PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.      6a 
ACTION ITEM 
Date of Meeting      May 17, 2016 
DATE:    May 13, 2016 
TO:      Ted Fick, Chief Executive Officer 
FROM:   Paula Edelstein, Senior Director, Human Resources 
Tammy Woodard, Assistant HR Director  Total Rewards 
SUBJECT:  First Reading, Resolution 3720, Amending Resolution 3712 as amended, 2016
Salary and Benefits Resolution 

ACTION REQUESTED 
Request First Reading of Resolution No. 3720: A resolution of the Port Commission of the Port
of Seattle amending Resolution No. 3712 as amended, the 2016 Salary and Benefits Resolution,
to modify the Pay for Performance program to add a lump sum incentive pay plan component to
the existing base pay increase component. 
SYNOPSIS 
Port staff is proposing an Incentive Pay Plan for non-represented employees. This plan will be in
addition to the existing Pay for Performance plan that rewards employees based on their
performance review ratings with base pay increases. The plan will be effective June 1, 2016. 
The proposed plan will support Port employees working together as One Port for the benefit of
the region, it will be self-funding and not add to fixed salary costs, will be socially responsible,
and will include non-financial goals that are results oriented, values driven, and Century Agenda
focused. The non-financial goals will also provide opportunities for employees across the Port to
have an impact. Importantly, the plan will reward results, not efforts toward results. 
The proposed Incentive Pay Plan will also support the Port's attraction and retention efforts by
adding a component to the pay program that is very common in private industry where 93% of
employers offer something similar. This plan will also create a competitive advantage for the
Port among public sector employers.  Nationally, about half the government employers
responding to an incentive pay survey reported offering some sort of plan while about 25% of
airports offer this type of plan and about 22% of ports offer a similar plan. The proposed plan
will particularly distinguish the Port among local public employers where these types of plans
are uncommon. 
The amendment to the 2016 Salary and Benefits Resolution will specify that the Pay for
Performance program has two components, the base pay increase component and the new lump

Template revised May 30, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 2 of 9 
sum Incentive Pay Plan component. The amendment will also include the plan's non-financial
goals for 2016 and will specify a maximum Incentive Pay Plan payout for the 2016 plan year. 

BACKGROUND 
Business Case 
The business case for the proposed Incentive Pay Plan is compelling; when the Port achieves
exceptional performance our community wins through job creation, economic development, and
environment and sustainability improvements. Incentive pay plans provide an opportunity for
employers to directly link business outcomes and employee performance. These plans provide
rewards to employees that are usually financial, cash, and paid as a lump sum based on the
organization achieving and surpassing predetermined goals. The awards these plans pay are
determined each year and do not carry forward from one year to the next. As such, they are selffunding
and do not add to fixed payroll costs. 
These type of pay plans are a competitive practice among both private and public employers. By
offering an Incentive Pay Plan the Port will be better able to compete with private industry 
employers for skilled employees with the talents essential to achieving the Century Agenda and
meet other key Port goals. This is important as the Port attracts job applicants from both public
and private sector employers. In 2015 about 75% of our new hire employees came from private
industry employers. While an Incentive Pay Plan will help the Port compete with these private
employers for employee talent, it will also differentiate us among public sector employers where
these types of plans are less common than among private sector employers. The following table
illustrates the prevalence of incentive pay plans on a national level. 
PREVALENCE OF INCENTIVE PAY PLANS 
Industry       Percent of Employers       Data Source 
Offering 
All Industry                  93%          Aon Hewitt book of business 
Public Sector               55%         WorldatWork, 2016 Survey 
Airports                    25%          ACI 2015/2016 Survey 
Seaports                 22%         AAPA 2015 Survey 
Among local government employers incentive pay plans are rare. Several local government
employers have implemented them only to eliminate them after several years. Currently, a plan
at the Wastewater Division of King County that is being phased out is the only plan we were able
to identify. 

