7d supp
ITEM NO. 7d_Supp ________ DATE OF MEETING: August 20, 2013 Sea-Tac Airport 2014 2018 Business Plan August 20, 2013 Contents State of Airline Industry State of Sea-Tac Airport Preliminary Forecast Capital Plans Strategies and Objectives 2014 Budget Opportunities 2 Airline Industry Key trends continue: ' Consolidation American & US Airways ' Managing capacity (seats) to meet demand; high load factors ' Disciplined growth, focus on profit not growth for sake of growth ' Growth largely focused on hubs, airports with international connections Small airport impact US airlines profitable 2010 2012 All major airlines reported strong 2013 results as of Q2. 3 State of Sea-Tac Airport Strong fundamentals in 2013: 'Enplanement growth of 4.4% YTD through June (2.6% after adjusting for non-revenue passengers not reported in 2012) International +10.1% Domestic +3.8% 'Air freight (tons): +4.0% YTD 'Landed weight: +2.5% YTD 4 Key Indicators 2008-2013 Enplanements Market share of AAG Capital Spending Debt and Debt/Enplaned Passenger Non-airline revenues and NOI Cash flow - NOI after debt service and interest income CPE Delay trends at Sea-Tac All-in CPE 5 Enplanement Growth Enplanements (in millions) 17.50 17.00 16.50 16.00 15.50 15.00 14.50 2008 2009 2010 2011 2012 2013 Fcst 6 Growing AAG Market Share 2008 Passengers 2013 June YTD Passengers 17% AAG 17% Delta AAG 10% 48% United Delta 8% 12% Southwest United 10% 54% Other Southwest 13% 11% Other 7 Capital Spending 2008 2013 $ in millions $250 $200 $150 $100 $50 $0 2008 2009 2010 2011 2012 2013 Fcst Other CIPs Rental Car Facility Spending picking up after declines in recent years 8 Debt Level Declining Debt Outstanding $ in millions $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 2008 2009 2010 2011 2012 2013 Fcst 9 Debt Per Enplaned Passenger Declining More Debt/Enplaned Passenger $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 2008 2009 2010 2011 2012 2013 Fcst 10 Non-Airline Revenues Recovering Non-Aero Revenue per Enplanement $10.00 $9.50 9.36 9.22 9.08 $9.00 8.80 8.72 8.59 $8.50 $8.00 $7.50 $7.00 $6.50 $6.00 2008 2009 2010 2011 2012 2013 Fcst 11 Non-Aero NOI Non-Aero NOI ($ in millions) $88.0 86.47 $86.0 84.17 $84.0 $82.0 81.16 79.79 $80.0 78.20 $78.0 $76.0 74.94 $74.0 $72.0 $70.0 $68.0 2008 2009 2010 2011 2012 2013 Fcst SLOA III shifts more terminal costs to Non-aeronautical side (20% to 23%) 12 Net Cash Flow Impacted by SLOA NOI after Debt Service & Interest Income ($ in millions) $60 $50 $40 $30 $20 $10 $0 2008 2009 2010 2011 2012 2013 Fcst SLOA III reduces airline costs, reduces Airport cash flow: shifts terminal costs to Non-aero, vacancy cost, revenue sharing 13 CPE $14.00 Cost Per Enplanement (CPE) 13.60 $13.00 13.23 $12.00 11.79 11.89 11.73 11.75 11.63 $11.00 11.10 10.92 $10.00 $9.00 $8.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 Fcst Cost Per Enplanement (CPE) Realignment drove up costs in 2012 ($.35) and 2013 ($.83) 14 Sea-Tac On-time Performance On-time performance increased after construction of 3rd runway in 2008 ($1 billion) and completion of reconstruction of 16L/34R ($60 million) in 2009. New runway added capital and operating costs to airline rate base, but airlines realize tangible financial benefits by reduced delay costs 15 Alaska On-Time Performance at SEA 16 CPE Comparisons (2011) 17 All-In CPE Comparisons (2011) 18 Economics of SLOA III Hybrid compensatory rate structure: ' Airline rates set to recover costs ' SEA assumes vacancy cost for some airline space ' Revised space/cost allocations: SEA pays for greater share of terminal costs ' SEA Retains debt service coverage trigger @1.25x ' Revenue Sharing: 50% of cash flow > 1.25x debt service ' Airfield Commercial Area is compensatory (cargo assets and investments are not in airline rate base) 19 Outlook Forecasting enplanement growth of 2.2% per year through 2018. Master Plan will refine forecast Passenger growth puts pressure on facilities: ' Baggage system ' Drives ' Gates Capital needs will grow, need to generate more non-airline revenue to mitigate growth in debt levels and CPE 20 Capital Plans Three major projects: ' NorthStar: $300 million ' International Arrivals Facility: $300 million ' Baggage System Optimization: $300 million Ongoing needs for renewal & replacement: ' South Satellite ' Runway 16C ' Service tunnel New projects: ' To implement business plan strategies ' New noise program after Part 150 approved Existing capital budget includes "allowances" so adding projects doesn't necessarily mean increased budget 21 Preliminary Capital Budget Total Figures in $ millions 2013 2014 2015 2016 2017 2018 2014-18 Committed Projects: Authorized 144 202 136 269 121 130 858 Other Projects 1 2 2 1 3 - 8 Subtotal 145 204 138 270 124 130 866 Bus. Plan Prospective: Specific projects 7 35 46 121 21 3 226 Allowance CIPs 10 35 58 80 120 303 Subtotal 7 45 81 179 101 123 529 Total 152 249 219 449 225 253 1,395 Includes: NorthSTAR and International Arrivals Facility Does not include: ' Baggage Optimization ' Business Plan driven new projects ' New Noise projects from Part 150 22 Preliminary Financial Forecast 2013 2014 2015 2016 2017 2018 NOI 165,910 172,685 194,831 212,482 232,813 230,654 Debt Service Coverage 1.34 1.31 1.29 1.25 1.25 1.26 CPE 13.60 13.35 14.35 15.22 16.04 15.78 Enplanement Growth 4.