A. TAX AT A GLANCE B. TAX LEVY SOURCES TYPES AND LIMITS OF LEVIES:

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1 A. TAX AT A GLANCE The maximum allowable levy for 2015 is $95.1 million. For 2015 the levy will be $73.0 million. The millage rate is estimated to be $ The 2015 levy will be used for: o General Obligation (G.O.) Bonds Debt Service o Regional Transportation & Freight Mobility projects (FAST Corridor and Argo Road) o Seaport and Real Estate Environmental Remediation Liability o A portion of operating expenses and Real Estate Capital Improvements o Highline Schools NOISE Insulation o Workforce Development/Port Jobs o Addition to the Transportation Infrastructure Fund (TIF) B. TAX LEVY SOURCES TYPES AND LIMITS OF LEVIES: Regular Tax The County Treasurer acts as an agent to collect property taxes levied in the County for all taxing authorities. Taxes are levied annually on January 1 on property value listed as of the prior year. Assessed values are established by the County Assessor at 100% of fair market value. A re-evaluation of all property is required annually. Taxes are due in two equal installments on April 30 and October 31. Collections are distributed to the Port by the County Treasurer. The Port is permitted to levy up to $0.45 per $1,000 of Assessed Valuation for general Port purposes under Washington State law in Revised Code of Washington ( RCW ) Chapter The levy may go beyond the $0.45 limit to provide for G.O. Bonds debt service. However, the rate may be reduced below the $0.45 limit for the following reason: RCW Chapter limits the annual growth of regular property taxes to the lesser of 1% or the inflation rate, where inflation is measured by the percentage change in the implicit price deflator for personal consumption expenditures for the United States, after adjustments for new construction. This 1% limit factor was instituted by Initiative 747 that Washington State voters approved in November Prior to the passage of the Initiative, the growth limit was the lesser of 6% or the inflation rate (for levy limit calculation see Section XII Statutory Budget). IX-1

2 FIGURE IX-1 shows the maximum levy permitted by law versus the actual levy levied by the Port from 1991 (the last year the Port levied the maximum) to In 1989, the law was changed whereby a port could have a levy at less than the maximum while preserving the ability to tax up to the maximum in the future if the need was justified. This allows a port to tax at the lower level in the years when the maximum levy is not required, but return to the maximum level in years of need. Since 1991, on a cumulative basis, the Port has levied a total of $410 million less than it could have if it had levied the maximum allowable levy each year. FIGURE IX-1: ACTUAL TAX LEVY VS. MAXIMUM ALLOWABLE LEVY: $100 $ Millions $90 $80 Maximum Allowable $70 $60 $50 $40 Cumulative foregone taxes = $410 million Actual Tax $30 $20 $10 $ FIGURE IX-2 shows the historical millage rate from 2006 to The Port has kept the tax levy at $73.0 million from 2012 to the present. FIGURE IX-2: TAX LEVY VS. MILLAGE RATE $ Millions $80 $75.90 $75.90 $73.50 $73.50 $73.00 $73.00 $73.00 $73.00 $0.70 $70 $62.79 $68.81 $0.60 $60 $0.50 $50 $0.40 $40 $0.30 $30 $20 $0.23 $0.23 $0.22 $0.20 $0.22 $0.22 $0.23 $0.23 $0.22 $0.19 $0.20 $10 $0.10 $ $0.00 Tax (Left Scale) Millage (Right Scale) IX-2

