Thursday, December 2, 2010

Seattle Port Adopts $500 Million Budget for 2011

The governing board for the Port of Seattle on Monday approved a 2011 budget that includes just over $385 million in capital development and the retention of the $73.5 million in tax levy revenue paid to the port by area property owners.
"Generating jobs, protecting our environment, and holding taxes flat – those are our priorities and they are reflected in this budget," said Commission President Bill Bryant in a port statement.

Due to the port's austerity measures – including more than $28 million in 2009 budgeted cuts – and increased cargo volumes, the port is forecast to end 2010 in the black with a net income of $53 million.

Despite this, port CEO Tay Yoshitani said "We also expect costs to increase next year – particularly in employee benefits, deferred maintenance at existing facilities, and certain initiatives focused on maintaining our competitiveness and positioning the Port for future growth. We must continue to manage our budgets diligently and effectively."

The 2011 budget calls for no increase of the tax levy on local property owners over 2010 levels. However, the budget calls for the revenue level to remain constant, not the tax levy rate. If property values decline, levy rates to property owners would have to be increased to maintain the $73.5 million total public contribution to the port authority's finances.

The port authority's total 2011 operating revenues are budgeted at $498.5 million, a $21.7 million or 4.6 percent increase from the 2010 budget. Operating expenses are budgeted at $282.8 million, a $20.0 million or 7.6 percent increase compared to the 2010 budget. Excluding several extraordinary items, which according to the port authority include a capital policy change, the Port Centennial, deferred maintenance, new rental car facilities, regulatory requirements, and spending requested by airlines, the baseline increase is $8.0 million or 3.0 percent over the 2010 budget. Net Operating Income before Depreciation is $215.7 million, a $1.8 million or 0.8 percent increase over 2010.

The port authority oversees the Port of Seattle, Seattle-Tacoma International Airport, and various real estate interests.

The seaport expects growth from container volumes, crane rental and lease revenues to increase 2011 operating revenue by about 5 percent compared to the 2010 budget. Container volumes are expected to increase about 12 percent compared to initial 2010 budgeted volume, but, according to port officials, that increase will be slightly offset by a decrease in cruise ship revenue – the current schedule for 2011 cruise ship calls forecasts a 6 percent decline in passenger numbers. Critical 2011 port initiatives identified in the 2011 budget include developing a stewardship plan for key division assets, implementing a Green Gateway strategy, and developing near- and long-term strategies for increasing revenues.

Operating revenues from the Seaport Division are budgeted at $99.0 million. Total operating expenses including corporate costs are $47.1 million. Net operating income before depreciation is budgeted at $51.9 million.

The port’s Real Estate Division operating revenue is expected to grow by about 3 percent compared to 2010 budget levels. Revenue from the Bell Harbor International Conference Center is projected to increase by more than 15 percent as more events are scheduled there and at the Smith Cove Cruise Terminal. A continuing soft real estate market, according to port officials, could mean higher vacancies at the port's commercial properties and marinas. Key focus areas for the Real Estate Division cited in the 2011 budget will be to "closely manage costs, catch up on maintenance of properties, and manage retained sections of the Eastside Rail Corridor."

The Real Estate Division's operating revenues are budgeted at $30.7 million and total operating expenses including corporate costs are $36.1 million. Net operating income before depreciation is minus $5.4 million.

At Sea-Tac Airport, passenger levels dropped significantly less than at other major airports. Through June of 2010, domestic enplanements are down 1.3 percent over last year, but international enplanements are up 4.9 percent, for a net decline of 0.7 percent from 2009. The domestic airline industry is expected to be profitable in 2010 – Alaska Air Group reported record earnings for the second quarter – but it is not yet clear when airlines will see passenger volumes growing enough to increase capacity. For the remainder of 2010, the port authority expects no increase in passenger levels. For 2011 port authority officials forecast a modest increase of 1.0 percent. The Aviation Division business strategy for 2011 will concentrate on non-airline revenues and managing airline costs, according to the 2011 budget executive summary.

Operating revenues for the Aviation Division are budgeted at $367.8 million. Revenues from airlines are $216.4 million, non-airline revenues are $143.0 million, and revenue from Fuel Hydrant is budgeted at $8.4 million. Total operating expenses are budgeted at $197.9 million. Net operating income before depreciation is budgeted at $169.9 million.