PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.      6b 
ACTION ITEM 
Date of Meeting      June 28, 2016 
DATE:    June 20, 2016 
TO:      Ted Fick, Chief Executive Officer 
FROM:   James R. Schone, Director, Aviation Business Development 
Wayne Grotheer, Director, Aviation Project Management Group 
SUBJECT:  Airport Dining & Retail (ADR) Infrastructure Modifications  Budget Increase
(CIP #C800638) 
Amount of This Request:        $7,325,000   Source of Funds:   Airport Development
Fund, Future Revenue
Est. Total Project Cost:         $21,278,000 
Bonds 
Est. State and Local Taxes:       $1,073,000 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to (1) increase authorized
funds for the Airport Dining and Retail Infrastructure Modification project (CIP #C800638) in
the amount of $7,325,000 and (2) transfer $1,500,000 of budget from Baggage Optimization
(CIP #C800612) back to ADR (CIP #C800638). Total ADR Infrastructure Modification project
authorization would be $21,278,000. 
SYNOPSIS 
The ADR Infrastructure Modification project has encountered delays and disruptions that have
led to increased costs. The causes for these increases can be placed into three categories: Scope
Changes, Schedule Changes, and Soft Cost Increases. These causes are covered in more detail
below. 
This request is for an increase of $7,325,000 to the budget that Commission approved in the fall
of 2014. Part of this amount will be added to the project in the form of a budget increase of
$5,825,000. The remainder will come from a budget transfer of $1,500,000 back from the
Baggage Optimization project. Funds were previously transferred to Baggage Optimization to 
construct elevator pits for the ADR project. The elevator pits are costing less than estimated
which allows for funds to be transferred back to ADR. 
The ADR redevelopment program will increase revenue to the Port by utilizing previously
unused space and by strategically placing food and beverage and retail locations. While the
project is now costing more to complete, the increased revenue will offset the cost of
construction. However, if there are further delays that require re-work of the master plan, this 
may generate additional costs. 

Template revised May 30, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 2 of 9 
BACKGROUND 
The ADR Program comprises approximately 100 dining, retail and passenger service locations
throughout the Airport. Over the next several years, new locations will be constructed and nearly
all of the existing locations will have construction in order to optimize the size, location and use 
to meet forecasted demand. The ADR Master Plan, which details all of these changes to units and
the associated schedule for construction and leasing activities, served as the basis for the ADR
Retail Infrastructure Modification Project, approved by the Commission in October 2014. 
The ADR Infrastructure Modification Project will impact the full breadth of the Main Terminal.
To date, designs for 13 individual ADR space and utility modifications have been completed; 
designs for the south side of the Central Terminal and two elevators have been completed; and a
Job Order Contract has been awarded for construction of ADR space and utility modifications. 
In addition, the Port has executed leases associated with Lease Group #1 (Hudson and Host
units) and is in the process of awarding leases for the opportunities in Lease Group #2. However, 
numerous issues have affected the execution of the ADR Master Plan. These issues have led to a
forecasted increase in costs above what Commission previously approved. The two main drivers
for these cost increases are: changes in schedule and in scope. These changes have resulted in a 
corresponding increase in soft costs. 
Schedule Changes: 
Commission approved the leases with Host and Hudson (Lease Group #1) in December, 2014.
The original schedule in the ADR Master Plan was to have construction on these units begin in
May 2015. However, this schedule was disrupted by several factors: the departure of two key
ADR staff in August 2015 who were the primary designers of the ADR Master Plan and the lead
negotiators on the new leases with Hudson and Host; the ruling by the Washington State
Supreme Court in August 2015 that the City of SeaTac's Ordinance 13-1020 (commonly referred
to as Proposition 1) that set a $15.00 per hour minimum wage, does apply to ADR tenants at the
Airport; and the Commission's subsequent approval of a change to the Airport's street pricing
policy in November, 2015. The leases with Host and Hudson were not executed until March 31,
2016, approximately one year later than expected. 
As a result of the delay in lease signing, not only was work delayed in units that were included in
the new leases with Host and Hudson, but utility modification work in Hudson and Host units
that were to be returned to the Port before lease expiration was also delayed. Then, in the
summer of 2015, there was delay to the planned schedule for Lease Group #2 while additional
outreach activities were conducted and changes made regarding which units to include in order
to better align the leasing opportunities with the Port's goals for increasing the participation of
small, local and disadvantaged businesses in the program. These delays led to construction cost
escalation as well as more Port resources needed to handle a work load that became concurrent
(Lease Group #1 and #2) instead of consecutive. The revised schedule has construction on the 
units in Lease Group #1 beginning in May 2016, one year later than originally planned. 

