7d report
ITEM NO: 7d_Attach_1_ DATE OF MEETING: May 24, 2016 PORT OF SEATTLE 2016 FINANCIAL & PERFORMANCE REPORT AS OF MARCH 31, 2016 TABLE OF CONTENTS Page I. Portwide Performance Report 3-5 II. Aviation Division Report 6-14 III. Maritime Division Report 15-18 IV. Economic Development Division Report 19-23 V. Corporate Report 24-27 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 03/31/16 EXECUTIVE SUMMARY Financial Summary The Port's overall operating revenues for the first three months of 2016 were $129.3M, which is $2.8M above budget and $4.2M higher than the same period in 2015. Excluding Aeronautical revenues, which are based on cost recovery, other operating revenues were $73.4M, $3.7M above budget and $4.1M over the same period last year mainly due to higher revenues from Public Parking, Airport Dining and Retail, Ground Transportation, and Licensed NWSA Assets. Total operating expenses were $69.7M, $10.7M below budget mainly due to vacant positions, hiring delays, timing of spending, and some actual budget savings. Operating income before depreciation was $59.6M, $13.5M above budget. For the full year, we are anticipating operating revenues without Aeronautical to be $331.9M, $4.7M over budget and operating expenses to be $329.2M, $6.7M below budget. The Port-wide capital spending is forecasted to be $239.5M for the year, $42.5M below the budgeted $282.0M. Operating Summary At the Airport, enplanements for the first quarter were 9.9% higher and landed weight was 10.2% higher than the same period in 2015. The enplanements growth for domestic and international was 10.1% and 8.5%, respectively. Total cargo metric tons were down 5.0% due to peak volume in Q1 2015 during the West Coast ports slowdown. For the Maritime division, Grain volumes were at the same levels as Q1 2015. While Cruise season has yet to start, we are anticipating a record year of passengers in 2016. For the Economic Development division, occupancy levels at Shilshole Bay Marina were at 94.3%, below 95.9% in the same period last year. Fishermen's Terminal was at 88.6% average occupancy, below the 91.3% in Q1 2015. Conference and Event Center revenue exceeded budget due to strong sales and delayed construction at Pier 66 Cruise Terminal. Key Business Events The Port launched the planning effort for the Commission's 38 Cities outreach program and provided a tour of Seattle port facilities to the Government Accountability Office as part of their study on West Coast port congestion issues. Spirit Airlines initiated new air service at the Airport; transportation network companies began service on March 31st; and Independent Packers Corp agreed to 5 year lease term to support 170 employees situated in Building 40. The Port also completed negotiations related to cruise operations and stormwater permit management issues. A working group of airlines, cruise lines, and various supporting stakeholders was formed to work with Maritime and Airport Operations to improve customer service/passenger experience. The sale of the remaining 12 miles of the Eastside Rail Corridor to Snohomish County was finally closed in March 2016. Additionally, we implemented Paid Parental Leave, the Phase II Re-org, the PerformanceLink System for employee performance review, and Contractors Database System (CDS) for Service Agreements to assist in tracking our efforts to promote small business growth. We also hired Boston Consulting to commence the quick assessment for Procurement Excellence (Purchasing Transformation project). Major Capital Projects The Port began design of International Arrivals Facility. Airlines voted to approve C60 interim baggage improvements, C3 Holdroom, South Satellite (SSAT) narrow body gates, and North Satellite (NSAT) budget increase. We completed design modifications for the 16C-34C project for schedule acceleration and compression. We also upgraded the Common Use Self Service (CUSS) kiosks used by customers of several airlines for check-in and other passenger services and executed contract with Parking Soft for a new parking revenue replacement system. Finally, we completed Terminal 91 underwater regrade and T117 cleanup construction. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 03/31/16 PORTWIDE FINANCIAL SUMMARY Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Yea-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Aeronautical Revenues 56,781 56,797 57,668 (872) -1.5% 253,100 261,019 (7,919) -3.0% SLOA III Incentive (894) (894) (894) - 0.0% (3,576) (3,576) - 0.0% Other Operating Revenues 69,298 73,434 69,708 3,725 5.3% 331,871 327,135 4,736 1.4% Total Operating Revenues 125,185 129,336 126,483 2,854 2.3% 581,395 584,578 (3,183) -0.5% Total Operating Expenses 67,108 69,740 80,420 10,680 13.3% 329,206 335,943 6,737 2.0% NOI before Depreciation 58,077 59,597 46,063 13,534 29.4% 252,189 248,635 3,554 1.4% Depreciation 40,771 41,085 40,737 (348) -0.9% 162,451 162,451 - 0.0% NOI after Depreciation 17,306 18,512 5,326 13,186 247.6% 89,738 86,184 3,554 4.1% MAJOR OPERATING REVENUES SUMMARY Fav (UnFav) Incr (Decr) 2015 YTD 2016 Year-to-Date Budget Variance Change from 2015 $ in 000's Actual Actual Budget $ % $ % Aeronautical Revenues 56,781 56,797 57,668 (872) -1.5% 16 0.0% SLOA III Incentive (894) (894) (894) - 0.0% - 0.0% Public Parking 14,726 16,286 15,723 563 3.6% 1,561 10.6% Rental Cars - Operations 5,833 6,159 5,586 573 10.3% 326 5.6% Rental Cars - Operating CFC 1,737 615 744 (129) -17.3% (1,121) -64.6% Rental Cars - Total 7,570 6,775 6,330 444 7.0% (796) -10.5% Airport Dining and Retail 11,003 11,794 11,828 (35) -0.3% 790 7.2% Employee Parking 1,904 2,298 1,992 305 15.3% 394 20.7% Ground Transportation 1,996 2,582 2,143 438 20.5% 585 29.3% Airport Properties 1,596 2,287 2,792 (505) -18.1% 691 43.3% Airport Utilities 1,647 1,812 1,830 (18) -1.0% 165 10.0% Fishing & Commercial Vessels 712 731 717 14 1.9% 19 2.7% Maritime Operations 979 1,369 1,050 319 30.4% 390 39.9% Recreational Boating 2,355 2,528 2,546 (18) -0.7% 173 7.4% Cruise 49 48 43 5 12.0% (1) -2.9% Grain 1,403 1,486 1,560 (75) -4.8% 82 5.9% Marina Office & Retail 995 1,028 957 72 7.5% 33 3.4% Maritime Industrial 1,409 1,531 1,587 (56) -3.5% 123 8.7% Central Harbor Management 1,472 1,585 1,594 (9) -0.5% 114 7.7% Conference & Event Centers 2,014 1,895 1,684 211 12.5% (120) -5.9% Licensed NWSA Assets - 15,242 13,106 2,137 16.3% 15,242 0.0% Other 17,468 2,155 2,223 (68) -3.0% (15,312) -87.7% Total Operating Revenues (w/o Aero) 69,298 73,434 69,708 3,725 5.3% 4,135 6.0% TOTAL 125,185 129,336 126,483 2,854 2.3% 4,152 3.3% 4 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 03/31/16 MAJOR OPERATING EXPENSES SUMMARY Fav (UnFav) Incr (Decr) 2015 YTD 2016 Year-to-Date Budget Variance Change from 2015 $ in 000's Actual Actual Budget $ % $ % Salaries & Benefits 23,458 25,674 27,169 1,494 5.5% 2,216 9.4% Wages & Benefits 22,890 23,554 25,067 1,513 6.0% 664 2.9% Payroll to Capital Projects 5,572 4,712 6,726 2,014 29.9% (860) -15.4% Equipment Expense 1,079 1,324 1,343 19 1.4% 245 22.7% Supplies & Stock 1,520 1,705 1,770 65 3.7% 185 12.1% Outside Services 9,556 9,779 18,333 8,554 46.7% 223 2.3% Utilities 4,878 5,280 5,588 308 5.5% 402 8.2% Travel & Other Employee Exps 911 746 1,595 849 53.2% (165) -18.1% Promotional Expenses 120 176 181 6 3.1% 55 46.1% Other