Port of Tacoma's bond rading upgraded

Impressed with Pierce County’s expanding economy, the Port of Tacoma’s strong financial position and success in the competitive West Coast market, strong demand for port facilities and a growing port district tax base, Moody’s Investors Service has upgraded the port’s bond rating from A1 to Aa3.

Moody’s analysts’ report emphasized Pierce County’s growing, diversifying economy.

“Once dependent on timber and paper products, Pierce County now possesses a more diversified economy which includes metal manufacturing, food processing, shipping, electronics and aerospace,” the report stated. “In recent years, the local economy has also benefited from the expansion of high tech and service firms.”

As one of the region’s primary “economic engines,” said Port of Tacoma Executive Director Andrea Riniker, the port is both creating and benefiting from the county’s economic strength.

The upgraded bond rating affects the port’s outstanding $44.8 million in General Obligation debt and the upcoming issuance of $58 million in Limited Tax General Obligation Bonds, Series 2003.

According to Riniker, the bond proceeds will fund a portion of the port’s Capital Improvement Plan, which includes construction of a container megaterminal and associated infrastructure on the Blair Waterway.

“These capital projects not only strengthen our port’s competitive position on the West Coast, they allow our customers to expand operations in Pierce County, bringing additional jobs and economic development to our region,” she said. “The bond rating upgrade is not only a reflection on the Port of Tacoma, it is also a positive reflection on the strength of the economy in Tacoma and Pierce County.”

Bonds are repaid with the port’s tax levy of 18.59 cents per $1,000 assessed value in Pierce County.

Although the Port is authorized by law to tax up to 45 cents per $1,000 assessed value, the port has no plans to increase the levy, says Port of Tacoma Commission President Dick Marzano.

The levy rate has remained its current level since 1997.

This is sufficient to pay the port’s annual debt service on general obligation debt, including the 2003 bond series.

The improved rating increases the bonds’ market value, resulting in lower interest rates and a lower bond insurance cost, explained Jeff Smith, the port’s senior director of finance and administration.

“The bottom line is that we are stretching the taxpayer’s dollar,” he said.

In 2002, the Port completed a comprehensive Plan of Finance that included a five-year, $341 million Capital Improvement Plan.

“For Moody’s, this Plan was a key element in demonstrating our long-term financial strategy and achieving this higher bond rating,” said Timothy J. Farrell, the port’s Deputy Executive Director.

In their report, Moody’s analysts rated the Port of Tacoma’s outlook as positive, noting its well-managed financial position as a key credit strength.

From 1997 to 2002, the report stated, the port’s operating revenues from terminal services and property rentals have grown at an average annual rate of 5 percent.

Net revenues available for debt service grew as well over the last five years, and in 2002 the port earned a 4.3 times debt service coverage ratio on its revenue debt.

Moody’s recent bond rating upgrade follows Standard & Poor’s December 2001 bond rating on the port’s Limited Tax General Obligation Bonds from A+ to AA-.

A major gateway to Asia and Alaska, the Port of Tacoma is the largest container port in the Pacific Northwest and the sixth largest in North America, handling more than 1.47 million TEUs (Twenty-foot Equivalent Unit ‘containers’) in 2002.

Other major freight categories include automobiles, bulk cargoes, breakbulk and project/heavy lift cargoes.

This activity contributes to $471 million in annual wages in Pierce County while generating more than $77 million each year in state and local taxes.

Port of Tacoma Financial Highlights

2002 revenues: $72.9 million
2002 net earnings: $20.7 million
2002 working capital: $27 million
2002 revenue bond debt service coverage: 4.23x
2002 debt ratio: 20 percent
Current general obligation bonds outstanding: $102.8
million (including 2003 sale)
Current revenue bonds outstanding: $50.4 million