Lake County Port Investment Task Force February 10, 2020 AGENDA - - PowerPoint PPT Presentation

Lake County Port Investment Task Force

February 10, 2020

AGENDA

Welcome & Introductions Task Force & Project Overview Project Update Local Revenue Feasibility Study Questions Recommendations & Next Steps

TASK FORCE

Purpose: Consensus building process to discuss and

develop a solution for the required airport infrastructure investment.

Members:

• 2 mayors from communities

within the WPD boundaries

• 2 mayors appointed by

LCML outside of the WPD boundaries

• 2 Lake County Board

members

• 2 members appointed by the

WPD Board

• 2 corporate representatives
• Lake County Partners

TASK FORCE

Members:

• Waukegan Mayor Sam Cunningham – In District Mayor
• Beach Park Mayor John Hucker – In District Mayor
• Kildeer President Nandia Black - LCML
• Fox Lake Mayor Donny Schmit - LCML
• Lake County Board Member Diane Hewitt – District 2
• Lake County Board Member Mike Rummel – District 12
• Greg Petry - WPD
• Bob Hamilton - WPD
• Kevin Considine – Lake County Partners
• Christina Lee, AbbVie – Corporate Representative
• Dale Johnson, Abbott – Corporate Representative

2/14/2020 5

TASK FORCE

Task Force Recommendations:

• Requested background information
• Conduct local funding analysis
• Focus on airport investment/ delay

harbor improvements

• Other

WPD BACKGROUND

• Created by Illinois Statute in 1955
• Seven-member volunteer Board of

Directors

• Self-funded through fees & grants
• Never levied a tax

WPD Boundaries: Waukegan, Beach Park, Park City, North Chicago, Gurnee, 2 miles into Lake Michigan

AIRPORT

• FAA designations: “National Asset”

and reliever for O’Hare

• Serves national and global markets
• On-site U.S. Customs
• 18,000 visitors annually
• Proximity to UGN makes Lake

County a desirable business location

AIRPORT ECONOMIC IMPACT

• $156.5 million economic

impact

• 723 jobs and $54 million in

payroll

• $11+ million in tax revenues

to state and local governments

• 18,000 visitors generate $2.9

million in direct spending

• 21,000 people are employed

by Lake County corporations that use the airport

• Runway does not meet minimum FAA design and safety standards
• Existing runway length and strength are inadequate for existing and future use.

EXISTING CONDITIONS

• The main runway needs to be replaced at a total cost of $142 million.
• State and federal assistance: 55-76% of the total project costs
• $34-$64 million local match needed

RUNWAY REPLACEMENT

AIRPORT CONSTRUCTION ECONOMIC IMPACT

PROJECT UPDATE

• Environmental Assessment - Draft

Document Delivered for Airport Review

• IDOT – Green Bay Rd. Widening

Project Moving Forward

• FAA – Numerous Coordination

Meetings and Document Review

• Lake County Forest Preserve District

– Continued IGA Coordination

• Other

PROJECT UPDATE

Stakeholder Outreach:

• Local Municipalities
• State Officials
• Users
• 11 Separate Stakeholder/ Resource

Agency meetings since last September Awareness & Engagement

• Updated Fact Sheet
• Video in development
• Earned media opportunities

Corporate Users: ABBOTT LABORATORIES based ABBVIE based BAXTER HEALTHCARE based BOEING COMPANY BRUNSWICK CORP. based CARDINAL HEALTH CNH AMERICA based DASSAULT FALCON JET FORTUNE BRANDS based GULFSTREAM AEROSPACE CORP JET AVIATION KLEIN TOOLS based REYES HOLDINGS based ULINE based WW GRAINGER INC based

AIRPORT TOTAL ESTIMATED PROGRAM COST

PROGRAM PHASE ESTIMATED COST Completion of Initial Planning $700,000 Land Acquisition $28,000,000 Management and Implementation Planning $2,000,000 Roadway Tunnel Construction $40,000,000 Illinois Route 131 Relocation $6,400,000 Construct Relocated Runway 5/23 $41,900,000 Construct Parallel Taxiway Bridge $8,900,000 Install New Runway 5/23 NAVAIDS $5,700,000 Conversion of Existing Runway 5/23 to a Taxiway $4,000,000 Construct a Parallel Taxiway A & Complete AO A Fencing $5,100,000 Estimated Total Project Cost $142,700,000