Revised March 28, 2016 

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 3 of 9 
In addition, there was significant re-work on the overall Master Plan to ensure that an adequate
airport customer level of service was available during construction of all lease groups due to
significantly higher enplanements than originally forecast. This rescheduling affected planned
construction efficiencies and delayed the closure of several spaces to ensure adequate service
levels. For example, there are contiguous locations that will change from dining to retail units.
Previously, the water service would have simply been extended from one unit to the other. Now,
due to the rescheduling, a new water service will be required since the existing dining unit's
closure has been delayed to maintain airport customer Level of Service. Similar types of
efficiencies were lost throughout the terminal as a result of the re-scheduling. 
Scope Changes: 
There are two major components to the additional costs associated with scope changes: scope
validation and airport customer level of service due to the rapidly increasing passenger levels. 
With the departure in August 2015 of two ADR staff persons who were the primary designers of
the ADR Master Plan, there was a need to review and validate key assumptions regarding which
utilities were needed at which spaces. This work led to significant scope changes including: 
natural gas installation at select dining locations, demolition of abandoned utilities to their source
(no cutting and capping per previous assumptions), reconfiguration of a Concourse C bar due to
an inability to tie into an existing grease interceptor as planned, andextension of Concourse D 
retail and food and beverage  locations into adjacent storage areas requiring  floor level 
modifications. 
The second major component of the scope changes to the ADR Master Plan pertains to 
maintaining airport customer levels of service in light of continuing rapid increases in passengers 
beyond what was forecast in the initial ADR Master Plan. It is critical that the travelling public
have access to an adequate amount of food and beverage locations during the construction of the
ADR program, and that the Airport achieves the optimum balance of dining, retail and passenger
services. As part of the Master Plan rework exercise, Port staff evaluated the highest and best use
for each space and made changes where appropriate. 
An example of such a change is a new Children's Play Area planned for Concourse D in what is
currently a news and gift store location. Given a forecast of increased demand for food and
beverage service on Concourse D, staff determined that the airport would be better served if the
planned Children's Play Area location was converted into an additional dining unit. This
required that new utilities be run to this location and a new Children's Play Area location found 
elsewhere. The team creatively identified a space for the Children's Play Area that is not suitable
for dining and retail leasing due to elevation changes within the space. This elevation change that
would make a dining and retail space unfeasible can be accommodated in a Children's Play Area
by provision of a ramp. This new location for the Children's Play Area is both larger and more
complicated to develop than the prior assumed location because of the elevation changes within
this space. 

Revised March 28, 2016 

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 4 of 9 
Soft Cost Increases: 
Included in the revised budget are also additional soft costs. These soft cost increases are due to
additional design for revised scope, additional Engineering support for the management and
inspection of the project, additional Project Management time for higher levels of involvement
for the Project Manager and Project Scheduler, additional Building Department inspections for
the additional scope, and additional Facilities and Infrastructure design reviews for the changed
scope of work. 
The ADR capital program is unique in that it has a relatively small budget when compared to the
project duration. The capital budget is to be spent over the course of eight years (2014-2021).
While the overall capital budget is relatively low for an eight year project, the cost to administer
a project for eight years is a higher percentage of the project cost as compared to a project of
similar size which would typically be completed in two years. Because of the need for extended
administration, the ADR team has revised the method of pricing soft costs. Rather than applying
a historical percentage rate to the construction budget, we have budgeted soft costs based on
actual costs we expect to incur over the remaining duration of the project. Tenants are expected
to spend a significant amount during this time. When tenant costs to design and construct their
units and the Port costs to support these tenant projects are included with this ADR capital
project, the overall total cost reaches approximately $90  $95 Million. 
The budget increase being requested is a reflection of all of the above issues and ADR's
dedication to accomplishing the Commission's Century Agenda goal of creating 100,000 jobs by 
enhancing the Airport's profile as the preferred gateway to the Pacific Northwest, by creating
new opportunities for small, local and disadvantaged businesses and by meeting the expectations
of the travelling public for quality food service, retail products and personal services. 
PROJECT JUSTIFICATION AND DETAILS 
Airport staff recently updated the ADR sales projections through 2025 based on newly updated
enplanement forecasts. With the revised program and the associated facility investments to
support it, ADR gross sales are anticipated to grow by an additional $50 million, reaching $400
million in the year 2025 (the original projection was approximately $350 million). These gross
sales are anticipated to generate an additional $7 million in revenue to the Port, reaching a total
of $70 million in the year 2025 (the original projection was approximately $63 million). 
In order to achieve this growth, the Airport must expand dining and retail capacity throughout
the terminal and also change the uses of some existing units to meet increased demand. All 
identified changes in use as well as the development of new locations have been evaluated and
have been projected to increase sales by meeting passenger demand for products and services. 