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2013 reflects Q2 forecast (Resolution), CPE likely lower due to crediting of Security Fund balance and revenue sharing in SLOA III Forecast does not include: ' 2014 operating budget decisions ' 2014 capital budget decisions and cash flow updates ' Updates to non-airline revenue forecast ' Potential changes in Corporate allocations 23 Summary/Implications Summary: ' SEA is positioned for continued passenger growth ' Capital needs are growing ' Debt level declining for now ' CPE will increase, all-in airport cost appears competitive Implications: ' Increasing Non-aero NOI is key to: Increasing debt service coverage (cash flow) Reducing required debt for capital plan Reducing airline costs (CPE) ' Ongoing need to manage cost growth Airport is growing, driving costs up Impact of shifting Port allocations to Airport 24 Strategies and Objectives For each of the Airport's strategies, we list major objectives for 2014 - 2018 and key actions and milestones Links to Century Agenda are marked as (CA) 25 Strategies and Objectives Strategy 1.1: Operate a world class airport by ensuring safe and secure operations: ' Improve overall airfield safety by improving "score" on runway incursions, wildlife strikes, nonmovement area surface incidents and Part 139 discrepancy corrections. ' Maintain compliance with TSA regulations and annual comprehensive TSA audit at 100% through 2018 26 Strategies and Objectives Strategy 1.2: Operate a world class airport by anticipating and meeting needs of tenants, passengers, region's economy: ' Commission new International Arrivals Facility by 12/31/2018 (CA) Actions/Milestones: Program Management team established Q1/2014. Planning/Project definition and bridging documents complete Q2/2014 Design Initiated Q2/2014. Design/Build team established Q1/2015. Environmental review completed 2015. Construction begins Q4/2015 27 Strategies and Objectives Strategy 1.2 cont.): ' Accommodate growth in international operations until new IAF is completed - Achieve annual reduction in hold on board incidents (CA) Actions/Milestones: Short-Term FIS improvements completed Q2/2014. Centralized management of FIS operations Q2/2014. Addition of fourth Global Entry Kiosk Q1/2014. Installation of 11 Automated Passenger Control kiosks Q1/2014. Hardstand Arrivals project completed Q2/2015. Twelfth and Thirteenth SSAT international gates Q4/2015. Elevators SSM, SSN completed Q2/2015. 28 Strategies and Objectives Strategy 1.2 (Cont.) ' Increase Air Cargo tonnage by 20% to a total of 350,000 in 2018 (CA) Actions/Milestones: Attract one new int'l air cargo customer in 2014 Additional increase in belly capacity in 2014 Air Cargo/Freight Forwarding RFP Q4 2015 29 Strategies and Objectives Strategy 1.2 (Cont.) ' Complete Terminal Development Strategy initiatives by 2018(CA) Actions/Milestones: Zone 1 Self Bag Drop Q2/2014. Zone 7 Self Bag Drop Q4/2015. Checkpoint 5 expansion Q4/2015. Pod 3 Zone 3 ticketing completed Q4/2015. NorthSTAR completed Q4/2018. 100% direct transfer of Cruise baggage ship to plane to ship Q4/2018. 30 Strategies and Objectives Strategy 1.3: Operate a world class airport by managing airport assets to minimize long-term total cost of ownership: ' Implement a comprehensive system to minimize life cycle costs by 2018. Create an integrated computer system(s) to: Improve accuracy of renewal capital projects to 80% Reduce the rate of growth of recurring division-wide annual O&M cost/sf. as measured against prior 5 year periods 31 Strategies and Objectives Strategy 2.0: Become one of the top customer service airports in the world: ' Achieve Top 5 ranking among selected North American peers in 2018 ACI ASQ. Actions/Milestones: Introduction of EID Trusted Traveler Program Q1/2014. Provide additional gate seating in Q2/2014. Increased performance standards for restroom cleanliness in new janitorial contract effective FEB 1, 2014. 32 Strategies and Objectives Strategy 3.0: Lead the US airport industry in environmental innovation, and minimize the airport's environmental impacts ' Reduce greenhouse gases by 15% below 2005 by 2020(CA) Be first large hub airport in the US, to fuel all airport-owned natural gas vehicles with renewable natural gas (RNG) from a regional dairy farm. ' Work with business partners to promote clean vehicles Finalize installation of PC Air and eGSE in 2014, achieve an annual reduction of 50,000 tons of greenhouse gases from both airplanes and ground support. ' Increase solid waste recycling rate to 50% by 2014 Be one of the first large hub airports in the nation to require concessioners to use compostable service ware for all food served in the terminal. 33 Strategies and Objectives Strategy 3.0 (cont.) ' Be the first large hub airport to fully integrate environmental sustainability goals and objectives into airport planning by developing the first Sustainable Airport Master Plan by 2015 (CA). Actions/Milestones: Complete airport-wide inventory, forecast, and facility requirements for economically wise sustainability metrics such as energy, water, greenhouse gases, solid waste diversion, and wildlife by Q2 2014 34 Strategies and Objectives Strategy 4.0: Reduce airline costs (CPE) as far as possible without compromising operational and capital needs ' Maintain CPE plus airline operating/delay costs within bottom third of peer airports through 2018 ' Limit O&M costs growth to CAGR of 2.8% from 2012 through 2018 Actions/Milestones Create organizational capacity through CPI projects (see Strategy #6 below) Energy conservation (see next slide) Benchmark performance (ACI airport survey), target areas for improvement 35 Strategies and Objectives Strategy 4.0 (cont.): ' Meet all future electrical load growth through conservation and renewable energy sources (CA). Actions/Milestones Install metering on concourses C & D for energy baseline by 2014 Install high level metering elsewhere in terminal by 2016 Complete terminal/central-plant mechanical conservation project by 2015 Complete garage electrical project by 2015 Develop electrical load growth forecasting tool via Masterplan in 2016 36 Strategies and Objectives Strategy 5.0: Maximize non-aeronautical net operating income (NOI) consistent with current contracts, appropriate use of airport properties, and market demand ' Grow non-aeronautical revenues at 4.5% compound annual growth rate through 2018 Actions/Milestones: Implement Public Parking pre-booking system by 12/2014 Implement comprehensive plan for all ground transportation services by end of 2014. 