7a supp
ITEM NO. 7a_____________ DATE OF MEETING: Oct 8, 2013 Aviation Division 2014 Preliminary Operating Budget Briefing October 8, 2013 EXECUTIVE SUMMARY 2 Overview Enplanement growth assumption: + 2.2% Budget target: 3.0% increase in O&M, allowing for exceptions Major expense changes: ' Completion of Airline Realignment ' Sustainable master plan ' Corporate allocations Major Revenue changes: ' Aero based on SLOA III: revenue sharing, cost of vacant space ' Non-Aero growing by 4.2%: Concessions, rental cars, public parking, in-flight meals 3 Aviation Expense Summary $000s Cost increases and new 2013 Budget 176,291 items absorbed into One-time exceptions (1,665) Realignment (16,069) baseline budget (+ 3%) RMM (4,615) ' Includes both recurring costs 2013 Baseline Budget 153,942 and one-time items. 3.0% increase 4,618 2014 Budget Target - Baseline 158,560 Exceptions to 3% Target listed in table Proposed Baseline Budget (1) 158,391 Savings vs Target (168) ' Major multi-year non- recurring items Proposed Exeptions to Target ' RMM driven by capital 1. Sustainable Airport Master Plan (CA) 2,300 program 2. Concessions Master Plan + Recruitment 450 3. RMM 2,356 Total Exeptions (2) 5,106 Proposed 2014 Budget (1)+(2) 163,497 4 Summary of Major Initiatives Within Baseline Budget Strategic Initiatives Total Major new initiatives include: Safe, Secure Airport 60 ' Centralized management of FIS Customer Needs/Capacity 1,652 operations ($866,155) Asset Management 245 Customer Service 473 ' Joint marketing costs for new Environmental Innovation 260 international service (CA), Airline Cost Management 450 ($550,000 new, $938,000 total) Non-Airline Revenue Development 1,426 ' $550,000 consulting for Burien NE Employee/Organizational Development 338 redevelopment area grant Community Partnership 100 request and FAA pilot program Subtotal - Strategic Goals: 5,004 ' Fire Dept. new breathing apparatuses ($331,085) Contractual/Required 1,227 ' Increase in janitorial costs Other 156 ($473,007) Major Initiatives within Baseline Budget: 6,387 ' Utilities cost increases ($580,467) 5 Aeronautical Business 2012 2013 2013 2014 Budget Change $ in 000's Actual Budget Forecast Budget $ % Revenues: Movement Area 74,526 74,526 100.0% Apron Area 10,208 10,208 100.0% Terminal Rents 144,495 144,495 100.0% Federal Inspection Services (FIS) 8,598 8,598 100.0% Total Rate Base Revenues 237,827 237,827 100.0% Commercial Area 9,517 9,517 100.0% Subtotal before Revenue Sharing 233,000 249,799 248,549 247,344 (2,455) -1.0% Revenue Sharing (5,406) (5,406) 100.0% Total Airline Revenues 233,000 249,799 248,549 241,938 (7,861) -3.2% Operating Expene 147,032 162,150 161,604 151,875 (10,275) -6.8% Net Operating Income 85,968 87,649 86,945 90,063 2,414 2.7% Debt Service 78,886 82,506 78,794 82,232 (275) -0.3% Net Cash Flow 7,082 5,143 8,150 7,831 2,688 34.3% 6 Non-Airline Business 2012 2013 2013 2014 Budget Change $ in 000's Actual Budget Forecast Budget $ % Non-Aero Revenues Rental Cars 38,072 39,236 38,489 40,783 1,547 3.9% Public Parking 49,781 50,948 50,948 52,138 1,189 2.3% Ground Transportation 7,900 7,267 7,464 7,555 288 4.0% Concessions 37,998 41,263 40,447 43,339 2,076 5.0% Other 19,273 19,113 19,625 20,595 1,482 7.8% Total Non-Aero Revenues 153,022 157,826 156,972 164,410 6,584 4.2% RCF Operating Expense 6,196 9,121 7,580 7,640 (1,481) -23.9% Operating Expense 64,855 68,911 66,721 74,290 5,379 8.3% Share of terminal O&M 18,366 18,615 20,802 22,505 3,890 21.2% Less utility internal billing (19,883) (17,095) (17,095) (18,302) (1,206) 6.1% Net Operating & Maint 69,533 79,552 78,007 86,133 6,581 9.5% Net Operating Income 83,489 78,274 78,965 78,277 2 0.0% Less: CFC Surplus (3,702) (3,465) (4,028) (4,780) (1,315) 37.9% Adjusted Non-Aero NOI 79,787 74,809 74,937 73,497 (1,312) -1.8% Debt Service 43,166 44,173 48,195 46,506 2,333 5.3% Net Cash Flow 36,621 30,636 26,742 26,991 (3,646) -11.9% Key Measures Revenues Per Enplanement 9.22 9.27 9.08 9.30 0.03 0.3% Primary Concessions Sales/Enpl. 10.91 11.25 11.13 11.47 0.22 2.0% 7 Budget Summary & Key Measures 2012 2013 2013 2014 Budget Change $ in 000's Actual Budget Forecast Budget $ % Aeronautical Revenues 233,000 249,799 248,549 241,938 (7,861) -3.1% SLOA III Incentive Straight Line Adj. (3,576) Non-Aeronautical Revenues 153,022 157,827 156,972 164,410 6,583 4.2% Total Operating Revenues 386,022 407,626 405,521 402,772 (4,854) -1.2% Expenses: Baseline Airport Expenses 144,880 153,942 154,905 158,211 4,270 2.8% Budget Target Exceptions 1,665 543 2,930 1,265 - Environmental