3 Special Tax Levies Special levies approved by the voters are not subject to the same limitations as the regular levy. The Port can levy property taxes for dredging, canal construction, leveling or filling upon approval of the majority of voters within the Port District, not to exceed $0.45 per $1,000 of Assessed Value of taxable property within the Port District. Industrial Development District Tax Levies The Port may also levy property taxes for Industrial Development Districts (under a comprehensive scheme of harbor improvements), for twelve years only, not to exceed $0.45 per $1,000 of Assessed Value of taxable property within the Port District. The Port of Seattle levied the tax for a six-year period between 1963 and 1968 for property acquisition and development of the lower Duwamish River. If the Port intends to levy this tax for a second six years (or the seventh through twelfth year period), the Port must publish notice of intent to impose such a levy and if signatures of at least eight percent (8%) of the voters protest the levy, a special election must be held with majority approval required. The Industrial Development could be imposed at up to $0.45 per $1,000 in the first year and the lesser of $0.45 per $1,000 or the 1% limit factor described above in subsequent years. The Port has not levied the seventh through twelfth year period but if the Port were to under this law, Port may levy up to an estimated $994 million over the six year period. C. TAX LEVY USES During the annual budget process, the Commission reviews and approves the use of the tax levy. The levy, by Washington State statute, may be used broadly for general Port purposes. The Port s policy has been to prioritize the use of the levy to first pay debt service on General Obligation (G.O.) bonds issued previously to fund portions of critical capital infrastructure investments in the Seaport, Real Estate and Corporate divisions. Projects have included container terminal upgrades and expansions, Fishermen's Terminal improvements; and dock renewals and upgrades at the Terminal 86 grain facility and Terminal 115. Thereafter, the levy is used to cash fund investments that foster regional economic growth and provide community benefits. These include environmental remediation in the Seattle Harbor, regional freight mobility initiatives such as FAST Corridor, the purchase of the Eastside Rail Corridor, and support for Port Jobs, a non-profit organization that helps develop Port and Airport-related career opportunities. Beginning in 2010, the Port began using the tax levy to pay for many Real Estate Division capital investments and a portion of the division s operating expenses. Beginning in 2010 the Port began to set aside resources in the Commission-designated Transportation & Infrastructure Reserve Fund (TIF) for the Port s contributions toward certain regional transportation and special item projects including the SR99 deep bore tunnel and the South Park Bridge replacement. To date, the TIF has been funded with $48 million of tax levy proceeds, and $20 million will be added in The Port s contribution of $4.29 million toward the South Park Bridge public expense project is funded from the TIF (two payments of $2.14 million in 2013 and 2015). Expenditures from the TIF are not included in Table IX-1. The levy has not traditionally been used for projects at Sea-Tac International Airport, however, the Commission approved the use of the levy for specific projects not eligible for Airport funding such as noise mitigation improvements at certain Highline School District schools near to Sea-Tac Airport. The timing of this funding is dependent on the Highline School District. For 2015, the Port plans to use the levy for debt service on G.O. Bonds, Real Estate capital improvements and a portion of the division s operating expenses, regional transportation and freight mobility projects (FAST Corridor and Argo Road), Seaport and Real Estate environmental remediation expenditures, the Highline School District schools NOISE insulation project, and Workforce Development/Port Jobs. Real Estate capital projects include major maintenance and upgrades at various facilities including Fishermen s Terminal and Pier 69. TABLE IX-1 shows how the Port plans to spend the levy in Additional details are provided in Tables IX-2 and IX-3. IX-3

4 TABLE IX-1: SOURCES AND USES OF TAX LEVY TABLE IX-1 shows how the Port plans to spend the levy in Notes 2015 ($ in 000's) SOURCES Prior Year Fund Balance $ 25,135 Projected Tax Collection 73,000 Environmental Grants 1,356 Eastside Rail Corridor Partner Reimbursement 6,100 Total Projected Sources 105,591 USES G.O. Bonds Debt Service - Seaport 26,309 G.O. Bonds Debt Service - Real Estate 2,115 G.O. Bonds Debt Service - Corporate 1 4,518 Total Projected G.O. Debt Service 32,941 Capital Expenditures: Committed - Real Estate 5,845 Business Plan Prospective - Real Estate 1,125 Total Projected Capital Expenditures 6,970 Other Expenditures: Regional Transportation & Freight Mobility 2 3,090 Transportation & Infrastructure Reserve Fund 20,000 Environmental Remediation Liability (Seaport & Real Estate) 3 10,432 Portion of Real Estate Operating 6,608 Workforce Development (Port Jobs) 327 Highline Schools NOISE Insulation 2,378 Total Projected Other Expenditures 42,834 Total Projected Uses 82,745 Projected Ending Balance $ 22,846 Notes: 1) Assumes new debt service associated with LTGO bonds issued in 2015 to fund the Port's first (of two) contributions to the Alaska Way Viaduct project. 2) Net of grant receipts. 3) Includes projected cashflows for environmental projects already or expected to be booked as liabilities. IX-4

