City of Long Beach Harbor Department FY 2020 Proposed Budget Study Session This is a study session – no board action is requested I will cover Sources of funds Uses of funds & 10-year cash flow forecast March 25, 2019 | Board of Harbor Commissioners Sam Joumblat Managing Director, Finance & Administration

SOURCES OF FUNDS

OPERATING REVENUE HIGHLIGHTS Projecting FY 2019 operating revenue estimate to be in-line with the FY 2019 budget Budgeted FY 2020 operating revenue is flat compared with FY 2019 FY 2019 container volume projected at 7,728,000 TEUs, 3% lower than FY 2018 actual Budgeted FY 2020 container volume at 7,632,000 TEUs, 1% lower than FY 2019 estimate

bond Issuance We are planning a $200 million net proceeds from bonds issuance in FY 2019, which is lower than the $326 budgeted No new debt issuance projected in FY 2020 We will refund the 2010 A&B bond series in FY 2020 which should result in savings and elimination of debt service reserve fund We are evaluating whether to refund the 2010 A&B at the same time of the 2019A issuance We are in the process of renewing our line of credit with Union Bank with the same credit limit of $200 million

FY 2020 SOURCES OF FUNDS ($000) 399,605 402,712 402,438 0.7% 86,007 FY 2019 ADOPTED BUDGET FY 2019 ESTIMATED ACTUAL FY 2020 PROPOSED BUDGET % CHANGE vs FY19 BUDGET OPERATING REVENUES 399,605 402,712 402,438 0.7% NON-OPERATING REVENUES 86,007 116,716 94,975 10.4% CASH THROUGH NEW DEBT 326,250 200,000 - CASH THROUGH EXISTING DEBT 31,871 133,934 48,430 FROM FUND BALANCE 138,539 131,600 TOTAL SOURCES OF FUNDS $982,272 $853,361 $677,444 (31%)

FY 2020 Sources OF FUNDS 6

USES OF FUNDS

Expenditure HIGHLIGHTS Current budget includes the addition of one SBE analyst, offset by a reduction of one headcount elsewhere We will propose adding two Grants positions and currently evaluating existing vacancies to offset the addition Operating expense budgeted to increase 2%, mainly due to the new Port Headquarters at the Civic Center and interdepartmental charges Capital program budget is proposed at $391 million Tidelands transfer highest ever at $20.1 million

FY 2020 uses OF FUNDS ($000) FY 2019 ADOPTED BUDGET FY 2019 ESTIMATED ACTUAL FY 2020 PROPOSED BUDGET % CHANGE vs FY19 BUDGET PERSONNEL SERVICES 70,705 66,987 72,456 2.5% NON-PERSONNEL SERVICES 102,779 99,837 104,875 2.0% TIDELANDS TRANSFERS 19,960 20,084 20,136 0.9% DEBT SERVICE 93,602 89,408 (4.5%) PORT CIVIC CENTER HEADQUARTERS 214,696 215,188 787 CAPITAL EXPENDITURES 480,530 318,277 389,783 (18.9%) TO FUND BALANCE - 39,387 TOTAL USES OF FUNDS $982,272 $853,361 $677,444 (31%)

FY 2020 uses OF FUNDS 10

CAPITAL PROGRAM BUDGET PROPOSED $390.6 MILLION CAPITAL PROGRAM BUDGET 11

CASH FLOW FORECAST

Cash Flow highlights – base case Middle Harbor Phase 3 incremental revenue forecasted for FY 2021-22 Sale of WTC parking lot and the IAO building to occur in FY 2019 and FY 2020, respectively TIFIA existing loan commitment of $325 million will be drawn in FY 2021 to repay the 2018A Bond Anticipation Notes Potential new TIFIA loan of $175 million being pursued for FY 2021 Operating Expense projected at an escalation rate of 3% Debt Service reflects all the amortization of new borrowings and TIFIA loans

BASE CASE CAPITAL SPENDING Tier FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 1 498,093 318,650 243,792 32,836 8,514 9,273 4,494 3,626 4,100 3,600 2 28,500 46,569 113,100 118,884 74,239 87,465 88,671 115,467 139,672 134,844 3 4,173 11,128 14,851 15,530 8,109 7,223 6,705 4,552 225 - 4 2,700 14,223 32,277 28,305 20,104 26,787 12,385 15,697 2,091 1,000 Grand Total 533,465 390,570 404,021 195,555 110,966 130,748 112,255 139,343 146,088 139,444 14

CASH FLOW FORECAST – BASE CASE 15

Economic outlook US economy has been expanding for 10 years Downturn will happen at a point in time. Without a catalyst, most economists expect a mild v-shaped recession when we get one The Federal Reserve signaled no interest rate hikes in 2019 and maybe one in 2020. They also signaled an end to quantitative tightening in September. Global demand for US goods seems to be softening The rush to import and avoid higher tariffs on Chinese goods could result in soft volumes in the coming months We could see a US-China trade agreement by the end of April

Cash Flow – stress test case Applied the 2008-09 Great Recession trends to the Operating Revenue to start in FY 2021 Scaled back the escalation rate of the Operating Expense to 1% and 2% Applied the Capital Resiliency Plan and deferred capital spending to the latter years Engineering has developed two scenarios of capital resiliency: First scenario categorizes projects into tiers and defers these projects accordingly, with tier 1 not impacted A second scenario of resiliency defers parts of tier 1 projects where no firm commitments are in place

CAPITAL RESILIENCY PLAN Tier FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 1 498,093 318,650 243,792 32,836 8,514 9,273 4,494 3,626 4,100 3,600 2 28,500 46,569   113,100 118,884 74,239 87,465 88,671 115,467 139,672 3 4,173 11,128 14,851 15,530 8,109 7,223 6,705 4,552 4 2,700 14,223 32,277 28,305 20,104 26,787 12,385 Cost Escalation (3.5%) N/A 3,959 4,681 4,272 4,336 4,060 5,214 5,481 Grand Total 533,465 390,570 149,895 146,930 135,591 132,708 123,684 158,272 165,690 18

CASH FLOW FORECAST – STRESS CASE 19

CAPITAL RESILIENCY PLAN Tier FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 1a 483,155 283,444 130,889 3,807 4,100 3,600 1b 14,938 35,207 112,903 29,029 4,414 5,673 394 26 - 2 28,500 46,569   113,100 118,884 74,239 87,465 88,671 115,467 139,672 3 4,173 11,128 14,851 15,530 8,109 7,223 6,705 4,552 4 2,700 14,223 32,277 28,305 20,104 26,787 12,385 Cost Escalation (3.5%) N/A 3,959 4,681 4,272 4,336 4,060 5,214 5,481 Grand Total 533,465 390,570 243,792 149,895 146,930 135,591 132,708 123,684 158,272 165,690 20

REMAINING BUDGET TIMELINE Milestone Estimated Timing Board of Harbor Commissioners Study Session Today Budget subcommittee briefing April 11 Board of Harbor Commissioners considers budget adoption May 27 Board-adopted budget submitted to the Mayor and City Manager Mid/late June Briefings with the Mayor, City Councilmembers and City Manager July - Aug Mayor submits the budget to the City Council along with recommendations Early August City Council approves Board adopted budget Early September 21

QUESTIONS? 22