Remediation Liability 5,321 4,615 9,471 2,356 (2,259) -49.0% Airline Realignment 5,802 16,069 14,311 - (16,069) - Total Airport Expenses 156,004 176,291 179,229 163,497 (12,794) -7.3% Corporate/CDD 60,562 65,411 63,170 74,511 9,100 13.9% Total Airport Expenses 216,565 241,702 242,399 238,008 (3,693) -1.5% NOI 169,457 165,924 163,122 164,763 (1,161) -0.7% Key Measures Enplaned Passengers (000s) 16,597 17,017 17,294 17,675 658 3.9% CPE ($) 13.23 13.89 13.60 12.82 (1.08) -7.7% Debt Service Coverage 1.40 1.35 1.34 1.33 (0.02) -1.2% Debt Service Cov. after Rev. Sharing 1.29 Non-Aero NOI less CFC Surplus ($000) 79,787 74,810 74,937 73,497 (1,313) -1.8% 8 Financial Forecast In $000's 2013 Bud 2014 Bud 2015 2016 2017 2018 Airline Revenue* 249,799 241,938 262,941 284,687 308,809 316,375 Non-Airline Revenue 157,827 164,410 170,255 175,793 184,350 193,141 Total Revenue 407,626 406,348 433,195 460,480 493,159 509,516 Operating Expense 241,702 238,008 244,648 251,666 258,302 265,032 Net Operating Income 165,924 168,340 188,547 208,814 234,857 244,484 Net Non-Operating Income/Expense 5,795 2,769 2,839 2,806 2,837 2,894 CFC Excess** (3,465) (4,780) (2,899) (1,399) (1,096) (584) Available for Debt Service 168,254 166,329 188,488 210,222 236,598 246,794 Debt Service (179,886) (182,247) (200,646) (220,571) (245,765) (253,578) Debt Service Paid by CFCs 19,873 19,968 20,586 21,872 23,230 24,836 Debt Service Paid by PFCs 33,800 33,541 33,800 33,800 33,800 33,800 Net Debt Service 126,213 128,738 146,259 164,900 188,735 194,943 Net Cash Flow 42,041 37,590 42,228 45,322 47,863 51,851 Key Measures Debt Service Coverage - Before Revenue Sharing 1.33 1.33 1.33 1.30 1.26 1.28 Debt Service Coverage - After Revenue Sharing n/a 1.29 1.29 1.27 1.25 1.27 Revenue Sharing n/a 5,406 5,663 4,097 679 3,115 Passenger Airline CPE 13.80 12.82 13.64 14.48 15.42 15.47 Debt per Enplaned Passenger 143.8 143.0 146.5 154.8 158.7 161.2 * Excludes accounting impact of SLOA III incentive straight line adjustment ** CFC collections in excess of CFC debt service/O&M are restricted and cannot be used for other revenue bond debt service 9 FULL BACKGROUND PRESENTATION 10 Outline Sea-Tac Update & Enplanement Forecast Economics of SLOA III Budget Approach & Targets 2014 Budget: ' Expense Summary ' Baseline Budget Initiatives ' Aeronautical and Non-Airline Business Budget Summary and Key Measures Financial Forecast 11 Sea-Tac Update and Enplanement Forecast YTD enplanements through August: ' Int'l +11.0% 'Domestic + 4.1% 'Total + 4.7% Delta announced new service, domestic and international 2014 enplanement growth forecast: +2.2% 12 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, but shares with airlines 50% of net revenues >1.25x ' Airfield Commercial Area is compensatory (cargo assets and investments are not in airline rate base) Implications vs. SLOA II: ' Lower Non-aero net income ' Lower debt service coverage ' Lower airline costs (CPE) 13 Budget Approach & Targets Century Agenda and Airport strategies drive business plan Business plan drives budget Budget target focus: manage growth of baseline budget (recurring costs) Budget targets: 'Limit growth of O&M to 3.0% Subject to exceptions for one-time items 'Grow Non-airline NOI 14 Budget Drivers Expenses: ' Completion of airline realignment in 2013 ' Ongoing major initiatives: Sustainable master plan Concessions master plan and recruitment ' Payroll, utilities, new initiatives, cost increases Revenues: ' Non-aero growth of 4.5% due to: Concessions, particularly duty free In-flight meals Public parking ' Aero revenues down due to removal of costs for airline realignment and SLOA III revenue sharing 15 Aviation Expense Summary $000s Cost increases and new 2013 Budget 176,291 items absorbed into One-time exceptions (1,665) Realignment (16,069) baseline budget (+ 3%) RMM (4,615) ' Includes both recurring costs 2013 Baseline Budget 153,942 and one-time items. 