The Port of Seattle Commission took initial steps Tuesday to scale down spending through the rest of 2020, while backing measures to protect laid-off workers and small businesses at Seattle-Tacoma International Airport.
Acknowledging that the coronavirus pandemic is taking a toll on projected revenue, commissioners shaved nearly $70 million from the Port’s 2020 budget, including by postponing the controversial $100 million redevelopment of a downtown pier into a cruise terminal while the industry is in turmoil.
“We update our forecasts every two weeks,” said Port CFO Dan Thomas at the meeting. “Our experience has been that every time we update our forecasts, they get a little bit worse.”
Current projections are that annual passenger traffic through the airport will be down 50% this year compared to 2019. In late March, that estimate stood at a 44% decline.
Rent and fees paid by airlines, retail, dining and transportation providers at Sea-Tac Airport represent nearly 40% of the Port’s total anticipated revenues for 2020. Airport director Lance Lyttle recently estimated plummeting passenger traffic and flight cancellations will cost the Port $251 million.
Airport dining and retail tenants, heavily reliant on foot traffic through the airport, have taken a heavy blow. Sixty-two of the 89 shops and restaurants at Sea-Tac have temporarily closed, said executive director Steve Metruck.
The Port will offer two more months of rent deferral to those tenants, in addition to the two months announced in March, Metruck said. Airlines will also be able to defer rents and fees for two months.
Sea-Tac business owners said the deferral didn’t go far enough.
In a letter to commissioners, a group of 22 small businesses asked the Port to waive their rent payments during the pandemic. Once they reopen, they said, the Port should only charge them a percentage of their revenues.
“With no income, bleeding money, we are in dire straits,” said Michele Manasse, owner of gift shop Fireworks. Manasse said she recently spent $3 million to renovate and build out her two airport locations.
“A significant portion” of projected $26 million in cruise revenues are also at risk, Thomas said. Federal disease control experts have issued a temporary no-sail order to control the spread of the coronavirus. Canada has taken similar measures that could halt voyages between Seattle and Alaska until July 1. The vast majority of sailings out of Seattle are Alaska voyages.
In the interim, commissioners conceded Tuesday, it makes little economic sense to continue plans to redevelop part of Terminal 46 near Pioneer Square into the city’s fourth cruise ship berth. The project has drawn opposition from climate activists because it builds capacity for a new source of climate-changing emissions.
Climate activists at Tuesday’s meeting, some drawing parallels between the lack of action on climate change and the federal government’s reluctance to heed expert advice on coronavirus response, once again asked the commission to cancel the project.
“One of the lessons we’ve learned from the coronavirus is that when scientists warn of a real emerging threat, it’s not good enough to wait until we see the impacts to start doing something about it,” said Neal Anderson, an activist with environmental nonprofit 350 Seattle.
It’s not clear when the Port will restart the Terminal 46 development, or the dozens of other aviation and maritime development projects it chose to delay Tuesday. Commissioners said they would reevaluate the decision as conditions changed. Together with an existing hiring freeze, the postponements will save the Port $70 million, Thomas said.
Those savings, combined with a $192 million federal relief package for Sea-Tac, still may not be enough for the Port to meet expenditures as the shutdown drags on. The Port is currently drawing on its rainy day fund to cover operations and maintenance, said corporate finance director Elizabeth Morrison.
Commissioners on Tuesday approved $150 million in “additional backup liquidity,” in the form of a short-term loan or revolving line of credit from JP Morgan Chase.
More federal stimulus funds are needed to shore up the Port’s revenues, Thomas said, as the economy continues to weaken.
“The consensus is that we are entering a severe economic downturn, possibly worse than the Great Recession,” Thomas said.