7b supp
ITEM NO: 7b_Supp_1 DATE OF MEETING: September 12,2017 Port of Seattle Q2 2017 Financial Performance Report Commission Meeting September 12, 2017 1 Portwide Financial Highlights Total Operating Revenues were $302.1M, $11.8M above budget and $22.7M higher than Q2 2016. Excluding Aeronautical revenues, which are based on cost recovery, operating revenues were $174.3M, $14.1M above budget and $12.6M higher than Q2 2016. Total Operating Expenses were $174.1M, $17.4M or 9.1% under budget. Net Operating Income before depreciation was $128.0M, $29.2M above budget and $3.6M lower than Q2 2016. Total capital spending forecasted to be $435M, $172.7M or 28.4% below budget. Revenue up, expenses down in Q2 2 Aviation Business Highlights Enplaned passenger growth slowed in June, still up 3.2%, international passenger growth of 10.2% Customer Service: Consistently exceeding Airport Service Quality (ASQ) targets for Q2 New air service: Condor launched service to Munich, Germany in June Aeromexico announced new service to Mexico City beginning November Airport dining and retail program awarded lease group 3 in June Sustainable Airport Master Plan progressing towards preferred alternative Key negotiations underway, targeting completion this year: Airline lease agreement (SLOA) Inter-local agreement with City of SeaTac Passenger growth up, customer service ratings improving 3 Aviation Financial Highlights Cost per Enplanement (CPE) Forecast $0.24 favorable to budget due to lower airline rate base costs and higher revenue sharing (driven by Non-Aero NOI growth) Non-Aeronautical NOI Forecast - $7.8M higher than budget $1.9M incremental NOI - DMCBP phase II lump sum pre-paid frontage fee $1.6M all other incremental Non-Aero Revenue growth $4.3M all other incremental Non-Aero Expense savings Positive outlook in Key Performance Metrics 4 Maritime Business Highlights Cruise P-66 Norwegian Cruise Line passenger terminal expansion project complete. Port Valet Program launched. Grain - Year to date volumes 39% higher than projected. Fishing - Continued work to prep for Fishermen's Terminal uplands projects. Another successful year of summer rec boat moorage with 52 vessels. Seafood Summit 2017 at P-90. Recreational Boating - New live-aboard authorization draft finalized. Shilshole Bay Marina Boater's Fest w/1000 attendees. Restroom design at 60% (all feedback collected). Marine Maintenance - Small Business utilization: 44.2%. Storm Water Utility T-18 outfall replacement approval received. Improving customer service, small business contracting, and community outreach 5 Maritime Financial Highlights Maritime YTD NOI $4,390K favorable to budget and $1,366K better than 2016 Revenue favorable to budget by $657K and $2,499K higher than 2016. Higher grain volumes, low vacancy rates, and increased tariffs are key drivers. Expenses favorable to budget by $3,732K from Port-wide timing of spend in part driven by regional hiring challenges. Y/Y expenses up $1,132K due to increased Corporate, Economic Development, and Environmental expenses. Maritime forecast to spend $30.5M or 88% of the capital budget. Stormwater Utility YTD NOI $109K favorable to budget Revenue $3K unfavorable, expenses $112K favorable to budget. Both revenue and expenses forecast at budget for 2017. Revenue growth in Grain, Cruise, and Rec Boating 6 EDD Business Highlights Real Estate Development Selected Miller Hull to complete A/E design services at Fishermen's Terminal for development of 2 new light industrial buildings and the renovation of the Seattle Ship Supply Building. Defined final scope and contracted for all relevant due diligent work on the Salmon Bay Marina acquisition. Completed a detailed design development and appraisal process for the L-Shape. Workforce Development executed 3 contracts (Seattle Maritime Academy, Seattle Goodwill, and Educurious). Small Business coordinated and conducted two (2) training workshops (PortGen sessions). Worked with Airport Dining and Retail to deliver a series of five (5) Airport Concessions Disadvantaged Business Enterprise (AC/DBE) PortGen trainings. Portfolio Management properties at 97% occupancy at end of Q2, above target of 95%. Tourism coordinated 15 tour and media familiarization visits. Advancing initiatives to expand WFD, Small Business, and Tourism 7 EDD Financial Highlights EDD NOI $2.6M (38%) favorable to budget and $2.7M lower than 2016 Revenue