3.0% increase 4,618 2014 Budget Target - Baseline 158,560 Exceptions to 3% Target listed in table Proposed Baseline Budget (1) 158,391 Savings vs Target (168) ' Major multi-year non- recurring items Proposed Exeptions to Target ' RMM driven by capital 1. Sustainable Airport Master Plan (CA) 2,300 program 2. Concessions Master Plan + Recruitment 450 3. RMM 2,356 Total Exeptions (2) 5,106 Proposed 2014 Budget (1)+(2) 163,497 16 Summary of Major Initiatives Within Baseline Budget Strategic Initiatives Total The following slides provide Safe, Secure Airport 60 Customer Needs/Capacity 1,652 details for each of the Airport Asset Management 245 strategies summarized in this Customer Service 473 table Environmental Innovation 260 Airline Cost Management 450 Non-Airline Revenue Development 1,426 Employee/Organizational Development 338 Community Partnership 100 Subtotal - Strategic Goals: 5,004 Contractual/Required 1,227 Other 156 Major Initiatives within Baseline Budget: 6,387 17 Baseline Budget Initiatives - Details Description in $000's Safe, Secure Airport ACI APEX Safety Review 20 Capital program is driving need Triennial Exercise 40 Safe, Secure Airport - Total: 60 for infrastructure engineers, and building inspector Customer Needs/Capacity (1) FTE - Baggage Handling Coordinator 83 Centralized management of FIS (1) FTE - Building Inspector/Plans Examiner 38 (1) FTE - Infrastructure Engineer, Electrical 45 operations is taking over function (1) FTE - Infrastructure Engineer, Mechanical 45 currently performed by airlines (1) FTE - Centralized Management of FIS Operations 111 Centralized Management of FIS Operations 755 Joint Marketing for new Joint marketing - new international air services 550 international services to London, On-Call Gate Planning Support 25 Customer Needs/Capacity - Total: 1,652 Seoul and Hong Kong Asset Management Additional maintenance materials Additional Thermoplastic Material Purchase 80 needed for new and existing Lighting Materials 70 Station Batteries at South Terminal Dist. 25 assets Operating expenses for New MCV 10 (4) Scooter Replacements 60 Asset Management- Total: 245 18 Baseline Budget Initiatives - Details Description in $000's Customer Service Increase in Janitorial contract Added Scope in New Janitorial Contract 473 Customer Service - Total: 473 both scope and cost Environmental Innovation Water system comprehensive plan Improved Electric Vehicle Infrastructure 10 required every five years Water System Comprehensive Plan 250 Environmental Innovation - Total: 260 Energy management system Airline Cost Management initiative will add meters to all Energy Management System Development 300 areas of terminal Financial Consulting - SLOA III implementation 150 Airline Cost Management - Total: 450 $125,000 for Music initiative will Non-Airline Revenue Development be matched by tenant marketing 24th Ave. Planning Consultant 50 fund for total of $250,000 Airport Music Initiative 125 Burien NERA 3 consultant and FAA Pilot program share 550 Real estate consultant for Burien Consulting Services for New Revenue Development 50 NE redevelopment area will assist DMCBP Landlord Liaison 100 Garage Facility Improvements 250 with grant application and Airport Hotel RFP 100 feasibility study Parking Consulting Services 60 Parking Pre-Booking Expenses 105 Garage improvements will focus Search Engine Marketing Services 36 on the 4th floor Non-Airline Revenue Development - Total: 1,426 19 Baseline Budget Initiatives - Details Description in $000's Expanding resources committed Employee/Organizational Development (1) FTE - Continuous Process Improvement Specialist 98 to Continuous Process Aviation Graduate Fellowship 60 Improvement initiative by adding Aviation Succession Program Pilot 30 FTE and continuing with Business Intelligence Strategy Plan Development 60 Continuous Process Improvement Consultant 90 consulting support Employee/Organizational Development - Total: 338 Aviation working with HRD on Community Partnership succession planning Part 150 Noise Compatibility Study/AIP 100 Community Partnership - Total: 100 Graduate fellowship is limited Contractual/Required duration FTE Public Parking credit card processing and bank fees 236 Self Contained Breathing Apparatus - Fire dept 331 Increased use of credit card in Utilities Commodities Cost Increase 580 parking garage SPCC Plan Funding 80 Contractual/Required - Total: 1,227 All Fire Dept. breathing Other 156 apparatuses are in need of replacement Major Initiatives within Baseline Budget: 6,387 20 FTEs 2014 Proposed Budget FTEs FTEs % 2013 Approved Budget 846.75 Sr Administrative Assistant - Environmental 0.07 Environmental Program Mgr - Environmental 0.52 Sr Access Controller - Airfield Security 2.00 Airport Office Building On-call Receptionist 0.12 2013 Baseline 849.46 2014 Budget Changes: Driven by Capital Program: Fire Prevention Engineer - Fire Dept 1.00 Building Inspector/Plans Examiner - Bldg Dept 1.00 Infrastructure Engineer, Electrical - F&I 1.00 Infrastructure Engineer, Mechanical - F&I 1.00 Driven by operational and strategic needs Continuous Process Improvement - ADO 1.00 Aviation Graduate Fellowship - ADO 1.00 Centralized