Revised March 28, 2016 

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 5 of 9 
Project Objectives 
The objectives of this project include: 
Develop new or currently unused space or re-purpose existing dining and retail space to
better serve passenger demand and generate additional revenue 
Reconfigure existing space to assure the ability to meet passenger demand and generate
revenue 
Maximize the overall use of space in order to achieve the optimal mix of ADR offerings
in every area of the Airport 
Ensure that necessary utility points of connection and other required infrastructure are in
place for each leased unit to support operations 
Carefully phase work that could impact ongoing revenue generation and airline
operations in the terminal and maintain an adequate Level of Service for airport
customers. 
Scope of Work 
This project can be characterized as a collection of smaller projects to create new ADR spaces as
well as provide infrastructure to existing tenant spaces in the Airport's main terminal. 
Schedule 
Activity                                End 
Design                           Second Quarter 2017 
Construction                          First Quarter 2021 
FINANCIAL IMPLICATIONS 
Budget/Authorization Summary              Capital     Expense   Total Project 
Original Budget                     $10,900,000          $0   $10,900,000 
Previous budget increase                 $6,453,000          $0    $6,453,000 
Budget Transfer to Baggage Optimization     ($3,400,000)          $0   ($3,400,000) 
(CIP #C800612) 
Budget to be transferred back from Baggage    $1,500,000          $0    $1,500,000 
(CIP #C800612) (In Progress) 
Current budget increase                  $5,825,000               $5,825,000 
Revised budget                     $21,278,000              $21,278,000 
Previous Authorizations                 13,953,000               13,953,000 
Current request for authorization            $7,325,000          $0    $7,325,000 
Total Authorizations, including this request    $21,278,000          $0    $21,278,000 
Remaining budget to be authorized                $0          $0          $0 


Revised March 28, 2016 

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 6 of 9 
Project Cost Breakdown                     This Request       Total Project 
Construction                               $4,588,000        $13,936,000 
Design                                  $2,444,000         $6,269,000 
State & Local Taxes (estimated)                   $293,000         $1,073,000 
Total                                      $7,325,000         $21,278,000 
Budget Status and Source of Funds 
This project has been included in the 2016-2020 capital budget under CIP#C800638. The budget
had been previously increased primarily due to the addition of the central terminal elevators and
stairs as well as communications infrastructure to the project scope. The source of funding is the
Airport Development Fund and future revenue bonds. 
Financial Analysis and Summary 
CIP Category             Capacity/Revenue Growth 
Project Type              Business Redevelopment and Expansion 
Risk adjusted discount rate     7.5% 
Key risk factors              Coordination with other construction projects 
Delays in improved base building HVAC and
electrical capacity to support expansion 
Delays in needed leasing activity 
Project cost for analysis        $23,178,000 (includes $1.9M transferred to Baggage project) 
Business Unit (BU)          Non-Aeronautical (Airport Dining and Retail) 
Effect on business performance  NOI after depreciation will increase 
IRR/NPV             12.3%/15.6 million 
CPE Impact             No direct impact. However, potential reduction in CPE
due to increased revenue sharing 
Lifecycle Cost and Savings 
Long-term capital and operating costs will be minimized by incorporating energy and water
efficient equipment and components and sustainable materials with pre- and post-consumer
recycled content, wherever possible. These choices will support environmentally sustainable
development and conservation. They may also reduce initial acquisition cost and long-term
operations and maintenance costs. 
There will be incremental maintenance costs associated with the facility-owned mechanical,
water, communication, and electrical utilities added to the lease line of each unit. However,
every tenant is responsible for providing ongoing maintenance for the materials and equipment
within their leased area in accordance with the Port's preventive maintenance program for dining 
and retail. 