favorable to budget by $517K and $610K lower than 2016. Conference and Event Center $185K favorable to budget, and $973K down from 2016 due to timing of construction at P66. Real Estate properties higher than budget from low vacancy rates. Expenses favorable to budget by $2.1M from timing for Workforce Development, Maintenance, leasing expenses, WTC Seattle Interior refresh, and other initiatives. Y/Y expenses up $2.1M primarily due to increased Corporate allocations, EDD Grants, and Bell Street Garage Elevator Refresh. EDD projects to spend 80% of capital budget. Strong Occupancy & Managing Expenses 8 Corporate Business Highlights The Port recognized 10 sustainable winners of the seventh-annual Green Gateway Environmental Excellence Award. Launched a new $1 million program to fund environmental projects in communities around Sea-Tac Airport. Conducted Rating Agency meetings in connection with the 2017 Intermediate Lien Revenue and Refunding Bonds. Implemented online workers compensation claim and safety reporting. Developed a new Noise Remedy system to replace a 20 year old system used by the Airport Environmental group to track remediation work completed on property surrounding the airport. Deployed an interface between the 911 Dispatch system and the Port Emergency Notification system which improved workflow and eliminated costly manual steps during critical event. Achieved a number of accomplishments in Q2 2017 9 Corporate Financial Highlights Total operating expenses for Corporate were $57.2M, $12.1M below budget. Most of the favorable budget variances came from payroll and outside services. Payroll savings due to delayed hiring, vacant positions, and project delays. Outside Services savings mainly came from delayed spending on advanced planning for SAMP, environmental review for SAMP, and some CDD projects. o Capital Development was $6.7M below budget. o Environment & Sustainability was $2.2M below budget. Total operating expenses forecasted to be $129.9M, $8.0M below budget. Expense control & delay expenses led to favorable budget variances 10 Appendix Q2 2017 Financial Performance Report Portwide Financial Summary Fav (UnFav) Fav (UnFav) 2016 YTD 2017 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Aeronautical Revenues 119,553 129,567 131,896 (2,328) -1.8% 269,531 278,375 (8,844) -3.2% SLOA III Incentive (1,788) (1,788) (1,788) - 0.0% (3,576) (3,576) - 0.0% Other Operating Revenues 161,658 174,309 160,195 14,113 8.8% 352,772 345,446 7,326 2.1% Total Operating Revenues 279,422 302,088 290,303 11,785 4.1% 618,727 620,245 (1,518) -0.2% Total Operating Expenses 147,874 174,104 191,493 17,389 9.1% 381,360 384,660 3,300 0.9% NOI before Depreciation 131,549 127,984 98,811 29,174 29.5% 237,367 235,585 1,782 0.8% Depreciation 82,277 81,860 82,649 789 1.0% 166,300 166,300 - 0.0% NOI after Depreciation 49,271 46,124 16,161 29,963 185.4% 71,067 69,285 1,782 2.6% Total Operating Revenues were $302.1M, $11.8M above budget in Q2. Total Operating Expenses were $174.1M, $17.4M or 9.1% below budget in Q2. Strong financial performance for the Port in Q2 12 Portwide Operating Revenues Summary 2016 YTD 2017 YTD 2017 YTD Budget Change $ in 000's Actual Actual Budget Variance from 2016 Aeronautical Revenues 119,553 129,567 131,896 (2,328) 10,015 SLOA III Incentive (1,788) (1,788) (1,788) () () Public Parking 34,166 36,958 35,460 1,498 2,792 Rental Cars - Operations 15,271 14,514 15,176 (662) (757) Rental Cars - Operating CFC 3,872 3,284 3,689 (405) (588) Airport Dining and Retail 25,952 26,349 24,762 1,587 396 Employee Parking 4,563 4,674 4,134 540 111 Ground Transportation 5,668 7,633 7,067 566 1,965 Non-Aero Commercial Properties 4,286 10,708 5,647 5,061 6,422 Airport Utilities 3,571 3,423 3,421 2 (147) Fishing & Commercial Vessels 1,500 1,456 1,558 (103) (44) Maritime Operations 2,919 2,984 2,981 3 65 Recreational Boating 5,083 5,438 5,508 (69) 355 Cruise 5,410 6,325 6,200 124 915 Grain 2,010 3,042 2,275 767 1,032 Maritime Industrial 3,075 3,306 3,345 (39) 230 Marina Office & Retail 2,024 1,961 2,002 (40) (63) Central Harbor Management 3,803 4,161 3,834 326 357 Conference & Event Centers 4,518 3,545 3,360 185 (973) NWSA Distributable Revenue 28,990 27,283 23,354 3,929 (1,707) Other 4,975 7,265 6,423 842 2,290 Total Operating Revenues (w/o Aero) 161,658 174,309 160,195 14,113 12,651 TOTAL 279,422 302,088 290,303 11,785 22,666 Operating revenues