Management of FIS Operations 1.00 Landside Operations Supervisor 1.00 Baggage Handling Coordinator 1.00 2014 Budget Changes: 9.00 2014 Budget Proposed FTEs 858.46 1.1% 21 Aeronautical Business 2012 2013 2013 2014 Budget Change $ in 000's Actual Budget Forecast Budget $ % Revenues: Movement Area 74,526 74,526 100.0% Apron Area 10,208 10,208 100.0% Terminal Rents 144,495 144,495 100.0% Federal Inspection Services (FIS) 8,598 8,598 100.0% Total Rate Base Revenues 237,827 237,827 100.0% Commercial Area 9,517 9,517 100.0% Subtotal before Revenue Sharing 233,000 249,799 248,549 247,344 (2,455) -1.0% Revenue Sharing (5,406) (5,406) 100.0% Total Airline Revenues 233,000 249,799 248,549 241,938 (7,861) -3.2% Operating Expene 147,032 162,150 161,604 151,875 (10,275) -6.8% Net Operating Income 85,968 87,649 86,945 90,063 2,414 2.7% Debt Service 78,886 82,506 78,794 82,232 (275) -0.3% Net Cash Flow 7,082 5,143 8,150 7,831 2,688 34.3% 22 Non-Airline Business 2012 2013 2013 2014 Budget Change $ in 000's Actual Budget Forecast Budget $ % Non-Aero Revenues Rental Cars 28,288 26,737 26,968 28,261 1,524 5.7% CFC Operating Revenues (RCF) 9,745 11,013 11,299 12,420 1,407 12.8% RCF Reimbursable Revenue 38 1,486 222 102 (1,383) -93.1% RCF Subtotal 38,072 39,236 38,489 40,783 1,547 3.9% Public Parking 49,781 50,948 50,948 52,138 1,189 2.3% Ground Transportation 7,900 7,267 7,464 7,555 288 4.0% Concessions 37,998 41,263 40,447 43,339 2,076 5.0% Other 19,273 19,113 19,625 20,595 1,482 7.8% Total Non-Aero Revenues 153,022 157,826 156,972 164,410 6,584 4.2% RCF Operating Expense 6,196 9,121 7,580 7,640 (1,481) -23.9% Operating Expense 64,855 68,911 66,721 74,290 5,379 8.3% Share of terminal O&M 18,366 18,615 20,802 22,505 3,890 21.2% Less utility internal billing (19,883) (17,095) (17,095) (18,302) (1,206) 6.1% Net Operating & Maint 69,533 79,552 78,007 86,133 6,581 9.5% Net Operating Income 83,489 78,274 78,965 78,277 2 0.0% Less: CFC Surplus (3,702) (3,465) (4,028) (4,780) (1,315) 37.9% Adjusted Non-Aero NOI 79,787 74,809 74,937 73,497 (1,312) -1.8% Debt Service 43,166 44,173 48,195 46,506 2,333 5.3% Net Cash Flow 36,621 30,636 26,742 26,991 (3,646) -11.9% 23 Non-Airline Key Measures 2012 2013 2013 2014 Budget Change Actual Budget Forecast Budget $ % Revenues Per Enplanement Parking 3.00 2.99 2.95 2.95 (0.04) -1.5% Rental Cars (excludes CFCs) 1.70 1.57 1.56 1.60 0.03 1.8% Ground Transportation 0.48 0.43 0.43 0.43 0.00 0.1% Concessions 2.29 2.42 2.34 2.45 0.03 1.1% Other 1.75 1.86 1.80 1.90 0.04 2.2% Total Revenues 9.22 9.27 9.08 9.33 0.05 0.6% Primary Concessions Sales/Enpl. 10.91 11.25 11.13 11.47 0.22 2.0% 24 2014 Budget by Business Unit Total For SLOA III $ in 000's Revenue Incentive SL Aero Non-Aero Other Sharing Adjustment Total Revenues 247,344 164,410 411,753 (3,576) 408,178 Revenue Sharing (5,406) (5,406) (5,406) Total after Revenue Sharing 241,938 164,410 - 406,348 (3,576) 402,772 Operating Expenses 151,875 86,133 238,008 238,008 Net Operating Income 90,063 78,277 - 168,340 (3,576) 164,764 ADF Interest Income 2,000 2,000 2,000 Non-operating grants 1,269 1,269 1,269 Misc. Non-Operating Expenses (500) (500) (500) CFC Excess (4,780) (4,780) (4,780) Available for Debt Service 90,063 73,497 2,769 166,328 (3,576) 162,752 Net debt service 82,232 46,506 128,738 128,738 Cash Flow 7,831 26,991 2,769 37,590 (3,576) 34,014 Debt Service Coverage 1.29 25 Expense Summary by Account 2012 2013 2013 2014 Budget Change $ in 000's Actual Budget Forecast Budget $ % Expenses: Salaries, Wages & Benefits 89,790 97,842 97,275 98,028 187 0.2% Outside Services 28,913 45,453 42,869 31,603 (13,850) -43.8% Supplies & Stock 5,944 4,284 4,564 4,361 77 1.8% Utilities 13,671 12,425 13,045 13,458 1,033 7.7% Other Expenses 12,364 11,672 12,005 13,691 2,019 14.8% Baseline Airport Expenses 150,683 171,676 169,759 161,141 (10,535) -6.5% Environmental Remediation Liability 5,321 4,615 9,471 2,356 (2,259) -95.9% Total Airport Expenses 156,004 176,291 179,229 163,497 (12,794) -7.8% Corporate Expenses 34,254 37,314 36,041 42,696 5,383 12.6% Police Costs 16,156 16,891 16,450 16,982 91 0.5% Capital Development & RE 10,151 11,206 10,679 14,833 3,627 24.5% Total Allocated Expenses 60,562 65,411 63,170 74,511 9,100 - 12.2%n/a Total Operating Expenses 216,565 241,702 242,399 238,008 (3,693) -1.6% 26 Budget Summary & Key Measures 2012 2013 2013 2014 Budget Change $ in 000's Actual Budget Forecast Budget $ % Aeronautical Revenues 233,000 249,799 248,549 241,938 (7,861) -3.1% SLOA III Incentive Straight Line Adj. (3,576) Non-Aeronautical