Goals and Incentive Pay Plan Funding 
Financial and non-financial goals are the basis for incenting the organization to deliver
exceptional performance. The plan defines performance through a socially responsible lens by
rewarding employees for achieving financial and non-financial goals.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 3 of 9 
Non-Financial Goals 
The Incentive Pay Plan included in the proposed Salary and Benefits Resolution Amendment 
will support a balanced approach to goals. N on-financial goals will be values driven, results
oriented strategically important and Century Agenda focused to support employees working
together as One Port for the benefit of our community. These goals will also be stretch goals that
are realistic and measurable, yet they will require focused effort to achieve them.  A very
important consideration of the non-financial goals is that employees across the Port will have
opportunities to impact them. 
We are proposing three non-financial goals each year, and achieving at least two of them
together with the financial goal is required for an Incentive Pay Plan payout to be earned. We
are proposing first year non-financial goals in the following areas: 
1.  Small Business and WMBE Participation 
This goal will build on existing contracting efforts and elevate the importance and visibility
of this goal to all employees. 
2.  Customer Satisfaction and Public Engagement 
This goal will bring a Port-wide, One Port, focus to customer satisfaction. 
3.  Environmental Stewardship 
This goal will focus on a One Port approach to reducing the Port's environmental footprint
print. 
The proposed specific goals are as follows: 
Goal 1  Small Business and WMBE Participation 
a.  Increase small business contracting participation Port-wide, as defined by the U.S. Small
Business Administration guidelines to 35%, including the sub-goal of a 50% increase (over
2015) of certified Washington State Office of Minority and Woman's Business Enterprises to
5.1%. 
b.  By November 1, 2016, assess all Port efforts geared to promoting small and WMBE business
participation and provide a report to the Commission rating the effectiveness of each and
providing specific recommendations for improvements for Commission consideration. 
Goal 2  Customer Satisfaction and Public Engagement 
a.  Quantitatively and qualitatively assess customer satisfaction of all segments of non-aviation
customers to measure satisfaction with Port services and facilities; and identify specific areas
for improvement.
b.  Improve aviation customer overall satisfaction, as measured by the Airport Service Quality
(ASQ), from 4.07 to 4.13. 
c.  Assess within our jurisdiction public and other local government understanding of the Port
and our role in the regional and local economy. 
d.  By November 1, 2016, provide a report to the Commission that includes: 
i.  Benchmarks for future goal setting to improve satisfaction with Port services and
facilities. 
ii.  Strategies to improve the ASQ.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 4 of 9 
iii.  High impact actions and programs to improve public and other local government 
understanding of the Port and our role in the regional and local economy. 
Goal 3  Environmental Stewardship 
a.  Develop and ensure Port-wide implementation of an environmental scorecard that measures
the Port's environmental footprint and that will serve to guide and monitor reduction efforts 
in all Port operating and non-operating divisions. 
b.  By November 1, 2016, assess potential opportunities for increasing the use of renewable
energy and reducing greenhouse gas emissions at Port owned facilities and report findings
and recommendations to the Commission for consideration. 
Financial Goal and Plan Funding 
In addition to the non-financial goals, the plan will have a financial goal. The financial goal will
be to achieve positive budget variances in total Port adjusted revenues (as defined below) and
reduce Port-wide expenses sufficient to fund at least the minimum level Incentive Pay Plan
payout. Using the 2016 approved budget and an estimated 2016 payroll for incentive eligible
employees, Port staff modeled the funding necessary to pay an Incentive Pay Plan award at 
minimum payout. This level payout is estimated to require a payout pool of $1.0 million and a re
an adjusted total positive variance of $2.0 million. Both the financial goal and at least two of
the non-financial goals must be met for any payout to be earned. 
Adjusted revenues are derived by subtracting Aeronautical revenues from Total Port revenues.
Aeronautical revenues are excluded because they are determined on a 'cost recovery' basis. In
other words, the revenues are set to fully recover Aeronautical costs so as costs increase or
decrease so do the associated revenues.  Actual adjusted revenues less budgeted adjusted
revenues yields the adjusted revenue variance. 
Total actual Port expenses are then compared to total budgeted Port expenses. The difference is
the total expense variance which is added to the adjusted revenue variance to determine the
adjusted total budget variance. Half the total variance is retained by the Port and the other half
funds the incentive payout pool. When the payout pool is sufficient to pay the minimum, or
threshold, incentive plan award the financial goal is met. As the payout pool grows larger
additional award levels may be achieved as described more fully below. 
The financial goal formula is illustrated below. 
2016 Budget    2016 Actual*    Variance 
Total Revenue                $584.5m 
Less Aeronautical Revenue       $257.4 m 
Equals Adjusted Revenue         $327.1m       $337.3 m       $10.2 m 
Total Port Expense             $336.1m       $324.7m      + 11.4 m 
Total Variance                                         = $21.6m 
Half Funds the Payout Pool                                $10.8m 
*Note  2016 Actuals are for illustrative purposes only

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 5 of 9 
There are a small number of expenditure categories that may be excluded from the Incentive Pay 
Plan variance calculations. These include unpredictable and non-controllable expenses such as
reserves established for lawsuits and environmental remediation, non-cash expensing of prior
year costs that had been capitalized when projects are cancelled, and major variances due to
accounting rule changes. Also included in this small group of exclusions are significant cost
savings due to major budgeted initiatives being cancelled or deferred. To provide transparency
items subject to exclusion will be identified and noted during the annual budget development
process.  For 2016 these items will be identified and communicated when the plan is
implemented. 