37 Strategies and Objectives Strategy 5.0 (cont.): Actions/Milestones (cont.): Re-lease the expiring food/beverage and retail concession units in the airport (80% by 2018) ' Master plan completed by Q2 2014 Lease 112 acres of vacant property by 2018 (including 75 acres of Des Moines Creek Business Park. Sell vacant property where appropriate ' Development options for NERA 1 and 2 finalized by Q3 2014 ' Finalize ground lease with developer for NERA 3 by Q2 2014 ' Entitlements completed for Des Moines Creek Bus. Park by 12/2014 ' Lora Lake Apartments site fully remediated and available for develoment as part of NERA by 2016 Develop a hotel on airport property Implement an integrated system of personalized services to improve travel experience by 2015 38 Strategies and Objectives Strategy 6.0: Strategy #6.0: Continually invest in a culture of employee development, organizational improvement, and business agility ' Grow Continuous Process Improvement (CPI) across the Port Increase number of process improvements by 20% per year Save $1.2 million in employee capacity by 2018 ' Realize mature business intelligence and performance measurement capacity 25% of employees regularly use BI-Hub (Tableau Server) 39 Strategies and Objectives Strategy 6.0 (cont.): ' Enhance employee familiarization: Implement an effective familiarization process for new and transitioning employees and managers to the Aviation Division by Q2 2014 ' Implement new hiring process to achieve reduction of 25% in airport caused employment delays by Q4 2014 ' Implement a targeted employee development program by Q3 2014 Allow rotational orientation training across several departments 40 Strategies and Objectives Strategy 7.0: Maintain valued community partnerships based on mutual understanding and socially responsible practices ' Continue to manage and renegotiate agreements with City of SeaTac (new ILA by 2016) Action/Milestones SWM fee issues resolved by Q2 2014 ' Expand sound insulation programs to reflect new noise remedy boundary Action/Milestones FAA record of Approval by Q2 2014 Commission approves new programs by Q3 2014, begin implementation in 2015/2016 Old noise projects completed by Q1 2016 41 2014 Budget Opportunities Revenue enhancement opportunities: 'Parking 'Ground Transportation 'Concessions 'Property development Expense control opportunities: 'Asset management system 'Continuous Process Improvement 'Energy conservation/renewable resources 42 Seaport Division 2014 Business Plan Overview Commission Presentation - August 20, 2013 Century Agenda - Connections Over the next 25 years, the Seaport will add jobs through economic growth while reducing our environmental footprint. In order to achieve this goal we will accomplish the following: Position Puget Sound region as a premier logistics hub: Grow container volume to 3.5 million TEUs* Structure relationship with WA ports to optimize infrastructure investments and financial returns Triple the value of outbound sea cargo Double the economic value of fishing & maritime clusters Advance the region as a leading tourism destination: Double the economic value of cruise traffic to WA state *TEU: One TEU represents the cargo capacity of a 20-foot intermodal container 44 44 Century Agenda - Connections Use our influence as an institution to promote small business growth and workforce development. Be the greenest, most energy efficient port in N America: Meet all increased energy needs through conservation and renewable sources Meet or exceed agency requirements for stormwater1 Reduce air pollutants and carbon emissions; specifically: Reduce air pollutant emissions by 50%2 Reduce carbon emissions from all port operations 50%2 Anchor Puget Sound urban-industrial land use Restore, create and enhance 40 additional acres of habitat in the Green/Duwamish River watershed and Elliott Bay 1 - leaving port owned or operated facilities 2 - compared to 2005 levels 45 45 Terminal 91 Pier 86 Pier 66 Terminal 46 T-18 On-Dock Rail BNSF (SIG - North) Terminal 30 T-5 On-Dock Rail Terminal 18 BNSF (SIG - South) Terminal 25 S Terminal 5 UPRR (ARGO) Seaport Strategies The Seaport strategies, business plan, capital and budget plans are aligned with our Proposed Century Agenda goals. Our Commercial Strategy is aligned with Positioning Puget Sound region as a premier logistics hub and Advance the region as a leading tourism destination all our lines of business will support this goal; including: Containers Industrial Properties Cruise Fishing & Other Maritime Grain (Commercial Moorage) 47 Seaport Strategies The Seaport strategies, business plan, capital and budget plans are aligned with our Proposed Century Agenda goals. In addition, our Asset Stewardship and Green Gateway Strategies are aligned with Using our influence as an institution to promote small business growth and workforce development and Be the greenest, most energy efficient port in N America including programs focused on: Freight mobility & land use Air quality improvements Asset stewardship Energy stewardship Dredging Stormwater mgmt Small bus./workforce dev. Habitat restoration 48 Commercial Business Strategy Business Development Financial Sustainability Port Advocacy Growing the Seaport's