Expenses 5,225 3,576 4,200 624 14.8% (1,648) -31.5% Charges to Capital Projects (8,101) (6,786) (11,553) (4,766) 41.3% 1,315 -16.2% TOTAL 67,108 69,740 80,420 10,680 13.3% 2,632 3.9% KEY PERFORMANCE METRICS Fav (UnFav) Incr (Decr) 2015 YTD 2016 YTD 2015 2016 2016 Forecast/Budget Change from 2015 Actual Actual Actual Forecast Budget Chg. % Chg. % Enplanements (in 000's) 4,352 4,783 21,109 22,214 22,214 - 0.0% 1,106 5.2% Landed Weight (lbs. in 000's) 5,283 5,821 24,757 26,126 26,126 - 0.0% 1,369 5.5% Passenger CPE (in $) n/a n/a 10.12 10.63 11.00 0.37 3.4% 0.5 5.0% Grain Volume (metric tons in 000's) 1,207 1,208 3,778 4,000 4,000 - 0.0% 222 5.9% Cruise Passenger (in 000's) n/a n/a 898 960 960 - 0.0% 62 6.9% Shilshole Bay Marina Occupancy 95.9% 94.3% 96.5% 95.8% 95.8% 0.0% 0.0% -0.7% -0.7% Fishermen's Terminal Occupancy 91.3% 88.6% 84.2% 83.7% 83.2% 0.5% 0.6% -0.5% -0.6% CAPITAL SPENDING RESULTS 2016 YTD 2016 2016 Budget Variance $ in 000's Actual Forecast Budget $ % Aviation 25,142 206,422 245,241 38,819 15.8% Maritime 947 14,496 15,660 1,164 7.4% Economic Development 1,179 7,866 8,751 885 10.1% Corporate & Other (note 1) 1,052 10,717 12,396 1,679 13.5% TOTAL 28,320 239,501 282,048 42,547 15.1% Note: (1) "Other" includes Street Vacation projects and Storm Water Utility Small Capital projects. PORTWIDE INVESTMENT PORTFOLIO During the first quarter of 2016, the investment portfolio earned 1.09% versus the benchmark's (the Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index) 0.75%. Over the last twelve months the portfolio and the benchmark have earned 0.99% and 0.77%, respectively. Since the Port became its own Treasurer in 2002, the life-to-date earnings of the Port's portfolio and the benchmark are 2.64% and 1.85%, respectively. 5 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 $ in 000's Actual Forecast Budget $ % $ % Operating Revenues: Aeronautical Revenues 229,624 253,100 261,019 (7,919) -3.0% 23,476 10.2% SLOA III Incentive Straight Line Adj (1) (3,576) (3,576) (3,576) - 0.0% - 0.0% Non-Aeronautical Revenues 196,844 211,885 208,321 3,564 1.7% 15,041 7.6% Total Operating Revenues 422,892 461,409 465,764 (4,355) -0.9% 38,517 9.1% Total Operating Expense 238,140 262,379 267,803 5,423 2.0% 24,239 10.2% Net Operating Income 184,752 199,030 197,962 1,068 0.5% 14,278 7.7% Capital Expenditures 164,931 206,422 245,241 38,819 15.8% 41,491 25.2% (1) Annual non-cash amortization of $17.9M lease incentive credited in 2013. Division Summary 2016 Forecast vs 2016 Budget Net Operating Income for 2016 is forecasted to be $1.1M higher than budget (0.5% favorable) o Operating Revenue is expected to be $4.4M lower than budget (0.9% unfavorable) primarily due to lower Aeronautical revenue from rate base cost savings and higher revenue sharing. The reduction in Aeronautical revenue is expected to be partially offset by higher Non-Aero revenue ($3.6M) driven by increased passenger volumes with strong performance in ground transportation, public parking, and rental cars. o Operating Expenses are expected to be $5.4M lower than budget (2.0% favorable) primarily due to savings in payroll ($3.4M) and lower charges from Corporate and other divisions ($3.0M). These expense savings are partially offset by higher outside services ($0.6M), and other expenses due to increased passenger volumes and related operational demands ($0.4M). Division Summary 2016 Forecast vs 2015 Actuals 2015 Net Operating Income is forecasted to be $14.3M higher than prior year (7.7% higher NOI) o 2016 Operating Revenue is expected to be $38.5M higher than prior year (9.1% higher) primarily due to growth in Aeronautical revenue ($23.5M) and higher Non-Aero revenue ($15.0M), which is driven by increased passenger volumes with strong performance in public parking, airport dining & retail, rental cars, and commercial properties. Increase in Aero rate based revenue is primarily due to cost recovery on new assets placed in service and higher operating expenses to support increased airline activity, partially offset by higher revenue sharing in 2016. o 2016 Operating Expenses are expected to be $24.2M higher than prior year (10.2% higher) due to higher airport direct charges ($13.1M) particularly in outside services ($8.7M) and payroll ($3.7M), higher forecasted charges from Corporate departments ($12.2M), slightly offset by lower environmental remediation liability charges ($1.1M). A. BUSINESS EVENTS New Air Service: Spirit Airlines initiated service. New ground transportation options: transportation network companies began service on March 31st. Planning progress: presented commission analysis of key components of Sustainable Airport Master Plan. Capital project milestones: o Began design of International Arrivals Facility o Received airline approval North Satellite expansion project Environmental initiatives: issued RFP for biofuels study. Customer service: TSA agreed to reinstate local training for Sea-Tac TSA officers. 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 B. KEY PERFORMANCE METRICS YTD 2015 YTD 2016 % Change Passengers: Enplaned Passengers (000's) Alaska +9% Domestic 3,880 4,272 10.1% Delta +20% Southwest +13% International 471 512 8.5% United -4% Total 4,352 4,783 9.9% Operations 81,668 91,480 12.0% Growth in Operations Landed Weight (million lbs.) trails enplaned passengers due to 2016 Cargo 394 369 -6.3% YTD Load Factor down All other 4,888 5,452 11.5% 2.5 points from last year. Total 5,283 5,821 10.2% Cargo - metric tons 2016 YTD International Domestic freight 37,165 35,988 -3.2% Freight tons trailing prior International freight 26,418 22,341 -15.4% year due to peak volume in 2015 during Port Mail 12,979 14,396 10.9% shutdown. Total 76,562 72,725 -5.0% Key Performance Measures Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 Actual Forecast Budget $ % $ % Performance Metrics Cost per Enplanement (CPE) 10.12 10.63 11.00 0.36 3.3% 0.52 5.1% O&M Cost per Enplanement 11.28 11.81 12.06 0.24 2.0% 0.53 4.7% Non-Aero Revenue per Enplanement 9.33 9.54 9.38 0.16 1.7% 0.21 2.3% Debt per Enplanement 119 112 111 (1) -0.9% (7) -5.9% Debt Service Coverage 1.49 1.49 1.46 0.03 2.2% 0.00 0.3% Days cash on hand (10 months = 304 days) 468 363 309 53 17.2% (105) -22.5% Aeronautical Revenue Sharing ($ in 000's) 29,450 31,995 28,055 (3,940) -14.0% 2,545 8.6% Activity (in 000's) Enplanements 21,109 22,214 22,214 0 0.0% 1,106 5.2% Notes: Reduction in CPE reflects lower airline costs due to higher revenue sharing (driven by increased non-airline revenues), and increased enplaned passengers. Improved debt service coverage compared to budget reflects increased cash flow from growth in enplanements. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 C. OPERATING RESULTS Division Summary Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Operating Revenues: Aeronautical Revenues (1) 56,781 56,797 57,668 (872) -1.5% 253,100 261,019 (7,919) -3.0% SLOA III Incentive Straight Line Adj (2) (894) (894) (894) - 0.0% (3,576) (3,576) - 0.0% Non-Aeronautical Revenues 41,112 44,871 43,720 1,151 2.6% 211,885 208,321 3,564 1.7% Total Operating Revenues 96,999 100,774 100,495 279 0.3% 461,409 465,764 (4,355) -0.9% Operating Expenses: Payroll 23,067 24,196 25,842 1,646 6.4% 103,274 106,659 3,386 3.2% Outside Services 6,264 6,548 9,324 2,776 29.8% 40,466 39,915 (551) -1.4% Utilities 3,305 3,646 3,839 193 5.0% 14,665 14,686 21 0.1% Other Airport Expenses 3,386 4,570 3,589 (981) -27.3% 17,320 16,911 (410) -2.4% Total Airport Direct Charges 36,022 38,960 42,594 3,634 8.5% 175,725 178,171 2,445 1.4% Environmental Remediation Liability - - - - n/a 3,246 3,246 - 0.0% Capital to Expense 0 - - - n/a 13 - (13) 0.0% Total Exceptions 0 - - - n/a 3,259 3,246 (13) -0.4% Total Airport Expenses 36,023 38,960 42,594 3,634 8.5% 178,984 181,417 2,433 1.3% Corporate 9,218 11,012 13,010 1,998 15.4% 52,043 52,424 381 0.7% Police Costs 3,857 4,327 4,634 307 6.6% 18,581 18,728 147 0.8% Capital Development 1,149 1,461 2,346 885 37.7% 9,283 11,746 2,463 21.0% Maritime/Economic Development 668 548 875 327 37.4% 3,488 3,488 - 0.0% Total Charges from Other Divisions 14,891 17,349 20,865 3,517 16.9% 83,395 86,386 2,991 3.5% Total Operating Expense 50,914 56,309 63,460 7,151 11.3% 262,379 267,803 5,423 2.0% Net Operating Income 46,085 44,465 37,035 7,430 20.1% 199,030 197,962 1,068 0.5% CFC Surplus (5,867) (5,146) (721) -14.0% Net Non-Operating Items in / out from ADF (3) 2,052 1,099 954 86.8% SLOA III Incentive Straight Line Adj 3,576 3,576 - 0.0% Debt Service (133,437) (135,217) 1,781 -1.3% Adjusted Net Cash Flow 65,355 62,273 3,081 4.9% (1) Aero revenues are net of revenue sharing. (2) Annual non-cash amortization of $17.9M lease incentive credited in 2013. (3) Per SLOA III definition of Net Revenues. 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 Operating Expenses 2016 YTD Actuals compared to 2016 YTD Budget: Total Operating Expenses are lower than the 2016 budget by $7.2 million due to the net of the following: YTD Aviation Direct Operating Expenses are lower than budget by $3.6 million due to the following: Positive Variance of $4.6M Negative Variance of $1.0M Payroll - vacancies & hiring delays $1.6M Other Aviation Expenses $1.0M Outside Services $2.8M Litigated & Non-litigated Damages 0.6M Delayed spending expected to clear by year-end 1.0M Lower charges to Capital Projects 0.5M SAMP consultant 0.2M All other Aviation Expenses (0.1M) ADR consultant 0.3M NERA 3 - verifying grant compliance 0.3M Environmental contracts 0.2M Savings and/or work deferred to future year: 1.2M Advance Planning for Master Plan 0.5M Maintenance contract savings 0.4M Airport Obstruction Removal - reduced scope 0.2M Rental Cars - curbside assistance not renewed 0.1M All other Outside Services 0.6M Utilities (lower usage due to mild weather) $0.2M There were no Operating Expense Exceptions in YTD 2016 Actuals or YTD 2016 Budget. YTD Operating Expense charges from Corporate and other divisions are lower than budget by $3.5 million due to the following: Positive Variance of $3.5M Negative Variance - no material variance Corporate savings $2.0M CPO 1.0M Public Affairs 0.3M Office of Strategic Initiatives 0.3M ICT (0.3M) All other - Corp 0.7M Police savings $0.3M CDD savings $0.9M Aviation PMG 0.9M PCS 0.2M Engineering (0.3M) All other - CDD 0.1M Maritime & EDD savings $0.3M Workforce development 0.3M 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 Operating Expenses 2016 YTD Actuals compared to YTD 2015: Total Operating Expenses increased in YTD 2016 by $5.4 million due to the net of the following: YTD Aviation Direct Operating Expenses increased in 2016 by $2.9 million due to the following: Increase of $2.9M Decrease - no material amount Payroll - vacancies & hiring delays $1.1M Outside Services $0.3M Utilities $0.3M Other Aviation expenses $1.2M Litigated & Non-litigated Damages 0.6M Maintenance Materials 0.2M Other general expenses 0.4M There were no Operating Expense Exceptions in YTD 2016 or YTD 2015. YTD Operating Expense charges from Corporate and other divisions increased by $2.5 million in 2016 due to the following: Increase of $2.6M Decrease of $0.1M Corporate departments $1.8M Maritime & EDD $0.1M ICT 0.8M HRD 0.4M Finance & Budget 0.2M Office of Strategic Initiatives 0.2M All Other - Corp 0.2M Police $0.5M CDD $0.3M Engineering 0.2M PCS 0.1M 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 Operating Expenses 2016 Forecast compared to 2016 Budget: Total Operating Expenses are forecasted to be lower than the 2016 budget by $5.4 million due to the net of the following: Aviation Direct Operating Expenses are forecasted to be lower than budget by $2.4 million due to the following: Positive Variance of $3.4M Negative Variance of $1.0M Payroll - vacancies & hiring delays $3.4M Outside Services $0.6M Security screening contract 3.2M FIS contract - Prop 1 wages 0.3M Interim Baggage Program 0.3M Aviation Biofuel study 0.2M Energy & Carbon strategy 0.1M SAMP environmental review deferred (1.3M) Advance Planning - Master Plan deferred (0.7M) Airport obstruction removal - reduced scope (0.4M) RCF curbside assistance savings (0.4M) Maintenance contract savings (0.4M) All other Outside Services savings (0.3M) Other Aviation Divisional expenses $0.4M Litigated & Non-litigated Damages 0.6M International Incentive - new routes 0.4M Charges to Capital - lower than budget 0.3M Contingency usage (in Outside Svcs above) (1.0M) All other Aviation expenses 0.1M Operating Expense Exceptions are forecasted to be equal to budget at this time. Operating Expense charges from Corporate and other divisions are forecasted to be lower than budget by $3.0 million due to the following: Positive Variance of $3.0M Negative Variance - no material variance Corporate savings $0.4M Police savings $0.1M CDD savings $2.5M IAF consultants now capitalized 1.2M Payroll - delayed hiring 0.7M All other - CDD 0.6M 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 Aeronautical Business Unit Summary Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Revenues: Movement Area 18,173 21,004 20,095 909 4.5% 95,245 95,220 25 0.0% Apron Area 2,825 2,464 3,026 (563) -18.6% 13,735 14,120 (385) -2.7% Terminal Rents 35,906 36,634 36,933 (299) -0.8% 155,977 159,593 (3,616) -2.3% Federal Inspection Services (FIS) 2,724 2,284 2,295 (11) -0.5% 10,689 10,836 (147) -1.4% Total Rate Base Revenues 59,628 62,385 62,349 36 0.1% 275,645 279,768 (4,123) -1.5% Commercial Area 2,024 2,154 2,333 (180) -7.7% 9,450 9,306 144 1.5% Subtotal before Revenue Sharing 61,652 64,539 64,682 (143) -0.2% 285,095 289,074 (3,979) -1.4% Revenue Sharing (4,872) (7,742) (7,014) (728) -10.4% (31,995) (28,055) (3,940) -14.0% Total Aeronautical Revenues 56,781 56,797 57,668 (872) -1.5% 253,100 261,019 (7,919) -3.0% Total Airport Direct Charges 25,432 27,890 29,475 1,584 5.4% 123,567 123,710 143 0.1% Total Exceptions 0 - - - 0.0% 2,687 2,675 (13) -0.5% Total Charges from Other Divisions 7,503 8,949 10,646 1,698 15.9% 42,469 43,964 1,495 3.4% Total Aeronautical Expenses 32,935 36,839 40,121 3,282 8.2% 168,724 170,349 1,625 1.0% Net Operating Income 23,845 19,958 17,547 2,411 13.7% 84,376 90,670 (6,294) -6.9% Debt Service (1) (89,867) (91,723) 1,856 2.0% Net Cash Flow (5,490) (1,053) (4,437) 421.4% NOTE: (1) Debt service is forecasted/budgeted on an annual basis only. Thus, quarterly data is not available. Airline Rate Base Cost Drivers Fav (UnFav) 2015 2016 2016 'Budget vs Forecast $ in 000's Actual Forecast Budget $ % O&M 150,286 164,691 166,776 (2,085) -1.3% Debt Service Gross 111,477 119,018 120,668 (1,650) -1.4% Debt Service PFC Offset (32,454) (32,860) (32,583) (277) 0.9% Amortization 24,853 28,203 28,338 (135) -0.5% Space Vacancy (3,469) (2,380) (2,431) 51 -2.1% TSA Operating Grant and Other (1,099) (1,026) (1,000) (26) 2.6% Rate Base Revenues 249,594 275,645 279,768 (4,123) -1.5% Commercial area 9,519 9,450 9,306 144 1.5% Total Aero Revenues 259,113 285,095 289,074 (3,979) -1.4% Aeronautical YTD Budget Variance Aeronautical YTD net operating income is $2.4M higher than budget. o Aeronautical revenue is $0.9M lower than budget due to higher revenue sharing. YTD revenue sharing includes a revenue sharing accrual based on 2016 higher forecasted revenue sharing primarily due to increased Landside revenues and non-aero expense savings. o Aeronautical operating expenses are $3.3M lower than YTD budget: Airport Direct Charges - $1.6M lower than budget due to savings in payroll ($0.6M), outside services ($0.6M), and other expenses ($0.4M). Exceptions no activity YTD. Charges from other divisions - $1.7M in savings from Corporate departments. 