VIABLE FUNDING SOURCES

FEDERAL

• Airport Improvement Program

(AIP) – Traditional

• Airport Improvement Program

(AIP) – Letter of Intent (LOI)

• FAA – Facilities and

Equipment Program

• AIP Supplemental

Appropriation

STATE

• State Match of Federal Funds
• Illinois Division of Aeronautics

(IDA) State-Local

• Illinois Department of

Transportation (IDOT) Highways Funding

PUBLIC PRIVATE PARTNERSHIPS

• Local Funding Sources
• User Contributions
• Other

SB Friedman Development Advisors is a Chicago-based consultancy working with the public and private sectors in a range of disciplines

• Market analysis and real estate economics
• Development strategy and planning
• Public-private partnerships and implementation

SB FRIEDMAN INTRODUCTION

FRAN LEFOR ROOD, AICP

Senior Vice President

RYAN SCHMITT, AICP

Associate Project Manager

Project Team ESTEFANY NORIA

Associate

OVERVIEW OF ANALYSIS

$

• Project likely requires $34-65 million in local funding match
• Up front local grant unlikely
• Bond issuance will likely be required with dedicated revenue stream for repayment
• Purpose of feasibility assessment:

(1) Evaluate variety of potential local revenue options

• Prepare order of magnitude revenue projections
• Identify benefits and challenges of funding sources

(2) Evaluate potential bonding authority and capacity of various political districts (3) Provide information for Task Force to decide which avenues to pursue

POTENTIAL LOCAL FUNDING SOURCES

• Range of revenues explored:
• General fund revenues
• Property taxes
• Airport lease rates/user fees
• Motor fuel tax revenues
• Tax increment financing (TIF)
• Revenue sources can be combined to meet

needs of project

• Local government entity/entities would need to

take action

• Allocate portion of existing revenue stream(s)
• Create new dedicated revenue stream(s) for project
• Issue bonds for project costs

THERE ARE NO EASY FUNDING SOLUTIONS ALL REVENUE SOURCES HAVE CHALLENGES POLITICAL WILL, REBALANCING OF SPENDING PRIORITIES AND/OR NEW REVENUE STREAMS WILL BE NEEDED

POTENTIAL LOCAL FUNDING SOURCES

• Potential to increase existing rates and fees to align with competitors
• Potential to impose new landing fee on corporate/business operations
• Must consider competitive implications
• Neighboring airports do not appear to charge landing fees
• Replacement runway should provide advantages to users

Airport-Generated Revenues

WAUKEGAN NATIONAL AIRPORT (UGN) CHICAGO EXECUTIVE AIRPORT (PWK) KENOSHA REGIONAL AIRPORT (ENW) POTENTIAL NEW UGN RATE OR FEE PROJECTED REVENUE FROM INCREASE (30-YEAR PERIOD) [1] Lease Rate

Average $/SF [2]

$0.51 $0.91 $0.21 $0.65-0.75 $1.3-2.2 M

Fuel Flowage Fee

Per JetA gallon

$0.14 $0.19 $0.15 $0.15-0.19 $0.3-1.6 M

T-Hangar Fee

Large Hangar, Per Month

$425 $594

• $594

$0.2 M

Landing Fee

Per corporate user landing [3]

• $50-250

$4-20 M

[1] Discounted using 6.5% cost of funds. [2] $0.65-0.75/SF lease rate based on conversations with Waukegan National Airport. Current lease rate for Waukegan National Airport is weighted average per year in 2019. Lease rate for Chicago Executive Airport is average per year sourced from 2019 Comprehensive Annual Financial Report. Lease rate increase applies only to leaseholders with leases equal to or greater than 1.8 acres after current lease expiration dates. [3] $50-250 fee based on conversations with Waukegan National Airport. Levied on half of total annual corporate operations, defined as Business Aviation operations. Per 2019 Update Forecast Working Paper, Business Aviation counts totaled 8,805 in 2017. Assumed annual inflation for corporate operations is consistent with inflation in 2019 Update Forecast Working Paper. Assumed fee increased 1% annually. Source: Chicago Executive Airport; City of Kenosha; Crawford, Murphy & Tilly; Ordinance 19-O-03; SB Friedman; Waukegan National Airport; Waukegan Port District Series 2019

POTENTIAL LOCAL FUNDING SOURCES

• Assumes 7 communities dedicate a portion of new MFT allocation
• MFT funds can be used for roadway and associated infrastructure components
• Could generate $6-12 M over 20-year period [1]
• Requires communities to prioritize airport project over other

transportation needs

Motor Fuel Tax (MFT) - Municipalities

[1] Discounted using 6.5% cost of funds. Source: Bureau of Labor Statistics (BLS); Esri; Illinois Department of Revenue (ILDOR); Illinois Department of Transportation (IDOT); SB Friedman; U.S. Census