Business Maintaining Financial Independence Building public & community support Strategic Goal Strategic Goal Strategic Goal Enhance regional economic Improve the Seaport's income Maintain and support development by increasing cargo from operations relationships that cultivate freight & passengers moving overall Port goals for freight through the Port's Terminals movement and economic development in Washington Guiding Principles Guiding Principles Guiding Principles Retain existing customers Prioritize projects that generate Maintain a business-friendly Develop & maintain relationships sustainable rates of return environment with strategic partners Maximize asset utilization to Ensure efficient freight mobility Capitalize on opportunities to increase returns on investments within the Harbor and on-ward secure new business Maintain market lease rates to inland destinations Maintain freight and passenger Maximize efficiency of dollars Reinforce the Seaport's mobility spent and resources used economic and environmental benefit story Overarching Objective Overarching Objective Increase container volume and Maintain the Seaport's financial Overarching Objective cruise activity to meet Century independence Manage/maintain advocacy for Agenda 5 & 25 year objectives Port issues with Stakeholders 49 Asset Stewardship Strategy Condition Assessment Asset Maintenance Capacity Growth Understand Existing Assets Maintain Existing Assets Invest in New Assets When Warranted Strategic Goal Strategic Goal Strategic Goal Assess and document existing Reduce total cost of ownership of Align asset investments to condition of major assets seaport assets support long term market demand Guiding Principles Guiding Principles Guiding Principles Maintain complete asset register Manage assets in a financially Enhance existing assets to Perform condition assessments sustainable manner support long term growth Align asset maintenance with Invest in new assets to support long term strategies commercial strategy Overarching Objective Overarching Objective Overarching Objective Steward assets to retain Maintain a condition assessment Prioritize and execute asset program that sustains or extends maintenance program that existing business and support the life of our assets sustains our assets future growth 50 Green Gateway Strategy Compliance Management Commercial Support Community Commitment Programs we have to do Programs that help support Initiatives that reflect our commitment our business advantage Strategic Goal Strategic Goal Strategic Goal Meet local, state and federal Engage stakeholders to build Collaborate with industry to regulations as effectively as reduce impacts while enhancing understanding and support for possible our competitive advantage environmental initiatives Guiding Principles Guiding Principles Guiding Principles Meet legal obligations Develop environmental initiatives Communicate that the Port is an Use scientific knowledge and to enhance the Port's economic environmental leader and vital programmatic approaches to use competitiveness economic engine. resources most efficiently Maintain collaborative approach to Inform and collaborate with Partner with internal/external environmental problem solving community stakeholders to support economic and stakeholders for effective environmental sustainability environmental management Overarching Objective Overarching Objective Overarching Objective Inform and engage stakeholders Minimize the % of environmental Implement programs that reduce resource use, emissions and the to aid in understanding and budget spent on compliance to support of the Port's focus on maximize resources available for Port's carbon footprint, while increasing our competitive balancing economic and other environmental strategies advantage environmental sustainability 51 Seaport Lines of Business COMMERCIAL BUSINESS Financial Overview Revenue By Business Group - $'s in thousands 120,000 Security/Other Maritime Operations 103,941 100,777 Cruise 2,260 173 100,000 4,750 Industrial Properties 4,357 Grain 13,051 12,881 Containers 80,000 15,279 15,878 3,749 3,654 60,000 40,000 64,853 63,833 20,000 0 2012 Actual 2013 Revised Budget 53 Financial Overview Net Operating Income By Business Group - $'s in thousands 70,000 Security/Other Maritime Operations 59,241 Cruise 60,000 54,630 Industrial Properties 7,040 Grain 6,786 50,000 6,290 Containers 6,801 2,473 2,232 40,000 30,000 44,613 20,000 41,550 10,000 0 (340) (961) (835) (1,778) 2012 Actual 2013 Revised Budget (10,000) 54 2014 Seaport Outlook: Container Market Outlook: Transpacific to North America volume projected at 3.7% growth for 2014, but PNW rate may likely be 0-2% Cost disadvantages over Puget Sound continue to affect cargo routing and vessel deployment decisions Revenue Assumption: Seattle Harbor volume forecast of 1.66M TEUs* Container lease revenue will be determined by minimum annual guarantee (MAG) Major Work: Enhance Big Ship capabilities through capital projects: channel & berth deepening, Asset Stewardship Program *TEU: One TEU represents the cargo capacity of a 20-foot intermodal container 55 2014 Seaport Outlook: Container Major Work (continued) Terminal 46 new lease related improvements Assess storm water infrastructure needs Joint market FTZ, Green Gateway, air cargo programs Advocate/facilitate terminal access & freight mobility Assess container business model to assure sustainability Secure new cargo through strategic initiatives: transload, equipment matching, export promotion 56 2014 Seaport Outlook Cruise Market Outlook: 3.5% 5% growth projected in global cruise industry Larger cruise ships being introduced in the market Alaska Cruise products