12 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 Aeronautical Year over Year YTD Changes Aeronautical net operating income is $3.9M lower than YTD 2015. o Aeronautical revenues are flat year over year higher rate based revenues are offset by higher revenue sharing: Higher rate based revenue ($2.8M) primarily due to cost recovery on new assets placed in service and higher operating expenses to support increased airline activity. Higher revenue sharing ($2.9M) mostly due to increase in non-aero revenues driven by increased passenger volumes. o Aeronautical operating expenses in YTD 2016 are $3.9M higher than YTD 2015: Airport Direct Charges - $2.5M higher than prior year primarily due to higher divisional allocations ($0.9M), outside services ($0.7M), internal department transfers utilities ($0.3M), payroll ($0.2M), supplies and stock ($0.2M), and other expenses ($0.2M). Exceptions - no material variance. Charges from other divisions - $1.4M higher than YTD 2015. Non-Aero Business Unit Summary Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Non-Aero Revenues Rental Cars - Operations 5,833 6,159 5,586 573 10.3% 36,209 35,398 810 2.3% Rental Cars - Operating CFC 1,737 615 744 (129) -17.3% 12,855 12,767 88 0.7% Public Parking 14,726 16,286 15,723 563 3.6% 67,779 66,847 932 1.4% Ground Transportation 1,996 2,582 2,143 438 20.5% 10,300 8,327 1,974 23.7% Airport Dining & Retail 11,003 11,794 11,828 (35) -0.3% 53,381 53,419 (38) -0.1% Commercial Properties 1,565 1,904 2,511 (607) -24.2% 10,175 10,251 (76) -0.7% Utilities 1,647 1,812 1,830 (18) -1.0% 7,074 7,626 (552) -7.2% Other 2,605 3,718 3,353 365 10.9% 14,111 13,686 426 3.1% Total Non-Aero Revenues 41,112 44,871 43,720 1,151 2.6% 211,885 208,321 3,564 1.7% Non-Aero Expenses Total Airport Direct Charges 10,591 11,070 13,119 2,050 15.6% 52,551 54,853 2,302 4.2% Total Exceptions 0 - - - n/a 571 571 - 0.0% Total Charges from Other Divisions 7,388 8,400 10,219 1,819 17.8% 40,533 42,029 1,496 3.6% Total Non-Aero Expenses 17,979 19,470 23,339 3,869 16.6% 93,656 97,454 3,798 3.9% Net Operating Income 23,133 25,401 20,382 5,019 24.6% 118,229 110,867 7,362 6.6% Less: CFC (Surplus) / Deficit (617) 1,121 1,052 69 6.6% (5,867) (5,146) (721) -14.0% Adjusted Non-Aero NOI 22,517 26,523 21,434 5,089 23.7% 112,362 105,721 6,641 6.3% Debt Service (1) (43,570) (43,494) (76) -0.2% Net Cash Flow 68,793 62,227 6,565 10.6% Note: (1) Debt service is forecasted/budgeted on an annual basis only. Thus, quarterly data is not available. Non-Aero YTD Budget Variance Non-Aeronautical net operating income is $5.0M higher than YTD budget. o Non-Aeronautical revenues are $1.2M higher than budget: Strong performance in Public Parking ($0.5M), Rental Cars ($0.4M), and Ground Transportation ($0.4M), offset by lower revenue in Commercial Properties ($0.6M). 13 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 o Non-Aeronautical operating expenses are $3.9M lower than YTD budget: Airport Direct Charges - $2.1M lower than budget due to savings from outside services ($2.1M) and payroll ($1.0M), offset by higher than budgeted general expenses ($0.5M), divisional allocations ($0.4M), and other expenses ($0.1M). Exceptions - no material variance. Charges from other divisions - $1.8M in savings from Corporate departments. Non-Aero Year over Year YTD Changes Non-Aeronautical net operating income is $2.3M higher than YTD 2015. o Non-Aeronautical revenues in YTD 2016 are $3.8M higher than YTD 2015 due to strong performance in Public Parking ($1.6M), Airport Dining & Retail ($0.8M), Ground Transportation ($0.6M), and Commercial Properties ($0.3M). o Non-Aeronautical operating expenses in YTD 2016 are $1.5M higher than YTD 2015: Airport Direct Charges - $0.5M higher than prior year due to higher payroll costs ($0.9M), general expenses ($0.8M), and utilities ($0.4M), partially offset by lower divisional allocations ($0.8M), outside services ($0.5M), and internal department transfers utilities ($0.3M). Variance in Exceptions not material. Charges from other divisions - $1.0M higher than YTD 2015. D. CAPITAL SPENDING RESULTS Capital Variance $ in 000's 2016 2016 2016 Budget Variance Description YTD Actual Forecast Budget $ % NS NSAT Renov NSTS Lobbies (1) 2,210 23,737 43,200 19,463 45.1% Interim Baggage System Program (2) 437 5,937 10,000 4,063 40.6% Concourse D Hardstand Terminal (3) 4 329 1,790 1,461 81.6% SSAT Interior Renovations (4) 76 3,226 1,850 (1,376) -74.4% B2 Expansion for DL Club (5) 191 7,691 9,000 1,309 14.5% RW16C-34C Design and Reconst 4,294 10,494 11,755 1,261 10.7% International Arrivals Fac-IAF 6,789 56,381 57,612 1,231 2.1% Checked Bag Recap/Optimization 1,304 7,604 8,257 653 7.9% All Other 9,838 91,023 101,777 10,754 10.6% Total Spending 25,143 206,422 245,241 38,819 15.8% (1) Delays in construction due to a rebid of the PWP#1 construction effort. (2) Budget was developed when project was early in design, resulting in overly aggressive projections. (3) Delays in hiring consultant for design. (4) Returned to Commission in March to increase the project authorization by $1.9M due to higher bids. Additional scope was also added in support of the Narrow Body Gates project which increased the budget by $500k. (5) Delays with the design schedule. Spending moved out to 2017. 14 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 $ in 000's Actual Forecast Budget $ % $ % Revenues: Operating Revenue 47,249 49,514 49,314 200 0% 2,265 5% Security Grants 0 0 0 0 NA 0 NA Total Revenues 47,249 49,514 49,314 200 0% 2,265 5% Total Operating Expenses 33,424 42,669 42,469 (200) 0% 9,245 28% Net Operating Income 13,825 6,845 6,845 0 0% (6,980) -50% Capital Expenditures 6,252 14,496 15,660 1,164 7% 8,244 132% Total Maritime Revenues were $265K favorable to budget through Q1 2016. Favorable variance driven by Fishing & Operations $333K from improved utilization of Dockage, Berthage, and Moorage. This was offset by ($81K) unfavorable revenue in Bulk related to demand for grain. Revenues are forecast to exceed budget in 2016 by $200K. Total Operating Expenses were $1,701K favorable to budget through Q1 2016 primarily due to timing of divisional expenses and lower than budgeted corporate allocated expenses. Expenses are forecast ($200K) unfavorable to budget from unexpected mitigation costs related to the P66 cruise terminal build out. Net Operating Income before Depreciation was $1,966 favorable to budget YTD, and forecast at budget. Capital Expenses forecast in 2016 at $14.5M, 93% of the approved annual budget amount of $15.7M. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2015 YTD 2016 YTD 2016 YTD 2016 Bud Var Change from 2015 $ in 000's Actual Actual Budget $ % $ % Fishing & Operations (1,208) (850) (1,413) 563 -40% 358 -30% Recreational Boating 506 389 84 306 366% (117) -23% Cruise (1,262) (1,234) (1,754) 520 -30% 28 -2% Bulk 1,271 1,200 1,227 (27) 2% (71) -6% Maritime Portfolio 1,282 341 (262) 604 230% (940) 73% All Other (0) 0 0 (0) NA 0 100% Total Maritime 588 (153) (2,119) 1,966 -93% (741) -126% 15 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 A. BUSINESS EVENTS Grain volume of 1,208 metric tons, equal to 2015, but (6%) below 2016 budget. Completed negotiations related to cruise operations and stormwater permit management issues. Formed working group of airlines, cruise lines, and various supporting stakeholders to work with Maritime and Airport Operations to improve customer service / passenger experience. Independent Packers Corp agreed to 5 year lease term to support 170 employees situated in Building 40. Barge moorage at north end of Harbor Island, T25 South, and T107 Kellogg Island more fully utilized. Operations staff facilitated 5 public events conducted at the Smith Cove Cruise Terminal, drawing over 20,000 attendees. Skip Himes hired as new General Manager of Marine Maintenance and Kenny Lyles promoted to Director of Fishing & Maritime Ops. Terminal 91 underwater regrade complete. T117 cleanup construction completed. B. KEY INDICATORS Grain Volume Metric Tons in 000's 5,000 4,000 3,000 2015 Actuals 2016 Budget 2,000 2016 Actuals 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cruise Passengers in 000's 1200 1000 800 2015 Actuals 600 2016 Budget 400 2016 Actuals 200 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 16 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 C. OPERATING RESULTS Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Operating Revenue 7,905 8,725 8,461 265 3% 49,514 49,314 200 0% Security Grants 0 0 0 0 NA 0 0 0 NA Total Revenues 7,905 8,725 8,461 265 3% 49,514 49,314 200 0% Maritime Expenses (excl Maint) 2,006 2,313 2,832 520 18% 11,787 11,382 (405) -4% Maintenance Expenses 2,126 2,146 2,612 466 18% 10,576 10,576 0 0% P69 Facilities Expenses 35 69 72 4 5% 294 294 0 0% Other ED Expenses 744 817 1,142 325 28% 3,819 3,819 0 0% Environmental & Sustainability 204 184 242 57 24% 1,430 1,430 0 0% CDD Expenses 336 271 215 (56) -26% 1,029 1,029 0 0% Police Expenses 622 932 996 64 6% 4,023 4,023 0 0% Corporate Expenses 1,244 2,149 2,469 321 13% 9,508 9,713 205 2% Envir Remed Liability 0 0 0 0 NA 202 202 0 0% Total Expenses 7,317 8,879 10,580 1,701 16% 42,669 42,469 (200) 0% NOI Before Depreciation 588 (153) (2,119) 1,966 -93% 6,845 6,845 0 0% Depreciation 4,217 4,336 4,299 (37) -1% 17,139 17,139 0 0% NOI After Depreciation (3,629) (4,490) (6,418) 1,929 -30% (10,294) (10,294) 0 0% Maritime Division Revenues were $265K favorable to budget. Key variances are as follows: Fishing & Operations favorable $333K Pier 2 docks with $57K unbudgeted space rental. Pier 28 $61K favorable dockage. T91 $250K favorable due to Dockage, Security Services, Moorage, and Sale of Electricity. T25 Space Rental unfavorable by ($58K). Recreational Boating Unfavorable ($18K) Shilshole Bay Marina ($24K) unfavorable due to shortfall in moorage and utility revenues. Bell Harbor Marina $7K favorable from higher guest moorage than budgeted. Bulk Unfavorable ($75K) Lower than budgeted grain volumes driven by economic headwinds. Total Maritime Division Expenses were $1,701 favorable to budget. Key variances are as follows: Maritime Expenses (Excluding Maintenance) were $520K favorable to budget. Major variances were as follows: Salaries & Benefits were $82K favorable due to open positions in Fishing & Operations. Equipment $56K favorable due to timing of furniture purchase for cruise at T91. Outside Services were $326K favorable due to favorable variances associated with the Terminal 91 Maintenance Dredging project. Project is completed and expense to be applied in Q2. Maintenance Expenses were $466K favorable to budget from unfilled positions and underspent in wages and benefits. Corporate Expenses were $$321K favorable to budget. Other Economic Development Expenses $325K favorable due to lighter than expected outside services. 17 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 2016 Full Year Forecast Revenue $200K Favorable Higher than budgeted revenue in moorage and dockage. Expenses Unfavorable by $200K Corp allocated expenses offset by unbudgeted P66 cruise mitigation payments. Change from 2015 YTD Actual Net Operating Income (NOI) before Depreciation for 2016 decreased by ($741K) Higher revenue offset by higher expenses from change in allocation process. Revenue increased by $821K - Revenue from the Grain terminal increased $82K. Fishing & Operations revenue increased $409K from better moorage utilization and rate increases. Recreational Boating increased $173K from rate increases. Maritime Portfolio Management increased $156K from rent and utilities at Shilshole Bay Marina, T91, and Fishermen's Terminal. Expenses, direct and allocated, increased by ($1,562K) - Variance driven by ($905K) in Corporate allocations and Police ($310K) from change in methodology with the creation of the NWSA. Maritime expenses ($307K) unfavorable from increased utility and outside services expenses. D. CAPITAL SPENDING RESULTS Budget Variance 2016 YTD 2016 2016 Actual Forecast Budget $ % $ in 000's Small Projects 181 3,788 3,772 (16) 0% Contingency Renewal & Replace. 0 2,000 2,000 0 0% T91 Substation Upgrades 192 1,415 1,381 (34) -2% Cruise Terminal Tenant Improv 0 1,350 1,350 0 0% Maritime Fleet Replacement 201 1,598 1,623 25 2% SBM Restrms/Service Bldgs Rep 54 644 1,017 373 37% C15 Building Tunnel Improvmnt 0 700 700 0 0% P91 South End Fender 8 478 655 177 27% Maint N Office Site Improvemnt 0 200 500 300 60% Marina Mgt Sys Replacement 0 450 450 0 0% All Other 311 1,873 2,212 339 15% Total Maritime 947 14,496 15,660 1,164 7% Comments on Key Projects: For Q1 2016, Maritime spent 6% of the annual approved budget. Full year estimate is expected to be 93% of the annual approved budget. Projects with significant changes in spending were: Shilshole Bay Marina Restroom and Services Building Replacement: $373K below budget from revised project schedule. Maintenance North Office Site Improvement: $300K under budget as project delayed until Q4. Pier 91 South End Fender: timing variance. 