Determining Individual Incentive Pay Plan Payouts 
When the Incentive Pay Plan has been funded the payout pool needs to be distributed to
employees. The plan is designed to have individual payout levels based on the size of the payout
pool. The minimum, or threshold, funding level is the amount necessary to pay an earned award
of 1% of employees' eligible earnings for employees receiving a Strong performance rating. The
maximum, level 5, funding level is the amount necessary to pay an earned award of 10% of
employees' eligible earnings for employees receiving a Strong performance rating. Regardless
of funding level, employees' performance review ratings will inform the award each employee
will receive. There are 3 additional funding levels between the minimum and maximum funding
levels. 
In addition, individual payouts will be determined for two groups, members of the Executive
Leadership Team (ELT) and other eligible non-represented employees. The payout will first be
set at the minimum step for employees. If there is sufficient funding in the payout pool to pay
employees at Step 1 the payout step will increase. If there is still sufficient funding in the payout
pool to pay members of the ELT at Step 1, that step will fund. If funds remain in the payout pool
sufficient to pay employees at step 2 funding will increases, and if funds still remain ELT will
receive Step 2 payouts. This pattern will continue until either insufficient funds remain in the
payout pool to fund the next step or the maximum payout for all eligible employees is reached. 
The following table illustrates how performance review ratings impact individual awards as well
as what the awards would be at the minimum and maximum funding levels.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 6 of 9 

Guided                                     Maximum,
Performance          Payout Minimum
Rating                 Step 1   Step 2   Step 3   Step 4   Level 5,
Rating               Factor   Payout 
Distribution                                                 Payout 
no    no     no    no    no    no
Unsatisfactory     0%                                               no payout 
payout   payout   payout   payout   payout   payout 
1 X
Contributing    0% -- 5%           0.5%     1%     2%     3%     4%      5% 
Payout 
2 X
Strong     65% -- 70%          1.0%     2%     4%     6%     8%     10% 
Payout 
Highly               3 X
15% -- 20%         1.5%     3%     6%     9%    12%     15% 
Effective               Payout 
4 X
Exceptional    5% -- 10%          2.0%     4%     8%     12%    16%     20% 
Payout 
With the guided rating distribution included with PerformanceLink, the performance goal setting
and review process, most employees are expected to earn a Strong performance rating. The
performance rating distribution will be reviewed across the organization before it is finalized.
The actual rating distribution vs. the guided distribution will be reported to the Commission,
along with the Port's financial results, estimated Incentive Pay Plan awards before any incentive
pay plan awards will be paid. 
Implementation 
Port staff is recommending June 1, 2016 as the implementation date for the Incentive Pay Plan.
This will require adjusting 2016 year-end financial results to reflect the partial year the plan will
be in effect. With the recommended June 1, 2016 implementation date 7/12 of the total year-end
results will be eligible to determine payout pool.  The following table illustrates how the 2016
pro-rating will work, using a $21.6M adjusted total positive variance as an example. The actual
adjusted total positive variance over the past 5 years has ranged from $14.0M to $31.0M so the
example below is possible, but in the upper range of possibilities. 
Possible 2016 year-end adjusted total positive variance   $21.6 M 
7/12 pro-rating applied to actual 2016 results          ~58% 
Variance eligible for Incentive Pay Plan calculations      $12.6M 
50% to the payout pool                       $6.3M 
Estimated Incentive Pay Plan Funding Step            2.1 
0% to 8% for employees 
Estimated Incentive Pay Plan Payouts 
and executives 
2016 Payout Pool Cap 
In addition to pro-rating the adjusted total positive variance to reflect the partial year that the
Incentive Pay Plan will be in effect for 2016, the payout pool will be capped at $5.0 million for
the 2016 plan year. Port staff is estimating the $5.0 million cap will fund at step 2.1 or 4% for
employees earning a Strong performance rating and a range of 0% to 8%.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 7 of 9 

ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Support employee attraction and retention by increasing base pay ranges and
actual employee pay levels.
Cost Implications: This alternative would add to fixed payroll cost rather than rewarding
employees when the Port's financial performance produces sufficient funding to pay the rewards. 
Pros: 
(1)  This option will address the gap in total pay between the Port's pay program and
programs of other, particularly private sector, employers that include a an incentive
pay plan. 
(2)  Increasing base pay ranges and rates will help the Port attract and retain skilled and
knowledgeable employees with the talents necessary to accomplish the Century
Agenda and achieve other Port of Seattle goals. 
(3)  Port staff conducted a survey in late January asking employees what form of award
they would most prefer for contributing to the Port meeting or exceeding both
financial and non-financial goals. Some employees indicated a preference for base
pay increases over lump sum cash payments. 
Cons: 
(1)  Increasing base pay will also lead to increased benefits costs for benefits related to
pay.  Life insurance, disability insurance, Social Security taxes and PERS
contributions are all benefits where Port costs are a percentage of pay. 
(2)  Increasing base pay will add to the Port's fixed costs whereas an incentive pay plan
that is self-funding and rewards results by paying awards only when financial and
non-financial goals are met will not. 
This is not the recommended alternative. 

Alternative 2  Move forward with the plan to implement the Incentive Pay Plan but postpone
implementation to January 1, 2017. 
Cost Implications: This alternative will have no financial impact for 2016 and will fund incentive
awards in future years from positive variances against the Port budget. 
Pros: 
(1)  Postponing implementation of the Incentive Pay Plan would provide more time to
educate employees about the plan, prepare ongoing communication plan, and
establish the administrative systems and processes that will assist Port staff in
administering the plan.  While additional time to accomplish a task is always
appreciated, it is not needed or even particularly beneficial in this case.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 8 of 9 

(2)  Implementing at the beginning of the year would eliminate the need to pro-rate the
Port's financial performance thus simplifying the first year's plan administration
somewhat. 
Cons: 
(1)  Postponing implementation to 2017 could result in loss of employee engagement
and confidence in the Incentive Pay Plan. Employees expressed excitement and
interest in the plan through the Employee Feedback mail box last fall, attendance at
the information sessions in January and participation in the 'form of award' survey
in late January. Efforts already undertaken will need to be increased, and likely
repeated, late in 2016 if the plan is not implemented until 2017. 
(2)  The Port will continue to have a pay program that is not as competitive with private
sector employers as it could be. Letting prospective employees know that we plan
to implement an Incentive Pay Plan will not have the same immediate positive
impact on recruiting and retention that being able to communicate an approved and
ready to implement plan will. 
This is not the recommended alternative. 
Alternative 3  Adopt the Incentive Pay Plan with a June 1, 2016 effective date by approving an
amended 2016 Salary and Benefits Resolution authorizing the plan. 
Cost Implications: Costs associated with this alternative will be funded with total positive
variances against the Port budget. 
Pros: 
(1)  Implementing the Incentive Pay Plan June 1, 2016 will permit the Port to
communicate the plan, how it will be funded and how pay outs can be earned
immediately. This will increase the value of the Port's Total Rewards Package for
both current and prospective employees. 
(2)  Implementing the plan now,  following the communication and outreach to
employees that has taken place over the past several months will permit the Port to
build on the excitement and engagement around the plan and increase the likelihood
of achieving all the 2016 goals of the plan. 
(3)  Implementing the plan now will help immediately focus employees on the financial
and non-financial goals in a new way. 
This is the recommended alternative.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
May 13, 2016 
Page 9 of 9 
ATTACHMENTS TO THIS REQUEST 
Draft Resolution No. 3720 amending Resolution No. 3712, 2016 Salary and Benefits
Resolution. 
Computer slide presentation 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
April 12, 2016  The Commission received a briefing on a proposed Incentive Pay Plan
for 2016. 
December 8, 2015  The Commission adopted Resolution No. 3712, the 2016 Salary
and Benefits Resolution, as amended to include a section for one-time special pay. 
November 24, 2015  Resolution No. 3712 was laid on the table prior to obtaining
Second Reading. 
November 10, 2015  The Commission passed Resolution No. 3712, the 2016 Salary
and Benefit Resolution, on First Reading.