Revenues 153,022 157,827 156,972 164,410 6,583 4.2% Total Operating Revenues 386,022 407,626 405,521 402,772 (4,854) -1.2% Expenses: Baseline Airport Expenses 144,880 153,942 154,905 158,211 4,270 2.8% Budget Target Exceptions 1,665 543 2,930 1,265 - Environmental Remediation Liability 5,321 4,615 9,471 2,356 (2,259) -49.0% Airline Realignment 5,802 16,069 14,311 - (16,069) - Total Airport Expenses 156,004 176,291 179,229 163,497 (12,794) -7.3% Corporate/CDD 60,562 65,411 63,170 74,511 9,100 13.9% Total Airport Expenses 216,565 241,702 242,399 238,008 (3,693) -1.5% NOI 169,457 165,924 163,122 164,763 (1,161) -0.7% Key Measures Enplaned Passengers (000s) 16,597 17,017 17,294 17,675 658 3.9% CPE ($) 13.23 13.89 13.60 12.82 (1.08) -7.7% Debt Service Coverage 1.40 1.35 1.34 1.33 (0.02) -1.2% Debt Service Cov. after Rev. Sharing 1.29 Non-Aero NOI less CFC Surplus ($000) 79,787 74,810 74,937 73,497 (1,313) -1.8% 27 Forecast Key assumptions: ' Airline rates and charges based on SLOA III ' Enplanements grow at 2.2% ' Achieve non-airline growth target of 4.5% CAGR ' Manage growth in O&M to 2.8% CAGR Drivers: ' $1.5 billion capital program for 2014- 2018 NorthSTAR and International Arrivals Facility completed by 2018 28 Financial Forecast In $000's 2013 Bud 2014 Bud 2015 2016 2017 2018 Airline Revenue* 249,799 241,938 262,941 284,687 308,809 316,375 Non-Airline Revenue 157,827 164,410 170,255 175,793 184,350 193,141 Total Revenue 407,626 406,348 433,195 460,480 493,159 509,516 Operating Expense 241,702 238,008 244,648 251,666 258,302 265,032 Net Operating Income 165,924 168,340 188,547 208,814 234,857 244,484 Net Non-Operating Income/Expense 5,795 2,769 2,839 2,806 2,837 2,894 CFC Excess** (3,465) (4,780) (2,899) (1,399) (1,096) (584) Available for Debt Service 168,254 166,329 188,488 210,222 236,598 246,794 Debt Service (179,886) (182,247) (200,646) (220,571) (245,765) (253,578) Debt Service Paid by CFCs 19,873 19,968 20,586 21,872 23,230 24,836 Debt Service Paid by PFCs 33,800 33,541 33,800 33,800 33,800 33,800 Net Debt Service 126,213 128,738 146,259 164,900 188,735 194,943 Net Cash Flow 42,041 37,590 42,228 45,322 47,863 51,851 Key Measures Debt Service Coverage - Before Revenue Sharing 1.33 1.33 1.33 1.30 1.26 1.28 Debt Service Coverage - After Revenue Sharing n/a 1.29 1.29 1.27 1.25 1.27 Revenue Sharing n/a 5,406 5,663 4,097 679 3,115 Passenger Airline CPE 13.80 12.82 13.64 14.48 15.42 15.47 Debt per Enplaned Passenger 143.8 143.0 146.5 154.8 158.7 161.2 * Excludes accounting impact of SLOA III incentive straight line adjustment ** CFC collections in excess of CFC debt service/O&M are restricted and cannot be used for other revenue bond debt service 29 Debt Per Enplanement 30 Seaport Division 2014 Preliminary Operating Budget Briefing October 8, 2013 2014 SEAPORT KEY STRATEGIES In 2011, the Seaport developed three long term Seaport Strategies: 1. Commercial Business 2. Asset Stewardship 3. Green Gateway For 2014, Seaport will advance these strategies in alignment with the Century Agenda, the CEO's goals and key corporate initiatives. 32 Key Revenue Assumptions TEU volume at 1.66 million, equal to the 2013 budget Cruise forecasts 805,000 passengers a 5.4% decrease from 2014 Budget Grain volume at 2.2 million metric tons based on current crop year results. 33 Expense Items Costs related to maintenance dredging T18 (IHI) crane removal Stormwater NW Ports Clean Air Strategy implementation Alaskan Way Viaduct monitoring related costs Environmental Remediation Liability expense Tribal fishing coordination program evolution 34 Org Revenues By Group Seaport Division Only 2012 2013 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % REVENUE Lease & Asset Management Containers 64,415 73,040 62,717 65,703 (7,336) -10.0% Grain 3,749 3,653 702 2,365 (1,288) -35.2% Industrial Properties 15,278 15,869 16,231 16,536 667 4.2% Cruise & Maritime Ops Cruise 12,954 12,800 13,149 12,627 (172) -1.3% Maritime Operations 4,663 4,333 4,363 4,866 532 12.3% Operating Revenue 101,059 109,695 97,161 102,098 (7,597) -6.9% Security Grants 2,226 173 0 0 (173) -100.0% Total Revenue 103,285 109,869 97,161 102,098 (7,771) -7.1% 35 Org Expenses By Group Seaport Division Only Incr (Decr) 2012 2013 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Org Expenses Lease & Asset Mgmt 6,920 8,156 7,604 9,787 1,631 20.0% Cruise & Maritime Ops 3,932 3,897 3,604 4,715 817 21.0% Commercial Strategy 1,642 1,895 1,586 1,688 (207) -10.9% Environmental Services 2,739 3,123 3,149 2,994 (129) -4.1% Planning 352 434 419 