exceeded budget 13 Portwide Operating Expense Summary Fav (UnFav) Incr (Decr) 2016 YTD 2017 Year-to-Date Budget Variance Change from 2016 $ in 000's Actual Actual Budget $ % $ % Salaries & Benefits 51,795 56,338 61,838 5,500 8.9% 4,543 8.8% Wages & Benefits 48,261 52,948 55,648 2,700 4.9% 4,687 9.7% Payroll to Capital Projects 10,040 12,873 13,533 660 4.9% 2,834 28.2% Equipment Expense 2,923 4,311 3,981 (330) -8.3% 1,388 47.5% Supplies & Stock 3,454 4,616 4,161 (455) -10.9% 1,162 33.6% Outside Services 25,663 32,969 50,050 17,081 34.1% 7,306 28.5% Utilities 10,510 11,911 11,155 (755) -6.8% 1,400 13.3% Travel & Other Employee Expenses 1,879 2,338 3,308 970 29.3% 459 24.4% Promotional Expenses 362 460 1,011 551 54.5% 98 27.2% Other Expenses 8,450 16,566 12,097 (4,469) -36.9% 8,116 96.0% Charges to Capital Projects (15,463) (21,226) (25,291) (4,065) 16.1% (5,763) 37.3% TOTAL 147,874 174,104 191,493 17,389 9.1% 26,230 17.7% Operating expenses were $17.4M or 9.1% below budget 14 Capital Spending by Division 2017 YTD 2017 2017 Budget Variance $ in 000's Actual Forecast Budget $ % Aviation 111,901 389,483 554,717 165,234 29.8% Maritime 13,484 30,458 34,518 4,060 11.8% Economic Development 1,512 5,030 6,304 1,274 20.2% Corporate & Other (note 1) 1,877 9,971 12,147 2,176 17.9% TOTAL 128,774 434,942 607,686 172,744 28.4% Note: (1) "Other" includes Street Vacation projects and Storm Water Utility (SWU) capital projects. 2017 capital spending forecasted to be $435M 15 Aviation Division Q2 2017 Financial Performance Report Airport Activity YTD June Passenger Growth YTD 2016 YTD 2017 % Change Alaska +0.4% Enplaned Passengers (000's) Delta +8.4% Domestic 9,548 9,775 2.4% Southwest -8.3% International 1,120 1,234 10.2% American -3.6% Total 10,668 11,009 3.2% United +4.4% Operations 197,152 199,610 1.2% 2017 Cargo metric tons: Landed Weight (million lbs.) Strong growth in cargo volume from existing carriers in both Cargo 843 1,025 21.6% Domestic and international All other 12,044 12,416 3.1% services. Total 12,886 13,441 4.3% New Domestic Freight services included in YTD 2017 results: Cargo - metric tons Prime Air/Amazon and DHL (both Domestic freight 83,079 111,136 33.8% commenced in mid-2016). International freight 55,287 58,406 5.6% New International Freight services included in YTD 2017 Mail 27,561 28,882 4.8% results: AeroLogic and AirBridge Total 165,927 198,424 19.6% (both commenced in mid-2016). Revised enplanement forecast of 3% growth in 2017 17 Aviation Financial Summary Fav (UnFav) Incr (Decr) 2016 2017 2017 Budget Variance Change from 2016 $ in 000's Actual Forecast Budget $ % $ % Operating Revenues: Aeronautical Revenues 247,811 269,531 278,375 (8,844) -3.2% 21,720 8.8% SLOA III Incentive Straight Line Adj (3,576) (3,576) (3,576) - 0.0% (0) 0.0% Non-Aeronautical Revenues 221,021 233,724 226,645 7,078 3.1% 12,702 5.7% Total Operating Revenues 465,256 499,678 501,444 (1,766) -0.4% 34,422 7.4% Total Operating Expense 261,226 300,162 302,711 2,549 0.8% 38,936 14.9% Net Operating Income 204,030 199,516 198,733 783 0.4% (4,514) -2.2% 2017 NOI forecast $0.8M favorable to budget 18 Key Performance Measures Fav (UnFav) Incr (Decr) 2017 Forecast 2016 2017 2017 Budget Variance Change from 2016 Actual Forecast Budget $ % $ % Key Performance Metrics Key Performance Metrics Reduced CPE due to lower Cost per Enplanement (CPE) 10.10 10.64 10.88 0.24 2.2% 0.54 5.3% airline rate base costs and Non-Aeronautical NOI (in 000's) 128,727 126,299 118,521 7,778 6.6% (2,428) -1.9% higher revenue sharing (driven Other Performance Metrics by Non-Aero NOI growth) O&M Cost per Enplanement 11.46 12.78 12.65 -0.13 -1.1% 1.32 11.6% Non-Aero Revenue per Enplanement 9.70 9.95 9.47 0.48 5.1% 0.26 2.7% Non-Aero NOI growth due to Debt per Enplanement (in $) 104 109 110 1 1.3% 5 4.3% DMCBP Phase II lump sum Debt Service Coverage 1.53 1.54 1.50 0.05 3.1% 0.01 0.9% ($1.9M NOI), combined with Days cash on hand (10 months = 304 days) 416 316 304 12 3.9% (100) -24.1% other Non-Aero revenue growth Aeronautical Revenue Sharing ($ in 000's) 37,395 38,916 33,093 (5,822) -17.6% 1,521 4.1% and Non-Aero expense savings. Activity (in 000's) Enplanements 22,796 23,480 23,929 -449 -1.9% 684 3.0% Other Performance Metrics Favorable outlook in all other performance metrics Positive outlook on all Key Performance Indicators 19 Aviation Expense Summary Fav (UnFav) Fav (UnFav) 2017 Forecast to Budget 2017 