HOW CAN PORTS AND HOW SHOULD PORTS USE PROPERTY

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					   HOW CAN PORTS
AND HOW SHOULD PORTS
 USE PROPERTY TAXES?



 WPPA Commissioners Seminar
        July 20-22, 2008
    The Resort at Semiahmoo
  Jim Darling, Executive Director
       Port of Bellingham
Why Do Ports Have Taxes?
 Originally intended to give communities the ability
  to develop harbors, sea walls, jetties, piers, water
  terminal and other transportation facilities including
  belt line railways
 Primarily for capital investments
   Early projects were docks and water terminals
   But the list of what ports can do has grown to
    include economic development programs, airports,
    industrial parks, pollution control facilities, and
    tourism promotion
What Are Ports Today?
   Ports have consistently seen an expansion of
    powers in virtually every decade
   Ports are “economic development” agencies
    unencumbered by regulatory responsibilities
How Can a Port Use Taxes?
   Capital costs: Tax collections can be used for
    direct investment in land, buildings and other
    facilities
   Debt service: Tax collections may be used to
    support general obligation debt or “conduit”
    revenue bonds
 Bond rating: Tax collections may be used to
  support favorable ratings from the market
 Operating costs: Tax collections can be used to
  pay ongoing operating expenses
The Port of Bellingham
   In the early 1990s the Port used tax revenues as
    part of the mix for operations, debt service and
    capital improvements
 The rate was $.42 per thousand
 The Commission decided to work towards a
  different structure whereby tax revenue and earned
  income would be separated and dedicated towards
  separate purposes
 How the Port of Bellingham Earns
 and Spends its Earned Income…
  Earned Operating
       Income            $15.8M


           Less…           $10.6M
       Operating Costs                              Operating Income:
                                             Moorage, Landing Fees, Rents, etc.
              Equals…
           Operating Income       $5.2M              Operating Costs:
                                               Operations and Port Overhead
  Capital Repairs         Debt Service
to Operating Assets   for Operating Assets

              Re-investment
           In operating assets
How the Port of Bellingham Uses its
Property Taxes….
  Property Taxes
    $.38/1,000         $7.1M


         Less…          $4.8M
     Operating Costs
                                              Operating Costs:
                                          Costs of operating parks,
                                           programatic economic
              Equals…                   development, environmental
         Net Available Taxes   $2.3M
                                              clean ups, and
                                             Commission costs
Capital Repairs
                    G.O. Debt Service
   to Parks

          Capital Projects
        Parks, Environmental
Port of Bellingham’s Model

                    Marinas                          Property Taxes
 Airport           Revenues
Revenues                            Economic Development
                        Marine           Programs                Parks and
Real Estate            Terminals                                  Public
Revenues               Revenues                                   Spaces
                                           Environmental
                                            Clean Ups
                                                                Infrastructure
    Net operating income…
                                          Commission


 Operating Division Capital Needs               General Obligation Bond
 and Revenue Bond Debt Service                Debt Service and Capital needs
How Did the Port of Bellingham Get
There?
   Started in 1995 with a deliberate decision by the
    Commission to move in that direction
 Structured the financials statement to reflect the
  accounting treatment
 Created a set of financial guidelines adopted by the
  Commission
   On the tax side, need to fight tendency to just raise
    taxes to absorb inflationary pressures
   On the operating side, put economic pressure on cost
    controls and pressure to raise revenues. Big commitment
    to go to market rates on everything, no underwriting for
    leases, moorage rates, etc.
    (Hardest increase was moorage rates that doubled over 4
    years)
Another Good Reason for Having a Tax
Stream…
   Back stopping debt service…
       General Obligation Bonds
       “See-through” Revenue Bonds
       Rating for all debt
Considerations in Taxation Policy
   Impact on debt rates
   Financially self-sustaining operations forces them
    to operate more on business terms
   Limiting taxes frees up longer term capacity for
    other entities, e.g. schools
   General trend toward limiting or eliminating Port’s
    ability to tax--be prepared
QUESTIONS