5 TABLE IX-2: LEVY FUNDED COMMITTED PROJECTS TABLE IX-2 provides the estimated 2015 Real Estate division committed projects that the Port expects to fund with a portion of the tax levy proceeds. In addition, any Real Estate Business Plan Prospective projects that are advanced in 2015 may be eligible for levy funding ($ in 000's) Real Estate Technology, Small and Other Projects $ 3,369 Fishermen's Terminal Upgrades & Improvements 1,606 Fleet Replacement 870 Total Real Estate Committed Projects $ 5,845 TABLE IX-3: EXISTING G.O. BONDS DEBT SERVICE BY PROJECTS AND GROUP TABLE IX-3 provides the allocation of existing G.O. bonds debt service to the projects that were funded by G.O. bonds issued in 1994, 2000, 2004, 2006, 2011 and ($ in 000's) Containers East Waterway Dredging $ 732 T-5 Expansion & Upgrades 6,105 T-46 Expansion Redevelopment 4,253 T-18 Expansion & Upgrade 11,916 T-115 Yard Upgrades 178 Total Containers 23,184 Docks and Commercial Properties T-91 Apron & Infrastructure Improvements 2,851 Pier 17 Dock Replacement 106 T-86 Terminal Upgrades 126 Total Docks and Commercial Properties 3,083 Real Estate Commercial Properties 541 Fishing Fishermen's Terminal Docks & Seawall Renewal 1,615 Total G.O. Bond Debt Service $ 28,423 IX-5

6 D. GENERAL OBLIGATION CAPACITY Non-Voted and Voted General Obligation Debt Limitations Under Washington State law the Port may incur indebtedness payable from ad valorem taxes in an amount not exceeding one-fourth of one percent of the value of the taxable property in the District without a vote of the people. With the assent of three-fifths of the voters voting thereon, the District may incur additional G.O. indebtedness provided the total indebtedness of the Port at any time shall not exceed three-fourths of one percent of the value of the taxable property in the District. For the Port, the following estimates the 2015 debt limit: Value of Taxable Property 1 $ 386,009,654,096 Debt Limit, Non-Voted General Obligation Bonds (.25% of Value of Taxable Property) $ 965,024,135 Less: Outstanding Non-Voted General Obligation Bonds as of 12/31/2014 $ 225,420,000 Less: Capital leases and other general obligations as of 9/30/ Remaining Capacity of Non-Voted General Obligation Debt $ 739,604,135 Debt Limit, Total General Obligation Debt (.75% of Value of Taxable Property) $ 2,895,072,406 Less: Total Outstanding General Obligation as of 12/31/2014 $ 225,420,000 Less: Capital leases and other general obligations as of 9/30/ Remaining Capacity of Total General Obligation Debt $ 2,669,652,406 1) Preliminary assessed valuation as of 11/18/2014 LEVY.XLS The Port may levy property taxes sufficient for the payment of principal of and interest on voted G.O. indebtedness. The existing limitation provides that unless a higher rate is approved by a majority of the voters at an election, the increase in regular total property taxes payable in the following year shall not exceed the lesser of inflation or one percent of the amount of regular property taxes lawfully levied for such district in the highest of the three most recent years in which such taxes were levied for such district, plus an additional dollar amount calculated by multiplying the increase in assessed value in that district resulting from new construction and improvements to property by the regular property tax levy rate of that district for the preceding year. With a super majority vote, the Port Commission can increase the levy by 1% if inflation is less than 1%. Interaction between General Purpose and General Obligation Debt Capacity Since the 101% levy limitation applies to the total levy for G.O. debt service and for general Port purposes, an increase in the tax levy for G.O. bonds may result in a decrease in the amount which could be levied for general Port purposes, unless a higher aggregate tax levy was approved by the voters. Beginning with the 2001 Budget, the Port established a target to use no more than 75% of the levy for debt service and retain at least 25% for general purposes. IX-6

7 Assessed Value Millage Port of Seattle E. TAXPAYER EFFECT FIGURE IX-3 shows the assessed valuation as compared to the millage rate from 2006 to The graph shows that the assessed value has increased from $270 billion in 2006 to an estimated $386 billion in 2015, while the millage (the rate paid per $1,000 Assessed Value) has decreased from $ in 2006, to the 2015 rate of $ The 2014 preliminary assessed value as of November 18, 2014, is estimated to be $386,009,654,096. (The 2014 assessed valuation is used for 2015 tax collection). FIGURE IX-3: KING COUNTY ASSESSED VALUATION VS. PORT MILLAGE RATE $Billions Rate/$1, $ $ $ $ $ $ $ $ $ $ $ Assessed Value (Left Scale) Millage (Right Scale) F. COUNTY PROPERTY TAX COMPARISON For 2014, the Port accounted for 1.9% of the total property taxes collected by the County. FIGURE IX-4: 2014 PERCENTAGE OF TAX LEVIES BY TAXING DISTRICT Port 1.9% County 13.1% All Other 13.5% State Schools 21.3% Municipal 17.7% Local Schools 32.6% IX-7

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