total expenses forecasted to align with 2016 YTD 2017 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Unplanned expenses: Operating Expenses:budget DMCBP Phase II pre-paid Payroll 49,708 55,798 58,727 2,929 5.0% 117,070 119,886 2,816 2.3% frontage fee expense ($3.6M) Outside Services 15,736 17,203 22,023 4,820 21.9% 43,513 45,279 1,766 3.9% Utilities 7,358 8,389 7,886 (503) -6.4% 15,368 15,187 (181) -1.2% Additional kiosks for FIS Other Airport Expenses 9,132 13,680 8,765 (4,915) -56.1% 23,721 18,004 (5,717) -31.8% processing ($0.9M) Total Airport Direct Charges 81,934 95,070 97,401 2,331 2.4% 199,671 198,355 (1,316) -0.7% Snow removal ($1.4M) Capital to expense: exit lane Environmental Remediation Liability 33 2,714 2,443 (271) -11.1% 3,527 3,775 248 6.6% equipment ($2.0M) Capital to Expense - 24 - (24) n/a 1,985 - (1,985) 0.0% Total Exceptions 33 2,738 2,443 (295) -12.1% 5,512 3,775 (1,737) -46.0% Offset by cost savings: Total Airport Expenses 81,968 97,809 99,844 2,035 2.0% 205,183 202,130 (3,052) -1.5% AVPMG savings due to Corporate 22,723 25,000 26,763 1,762 6.6% 54,028 54,673 645 1.2% Terminal project delays Police Costs 8,943 9,146 9,525 379 4.0% 19,016 19,173 157 0.8% partially offset by lower Capital Development 3,358 6,486 12,864 6,377 49.6% 17,579 22,378 4,799 21.4% charges to capital. Maritime/Economic Development 1,826 1,879 2,025 145 7.2% 4,356 4,356 - 0.0% Payroll savings - vacancies Total Charges from Other Divisions 36,849 42,512 51,176 8,664 16.9% 94,979 100,581 5,602 5.6% and hiring delays ($2.8M) SAMP-related spending Total Operating Expense 118,817 140,321 151,020 10,700 7.1% 300,162 302,711 2,549 0.8% delays Unplanned expenses absorbed by cost savings 20 Aeronautical Business 2017 Forecast Fav (UnFav) Fav (UnFav) Revenue - $8.8M lower 2016 YTD 2017 Year-to-Date Budget Variance Year-End Projection Budget Variance Rate based revenue $3.4M $ in 000's Actual Actual Budget $ % Forecast Budget $ % lower due to savings from Revenues: project delays and lower debt service. Movement Area 45,551 50,946 51,414 (468) -0.9% 108,994 109,845 (851) -0.8% Commercial Area revenue Apron Area 6,088 7,554 7,427 127 1.7% 16,338 15,957 381 2.4% $0.4 higher due to higher Terminal Rents 75,640 78,259 79,109 (850) -1.1% 159,827 163,565 (3,738) -2.3% RON parking activity. Federal Inspection Services (FIS) 5,174 6,456 5,885 571 9.7% 13,246 12,437 809 6.5% Revenue sharing $5.8M Total Rate Base Revenues 132,453 143,215 143,835 (621) -0.4% 298,404 higher due to Non-Aero NOI \ 301,803 (3,399) -1.1% growth Commercial Area 4,479 4,959 4,607 352 7.6% 10,042 9,665 376 3.9% Expenses $1.8M lower Subtotal before Revenue Sharing 136,932 148,174 148,442 (269) -0.2% 308,446 311,468 (3,022) -1.0% AVPMG terminal projects Revenue Sharing (17,379) (18,606) (16,547) (2,059) -12.4% (38,916) (33,093) (5,822) -17.6% delayed Total Aeronautical Revenues 119,553 129,567 131,896 (2,328) -1.8% 269,531 278,375 (8,844) -3.2% Payroll savings due to vacancies & hiring delays Total Aeronautical Expenses 76,044 91,209 95,962 4,752 5.0% 192,738 194,587 1,850 1.0% SAMP related spending delayed Net Operating Income 43,509 38,358 35,934 2,424 - 6.7% 76,793 83,788 (6,995) -8.3% Partially offset by unplanned Debt Service (87,722) (88,740) 1,018 1.1% cost for additional kiosks for FIS processing ($0.9M) and Net Cash Flow (10,930) (4,952) (5,977) 120.7% exit lane equipment write-off ($2.0M). Expense savings and higher revenue sharing compared to Budget 21 Aero Cost Drivers 2017 Forecast Fav (Unfav) Incr (Decr) O&M Expenses $1.6M lower 2016 2017 2017 Budget Variance Change from 2016 AVPMG terminal projects $ in 000's Actual Forecast Budget $ % $ % delayed O&M (1) 165,427 189,052 190,645 (1,594) -0.8% 23,625 14.3% Payroll savings due to Debt Service Gross 118,641 116,311 117,336 (1,025) -0.9% (2,330) -2.0% vacancies & hiring delays Debt Service PFC Offset (32,831) (33,086) (33,099) 12 0.0% (256) -0.8% SAMP related spending Amortization 28,215 29,636 29,637 (1) 0.0% 1,421 5.0% delayed Space Vacancy (2,638) (2,217) (1,486) (731) 49.2% 421 -16.0% These savings are largely TSA Operating Grant and Other (982) (1,291) (1,230) (61) 4.9% (309) 31.5% offset by unplanned security Rate Base Revenues 275,832 298,404 301,803 (3,399) -1.1% 22,572 8.2% exit lanes project equipment Commercial area 9,379 10,042 9,665 376 3.9% 663 7.1% write-off ($2.0M) and the Total Aero Revenues 285,211 308,446 311,468 (3,022) -1.0% 23,235 8.1% purchase of additional kiosks for FIS processing ($0.9M) O&M, Debt Service Gross, and Amortization do not include commercial area costs or the international incentive expenses Debt Service $1.0M lower due to interest savings on 2008 VRDB and commercial paper Aero rate base revenues based on cost recovery formulas 22 Aero Revenue Sharing Aero Revenue Sharing calculation Fav (Unfav) Incr (Decr) 2016 2017 2017 Budget Variance Change from 2016 $ in 000's Actual Forecast Budget $ % $ % Aero Revenues (incl' commercial) 285,211 308,446 311,468 (3,022) -1.0% 23,235 8.1% Non-Aeronautical Revenues 221,021 233,724 226,645 7,078 3.1% 12,702 5.7% Total O&M Expenses (261,226) (300,162) (302,711) 2,549 -0.8% (38,936) -14.9% Net Operating Income 245,006 242,008 235,403 6,605 2.8% (2,999) -1.2% ADF Interest Income 3,725 4,167 3,299 868 26.3% 442 11.9% Security Checkpoint TSA Grant 916 1,230 1,230 - 0.0% 314 34.3% Misc. Non-Operating Expenses (2,481) (750) (838) 89 -10.6% 1,732 69.8% CFC Excess (4,899) (3,020) (5,561) 2,542 -45.7% 1,879 38.4% Available for Debt Service [a] 242,267 243,636 233,532 10,104 4.3% 1,369 0.6% Debt Service 133,982 132,644 133,876 (1,233) -0.9% (1,338) -1.0% Debt Service x 1.25 [b] 167,477 165,805 167,345 (1,541) -0.9% (1,672) -1.0% Available for revenue sharing [c]=[a]-[b] 74,790 77,831 66,187 11,644 17.6% 3,041 4.1% Revenue Sharing [d]=[c]*0.5 37,395 38,916 33,093 5,822 17.6% 1,521 4.1% Increased revenue sharing drives reduction in CPE 23 Non-Aeronautical Business Fav (UnFav) Fav (UnFav) 2017 Forecast Revenue growth driven by increased 2016 YTD 2017 Year-to-Date Budget Variance Year-End Projection Budget Variance Revenue - $7.1M increase $ in 000's Actual Actual Budget $ % Forecast Budget $ % DMCBP Phase II ($5.4M) lump sum enplanements payment for prepaid frontage fees was Non-Aero Revenues expected in Q4 2016. Rental Cars - Operations 15,271 14,514 15,176 (662) -4.4% 34,474 37,815 (3,341) -8.8% Parking - strong performance partially offset by City of SeaTac parking tax Rental Cars - Operating CFC 3,872 3,284 3,689 (405) -11.0% 10,533 12,931 (2,398) -18.5% increase on March 1st. Parking tariff Public Parking 34,166 36,958 35,460 1,498 4.2% 74,443 73,568 875 1.2% rate was increased 6 weeks later on April 14th. Ground Transportation 5,668 7,633 7,067 566 8.0% 15,024 14,417 607 4.2% Strong performance in ADR, GT, and Airport Dining & Retail/Terminal Leased Space 27,118 28,976 27,374 1,602 5.9% 55,281 52,450 2,831 5.4% Clubs & Lounges continues. Commercial Properties 4,286 10,708 5,647 5,061 89.6% 17,384 12,141 5,243 43.2% Employee Parking increased Utilities 3,571 3,423 3,421 2 0.1% 7,118 7,118 - 0.0% utilization continues from prior year. Employee Parking 4,563 4,674 4,134 540 13.1% 9,482 8,482 1,000 11.8% Rental Car revenue growth continues to be challenged by the increasing options Clubs and Lounges 1,378 2,173 1,335 838 62.8% 4,979 2,729 2,250 82.4% in transportation alternatives (light Other 443 417 361 56 15.6% 5,004 4,993 11 0.2% rail, TNC's, car-sharing). Total Non-Aero Revenues 100,336 112,761 103,664 9,097 8.8% 233,724 226,645 7,078 3.1% Expenses - $0.7M decrease DMCBP Phase II ($3.6M) pre-paid Total Non-Aero Expenses 42,743 49,111 53,173 4,062 7.6% 107,424 108,124 frontage fee expense. 700 0.6% Light rail electric cart service not Net Operating Income 57,592 63,649 50,491 anticipated in the budget ($202K). 13,159 26.1% 126,299 118,521 7,778 6.6% RCF curbside assistance reinstated for Less: CFC (Surplus) / Deficit - - 0 - (3,020) (5,561) 2,542 45.7% peak periods ($310K) Adjusted Non-Aero NOI 57,592 63,649 50,491 13,159 26.1% 123,280 112,960 10,320 9.1% More than offset by lower charges from other divisions including Non-Aero Debt Service (44,921) (45,136) 215 0.5% share of AVPMG savings for Terminal Net Cash Flow 78,358 67,824 10,535 15.5% project delays and savings in other AV division expenses. Non-Aero NOI $7.8M higher than budget 24 2017 Capital Expenditures $ in 000's 2017 2017 2017 Budget Variance (1) Delays in payment cycle and construction ramp up. Description YTD Actual Forecast Budget $ % (2) Delays in enabling work and main building design International Arrivals Fac-IAF (1) efforts. 