yield high returns and customer satisfaction Alaska ports receive approx 65% of all port-of-call cruise visits at U.S. ports Revenue Assumptions: 176 vessel calls scheduled for 2014 800,000 revenue passengers Major Work Continue to market shorter PNW itineraries from Seattle Concentrate on getting a Friday and/or Monday homeport at P66. Work closely with POS Tourism, Visit Seattle (formally SCVB), and our Cruise Line customers Complete P66 Pile Wrapping project 57 2014 Seaport Outlook Grain Export Market Outlook: Export corn/soybean market forecast is uncertain Revenue Assumptions: Grain volume estimate 2.2 million metric tons Estimate will be refined when more information available in late August Major Work: Continue discussions/implement lease extension 58 2014 Outlook - Industrial Properties Market Outlook: Occupancy expected to increase slightly Market conditions seem to be improving Revenue Assumptions: Revenue forecast to increase by 3% - 4% Major Work: Investigate new approaches to increasing revenue 59 2014 Outlook: Maritime Operations Market Outlook: Commercial Fishing in Alaska strong and stable Global demand for US Fish Products increasing Factory trawler moorage demand consistently strong Revenue Assumptions: Facility use fees at market rates New revenue from Kellogg Island moorage agreements Major Work: Increase commercial moorage business harbor wide Seek additional business through third party maritime activity Promote utilization of upland services for maritime activity Yard space, Secure Storage and Equipment Rental 60 2014 Outlook: Emergency Preparedness & Maritime Security Emergency Preparedness (EP): Conduct EP Program training and exercising Annual Review of departmental COOP* plans Seaport Security: Security awareness training and exercising Perform security risk assessments and improvements Seek grant opportunities for Security Improvements * Continuity Of Operations Plan 61 Seaport Asset Stewardship PROJECTS & CAPITAL BUDGET Terminal 5 Net Operating Income Snapshot 2013 $'s Thousands Rvsd Budget Terminal 5 - 158 Acres Revenue 22,739 Expenses Project CIP STATUS 2014 2014-2018 2019-2023 TOTAL Direct Expenses 2,213 T5 Street Vacation Completion Commission Authorized $ 300 $ 300 $ - $ 300 Container Management* 1,239 T5 Upgrade 600' Exist. Docks Pending Future Authorization $ - $ 1,000 $ 72,000 $ 73,000 Divisional Allocations* 1,319 T5 Dock Rehabilitation Pending Future Authorization $ - $ 7,800 $ - $ 7,800 Corporate Allocations* 2,813 T5 Maintenance Dredging EXPENSE $ 2,900 $ 3,400 $ 3,500 $ 6,900 Total Expenses 7,584 TOTAL $ 3,200 $ 12,500 $ 75,500 $ 88,000 Net Operating Income 15,155 Note - Excludes Prospective Items Note*- Pro-rata share based on total acres Terminal 18 Net Operating Income Snapshot 2013 $'s Thousands Rvsd Budget Terminal 18 - 194 Acres Revenue 23,952 Project CIP STATUS 2014 2014-2018 2019-2023 TOTAL Expenses Direct Expenses 1,303 T18 Street Vacation Completion Commission Authorized $ 1,210 $ 1,210 $ - $ 1,210 Container Management* 1,521 T18 Dock Rehabilitation Pending Future Authorization $ 1,600 $ 17,600 $ - $ 17,600 Remove IHI Cranes T18 EXPENSE $ 1,300 $ 1,300 $ - $ 1,300 Divisional Allocations* 1,620 T18 Paint MHI Cranes EXPENSE $ - $ 2,200 $ - $ 2,200 Corporate Allocations* 3,454 T18 Maintenance Dredging EXPENSE $ 500 $ 1,337 $ 2,800 $ 4,137 Total Expenses 7,898 TOTAL $ 4,610 $ 23,647 $ 2,800 $ 26,447 Net Operating Income 16,055 64 Note - Excludes Prospective Items Note*- Pro-rata share based on total acres Terminal 30 Net Operating Income Snapshot 2013 $'s Thousands Rvsd Budget Terminal 30 - 70 Acres Revenue 7,625 Expenses Project CIP STATUS 2014 2014-2018 2019-2023 TOTAL Direct Expenses 592 T30 Alaskan Way Street Vacation Commission Authorized $ - $ 5,500 $ - $ 5,500 Container Management* 549 T30 Dock Rehabilitation Pending Future Authorization $ - $ 1,000 $ 9,000 $ 10,000 Divisional Allocations* 584 T25 Dock Rehabilitation Pending Future Authorization $ - $ - $ 2,900 $ 2,900 Corporate Allocations* 1,246 T25 Maintenance Dredging EXPENSE $ - $ 1,200 $ - $ 1,200 Total Expenses 2,971 T30 Maintenance Dredging EXPENSE $ - $ 1,700 $ 2,300 $ 4,000 TOTAL $ - $ 9,400 $ 14,200 $ 23,600 Net Operating Income 4,654 Note - Excludes Prospective Items Note*- Pro-rata share based on total acres Terminal 46 Net Operating Income Snapshot 2013 $'s Thousands Rvsd Budget Terminal 46 - 88 Acres Project CIP STATUS 2014 2014-2018 2019-2023 TOTAL Revenue 9,410 T46 Development Commission Authorized $ 12,450 $ 34,500 $ - $ 34,500 Expenses T46 Dock Rehabilitation Commission Authorized $ 1,347 $ 23,347 $ - $ 23,347 Direct Expenses 732 T46 Public Access Mitigation at T117 Commission Authorized $ 1,600 $ 3,382 $ - $ 3,382 Container Management* 690 T46 Viaduct Driven Capital Work Pending 2014 Authorization $ 100 $ 300 $ - $ 300 Divisional Allocations* 735 T46 Replace South Pier Pending Future Authorization $ - $ 10,400 $ - $ 10,400 Corporate Allocations* 1,567 Crane 54 Demolition EXPENSE $ - $ 470 $ - $ 470 Total Expenses 3,724 TOTAL $ 15,497 $ 72,399 $ - $ 72,399 Net Operating Income 5,687 Note - Excludes Prospective Items Note*- Pro-rata share based on total acres Pier 66 Net Operating Income Snapshot 2013 $'s Thousands Rvsd Budget Pier 66 Cruise Operations Revenue 2,866 Expenses Direct Expenses 684 Cruise Services Management* 147 Divisional Allocations* 221 Corporate Allocations* 653 Project CIP STATUS 2014 2014-2018 2019-2023 TOTAL Total Expenses 1,706 SEA P66 Apron Pile Wrap Commission Authorized $ 400 $ 400 $ - $ 400 TOTAL $ 400 $ 400 $ - $ 400 Net Operating Income 1,161 Note - Excludes Prospective Items Note*- Pro-rata share based on total revenue Terminal 91 Seaport Projects - Terminal 91 