COMMUNITY PORTION OF NEW MFT FUNDS ALLOCATED TO PROJECT REASON FOR ALLOCATION Beach Park 5-10% Within WPD boundary Gurnee 5-10% Within WPD boundary Lake Forest 20-30% Corporate user headquarters North Chicago 20-30% Within WPD boundary; Corporate user headquarters Park City 5-10% Within WPD boundary Wadsworth 5-10% Within WPD boundary Waukegan 25-50% Within WPD boundary; Contains airport

POTENTIAL LOCAL FUNDING SOURCES

Motor Fuel Tax (MFT) – Lake County

• Assumes Lake County dedicates 5-10% of new MFT allocation to the project
• MFT funds can be used for roadway and associated infrastructure

components

• Could generate $3-7 M over 20-year period [1]
• Requires County to prioritize airport project over other

transportation needs

[1] Discounted using 6.5% cost of funds. Source: U.S. Bureau of Labor Statistics; Esri; Illinois Department of Revenue; Illinois Department of Transportation; SB Friedman

LAKE COUNTY

WAUKEGAN PORT DISTRICT

POTENTIAL LOCAL FUNDING SOURCES

Tax Increment Financing (TIF) District

WAUKEGAN

ZONE 2 ZONE 1 ZONE 3

PROJECTED REVENUE (23-YEAR PERIOD) [1]

Zone 1

$9 M

Zone 2

$12 M

Zone 3

$7 M

• Areas north and west are in Beach Park TIF districts
• TIF revenues estimated for 3 zones in Waukegan
• Primarily residential, with commercial/industrial in Zone 3
• Use of TIF likely to be challenging
• Specific eligibility criteria must be found on a parcel level throughout district
• Substantial land area needed to generate revenue
• Primarily residential TIF district
• City has several relatively new TIF districts; non-TIF areas would have to support

City finances and existing debt

• Alternative TIF legislation could be explored, similar to Transit TIF

[1] Discounted using 6.5% cost of funds. Source: Esri; Lake County Assessor; SB Friedman

3 4 6 5 TIF District Name (Year Designated/Anticipated Expiration Year) Beach Park TIF #4-Green Bay Road (2010/2033) Beach Park TIF #3-Wadsworth/Lewis (2010/2033) Waukegan TIF #7-North Lakefront (2014/2037) Waukegan TIF #8-Downtown TIF (2014/2037) Waukegan TIF #9-South Lakefront (2014/2037) Waukegan TIF #10-McGaw Business Center (2015/2038)

1 2 3 4

1 2

5 6

BONDING AUTHORITY AND CAPACITY BY DISTRICT

Waukegan Port District (WPD)

[1] SB Friedman was unable to locate any public documents for WPD debt. This analysis is based on information from WPD only. Source: Esri, Lake County; SB Friedman; State of Illinois; Waukegan Port District

WADSWORTH BEACH PARK WAUKEGAN NORTH CHICAGO GURNEE

WAUKEGAN PORT DISTRICT

PARK CITY

IT APPEARS UNLIKELY THAT WPD COULD ISSUE BONDS BACKED BY WPD PROPERTY TAX REVENUES

• WPD may levy property taxes up to 0.05% of taxable value in District to cover debt

payments (about $700,000)

• Existing obligations are backed by WPD property tax levy
• Debt service payments for existing obligations exceed annual property taxing authority [1]
• Based on discussions with UGN, any annual Airport operating surplus (recently

$250,000) is used for needed capital improvements and does not appear to be a viable long-term, dedicated repayment source for debt

BONDING AUTHORITY AND CAPACITY BY DISTRICT

City of Waukegan

IT APPEARS UNLIKELY THAT THE CITY OF WAUKEGAN COULD ISSUE GENERAL OBLIGATION BONDS WITHOUT INCREASING PROPERTY TAXES

Source: City of Waukegan; Lake County; Lake County communities; Municipal Securities Rulemaking Board (MSRB); Moody’s Investors Service; SB Friedman; State of Illinois; statisticalatlas.com

• Home rule municipality with no statutory debt limit
• Borrowing constrained by market and investor norms
• City appears to have limited bonding capacity before

negatively impacting credit rating

• Recent bond rating A2 (Upper-medium grade and subject to

low credit risk)

