
Structurally, the Port of Seattle is extremely complex. That’s not a question of size. For example, one could run a cookie factory that, like the Port, took in $784,000,00 in one year and that company would be considered simple. You bake the cookies, you ship the cookies, you pay your employees and you get paid. Simple.
The Port of Seattle, is on the other hand, a government agency broken down into several very different Divisions. Managing an airport is nothing like managing a seaport, and a real estate development company is nothing like either. However, an airport and a seaport both promote tourism and a real estate company is very useful to both. So despite the fact that they all require very different management systems, they do have obvious strategic synergies and overlaps. But on the other hand, since they are a quasi-government agency, there are walls which are meant to keep each Division separate.
This can make their financial statements challenging to get through. On some pages of their financials, each division is segregated. While on others, the numbers attempt to reflect how they work together across the entire corporation.
In truth, the Port can be a nightmare to understand. So its worth noting that its board of directors (the five Port Commissioners) are part-time employees, making less than $50,000 a year. Their sole job requirement and authority is to get elected. They come into the job with no required accreditation such as CPAs, MDs or lawyers. What could go wrong? 😀 That’s not meant to diss the Commissioners. It’s to give you confidence and some perspective. Because the Port is so complex, often, they’re in the same boat you are.
So…. why would a layperson want to bother with this?
For the footnotes, dude! 😀 Sorry, actually we meant ‘for the appendices’. But ‘footnotes’ sounds funnier. The appendices of the CAFR contain all kinds of general information that a lay person interested in the airport might find interesting, including how many employees the Port, how many pensioners, how many ships go in and out, how much cargo and what kind, who the biggest taxpayers in King County are (spoiler alert: Microsoft), who their biggest vendors are, how their bonds work, where their properties are and how the fishing biz is doing. Just as examples. 🙂 Those appendices will give you a sense of “the empire.”
In fact, we strongly recommend that you read any CAFR starting from the last page and working your way backwards. Because in addition to the appendices, corporate financials tend to be as long as, and read like, Russian novels. They take forever to get to the point, but the exciting parts (the most comprehensible summaries of each division) tend to be near the end.
Revenue by Division: the ®CliffsNotes version
That said, the Port’s revenue sources are usually broken down by Division. Each Division gets its funding from different sources and has rules specifying where and how they can spend those funds for different uses. The Port cannot simply move money wherever and wherever it wants.
And also, if you actually read the CAFR from the beginning, you’ll immediately notice that it is not meant for lay people. To keep this simple, we’re mixing and matching all kinds of terminology and generalizations that would make any real accountant barf.
Port of Seattle Division Revenue Sources/Uses (2019)
| Type | $ (in millions) | % of budget | Sources | Allowed Uses | Notes |
|---|---|---|---|---|---|
| Aviation | 626 | 80 | AIP, Tenants, Passenger Facilities Charges | Highly constrained by FAA. Limited to the airport upkeep and expansion.oise Mitigation | AIP grants may be used for noise mitigation. |
| Maritime | 59 | 7 | Cargo Fees, Cruise Ships | Almost unlimited | |
| Economic Development (Real Estate) | 21 | 4 | Tenant Fees, One time construction, Tourism | Almost unlimited | |
| Property Tax Levy | 74 | 9 | Property Taxes | Almost unlimited | Paying down bonds, ACE Grants, SKCF Grants |
| 1Bonds | Almost unlimited |
Fun Facts
- Aviation Division money is broken down into three major categories: Aeronautical revenue, Non-aeronautical revenue and FAA grants.
- Aeronautical is basically airline money.Take-offs and landings, use of the facilities. Currently under FAA regs, almost zilch of this may be spent on community anything.
- Non-aeronautical money is parking, airport book sales, dining, car rentals. That’s worth mentioning because the non-aeronautical money is now almost (prox. 43%) as large as the aeronautical money (57%.) The airport takes in almost as much money now selling ‘after-market’ services as it does the main product. How much of this may be used for community benefit is subject to interpretation. For example, the City of SeaTac takes in almost $4,000,000 a year by virtue of the fact that the airport is within the city boundaries and the Port has a revenue sharing agreement (Interlocal Agreement or ILA) for things like parking revenue. The Port has no such agreement with any other jurisdiction.
- FAA grants are meant to maintain and expand the airport. A portion of these can be used for community mitigation (aka Port Packages and property buyouts.)
- According to FAA regulations, by far the largest chunk of Aviation money can only be used on the airfield, it cannot be allocated for community compensation or mitigation.
- A whole chunk of the Port’s revenue comes from land and much of that land was originally purchased at a bargain price by the FAA or the State of Washington. But currently all the revenue, (rents, taxes) from those lands goes to the Port of Seattle, not to the communities.
- About 100% of the do-gooder projects the Port undertakes are from your Property Taxes via their Property Tax Levy. Tree planting, Maritime High School, Fish. You name it, you are literally paying yourself.
- The vast majority of that Property Tax Levy goes to pay down Port debt for development projects (like the SR-99 tunnel.) Your taxes leverage their development because it makes their cost of borrowing cheaper.
- Technically speaking, bonds are not revenue sources, they’re debt. We included them here as a reminder to us to revisit this in the future. The Port can borrow money at 2lucrative rates, then re-pay that debt using other funds (like the Property Tax Levy), which often makes their effective borrowing cost close to zero.
The Greater Good
Taken together, this helps explain, philosophically, why the Port has been so miserly with community compensation. It always goes back to the Greater Good Argument.
- FAA regulations place tight constraints on how aviation money can be spent off the airfield. In fact, within their revenues and FAA grants, only a small percentage of that money is even eligible for programs like Noise Mitigation–and those funds compete with very necessary issues like keeping the runways in good working order. Every dollar they spend more on community benefit, cuts into their ability to not only to expand, but simply to maintain the airport. That is not exactly “100%” as the kids say, but that is their messaging.
- Using the Property Tax Levy for bond re-payment is extremely lucrative. Prioritizing debt repayment helps them do the big projects (SR-99, West Seattle Bridge, etc.) that benefit all of King County.
Given those constraints, setting aside more from either source for the airport communities would, from this point of view, not be the highest use of either fund. The Port wants to do the most good for the most people and from their perspective, the airport and bond re-payment are much more efficient uses of funds than setting aside monies for airport impacts.
The Big Boys
One more fun fact: In both the Aviation and Maritime Divisions, the Port has two customers who represent about a third of their business. For Aviation that means Alaska and Delta. Number three is Horizon, which is owned by Alaska Air. Taken together, two corporations represent forty percent of Sea-Tac Airport’s airline revenues. This sort of information is always presented on financial statements because investors are rightly concerned as to how diversified any business’ revenue streams are. Since 2008, over 97% of the airport’s flights are commercial. So if, by some chance, either Delta or Alaska Air Group were to decide to relocate even some of their routes, it would have a seismic impact for the Port of Seattle.
Port of Seattle Comprehensive Annual Financial Reports (CAFR)
1At the risk of punting, “bonds” are simply too big a topic to fit here. They represent a huge part of the Port’s funding for various projects, but we don’t want to confuse people even more by putting up numbers. Stay tuned.
2It’s notable that, as of 2022, the Port’s investment rating for all classes of bonds is not universally top-rated. They are, in fact, still being punished slightly for a string of scandals and very poor decisions. After the last house cleaning, the Port has done an admirable job of public relations to the extent that most of the public under the age of sixty seems oblivious to decades of cost over-runs and scandals as recent as 2015.