Project CIP STATUS 2014 2014-2018 2019-2023 TOTAL T30/91 Program Commission Authorized $ 70 $ 70 $ - $ 70 P90 C175 Roof Replacement Commission Authorized $ 2,261 $ 2,261 $ - $ 2,261 T91 Substation Upgrades Pending 2014 Authorization $ 1,150 $ 2,425 $ - $ 2,425 Second Gangway per Berth @ T91 Pending Future Authorization $ 1,000 $ 9,500 $ - $ 9,500 SCCT Freight Elevator Pending Future Authorization $ 100 $ 750 $ - $ 750 T91 Camel Replacements Pending Future Authorization $ - $ 1,255 $ - $ 1,255 T91 Berth 6 & 8 Redevelopment Pending Future Authorization $ 800 $ 24,900 $ - $ 24,900 P91 South End Fender Pending Future Authorization $ - $ 1,250 $ - $ 1,250 Resurface 1st floor Lobby SCCT EXPENSE $ 230 $ 230 $ - $ 230 Resurface 1st floor Baggage Hall SCCT EXPENSE $ - $ 640 $ - $ 640 T91 Cruise Maintenance Dredging EXPENSE $ 529 $ 529 $ - $ 529 TOTAL $ 6,140 $ 43,810 $ - $ 43,810 Note - Excludes Prospective Items 69 Seaport Projects - Other Project CIP STATUS 2014 2014-2018 2019-2023 TOTAL Cruise Cap Allow - CTA Lease Commission Authorized $ 200 $ 1,000 $ 250 $ 1,250 Cruise per Passenger Allowance Commission Authorized $ 73 $ 358 $ 48 $ 406 Argo Yard Roadway Element I Commission Authorized $ 1,594 $ 1,594 $ - $ 1,594 Seaport Green Port Initiative Pending 2014 Authorization $ 368 $ 368 $ - $ 368 Seaport Small Pojects Small Projects $ 1,070 $ 3,070 $ 2,500 $ 5,570 Fleet, Technology, Prelim Planning Small Projects $ 675 $ 3,162 $ 3,169 $ 6,331 West Waterway Deepening Pending Future Authorization $ - $ 1,425 $ 18,500 $ 19,925 East Waterway Deepening Pending Future Authorization $ - $ 1,425 $ 14,500 $ 15,925 Mega Berth (depth) Loc TBD Pending Future Authorization $ - $ 2,000 $ 21,000 $ 23,000 Seaport Security Rnd 13 Pending Future Authorization $ 778 $ 805 $ - $ 805 P34 Dolphns & Catwalk for Barges (4) Pending Future Authorization $ 2,120 $ 2,420 $ - $ 2,420 Contingency Renewal & Replace. Pending Future Authorization $ 5,000 $ 31,500 $ 61,430 $ 92,930 Argo Element III Gate * EXPENSE $ 1,775 $ 1,775 $ - $ 1,775 Dock System-Routine Condition Assess EXPENSE $ - $ 270 $ 700 $ 970 Berth Depth Soundings EXPENSE $ 70 $ 375 $ 380 $ 755 Yard & Building Condition Assess EXPENSE $ 100 $ 500 $ 500 $ 1,000 TOTAL $ 13,823 $ 52,047 $ 122,977 $ 175,024 Note - Excludes Prospective Items * FMSIB Grant 70 Seaport Project Plan 2014-2023 Draft as of 08/03/2013 $'s in 000's 2014 2014-2018 2019-2023 Total Commission Authorized 21,505 73,922 298 74,220 Pending 2014 Authorization 1,618 3,093 0 3,093 Pending Future Authorization 11,398 115,030 199,330 314,360 Small Projects 1,745 6,232 5,669 11,901 Total 36,266 198,277 205,297 403,574 Major Expense Projects 7,404 15,926 10,180 26,106 Total Projects 43,670 214,203 215,477 429,680 Other Prospective Capital Projects 0 369,700 383,430 753,130 71 2014 Seaport Financial Outlook Operating Revenue: Projected to be flat compared to 2013 Revised Budget: Increase in containers $1.2M Increase in industrial property, dock revenue $.5M Decrease in security grant revenue ($.2M) Decrease in grain revenue ($1.4M) Estimates will be refined in the 2014 budget process 72 2014 Seaport Financial Outlook Expense Trends and Risks: Costs related to maintenance dredging Unforeseen repair costs T18 (IHI) crane removal Storm water infrastructure investment NW Clean Air Strategy implementation Environmental Remediation Liability Expense Tribal fishing coordination program evolution 73 2013 Seaport Financial Outlook 2011 2012 2013 2013 2013 Bud Var $'s Thousands Actual Actual Forecast Rvsd Budget $ % Revenues Operating Revenues 98,910 101,715 97,147 100,603 (3,456) -3.4% Security Grants 394 2,226 0 173 (173) -100.0% Total Revenues 99,304 103,941 97,147 100,777 (3,629) -3.7% Expenses Seaport Expenses (excl env srvs) 12,899 13,684 14,771 14,971 200 1.3% Environmental Services 2,127 2,207 2,675 2,675 0 0.0% Maintenance Expenses 4,608 6,040 6,076 6,076 0 0.0% P69 Facilities Expenses 506 532 526 526 0 0.0% Other RE Expenses 180 233 353 353 0 0.0% CDD Expenses 3,539 4,244 3,475 3,475 0 0.0% Police Expenses 3,578 3,969 4,141 4,223 82 1.9% Corporate Expenses 11,177 11,538 12,391 12,678 287 2.3% Security Grant Expenses 481 2,227 0 0 0 NA Envir Remed Liability (633) 26 1,170 1,170 0 0.0% Operating Expenses 38,463 44,700 45,578 46,147 569 1.5% Net Operating Income 60,842 59,241 51,569 54,630 (3,060) -5.6% 74 2014 Seaport Business Plan Risks: Competitive threats U.S. economic recovery stalls or contracts Loss of business due to lower cost competitive ports Expanding alternative gateways (Panama and Suez Canals, Canada, So Cal) Legislation/regulation/inequities that impede port competitiveness (i.e. Harbor Maintenance Tax) Escalating land use pressures Other risks Escalating liability, project and overhead costs 75 2014 Seaport Business Plan Key Highlights: Business/Capital Plans align with Century Agenda/CEO goals Container and grain outlook remains uncertain Cruise, Fishing, Commercial Moorage outlook is positive Advance "Big Ship Ready" programs to retain/grow business Assess potential new lines of business and capitalize on revenue generation opportunities Build on "Green Gateway" & "Asset Stewardship" programs Expand on Export, Cruise/Tourism efforts and marketing Port of Seattle advantages Remain focused on optimization, cost containment & CPI 76 Real Estate Division 2014 Business Plan Overview Commission Presentation - August 20, 2013 Division Objectives Discretely analyze the portfolio and recommend long- term strategies Provide for Net Operating Income consistent with 2013 levels Maintain an aggressively defensive posture and withstand market pressures while waterfront infrastructure projects underway Position assets for long-term growth 