Revised March 28, 2016 

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 7 of 9 
STRATEGIES AND OBJECTIVES 
This project supports the Port's Century Agenda goal to "advance the region as a leading tourism
destination and business gateway" by providing an extraordinary customer experience at the
Airport. The project also supports the Aviation Division's strategic goal to operate a world-class
international airport and increase non-aeronautical revenue. In addition, this project is consistent
with guidance provided by the Commission in February 2012 and November 2014 regarding the
redevelopment of the ADR Program. 
The project manager will coordinate with the small business program manager to maximize the
participation of qualified small business firms. 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Utilize Current Budget without cost increase 
Cost Implications: $0 Additional Capital Spent 
Pros: 
(1)  Prevents the expenditure of an additional $7.3 million of non-aeronautical funds 
Cons: 
(1)  Does not address issues of providing adequate airport customer Level of Service 
(2)  Limits PMG involvement in scheduling and managing the overall program 
(3)  Projects would likely take twice as long with limited project management support 
(4)  Extended project time could reduce anticipated revenues by up to approximately $5
Million to $6 Million. 
(5)  Tenants would incur higher buildout cost with missing infrastructure 
(6)  Extended project time would delay the additional jobs created from the new lease
packages 
(7)  With variations in infrastructure within each unit, not all tenants would be treated
equally 
This is not the recommended alternative. 
Alternative 2  Request Authorization only for Infrastructure Validation Scope 
Cost Implications: $2.9 million 
Pros: 
(1)  Reduces request for additional funds from $7.3 million to $2.9 million 
(2)  Mitigates risk that tenants will require "relief" due to excessive build costs 
(3)  All utility infrastructure would be in place for tenant build out 
(4)  Reduces tenant infrastructure buildout costs, while providing more equitable
treatment to tenants 
Cons: 
(1)  Does not address growing airport customer Level Of Service issues 

Revised March 28, 2016 

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 8 of 9 
(2)  Limits PMG involvement in scheduling and managing the overall program 
(3)  Projects would likely take twice as long with limited project management support 
(4)  Extended project time could reduce anticipated revenues by up to $1 Million to $3
Million. 
(5)  Tenants could incur higher buildout costs due to extend project timing. 
(6)  Extended project time would delay the additional jobs created from the new leasing
packages. 
This is not the recommended alternative. 
Alternative 3  Authorize Proposed Budget Increases 
Cost Implications: $7,325,000 
Pros: 
(1)  Allows for ADR Master Plan to be executed. Execution of plan will accommodate
passenger growth. 
(2)  Adhering to the redeveloped ADR Master Plan maximizes gross sales 
(3)  New schedule and planning helps to maintain Level of Service to the traveling
public. 
(4)  Allows PMG heavy involvement in the scheduling and management of the overall
$90-$95 million program 
Cons: 
(1)  Uses an additional significant sum of non-aeronautical funds. 
This is the recommended alternative. 
ATTACHMENTS TO THIS REQUEST 
Computer slide presentation. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
June 14, 2016  Request for authorization of Airport Dining and Retail Lease Group 3 
May 24, 2016  (Briefing) Proposed 12 new opportunities encompassing 24 units in
Airport Dining and Retail Lease Group 3 
May 17, 2016  Request for authorization to advertise and execute a Public Works
contract for the Central Terminal Elevators, Stairs, and Infrastructure Modifications 
December 8, 2015  Request for authorization to conduct competitive solicitations and
execute lease and concession agreements with selected proposers for new small
business-oriented opportunities under Lease Group 2 in the Airport Dining and Retail
program 
November 24, 2015 Request for Airport Dining and Retail Lease Group Authorization 
August 4, 2015 Request for Airport Dining and Retail Group Lease Authorization 
April 14, 2015  (C800638-Design) Airport Dining and Retail Infrastructure 
February 24, 2015  (Briefing) Airport Dining and Retail Outreach and Leasing Plans 

Revised March 28, 2016 

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 20, 2016 
Page 9 of 9 
December 9, 2014  Phasing Proposal for Hudson Group Leased Units 
December 9, 2014  Phasing Proposal for HMSHost Leased Units 
December 9, 2014  Amendment to Lease and Concession Agreement Anton Airfoods 
November 25, 2014  Airport Dining and Retail Quality Jobs Motion/Guidance 
November 11, 2014  (Briefing) Airport Dining and Retail Quality Jobs 
October 28, 2014  Authorization to Design Airport Dining and Retail Infrastructure
Modifications 
September 30, 2014  (Briefing) Drivers for Phasing Plan Decisions 
May 27, 2014  (Briefing) Airport Dining and Retail Master Plan 
April 22, 2014  Terminal Utility Upgrades Design Services Contract (CIP #C800638) 
September 11, 2012  (Briefing) Airport Concessions Master Plan Update 
March 27, 2012  Briefing about Interim Concessions Leasing 
February 14, 2012  Commission Motion Concerning the Airport Concessions Program 
December 13, 2011  Aviation Concessions Program Principles and Practices 
July 26, 2011  Procurement for Concessions Planning and Leasing Services 











Revised March 28, 2016