18 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 $ in 000's Actual Forecast Budget $ % $ % Revenues: Operating Revenue 18,164 14,272 13,745 527 4% (3,892) -21% Total Revenues 18,164 14,272 13,745 527 4% (3,892) -21% Total Operating Expenses 19,206 23,672 23,447 (225) -1% 4,466 23% Net Operating Income (1,042) (9,400) (9,702) 302 3% (8,358) -802% Capital Expenditures 2,098 7,866 8,751 885 10% 5,768 275% Total Economic Development Division (EDD) revenues were $232K or about 7% favorable to budget through the first quarter primarily due to stronger sales activities at Conference and Event Centers than budgeted. For the full year, revenue is expected to be $527K favorable to budget also primarily due to favorable Conference and Event Centers' revenue. Total Operating Expenses were $1,310K or 22% favorable through the first quarter due to lower spending than budgeted across all groups except for unfavorable variances for CDD Expenses. For the full year, EDD is forecasting Operating Expenses to be ($225K) unfavorable to budget due to higher activity at the Conference and Events Center. Net Operating Income year-to-date for 2016 was $1,542K favorable to budget and ($446K) below 2015 Actual primarily due to higher divisional and corporate allocations. For the full year, EDD is forecasting Net Operating Income of $302K favorable to budget. At the end of the first quarter, capital spending for full year 2016 is forecasted to be $7.9 million or 90% of the approved budget of $8.8 million. A. BUSINESS EVENTS Overall occupancy of buildings managed by Portfolio Management was at 97% at the end of the first quarter of 2016, above the 90% target for 2016. Portfolio Management's occupancy is above the average of 94% for the comparable office markets and near the average of 98% for comparable industrial markets.1 Conference and Event Center activity exceeded budget year-to-date due to a strong sales team and healthy regional economy. The sale of the remaining 12 miles of the Eastside Rail Corridor to Snohomish County closed in March 2016. 1 Market averages are calculated based on Costar building occupancies reported for: Office: Class B & C office space in Ballard/U District, Queen Anne/Magnolia, Belltown/Denny Regrade, Pioneer Square/Waterfront, and South Seattle. Industrial: Georgetown/Duwamish North, SoDo, and West Seattle 19 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 B. KEY INDICATORS Building Occupancy by Location: 105% 100% Central Harbor 95% T-91 Uplands Marina Office & Retail 90% T-91 Industrial T-106 Warehouse 85% 80% Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2015 YTD 2016 YTD 2016 YTD 2016 Bud Var Change from 2015 $ in 000's Actual Actual Budget $ % $ % Central Harbor Management (283) (359) (772) 413 53% (76) -27% Conference & Event Centers 191 109 (233) 343 147% (82) 43% Eastside Rail (78) (90) (53) (37) -70% (12) -15% RE Dev & Planning (142) (345) (659) 314 48% (204) -144% Tourism (149) (200) (425) 224 53% (51) -34% Workforce Dev 5 (20) (305) 285 93% (25) 465% Env Grants/Remed Liab/FTZ 0 5 5 (0) -10% 5 587103% Total Econ Dev (455) (901) (2,442) 1,542 63% (446) -98% 20 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 C. OPERATING RESULTS Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Revenue 1,685 1,777 1,756 21 1% 7,513 7,449 64 1% Conf & Event Ctr Revenue 2,014 1,895 1,684 211 13% 6,759 6,296 463 7% Total Revenue 3,699 3,672 3,440 232 7% 14,272 13,745 527 4% Central Harbor 557 483 670 187 28% 2,650 2,746 96 4% Conf & Event Centers 1,734 1,721 1,748 27 2% 7,013 6,439 (574) -9% Eastside Rail Corridor 13 4 30 26 85% 118 144 26 18% P69 Facilities Expenses 9 41 43 2 5% 177 177 0 0% Small Business 0 4 31 27 87% 120 120 0 0% Workforce Development 0 (9) 284 293 103% 1,558 1,558 0 0% Tourism 146 193 421 227 54% 1,114 1,174 60 5% EconDev Expenses Other 380 470 615 145 24% 2,800 2,800 0 0% Maintenance Expenses 694 573 795 222 28% 3,153 3,153 0 0% Maritime Expenses (Excl Maint) 3 8 7 (1) -11% 28 28 (0) 0% Environmental & Sustainability 48 11 25 13 54% 126 126 (0) 0% CDD Expenses 11 88 46 (42) -92% 248 248 (0) 0% Police Expenses 108 39 42 3 7% 167 169 2 1% Corporate Expenses 452 946 1,126 181 16% 4,400 4,565 165 4% Envir Remed Liability 0 0 0 (0) NA 0 0 0 NA Total Expense 4,154 4,573 5,882 1,310 22% 23,672 23,447 (225) -1% NOI Before Depreciation (455) (901) (2,442) 1,542 63% (9,400) (9,702) 302 3% Depreciation 834 934 859 (75) -9% 3,461 3,461 0 0% NOI After Depreciation (1,289) (1,835) (3,302) 1,467 44% (12,861) (13,163) 302 2% Total Economic Development Division Revenue was $232K favorable to budget. Key variances: Portfolio Management: $232K favorable Conference & Event Centers were $211K favorable primarily due to strong food sales activities at Bell Harbor International Conference Center (BHICC), membership sales at World Trade Center Seattle (WTCS ) and the new program at Smith Cove Center (SCCT) despite limitations imposed by the pending cruise terminal expansion project. Real Estate Development & Planning was $29K favorable primarily due to an unbudgeted $29K payment in January from King County Wastewater Treatment for space rental at T-91 Uplands.2 Central Harbor Management Group was ($9K) unfavorable mainly due to unfavorable space rental revenue from Bell Street Garage ($23K) and Bell Street Retail Leases unfavorable ($13K) due to vacancies associated with upcoming Cruise Terminal construction. The unfavorable variance was offset by a $15K favorable variance for space rental revenue at T-34. Total Economic Development Expenses were $1,310K favorable to budget. Key variances: Central Harbor was $187K favorable due to $65K lower for broker fees and tenant improvements, $47K lower management expenses for World Trade Center West (WTC-W), $30K lower utility costs (surface water and sewer), and $25K lower salary & benefit costs. Conference & Event Centers were $27K favorable mainly due to delay in spending of the $86K Smith Cove Event Permit while waiting for finalizing from the city. It is partially offset with the higher operating expenses and management fee of related to the higher sales activities. Workforce Development was $293K favorable due to timing of spending for Workforce Development programs. 2 T-91 Uplands is managed by Portfolio Management and will be moved to Portfolio Management in 2017. However, it cannot be moved in 2016 due to established allocation calculations. 21 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 Tourism was $227K favorable primarily due to timing of Visit Seattle Agreement payment, timing of spending in marketing costs, and a Director position vacancy in the first quarter. Economic Development Other (excluding the above direct expenses) were favorable $145K. Major account variances were as follows: RE Development & Planning was $239K favorable due to unspent $125K Opportunity Fund, $41K timing of expenses for strategic planning consultant services, and $25K of misbudgeted membership dues for the King County Economic Development Council (offset by expenditure from RE Div Admin). RE Division Management was $43K unfavorable due to higher than budgeted divisional allocations. Salaries & Benefits were $70K unfavorable due to higher charges from Central Harbor to Development & Planning and Eastside Rail. Maintenance expenses were $222K favorable due to later start than expected on planned maintenance work at virtually all facilities. CDD costs, direct and allocated, were unfavorable ($42K) due primarily to above budget spending by Port Construction Services ($31K). Corporate costs, direct and allocated, were favorable $181K primarily due to lower than anticipated direct charges and allocations from Central Procurement $63K, Public Affairs $46K, Office of Strategic Initiatives $22K, and Accounting & Financial Reporting $16K. All other variances net to a favorable variance of $17K. NOI before Depreciation was $1,542K favorable to budget. Depreciation was ($75K) or 9% unfavorable to budget. NOI after Depreciation was $1,467K favorable to budget. 