• Substantial issuance could reduce rating and increase

borrowing costs

• City does not appear to have budget flexibility to

accommodate new debt service payments

• Operating deficit in 3 of last 5 years
• City has increased sales tax, food and beverage tax and

hotel/motel tax rates since 2011

• Tax rates exceed nearly every nearby and competitive

community in Lake County

BONDING AUTHORITY AND CAPACITY BY DISTRICT

Lake County

[1] Assumes $65.5 million in principal (full Pessimistic scenario project costs of $64.5 million plus 1.5% issuance cost), 4.0% interest, and 20-year term. Source: Lake County; MSRB; Moody’s Investors Service; SB Friedman; State of Illinois

• Statutory debt limit of $1.4B
• Outstanding debt of $251M
• County appears to have bonding capacity before negatively

impacting its credit rating significantly

• 2019 GO bond rated Aaa (highest quality, minimal risk)
• County may have budget flexibility to support debt payments
• Annual debt payments for $65M in project costs could be

in $5 million range [1]

• Appears to have operating surplus in each of last 5 years
• Recent property tax rate (0.61%) below 0.75% statutory

limit

IT APPEARS LAKE COUNTY HAS CAPACITY TO ISSUE GENERAL OBLIGATION BONDS TO SUPPORT THE PROJECT

BONDING AUTHORITY AND CAPACITY BY DISTRICT

Lake County Partners

Source: Lake County Partners; Congressional Research Service; Internal Revenue Service; SB Friedman

• Lake County Partners manages pooled volume cap for private

activity bonds

• Currently up to $100M available from volume cap that

has rolled over

• Availability changes annually

IT APPEARS PRIVATE ACTIVITY BONDS COULD POSSIBLY BE USED WITH AN APPROPRIATE REVENUE STREAM

• Airport improvements like runways are typically eligible as

exempt facility projects and likely outside volume cap

• Dedicated private revenue stream (user fees, lease revenues,

increment from private development) would repay bonds

• Bond counsel would need to weigh in on eligibility

POTENTIAL LOCAL FUNDING SOURCES

EXISTING RATE AND FEE INCREASE LANDING FEE MOTOR FUEL TAX TIF PROPERTY TAX

PROJECTED REVENUE [1]

$2-4 M $4-20 M $9-19 M $9-28 M Up to $65 M

RESPONSIBLE ENTITY Waukegan National Airport Waukegan National Airport Stakeholder municipalities; Lake County City of Waukegan Lake County, City of Waukegan, other districts/municipalities POSSIBLE ISSUER Lake County Partners (Private Activity Bond), Lake County, Other? Lake County Partners (Private Activity Bond), Lake County, Other? Lake County Partners (Private Activity Bond), Lake County, Other? City of Waukegan Lake County, City of Waukegan, Other entity IMPLEMENTATION CHALLENGES Need to weigh/ mitigate potential competitive disadvantage Need to weigh/ mitigate potential competitive disadvantage Project would need to be prioritized over

• ther local

infrastructure needs;

• nly available for

roadway costs Eligibility for TIF designation likely to be challenging Requires increase in levy or shifting of priorities

[1] Assumes discount rate of 6.5%, and bond issuance by entity with sufficient bonding capacity.

POTENTIAL BONDING OPTIONS

WAUKEGAN PORT DISTRICT CITY OF WAUKEGAN LAKE COUNTY PRIVATE ACTIVITY BONDS (LAKE COUNTY PARTNERS)

POTENTIAL BONDING CAPACITY [1]

Limited

General Obligation

Limited

Special Revenue

Depends on Revenue

Up to $65M Up to $65M

POTENTIAL FUNDING SOURCE Existing rate and fee increase; New landing fee New property tax revenues; New sales or

• ther taxes

Portion of new MFT revenues; TIF Current countywide

• perating surplus/

revenue streams; Portion of new MFT revenues; New property tax revenues Existing rate and fee increase; New landing fee IMPLEMENTATION CHALLENGES Would need backing from a non-WPD property tax source New debt issuances may have lower ratings; new taxes may cause competitive challenges Would likely need backing from another source Requires prioritizing project at county level Competitive considerations; May require backing from another source

[1] Assumes discount rate of 6.5%, bond issuance by entity with sufficient bonding capacity, and appropriate dedicated revenue streams.

Questions?

RECOMMENDATIONS & NEXT STEPS

TASK FORCE

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