426 (8) -1.8% Seaport Finance 917 1,040 944 1,073 33 3.2% Seaport Admin 505 783 685 654 (128) -16.4% Contingency 0 0 0 366 366 NA Capital to Expense 144 0 0 0 0 NA Total Operating Expense 17,151 19,328 17,991 21,703 2,375 12.3% Security Grants 2,190 0 18 0 0 NA Envir Remediation Liability 26 1,170 1,170 1,180 10 0.9% Total Expenses 19,366 20,498 19,179 22,883 2,385 11.6% 36 Seaport Org Expense Budget Seaport Division Expenses Only 2013 2014 14-'13 Change $'s Thousands Budget Budget $ % COMMENTS Baseline Budget Salaries 5,404 5,309 (95) -1.8% FTE Trf to Corp/Replacement staff hired at lower salaries Benefits 1,692 1,854 162 9.5% Based on Budget Guidelines Wages & Benefits 0 0 0 NA OPEB/Pension 65 33 (32) -49.2% Salaries & Wages to Cap/Non-Op/ERL 902 889 (13) -1.5% Total Payroll Costs 8,063 8,084 21 0.3% In line with Corporate Guidelines Non-Payroll Costs Charges to Capital/Non-Op/ERL (1,263) (1,338) (75) 5.9% Utilities 5,751 6,044 294 5.1% Primarily Surface Water & Electricity (offset by Tenant Reim) Environmental Outside Contracts 1,777 1,525 (252) -14.2% Lower Stormwater permit related costs. Contract Watchmen 526 469 (57) -10.8% Less Demand for TWIC Other O&M 2,270 2,214 (56) -2.5% Other Total Baseline Budget 17,123 16,998 (124) -0.7% Projects & Initiatives T5 Phase II Maintenance Dredge 1,000 1,470 470 47.0% Maintenance Dredging T91 Maintenance Dredge 0 1,140 1,140 NA Maintenance Dredging Remove IHI Cranes 128 1,200 1,072 837.5% Crane Removal Tribal Mitigation 351 0 (351) -100.0% RFID Expenses 164 149 (15) -9.4% Contract Costs & Subscrip fees only. Artifact Permanent Storage 117 0 (117) -100.0% 10-Yr Container Terminal Access Study 125 80 (45) -36.0% Study to be completed in 2014 Traffic Studies 100 80 (20) -20.0% Planning Studies 145 145 0 0.0% Seaport Division Certification/Training TBD 75 75 0 0.0% Contingency 0 366 366 NA Total Projects & Initiatives 2,205 4,705 2,500 113.3% Total Operating Expenses 19,328 21,703 2,375 12.3% Security Grant Expenses 0 0 0 NA No operating security grants assumed in Budget Envir Remediation Liability 1,170 1,180 10 0.9% Total Expenses 20,498 22,883 2,385 11.6% 37 Projects & Initiatives $'s in Thousands Projects & Initiatives - Proposed for 2014 Budget Maintenance Dredging T-5 maintenance dredging (phase 2) 1,470 T-91 maintenance dredging 1,140 2,610 Crane Removal Remove IHI cranes from Terminal 18 1,200 RFID Implementation Costs ($95K grant funded) 149 Transportation & Planning Studies 10 Yr Container Terminal Access Study 80 Transportation 80 Planning Studies 145 305 Efficiency Initiative Seaport Certification/Training TBD 75 Seaport Contingency 366 Total 2014 Seaport Projects & Initiatives 4,705 38 Northwest Ports Clean Air Initiatives and Environmental Remediation Liability Classified as Non-Operating Expense $'s Thousands 2014 Non-Operating Expense Budget Clean Air Program ABC Fuels $400 Cargo Handling Equip 100 Truck Scrapping Incentives 4,582 4,582 Less: CMAQ(1) Grant Revenue (3,568) Less: DOE(2) Grant Revenue (400) Net cost to Port 614 Envir Remediation Liability -Sea 8,500 Envir Remediation Liability -RE 800 Total $14,382 Notes : (1) Federal Congestion Mitigation and Air Quality Improvement Program (2) Washington State Department of Ecology 39 Full-Time Equivalents (FTEs) FTE's 2013 Budget 60.0 2013 Changes Staff Transfer: International Liaison Trf To Corporate -1.0 Staff Changes: Envir Remediation Project Mgr -1.0 Stormwater FTE 1.0 Client Manager Position/Existing Staff 0.0 Adjusted 2013 59.0 2014 Budget No Changes 0.0 Subtotal 0.0 Proposed FTE's for 2014 59.0 40 Full-Time Equivalents (FTEs) Summary Seaport FTE Summary 2008 Bud 2009 Bud 2010 Bud 2011 Bud 2012 Bud 2013 Bud 2014 Bud Total Seaport 64.9 61.8 60.4 60.4 59.9 60.0 59.0 Less: Interns (2.8) (2.2) (2.2) (2.2) (2.2) (2.2) (2.2) Adjusted Seaport 62.1 59.6 58.2 58.2 57.7 57.8 56.8 41 Seaport Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Incr (Decr) 2012 2013 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenues Operating Revenues 101,715 110,110 97,575 102,425 (7,685) -7.0% Security Grants 2,226 173 0 0 (173) -100.0% Total Revenues 103,941 110,283 97,575 102,425 (7,858) -7.1% Expenses Seaport Expenses (excl env srvs) 13,684 15,385 14,037 17,812 2,427 15.8% Envir Services & Planning 2,207 2,675 2,686 2,565 (110) -4.1% Maintenance Expenses 6,040 6,360 5,943 6,637 277 4.4% P69 Facilities Expenses 532 526 526 414 (113) -21.4% Other RE Expenses 233 353 353 386 32 9.2% CDD Expenses 4,244 3,530 3,475 2,190 (1,340) -38.0% Police Expenses 3,969 4,271 4,141 4,286 15 