35,875 119,159 202,598 83,439 41.2% (3) Spending deferred to 2018 to evaluate the impact of Concourse D Hardstand Holdroom (2) 426 6,926 22,163 15,237 68.7% passenger growth and capacity loads on existing STS Additional STS Cars (3) - - 6,525 6,525 100.0% trains. (4) Delays in contracting efforts and issuance of notice Checked Bag Recap/Optimization (4) 2,992 17,992 24,256 6,264 25.8% to proceed (NTP). NS NSAT Renov NSTS Lobbies (5) 21,752 58,835 64,285 5,450 8.5% (5) Delays with negotiating maximum allowable N. Terminals Utilities Upgrade (6) 575 2,575 7,996 5,421 67.8% construction cost (MACC) pushed out construction timeline. Fuel System Modifications (7) 4,740 8,708 11,600 2,892 24.9% (6) Half of the Early Works portion of the project was Alternate Utility Facility (8) 2,116 21,616 23,998 2,382 9.9% cancelled due to operational concerns from airlines. Add'l Baggage Makeup Space IAF 949 12,699 13,475 776 5.8% Delay in starting construction for the remaining Early Works portion. Service Tunnel Renewal/Replace 643 7,793 8,000 207 2.6% (7) Future fuel system work will be covered under Concourse B Gate Reconfigure 203 9,770 9,819 50 0.5% C800772 (Fuel Hydrant Pit Program). Additional savings of $1.7M attributable to 2016 project work All Other 41,630 123,410 160,002 36,591 22.9% planned in 2017. Total Spending 111,901 389,483 554,717 165,234 29.8% (8) Major contractor submitting invoices slower than anticipated. 2017 spending forecasted to be 70% of budget 25 SAMP Overview Description Fav (Unfav) Inc (Decr) 2016 2017 2017 Budget Variance Change from 2016 $ in 000's Actual Forecast Budget $ % $ % SAMP Completion & Transition to Env Review 1,591 1,000 500 (500) -100.0% (591) -37.1% Adv Planning IDIQ - Master Plan 0 2,300 3,500 1,200 34.3% 2,300 n/a Environmental Review - Master Plan 208 350 2,300 1,950 84.8% 142 68.3% SAMP Utilities Evaluation 0 500 500 0 0.0% 500 n/a Total SAMP-related Spending 1,799 4,150 6,800 2,650 39.0% 2,351 130.7% Advance Planning and Environmental Review in support of Master Plan projects deferred pending completion of SAMP. Delayed start will increase budget requirement in future years. SAMP implementation timing 26 Maritime Division 2017 Financial Performance Report Maritime 2017 Financial Summary Budget Variance Fav (UnFav) Fav (UnFav) Grain driving favorable 2016 YTD 2017 Year-to-Date Budget Variance Year End Projections Budget Variance to budget revenue. $ in 000's Actual Actual Budget $ % Forecast Budget $ % Operating expenses Operating Revenue 22,027 24,525 23,868 657 3% 51,682 51,830 (148) 0% Security Grants 0 0 0 0 NA 0 0 0 NA below budget driven by Total Revenues 22,027 24,525 23,868 657 3% 51,682 51,830 (148) 0% maintenance & payroll Maritime Expenses (excl Maint) 4,993 4,929 6,523 1,595 24% 13,791 12,791 (1,000) -8% savings. Maintenance Expenses 4,716 4,740 6,028 1,287 21% 11,439 11,439 0 0% Variance from 2016 P69 Facilities Expenses 134 141 189 48 25% 343 343 0 0% Revenue growth seen in Other ED Expenses 1,710 1,982 2,228 246 11% 4,262 4,262 0 0% Environmental & Sustainability 303 598 805 207 26% 1,701 1,701 0 0% Grain (53%), Cruise CDD Expenses 522 419 589 170 29% 1,177 1,177 0 0% (16%), Rec Boating Police Expenses 1,925 1,889 1,921 32 2% 3,867 3,867 0 0% (7%), and Maritime Corporate Expenses 4,423 4,839 5,356 517 10% 10,924 10,924 0 0% Portfolio Management Envir Remed Liability 48 371 0 (371) NA 0 0 0 NA (4%). Total Expenses 18,775 19,907 23,640 3,732 16% 47,502 46,502 (1,000) -2% Expense growth driven NOI Before Depreciation 3,252 4,618 228 4,390 1922% 4,179 5,327 (1,148) -22% by Corporate, EDD, and Depreciation 8,655 8,442 8,343 (98) -1% 16,672 16,672 0 0% Environmental. NOI After Depreciation (5,404) (3,824) (8,115) 4,291 -53% (12,493) (11,345) (1,148) -10% Unfilled positions and project delays driving lower costs 28 Maritime Capital 2017 Budget Variance 2017 YTD 2017 2017 Cruise Tenant Actual Forecast Budget $ % $ in 000's Improvement: Favorable Cruise Terminal Tenant Improv 11,819 14,356 15,228 872 6% due to permit delays and P91 South End Fender 35 3,272 3,347 75 2% main construction FT Net Shed 3,4,5 &6 Roof Rpl 323 2,177 2,837 660 23% postponed to Oct 2017. Small Projects 572 2,531 2,685 154 6% Contingency Renewal & Replace. 