2016 Full Year Forecast As of the end of the 1st Quarter 2016, the Economic Development Division anticipates ending the year $302K favorable to budget for Net Operating Income (NOI) Before Depreciation. The variance reflects above budget revenue of $527K, which is offset by an unfavorable expense variance of ($225K). Revenue is forecasted to be $527K favorable due to higher revenue expected for the Conference & Event Centers $463K due to stronger sales than budgeted due in part to the delayed initiation of construction for the Cruise Terminal expansion project. The unfavorable expense variance of ($225K) is primarily due to unfavorable Conference & Event Center expenses ($574K) mainly resulting from increased sales activity and unspent tenant improvement allowances that rolled over from 2015. It is partially offset by the favorable Corporate expenses $165K, and Central Harbor management expenses $96K. Change from 2015 YTD Actual Net Operating Income before Depreciation decreased by $446K between 2016 and 2015 as a result of lower revenue ($27K) and higher expenses ($419K) primarily due to higher corporate and divisional allocations. Revenues decreased by ($27K) due to higher revenue from Central Harbor Management $114K with is offset by lower revenue from Conference & Events Center ($120K) and T91 Uplands ($23K). Expenses increased by ($419K). Conference and Event Center Expenses had a net decrease of ($13K). Eastside Rail expenses decreased ($9K). Maintenance expenses decreased ($121K) primarily due to lower allocations. CDD expenses increased $77K due to higher charges from Seaport Project Management and Port Construction Services. Corporate expenses increased $494K mainly due to higher allocations from Public Affairs, Information & Communication Technology, Accounting & Financial Reporting and Human Resources. 22 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 03/31/16 CONTRIBUTIONS TO OTHER DIVISIONS Fav (UnFav) Incr (Decr) 2015 YTD 2016 YTD 2016 Budget Variance Change from 2015 $ in 000's Actual Actual Budget $ % $ % Revenues: Airport Dining & Retail 11,003 11,794 11,828 (35) 0% 791 7% Airport Properties 1,596 2,287 2,792 (505) -18% 691 43% Business Development 587 883 986 (103) -10% 296 50% Business Development & Mgmt 13,186 14,964 15,607 (643) -4% 1,778 13% Maritime Industrial 1,409 1,531 1,587 (56) -4% 123 9% Marina Office & Retail 995 1,028 957 72 7% 33 3% Maritime Portfolio Management 2,404 2,560 2,544 16 1% 156 6% Total Revenues to Other Divisions 15,590 17,524 18,150 (627) -3% 1,934 12% Expenses to Other Divisions Business Development & Mgmt 1,333 1,423 2,466 1,043 42% 90 7% Maritime Portfolio Management 567 706 1,015 309 30% 139 25% 1,900 2,130 3,481 1,352 39% 229 12% D. CAPITAL SPENDING RESULTS 2016 Budget Variance 2016 2016 YTD Forecast Budget $ % $ in 000's Actual T102 Bldg Roof HVAC Replacement 84 2,919 2,850 (69) -2% P66 Elevator 2,3,4 Upgrades 14 469 1,440 971 67% Tenant Improvements -Capital 878 1,178 1,178 0 0% P69 Roof Beam Rehabilitation 46 950 950 0 0% ED: Contingency Renew & Replace 0 500 500 0 0% Small Projects 122 698 585 (113) -19% ED BHICC Roof Fall Protection 0 389 409 20 5% All Others 35 763 839 76 9% Total Economic Development 1,179 7,866 8,751 885 10% Comments on Key Projects: Through the 1st quarter of 2016, Economic Development spent 13% of the annual approved capital budget. Full year spending is estimated to be 90% of budget. Projects with significant changes in spending were: P66 Elevator 2, 3, 4 Upgrades: - favorable budget variance due to modernizations for elevators 3 and 4 has been postponed until after the NCL cruise terminal work is completed. Small Projects: unfavorable budget variance is due to moving forward with the higher bids related to World Trade Center West projects including VAV Controller Upgrade and Roof Deck Replacement. 23 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 03/31/16 A. BUSINESS EVENTS Organized CMA-CGM Benjamin Franklin Vessel Welcoming program and reception featuring Mayor Murray, Commissioner Bowman and industry leaders; attended by approximately 60 invited guests. CEO Fick provided "state of the port" presentation to the Seattle Propeller Club. CEO Fick delivered the first-ever webcast to the Port employees. Developed and executed the Centers of Expertise for the Port. Implemented Paid Parental Leave. Launched planning effort to support Commission's 38 Cities outreach program. Mailed Air Mail community newsletter to 32,000 households around the airport and posted on POS website. Provided a tour of Seattle port facilities to the Government Accountability Office as part of their study on West Coast port congestion issues. Port employees donated $34,968.50 to 157 different charities through the Community Giving Campaign payroll deduction program and volunteered their time through the Port Association of Volunteer Employees (PAVE). Continued to provide ongoing support and proactively work through accounting/financial reporting set-up and scenarios for the Northwest Seaport Alliance (NWSA). Launched PerformanceLink and posted interim goals setting form for managers and employees to use and map 2016 goals. Continued to receive plan design input from employees and Commissioners for the Incentive Plan. Prepared, negotiated and implemented collective bargaining agreements and provided consultation on administration of collective bargaining agreements to Port divisions and oversight committees. Continued to deliver new technology solutions that fulfill business needs and enhance business processes, efficiently and effectively. Upgraded the Common Use Self Service (CUSS) kiosks used at SeaTac by customers of several airlines for check-in and other passenger services to the latest vendor version. Expanded the popular Airport Inspections program by adding functionality for Aviation Landside to record and manage citations issued to ground transportation providers using mobile technology to receive immediate information. Conducted a Port-wide Everbridge Communication Test for emergency preparedness. Initiated the Investment Banking Services procurement; obtained Commission authorization to select Underwriting, Remarketing and Debt management Finance Team through a competitive selection process. Continue to increase audit coverage on management operations and programs from a performance audit perspective based on Commission policies. Selected and hired Boston Consulting to commence the quick assessment for Procurement Excellence (Purchasing Transformation project) Implemented and launched the Contractors Database System (CDS) for Service Agreements to assist in tracking our efforts to promote small business growth. Executed contract with Parking Soft for a Parking Revenue Replacement System. Continued to conduct Customer Service Surveys and have improved process to an electronic version that will allow contacting a larger number of customers. Airlines voted to approve C60 interim baggage improvements, C3 holdroom, SSAT (South Satellite) narrow body gates and North Satellite (NSAT) budget increase. Completed design modifications for the 16C-34C project for schedule acceleration and compression. Hired the