The Port of Seattle’s financial outlook is poor and likely to get worse, according to Moody’s Investors Service, which changed its outlook on the Port’s bonds from stable to negative last week.
The news won’t immediately change anything for taxpayers. Moody’s stuck with the existing ratings on the Port’s $2.7 billion debt. But it’s a signal that the taxpayer-subsidized Port is facing a lot of challenges.
“We do think that there is some strain emerging,” said David Jacobson, a Moody’s spokesman, adding it means the Port’s bond ratings could be downgraded in the next one to two years if it doesn’t increase its cash flow.
Declining shipping revenue and an impasse in negotiations of airline-lease fees are the main reasons for the poor forecast, the report said. The Port operates Seattle-Tacoma International Airport.
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The looming financial pressures are no secret to Port staff.
In April, Port staff told commissioners they were backing off on planned expenditures in 2013 because of the ongoing negotiations with the airlines and a lease agreement commissioners made for Terminal 46 with Hanjin. The Port hailed the Hanjin deal as a good one, but the report says it will “result in a reduction of Seaport revenues for 2013 and in future years.”
Port spokesman Jason Kelly said the Port is working to address its challenges.
For example, in May, Port CEO Tay Yoshitani handed over some of his day-to-day responsibilities to his deputy chief executive officer so he could focus on promoting the Port and attracting new shipping lines.
The reason for the change, an announcement said, was stiff competition from other ports. But the news release also cited Yoshitani’s new, unpaid role as the chairman of the board of the American Association of Port Authorities.
Kelly said the work Yoshitani does at the association will relate directly to the challenges the Port of Seattle is facing.
Yoshitani faced criticism last year for accepting a role on another board, Expeditors International. Critics said the Expeditors role would be distracting.
Shipping business is declining overall, and Moody’s specifically cited the fact that four shipping lines, known as the Grand Alliance, moved to the Port of Tacoma last summer. That left a big hole in the Port’s shipping business.
A recent deal with Hanjin opened up other leases at the Port for renegotiation, which is expected to result in “substantially lower revenues,” Moody’s wrote.
The rating company also criticized the Port’s inability to make a deal with airlines. The Port has been negotiating since December 2011 with airlines, trying to agree on rates and fees for services the airport provides, such as security.
Moody’s did point out a few strengths: The Port has a long track record of well-managed finances, a proactive Port commission and “a vibrant and resilient area economy.”
Commissioner Bill Bryant said the report is no surprise.
“The global competition for our port-related jobs in Puget Sound is real. This is validation of that. It’s not serious unless we ignore it. It’s a wake-up call.”
Bryant said Seattle still has geographic and business advantages, but it has to invest to make sure big shipping companies want to continue doing business there.
“It doesn’t mean we put up a white flag. It means we take this seriously.”
Four of the five Port commissioners are up for re-election on the November ballot this year.
Emily Heffter: 206-464-8246 or firstname.lastname@example.org.
On Twitter: @EmilyHeffter