0 1,825 2,000 175 9% SBM Restrms/Service Bldgs Rep 173 1,184 1,694 510 30% Shilshole Bay Marina Maritime Fleet Replacement 36 1,023 1,586 563 35% Restroom and Services T91 Building C-173 Roof Overl 112 1,219 1,321 102 8% Building Replacement: T91 P91W Slope Stabilization 65 115 650 535 0% Overall schedule FT Strategic Plan 193 993 580 (413) 41% delayed due to 2nd floor T91 Camel Replacements 4 174 0 (174) 100% decision by sponsor. All Other 152 1,589 2,590 1,001 39% Total Maritime 13,484 30,458 34,518 4,060 12% Maritime Division 88% of Capital Budget 29 Stormwater Utility 2017 Financial Summary Fav (UnFav) Fav (UnFav) Revenue: ($3K) unfavorable 2016 YTD 2017 Year-to-Date Budget Variance Year End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Variance from timing StormWater Utility in the budget. Annual NWSA 1,708 1,706 1,713 (7) 0% 3,426 3,426 - 0% revenue forecast right Tenants Revenue 120 213 210 3 2% 419 419 - 0% Non-tenants Revenue 541 564 564 1 0% 1,110 1,110 - 0% at budget. Total Revenues 2,369 2,483 2,486 (3) 0% 4,955 4,955 - 0% Expenses: $112K favorable SWU Direct 51 267 536 270 50% 1,056 1,056 - 0% Invoice timing of key Maintenance Expenses 324 1,129 1,132 2 0% 2,260 2,260 - 0% outside support vendor Other Maritime Expenses - - - - NA - - - NA to be applied in 2H EDD Expenses 0 10 17 7 42% 32 32 - 0% Environmental & Sustainability 11 261 82 (179) -220% 168 168 - 0% 2017. Annual CDD Expenses 20 31 29 (1) -4% 59 59 - 0% expenses to come in Police Expenses - - - - NA - - - NA right at budget. Corporate Expenses 4 188 201 13 6% 418 418 - 0% Total Expenses 410 1,885 1,997 112 6% 3,993 3,993 - 0% NOI Before Depreciation 1,959 598 489 109 22% 963 963 - 0% Depreciation 445 498 484 (14) -3% 929 929 - 0% NOI After Depreciation 1,515 101 5 95 1830% 34 34 - 0% Net Operating Income forecast to budget 30 Economic Development Division Q2 2017 Financial Performance Report EDD 2017 Financial Summary Fav (UnFav) Fav (UnFav) 2016 YTD 2017 Year-to-Date Budget Variance Year End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Revenue 3,819 4,182 3,850 332 9% 8,344 8,088 256 3% Conf & Event Ctr Revenue 4,518 3,545 3,360 185 6% 8,083 7,943 140 2% Total Revenue 8,338 7,727 7,210 517 7% 16,427 16,030 396 2% Portfolio Management 1,618 2,053 2,277 224 10% 3,971 4,161 190 5% Conf & Event Centers 3,665 3,660 3,914 254 6% 7,905 7,935 30 0% P69 Facilities Expenses 81 96 129 33 26% 194 234 40 17% Small Business 9 26 100 73 73% 161 161 (0) 0% Workforce Development 150 228 804 576 72% 1,999 1,999 (0) 0% Tourism 420 514 638 124 19% 1,285 1,285 0 0% RE Dev & Planning 211 120 143 23 16% 223 303 80 26% EDD Grants 0 427 250 (177) -71% 940 960 20 2% EconDev Expenses Other 330 383 659 276 42% 1,204 1,413 209 15% Maintenance Expenses 1,253 1,483 1,802 319 18% 3,410 3,592 182 5% Maritime Expenses (Excl Maint) 14 25 28 4 13% 64 64 (0) -1% Environmental & Sustainability 9 130 218 88 40% 361 451 90 20% CDD Expenses 153 200 220 20 9% 435 439 4 1% Police Expenses 81 85 86 2 2% 172 173 1 1% Corporate Expenses 1,959 2,632 2,895 263 9% 5,840 5,899 59 1% Envir Remed Liability 0 0 0 (0) NA 0 0 0 NA Total Expense 9,952 12,061 14,162 2,102 15% 28,163 29,069 906 3% NOI Before Depreciation (1,615) (4,333) (6,952) 2,619 38% (11,736) (13,039) 1,303 10% Depreciation 1,881 1,860 1,922 62 3% 3,461 3,461 0 0% NOI After Depreciation (3,496) (6,194) (8,875) 2,681 30% (15,198) (16,500) 1,303 8% Strong Occupancy and Timing of Expenses 32 Contribution to Maritime Division Fav (UnFav) Incr (Decr) 2016 YTD 2017 YTD Budget Variance Change from 2016 $ in 000's Actual Actual Budget $ % $ % Revenues: Maritime Industrial 3,075 3,306 3,345 (39) -1% 230 7% Marina Office & Retail 2,024 1,961 2,002 (40) -2% (63) -3% Total Revenues to Other Divisions 5,100 5,267 5,346 (79) -1% 167 3% Expenses to Other Divisions Maritime Portfolio Mgmt 4,650 5,146 6,067 921 15% 496 11% NOI Before Depreciation 450 121 (721) (842) 117% (329) -73% EDD making contribution to Maritime Division 33 EDD Capital 2017 $ in 000's 2017 YTD 2017 2017 Budget Variance Actual Forecast Budget $ % Econ Dev 1,512 5,030 6,304 1,274 20% Planned Capital Projects Moving Forward 34 Corporate Q2 2017 Financial Performance Report Corporate Expense by Category Fav (UnFav) Incr (Decr) 2016 YTD 2017 Year-to-Date Budget Variance Change from 2016 $ in 000's Actual Actual Budget $ % $ % Salaries & Benefits 32,717 34,654 38,382 3,728 9.7% 1,937 5.9% Payroll savings due Wages & Benefits 10,695 10,679 11,095 416 3.7% (16) -0.2% to delay hiring, vacant positions, and Payroll to Capital Projects 8,610 11,207 11,309 101 0.9% 2,597 30.2% project delays. Equipment Expense 750 1,230 1,125 (105) -9.4% 481 64.1% Supplies & Stock 427 493 739 247 33.4% 66 15.4% Outside Services Outside Services 7,810 13,311 24,732 11,421 46.2% 5,501 70.4% saving