78 Division Objectives Provide for amended real estate policies as necessary with regard to recommendations from Century Agenda planning Continue internship/apprenticeship/workforce development within Marine Maintenance ' 4 apprentices ' 12 interns ' 2 internal internships ' Represent the Port in 11 outside agencies Continue to execute CPI program 79 Real Estate 2014 Budget Preview Operating Revenues expected to decrease by approximately 5% relative to 2013 Budget Positive trailing indicators: ' Market conditions continue to tighten, albeit with aggressive owner contributions ' Real estate investment capital markets are thawing ' Development projects are underway (mostly residential) Exposures/risks: ' Conference & Event Centers impacted by increased competition and perceived traffic issues ' Eastside Rail Corridor proposed sales to City of Woodinville and Snohomish County ' Deferred maintenance costs re-emerge ' Tenant improvement allowances ' Competition for capital ' Significant increase in revenue bond debt service payments 2016-2019 ' Major infrastructure projects along the waterfront 80 Real Estate Division Financial Overview 2011 2012 2013 2013 2013 Rvsd Bud Var $'s Thousands Actual Actual Forecast Rvsd Budget $ % Revenues Revenue 22,051 22,445 22,819 22,776 43 0.2% Conference & Event Ctr Revenue 9,518 8,863 8,205 9,740 (1,535) -16.1% Total Revenues 31,569 31,308 31,024 32,516 (1,492) -4.7% Expenses Real Estate Exp (excl Maint,P69,Hosp) 9,698 10,564 11,108 11,300 192 2.0% Conference & Event Ctr Expense 7,661 6,816 6,502 7,642 1,140 14.9% Eastside Rail Corridor 1,585 293 177 177 0 0.0% Maintenance Expenses 7,192 9,110 9,435 9,535 100 1.4% P69 Facilities 150 198 178 178 0 0.0% Environmental Services & Planning 871 883 882 882 0 0.0% Seaport Expenses (excl env srvs) 359 361 386 386 0 0.0% CDD Expenses 917 1,084 2,131 2,131 0 0.0% Police Expenses 1,301 1,374 1,376 1,396 20 1.5% Corporate Expenses 5,018 4,836 5,077 5,117 40 0.8% Envir Remediation Liability 7 6 80 80 0 0.0% Operating Expenses 34,758 35,525 37,332 38,824 1,492 4.3% Net Operating Income (3,189) (4,217) (6,308) (6,308) (0) 0.0% 81 Financial Overview Harbor Services Fishing & Commercial Fishing & Commercial 2011 2012 2013 $'s Thousands Actual Actual Rvsd Budget Income From Operations FT Commercial Fish Ops (142) 36 (893) FT Recreational Moorage 250 260 254 Maritime Industrial Ctr Fish Ops 21 43 69 Fishing & Commercial Overhead (495) (766) (781) Total Income From Operations (367) (427) (1,351) Allocations Divisional Allocations (858) (1,205) (1,128) Corporate Allocations (1,316) (1,421) (1,460) Total Allocations (2,174) (2,626) (2,588) Net Operating Income (2,541) (3,053) (3,940) Income from Operation(IFO) = Revenue Direct Expense Charges 82 Financial Overview Harbor Services Recreational Boating Recreational Boating 2011 2012 2013 $'s Thousands Actual Actual Rvsd Budget Income From Operations Shilshole Bay Marina 5,842 5,609 5,546 Bell Harbor Marina (52) (124) (364) Harbor Island Marina 112 182 (37) Rec Boating Overhead (597) (820) (905) Total Income From Operations 5,304 4,848 4,240 Allocations Divisional Allocations (1,250) (1,236) (1,530) Corporate Allocations (2,265) (2,260) (2,427) Total Allocations (3,515) (3,496) (3,957) Net Operating Income 1,790 1,352 283 Income from Operation(IFO) = Revenue Direct Expense Charges 83 Financial Overview Portfolio & Asset Management Portfolio Management 2011 2012 2013 $'s Thousands Actual Actual Rvsd Budget Income From Operations FT Office & Retail 686 1,139 35 Terminal 102 Office & Ind 871 733 712 Maritime Indust Ctr 581 499 437 Pier 69 Offices & Passenger Travel 573 626 581 SBM Office & Retail 104 71 63 Tsubota Steel Site 8 30 (100) Terminal 34 Gen Industrial 273 274 282 Pier 2 General Industrial (166) (176) (196) Terminal 5 SE 24 29 29 Terminal 117 General Industrial 0 (19) (23) Bell Street Retail 382 410 309 Bell Street Office 75 84 96 Bell Harbor International Conf Ctr 1,738 1,803 1,756 World Trade Ctr Club 74 170 229 Income from Operations(IFO) = World Trade Ctr West 367 548 445 Revenue Direct Expense Charges Bell Street Garage 1,300 1,518 1,689 Bell Street Common Areas (1,414) (1,919) (1,516) Centennial Park Lease (118) (126) (109) Commercial Property Overhead (616) (1,596) (558) Portfolio Mgmt Overhead (1,062) (949) (1,147) Total Income From Operations 3,681 3,151 3,014 Allocations Divisional Allocations (1,226) (2,176) (1,759) Corporate Allocations (2,384) (2,360) (2,486) Total Allocations (3,610) (4,537) (4,245) Net Operating Income 71 (1,385) (1,231) 84 Financial Overview Fishermen's Terminal Facility (incl. Harbor Srvs & Portfolio Management) Fishermen's Terminal Facility 2011 2012 2013 Rvsd $'s in 000's Actual Actual Budget Revenue 4,824 5,009 5,187 Direct Expenses 5,517 5,415 7,392 Income from Operations (693) (406) (2,205) Divisional Allocations 907 1,526 1,479 Corp Allocations 2,052 2,094 1,949 Net Operating Income (3,652) (4,025) (5,633) 85 Financial Overview Shilshole Bay Marina Facility (incl. Harbor Srvs & Portfolio Management Shilshole Bay Marina 2011 2012 2013 Rvsd $'s in 000's Actual Actual Budget Revenue 8,627 8,658 8,620 Direct Expenses 3,675 4,038 4,127 Income from Operations 4,952 4,620 4,493 Divisional Allocations 736 921 1,101 Corp Allocations 2,182 2,181 2,299 Net Operating Income 2,034 1,517 1,093 86 Draft 2014 Capital Plan Total Real Estate Division $'s thousands TOTAL REAL ESTATE DIVISION 2014 2014-2018 Total Commission Authorized 8,098 8,098 Pending 2014 Authorization 5,137 14,560 Pending Future Authorization 2,877 10,878 Small Projects 1,700 20,983 TOTAL 17,812 54,519 87 Draft 2014 Capital Plan By Location Fishermen's Terminal 000's FISHERMEN'S TERMINAL 2014 2014-2018 Total FT