0.4% Corporate Expenses 11,538 12,773 12,391 8,315 (4,457) -34.9% Security Grant Expenses 2,227 0 18 0 0 NA Envir Remed Liability 26 1,170 1,170 1,180 10 0.9% Operating Expenses 44,700 47,043 44,740 43,785 (3,258) -6.9% Net Operating Income 59,241 63,240 52,835 58,640 (4,600) -7.3% 42 Containers Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Containers Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Container Revenues 64,415 73,040 65,703 (7,336) -10.0% Maintenance Reimburseable 438 300 205 (95) -31.7% Total Revenues 64,853 73,340 65,908 (7,431) -10.1% Expenses Seaport Expenses (excl env srvs) 5,908 7,748 9,099 1,350 17.4% Envir Services & Planning 1,225 1,612 1,518 (93) -5.8% Maintenance Expenses 1,739 1,983 1,727 (256) -12.9% P69 Facilities Expenses 337 333 254 (79) -23.7% Other RE Expenses 9 121 125 4 3.1% CDD Expenses 3,280 2,485 1,613 (872) -35.1% Police Expenses 1,041 1,179 1,142 (37) -3.2% Corporate Expenses 6,703 7,513 4,684 (2,829) -37.7% Operating Expenses 20,241 22,974 20,162 (2,812) -12.2% Net Operating Income 44,613 50,365 45,746 (4,619) -9.2% 43 Grain Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Grain Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Grain Revenues 3,749 3,653 2,365 (1,288) -35.2% Maintenance Reimburseable (0) 1 1 0 20.0% Total Revenues 3,749 3,654 2,366 (1,288) -35.2% Expenses Seaport Expenses (excl env srvs) 242 283 284 2 0.5% Envir Services & Planning 2 10 3 (7) -70.0% Maintenance Expenses 28 54 42 (12) -22.6% P69 Facilities Expenses 31 31 14 (17) -54.9% Other RE Expenses 0 0 0 (0) -100.0% CDD Expenses 112 135 41 (93) -69.4% Police Expenses 217 221 222 1 0.2% Corporate Expenses 644 715 245 (470) -65.7% Operating Expenses 1,276 1,449 851 (598) -41.2% Net Operating Income 2,473 2,204 1,515 (690) -31.3% 44 Industrial Properties Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Industrial Properties Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Industrial Properties Revenues 15,278 15,869 16,536 667 4.2% Maintenance Reimburseable 1 9 19 9 101.1% Total Revenues 15,279 15,878 16,555 676 4.3% Expenses Seaport Expenses (excl env srvs) 3,741 3,435 3,381 (54) -1.6% Envir Services & Planning 469 606 578 (28) -4.6% Maintenance Expenses 1,383 1,461 1,664 203 13.9% P69 Facilities Expenses 83 82 70 (13) -15.3% Other RE Expenses 156 166 187 21 12.6% CDD Expenses 414 466 230 (236) -50.7% Police Expenses 952 965 978 14 1.4% Corporate Expenses 1,791 1,979 1,364 (615) -31.1% Operating Expenses 8,989 9,160 8,452 (708) -7.7% Net Operating Income 6,290 6,719 8,103 1,384 20.6% 45 Cruise Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Cruise Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Cruise Revenues 12,954 12,800 12,627 (172) -1.3% Maintenance Reimburseable/Oth 97 81 78 (3) -4.1% Total Revenues 13,051 12,881 12,705 (176) -1.4% Expenses Seaport Expenses (excl env srvs) 1,162 1,100 2,294 1,194 108.5% Envir Services & Planning 247 229 224 (5) -2.1% Maintenance Expenses 1,575 1,618 1,786 168 10.4% P69 Facilities Expenses 55 55 51 (4) -7.0% Other RE Expenses 48 1 6 5 488.1% CDD Expenses 328 280 209 (71) -25.5% Police Expenses 1,281 1,422 1,457 34 2.4% Corporate Expenses 1,314 1,454 1,071 (383) -26.3% Operating Expenses 6,010 6,159 7,098 938 15.2% Net Operating Income 7,040 6,722 5,608 (1,114) -16.6% 46 Maritime Ops Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Maritime Ops Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Docks Revenues 4,663 4,333 4,866 532 12.3% Maintenance Reimburseable/Oth 87 24 25 2 6.4% Total Revenues 4,750 4,357 4,891 534 12.3% Expenses Seaport Expenses (excl env srvs) 2,299 2,456 2,380 (76) -3.1% Envir Services & Planning 230 219 242 23 10.3% Maintenance Expenses 1,283 1,234 1,407 173 14.0% P69 Facilities Expenses 26 25 25 (0) -1.2% Other RE Expenses 21 66 68 3 3.9% CDD Expenses 110 159 97 (62) -38.9% Police Expenses 477 483 487 4 0.8% Corporate Expenses 644 704 574 (130) -18.5% Operating Expenses 5,089 5,346 5,280 (66) -1.2% Net Operating Income (340) (989) (389) 600 -60.7% 47 Risks U.S. and Global economic uncertainties - Potential impact on Container and Cruise volumes Competitive pressures Traffic congestion due to construction Unexpected repairs Escalating liability, project and overhead costs 48 Real Estate Division 2014 Preliminary Operating Budget Briefing October 8, 2013 Key Assumptions Marina occupancy rate 94% compared to 92% in 2013 Budget Fishing & Commercial occupancy rates FT 78% and MIC 70% equal to 2013 Budget Commercial Properties target 92% occupancy 2013 Budget target was also 