mainly came Travel & Other Employee Exps 1,095 1,188 2,012 824 41.0% 93 8.5% from project delays, Insurance Expense 1,192 1,167 1,250 83 6.6% (25) -2.1% advanced planning IDIQ for SAMP and Litigated Injuries & Damages 223 838 - (838) 0.0% 614 275.0% environmental Other 85 1,633 1,384 (248) -17.9% 1,548 1821.2% review for SAMP. Charge to Capital (13,712) (19,219) (22,749) (3,530) 15.5% 5,507 40.2% Total 49,892 57,181 69,279 12,099 17.5% 7,288 14.6% Most of the budget savings came from payroll and outside services 36 Financial Summary by Dept. Fav (UnFav) Fav (UnFav) Incr (Decr) 2016 YTD 2017 Year-to-Date Budget Variance Year-End Projections Budget Variance Change from 2016 $ in 000's Actual Actual Budget $ % Forecast Budget $ % $ % Total Revenues 75 82 151 (69) -45.7% 367 367 - 0.0% 7 9.6% Executive 1,019 623 958 335 35.0% 1,764 1,944 181 9.3% (396) -38.9% Commission 723 867 949 82 8.6% 1,748 1,830 82 4.5% 144 19.9% Legal 1,510 1,877 1,642 (234) -14.3% 3,504 3,288 (216) -6.6% 367 24.3% Public Affairs 2,795 3,426 3,985 558 14.0% 7,683 7,847 164 2.1% 632 22.6% Human Resources 3,294 3,829 4,449 621 13.9% 8,825 9,035 210 2.3% 534 16.2% Labor Relations 568 1,389 669 (720) -107.6% 2,048 1,313 (735) -56.0% 821 144.6% Internal Audit 673 612 891 279 31.3% 1,713 1,770 56 3.2% (61) -9.1% Office of Strategic Initiatives 2,235 2,719 3,192 474 14.8% 5,964 6,264 300 4.8% 484 21.7% Police 11,312 11,378 11,866 488 4.1% 23,689 23,884 196 0.8% 66 0.6% Security and Preparedness 647 732 855 122 14.3% 1,984 2,065 81 3.9% 85 13.2% Contingency 126 12 125 113 90.2% 250 250 - 0.0% (113) -90.2% Finance Accounting & Financial Reporting Services 3,364 3,439 3,893 454 11.7% 7,435 7,763 328 4.2% 76 2.2% Information & Communication Technology 10,228 10,693 10,543 (150) -1.4% 22,345 22,420 75 0.3% 464 4.5% Finance & Budget 2,378 2,254 2,781 527 19.0% 5,499 5,873 374 6.4% (125) -5.2% Business Intelligence 416 633 714 81 11.3% 1,423 1,458 35 2.4% 217 52.1% Risk Services 1,619 1,588 1,737 149 8.6% 3,293 3,470 177 5.1% (31) -1.9% Sub-Total 18,006 18,606 19,667 1,061 5.4% 39,996 40,985 989 2.4% 601 3.3% Total Before CDD and Environmental 42,907 46,070 49,249 3,179 6.5% 99,167 100,475 1,308 1.3% 3,163 7.4% Most Corporate departments had a favorable budget variance in Q2 37 Financial Summary by Dept. Con't Fav (UnFav) Fav (UnFav) Incr (Decr) 2016 YTD 2017 Year-to-Date Budget Variance Year-End Projections Budget Variance Change from 2016 $ in 000's Actual Actual Budget $ % Forecast Budget $ % $ % Capital Development Engineering 2,227 2,646 3,420 774 22.6% 7,081 7,092 11 0.2% 420 18.9% Port Construction Services 1,182 1,116 2,033 917 45.1% 3,949 4,079 130 3.2% (66) -5.6% Aviation PMG 560 3,151 8,315 5,164 62.1% 8,737 13,005 4,268 32.8% 2,591 462.8% Seaport PMG 566 627 459 (168) -36.6% 947 912 (35) -3.8% 61 10.7% Capital Development Admin 212 222 220 (2) -0.9% 450 447 (3) -0.6% 11 5.0% Sub-Total 4,747 7,763 14,448 6,684 46.3% 21,164 25,535 4,371 17.1% 3,016 63.5% Environment & Sustainability Aviation Environmental 1,407 1,623 2,833 1,211 42.7% 4,915 6,301 1,386 22.0% 216 15.3% Maritime Environmental & Planning 484 1,231 1,126 (105) -9.3% 2,392 2,385 (8) -0.3% 747 154.5% Noise Programs 348 347 330 (17) -5.1% 738 723 (15) -2.1% (1) -0.4% Environment & Sustainability 1 146 1,293 1,146 88.7% 1,523 2,523 1,000 39.6% 146 16684.6% Sub-Total 2,239 3,347 5,582 2,236 40.0% 9,569 11,932 2,363 19.8% 1,107 49.5% Total Expenses 49,893 57,181 69,279 12,099 17.5% 129,900 137,942 8,042 5.8% 7,287 14.6% Corporate operating expenses were $8.0M favorable to budget in Q2 38 Corporate Capital Spending 2017 YTD 2017 2017 Budget Variance $ in 000's Actual Forecast Budget $ % Infrastructure - Small Cap 438 1,581 1,581 0 0.0% Services Tech - Small Cap 277 1,000 1,150 150 13.0% Enterprise GIS - Small Cap 0 200 400 200 50.0% Constr Doc Mgmt Sys Repl. 207 427 427 0 0.0% Project Cost Mgmt System 110 419 900 481 53.4% POS Website Redevelopment 207 679 796 117 14.7% Supplier Database System 0 250 700 450 64.3% Corporate Firewall 0 1,300 800 (500) -62.5% CDD Fleet Replacement 21 589 589 0 0.0% Cap Dev Small Cap 0 340 340 0 0.0% Other (note 1) 314 1,370 1,640 270 16.5% TOTAL 1,574 8,155 9,323 1,168 12.5% Note: (1) "Other" includes remaining ICT projects, Corporate fleet replacement and small capital acquistion. 2017 capital spending forecasted to be 87.5% of budget 39
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