Waterside Projects Capital Projects Status Description Commission Authorized FT Net Shed 9 Roof Replacement 373 373 Small Projects FT Waterside Small Capital Projects 80 240 Pending Future Authorization FT Net Shed 3 or 8 Roof Replacement 0 541 Pending Future Authorization FT West Wall N Fender Replacement 0 200 Pending Future Authorization FT W Wall N Sheet Pile Corrosion Protect 0 200 Pending Future Authorization FT South Wall West End Improvements 0 1,674 Pending Future Authorization FT Dock 3 Fixed Pier Improvements 0 3,000 Pending Future Authorization FT Dock 4 Fixed Pier Improvements 0 3,500 Pending Future Authorization FT Net Shed 4 or 7 Roof Replacement 0 503 Pending Future Authorization FT Net Shed 5 Roof Replacement 0 461 Pending Future Authorization FT Net Shed 6 Roof Replacement 0 481 Total FT Waterside 453 11,173 FT Upland Projects Capital Projects Status Description Commission Authorized FT C2 (Nordby) Roof & HVAC 1,823 1,823 Commission Authorized FT C15 HVAC Improvements 2,570 2,570 Pending 2014 Authorization FT Paving/Storm Drainage Upgrades 3,010 3,010 Pending 2014 Authorization FT C15 Bldg East Sewer Line 612 612 Pending 2014 Authorization FT C15 Bldg Subsidence Improvements 306 306 Small Projects FT Uplands Small Capital Projects 0 460 Pending Future Authorization FT C14 (Downie) Roof & HVAC 0 975 Pending Future Authorization FT 25 Year Plan Improvements 0 868 Total FT Landside 8,321 10,624 TOTAL FISHERMEN'S TERMINAL 8,774 21,797 88 Draft 2014 Capital Plan By Location Shilshole Bay Marina $ 000's SHILSHOLE BAY MARINA 2014 2014-2018 Total Shilshole Bay Marina Recreational Boating Status Description Commission Authorized SBM Central Seawall Replacemnt 663 663 Pending 2014 Authorization SBM Paving 100 1,000 Pending 2014 Authorization SBM Restroom Replacement 100 4,800 Small Projects SBM Small Projects 425 575 Pending Future Authorization SBM Fuel Float/Bldg Improvements 200 1,100 Pending Future Authorization SBM A Dock Rehab Improvements 450 450 Total SBM Recreational Boating 1,938 8,588 Shilshole Bay Marina Commercial Prop 0 0 Total SBM Commercial Prop 0 0 TOTAL SHILSHOLE BAY MARINA 1,938 8,588 89 Draft 2014 Capital Plan By Location Maritime Industrial Ctr & Harbor Island Marina $ 000's MARITIME INDUSTRIAL CENTER 2014 2014-2018 Total Maritime Industrial Center Status Description Pending 2014 Authorization MIC West & Central Piers Resurfacing 477 627 Small Projects MIC Small Capital Projects 0 50 TOTAL MARITIME INDUSTRIAL CENTER 477 677 HARBOR ISLAND MARINA 2014 2014-2018 Total Harbor Island Marina Status Description Small Projects Small Capital Projects 265 550 Pending Future Authorization HIM AB&D Dock Rehabilitation 0 350 Pending Future Authorization HIM C Dock Rehabilitation 0 350 Pending Future Authorization HIM E Dock Rehabilitation 400 400 TOTAL HARBOR ISLAND MARINA 665 1,650 90 Draft 2014 Capital Plan By Location Central Waterfront $ 000's CENTRAL WATERFRONT 2014 2014-2018 Total Central Waterfront- Bell Harbor Marina Status Description Pending 2014 Authorization BHM Pile Wraps 100 2,600 Small Projects BHM Small Projects 240 240 Total BHM Recreational Boating 340 2,840 Central Waterfront Commercial Bldgs Commission Authorized Pier 66 Steam Replacement 279 279 Small Projects Small Projects 0 910 Total Central Waterfront Commerical Bldgs 279 1,189 TOTAL CENTRAL WATERFRONT 619 4,029 91 Draft 2014 Capital Plan By Location Other Commercial Properties $ 000's OTHER COMMERCIAL PROPERTIES 2014 2014-2018 Total Other Commercial Properties Status Description Pending 2014 Authorization Tenant Improvements -Capital 432 1,605 Small Projects T102 Small Projects 0 500 Pending Future Authorization T102 Bldg Roof Replacement 150 2,430 Total Other Commercial Buildings 582 4,535 TOTAL OTHER COMMERCIAL PROPERTIES 582 4,535 92 Draft 2014 Capital Plan By Location Pier 69 and Other Projects $ 000's PIER 69 AND OTHER PROJECTS 2014 2014-2018 Total Other Status Description Commission Authorized P69 N Apron Corrosion Control 639 639 Commission Authorized P69 Built-Up Roof Replacement 1,751 1,751 Small Projects Fleet Replacement 749 3,735 Small Projects RE Preliminary Planning 250 1,250 Small Projects RE Technology Projects 458 1,458 Small Projects Marine Maintenance Small Projects 410 410 Small Projects Real Estate Unindentified Projects 0 500 Pending Future Authorization RE: Contingency Renew.&Replace 500 3,500 Total Other 4,757 13,243 TOTAL P69 AND OTHER PROJECTS 4,757 13,243 93 Real Estate Development and Planning Master planning and land development: 'Terminal 91 Uplands Explore solicitation for master developer 'Des Moines Creek Business Park Finalize ground lease agreement with Panattoni 'Explore emerging opportunities for acquisition 'Analyze viability of maritime academy 'Broaden utility of Marine Maintenance North Operations Office 94 Portfolio and Asset Management Property Management ' Achieve net operating income and occupancy targets ' Fishermen's Terminal Update asset plan in conjunction with Harbor Services Propose "FT 25-year Plan" development scenario ' Examine alternatives for energy conservation measures utilizing utility company incentive plans ' Implement PropWorks upgrade and launch space management module 95 Harbor Services Financial performance: ' Achieve net operating income and occupancy targets Fishermen's Terminal: ' Update asset plan in conjunction with Portfolio & Asset Management ' Implement improvements to net locker buildings Phase I & II Shilshole Bay Marina: ' Integrate improvements from the 2013 site plan update into capital and maintenance plans/budgets Bell Harbor Marina ' Plan required pile wrap system for wavebreak structure 96
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