Stormwater Program Manager and Stormwater Utility Program Manager. Executed the purchase of a CCTV Truck with an early August delivery. Implemented the billing and collection of the Port's own Stormwater Utility fees. 24 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 03/31/16 B. KEY PERFORMANCE METRICS Key Performance Indicators/Measures YTD 2016 YTD 2015/Notes A. Implement Century Agenda Strategies 1. Small Business Participation Annual / Small Works (port-wide) 90% 2. Small Business Participation Annual / Major Construction (port- 39% wide) 3. Small Business Participation Annual / Goods & Services (CD- 24% only) 4. Small Business Participation Service Agreements (CD and CD- 23% managed) - Annual B. Consistently Live by Our Values Through Our Actions and Priorities 6 classes, 58 5 classes, 37 1. MIS and Clarity Training attendees attendees 197 168, increased by 2. Employee Development Class Attendees/Structured Learning 29 In process due 47% 3. Required Safety Training to Reorg 4. Request of information and guidelines for integrity & business 53 50, increased by 3 conduct 5. Occupational Injury Rate 4.19 3.25 89 143, decreased by 6. Total Lost work days 54 days C. Manage Our Finances Responsibly 1. Corporate costs as a % of Total Operating Expenses 34.5% 32.1% 2. Clean independent CPA audits involving AFR n/a yes 3. Timely process disbursement payment requests 4 days 3 days 4. Keep receivables collections 85% current (within 30 days) 96% 96% 5. Investment Portfolio Yield 1.09% 0.81% 6. Litigation and Claim Reserves (in $ thousand) $1.7 $3.2 D. Exceed Customer Expectations 1. Respond to Public Disclosure Requests 115 98, increased by 17 2. Information and Communication Technology System Availability 99.7% 99.4% 3. IT Network Availability 100.% 99.9% 4. Service Desk % First Call Resolution 41% 44% 5. Customer Survey for Police Service Excellent or Very Good 92% 88% E. Support Port Mission with Implementation of Port Divisions' Business Plan 1. Oversee Implementation and Administration of CBAs agreements 34 40 2. Number of Jobs Openings 149 110 3. Percent of annual audit work plan completed each year 17% 17% 25 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 03/31/16 C. OPERATING RESULTS Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Total Revenues 692 933 1,038 (105) -10.1% 4,151 4,151 - 0.0% Executive 390 498 668 169 25.3% 1,569 1,569 - 0.0% Commission 360 301 430 130 30.1% 1,505 1,635 130 7.9% Legal 612 691 827 136 16.5% 3,100 3,219 119 3.7% Public Affairs 909 1,296 1,596 300 18.8% 6,402 6,447 46 0.7% Human Resources & Development 1,384 1,654 1,788 135 7.5% 7,574 7,634 60 0.8% Labor Relations 191 278 293 15 5.3% 1,135 1,126 (9) -0.8% Internal Audit 248 284 405 120 29.8% 1,577 1,620 43 2.6% Office of Strategic Initiatives 589 1,004 2,619 1,616 61.7% 9,059 9,059 - 0.0% Police 5,092 5,374 5,837 463 7.9% 23,404 23,587 183 0.8% Contingency 169 38 125 87 69.6% 400 500 100 20.0% Capital Development Engineering 672 1,072 698 (375) -53.8% 5,913 5,913 - 0.0% Port Construction Services 469 520 698 179 25.6% 2,809 2,862 53 1.9% Aviation PMG 331 260 1,182 921 78.0% 2,122 4,543 2,421 53.3% Seaport PMG 40 255 203 (51) -25.3% 741 789 48 6.1% Capital Development Admin 95 106 107 1 0.7% 430 430 - 0.0% Sub-Total 1,608 2,213 2,888 675 23.4% 12,016 14,538 2,522 17.3% Finance Accounting & Financial Reporting 1,578 1,636 1,780 144 8.1% 7,497 7,570 73 1.0% Information & Communication Technology 4,288 5,172 4,789 (383) -8.0% 21,127 21,127 - 0.0% Finance & Budget 1,064 1,186 1,195 9 0.8% 4,912 4,933 21 0.4% Business Intelligence - 205 225 19 8.7% 1,066 917 (149) -16.3% Risk Services 745 790 859 69 8.0% 3,431 3,449 18 0.5% Sub-Total 7,675 8,989 8,847 (142) -1.6% 38,033 37,995 (38) -0.1% Security and Preparedness Emergency Management 93 80 90 10 10.7% 365 393 28 7.1% ICT Information Security 158 265 234 (30) -12.9% 927 927 - 0.0% Maritime Security 36 38 38 1 1.5% 161 161 - 0.0% Sub-Total 288 383 363 (20) -5.5% 1,452 1,480 28 1.9% Environment & Sustainability Aviation Environmental & Planning 1,646 940 1,923 982 51.1% 8,173 10,064 1,891 18.8% Maritime Environmental & Planning 648 220 435 215 49.4% 2,587 2,587 - 0.0% Storm Water Utility (net) (382) (255) (13) 241 -1807.9% (53) (53) - 0.0% Noise Programs 125 184 237 53 22.4% 862 891 29 3.3% Sub-Total 2,037 1,089 2,581 1,492 57.8% 11,569 13,489 1,920 14.2% Total Expenses 21,552 24,091 29,266 5,176 17.7% 118,795 123,897 5,102 4.1% Corporate revenues were $105K unfavorable compared to budget due to lower operating grants. Corporate expenses for the first three months of 2016 were $24.1M, $5.2M or 17.7% favorable compared to budget and $2.5M or 11.8% higher than the same period a year ago. The $5.2M favorable variance is due primarily to cost savings in vacant positions, delay hiring, timing of spending, and some actual savings. All corporate departments have a favorable variance except for: Engineering unfavorable variance of $375K is due to charging less to capital projects than originally anticipated. Seaport Project Management unfavorable variance of $51K is due to charging less to capital projects than originally anticipated. Information & Communication Technology unfavorable variance of $383K is due to timing of spending which should be resolved by the end of the year. Security and Preparedness unfavorable variance of $20K is due to higher Software Licenses and Maintenance Agreement. 26 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 03/31/16 Year-end spending is projected to be $5.1M under budget due primarily to: Executive plans on being on budget. Commission savings due to a vacant position and Outside Services. Legal savings in Outside Legal. Public Affairs savings due to Outside Services and Travel Expenses. Human Resources and Development savings due to vacant positions. Labor Relations overspending due to unbudgeted position. Internal Audit savings due to vacant positions. Office of Strategic Initiative plans on being on budget. Police savings in Payroll. Contingency anticipate not using all funds. Capital Development savings due to vacant positions and Outside Services. Accounting and Financial Reporting Services savings due to vacant positions. Information & Communication Technology plans on being on budget. Finance & Budget savings due to a vacant position. Business Intelligence unfavorable variance due to 2 new business analyst positions. Risk Services savings due to lower Insurance Broker Fees. Security and Preparedness savings in Telecommunications, Travel and Equipment Expenses. Environment & Sustainability savings in Outside Services. D. CAPITAL SPENDING RESULTS 2016 YTD 2016 2016 Budget Variance $ in 000's Actual Forecast Budget $ % Infrastructure - Small Cap 606 1,836 1,836 0 0.0% Service Tech - Small Cap 39 1,500 1,500 0 0.0% Constr Doc Mgmt Sys Repl. 7 538 538 0 0.0% Maximo Upgrade 35 991 991 0 0.0% PMIS Replacement 0 300 500 200 40.0% Remote Data Ctr Bus Continuity 2 1,200 1,200 0 0.0% PeopleSoft BU Configuration 0 300 1,400 1,100 78.6% Capital Dev Fleet Replacement 80 721 815 94 11.5% All Other (note 1) 278 2,736 2,946 210 7.1% TOTAL 1,047 10,122 11,726 1,604 13.7% Note: (1) "All Other" includes remaining ICT projects, other Corporate fleet replacement, and small cap. 27
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