92% Bell Harbor International Conference Center revenue down 17% from 2013 Budget 50 Org Revenues By Group Real Estate Division Only Incr (Decr) 2012 2013 2013 2014 14-'13 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenue Harbor Services 11,497 11,611 11,690 12,059 449 3.9% Portfolio Management 18,576 19,877 17,584 18,394 (1,483) -7.5% Commercial 9,755 10,153 9,774 10,284 130 1.3% Conf & Event Centers 8,821 9,724 7,810 8,110 (1,613) -16.6% Development & Planning 884 850 903 808 (42) -5.0% Eastside Rail 90 7 4 7 (0) -0.7% Maintenance & Facilities 890 585 819 435 (151) -25.7% Total Revenue 31,937 32,930 31,000 31,703 (1,227) -3.7% 51 Org Expenses By Group Real Estate Division Expenses Only Incr (Decr) 2012 2013 2013 2014 14-'13 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Operating Expenses Harbor Services 4,620 4,854 4,761 5,090 236 4.9% Portfolio Management 11,937 12,843 11,282 12,584 (259) -2.0% Commercial 5,121 5,201 4,804 5,725 524 10.1% Conf & Event Centers 6,816 7,642 6,478 6,858 (784) -10.3% Development & Planning 745 854 768 899 45 5.3% Eastside Rail Corridor 293 177 115 170 (7) -3.7% Maintenance 15,990 17,350 16,019 18,050 700 4.0% Facilities 1,523 1,482 1,452 1,509 27 1.8% Division Admin 368 396 396 410 14 3.5% Envir Remed Exp/Other 82 80 38 600 520 650.0% Contingency 0 500 0 0 (500) -100.0% Total Operating Expenses 35,559 38,536 34,832 39,312 776 2.0% 52 Real Estate Org Expense Budget Real Estate Division Expenses Only 2013 2014 Incr (Decr) $'s Thousands Budget Budget Change % Explanation Baseline Budget Salaries 6,527 6,724 197 3.0% New FTE in Maint and incr .5 FTE in Harbor Services Benefits 2,410 2,609 199 8.3% Calculated per Budget Guidelines Wages & Benefits 8,456 9,412 956 11.3% Increase in Maintenance Work (see next slide) OPEB 30 34 4 12.4% Salaries & Wages to Cap, Non-op,ERL 836 821 (15) -1.9% Less work by Maint on Cap Projects Total Payroll Costs 18,260 19,600 1,340 7.3% Net Payroll Exp (net of to capital,Non-op,ERL) 17,424 18,779 1,355 7.8% Utilities 3,799 3,916 117 3.1% Conf & Event Activity Centers 7,642 6,858 (784) -10.3% Lower Conf & Event Activity, 2013 Cap Allowance WTC West Operating Expense 479 532 53 11.1% Incr HVAC, Security Maintenance Materials & Vehicle Parts 757 905 148 19.6% Increase in Maintenance Work (see next slide) Overhead Allocated To Capital & Exp (502) (377) 125 -24.9% Less work by Maint on Cap Projects and lower rate Other O&M 4,489 4,617 127 2.8% Total Baseline Budget 34,088 35,230 1,142 3.4% Initiatives Tenant Improve, Broker Fees,Space Plan 722 1,127 405 56.1% Deferred Maint Salaried Staff 278 0 (278) -100.0% Deferred Maint Program Complete in 2013 Deferred Maint Wages,Materials,Outside Svrs 1,290 0 (1,290) -100.0% Deferred Maint Program Complete in 2013 Maintenance Contingency 300 300 0 0.0% Net Shed related work 250 140 (110) -44.0% Lighting work in 2014 P69 Carpet Replacement 800 1,200 400 50.0% P69 2013 Carpet project postponed to 2014 P69 Concrete Beam Rehab 0 570 570 NA P69 Concrete Beam Rehab SBM Dock Inspection Consultant 75 0 (75) -100.0% Budgeted in CDD in 2014 Eastside Rail Corridor-Outside Services 152 144 (8) -5.3% Contingency 500 0 (500) -100.0% No general contingency budgeted in 2014 Total Initiatives 4,367 3,481 (886) -20.3% Total Operating Expenses 38,456 38,712 256 0.7% Op Envir Remediation Liability 80 600 520 650.0% Total Expenses 38,536 39,312 776 2.0% 53 Maintenance 2014 Significant Projects $'s Thousands Significant Maintenance Projects 2014 Budget Shilshole Bay Marina - Install Standpipe Hangers (RE) 137 FT - Downie Building Repairs, Carpet, Signage (RE) 106 Bell Harbor Marina - Replace Dock Rub Rails (RE) 100 T91 Docks - Non-Fishing Moorage Facility Improve (SEA) 100 FT C-15 Building - Carpet Replacement (RE) 87 FT & MIC - Fall Protection (RE) 84 Marine Maint - Convert 10 Vehicles to Propane (MM) 70 Smith Cove Cruise-External Building Touch Up Painting (SEA) 70 Marine Maint - Carpenter Shop Remodel & Safety Improve (MM) 65 FT C-15 Building - Window Replacements (RE) 60 Smith Cove Cruise - Coating Building Structure (SEA) 60 P69 Facilities - Rebuild Chillers (2) (FAC) 50 T91 Docks - Non-Fishing Gangway & Perch Improve (SEA) 50 Total 1,039 RE = Real Estate Div SEA = Seaport Div MM = Marine Maint FAC = P69 Facilities 54 Full-Time Equivalents (FTEs) 2013 Budget 168.3 2013 Changes NA 0.0 Adjusted 2013 168.3 2014 Budget Staff Additions: Harbor Services-Admin, Half-time 0.5 Maintenance - Complete Deferred Maint Reduction Program (3.0) Shift Purchasing Specialist form Limited Duration to Regular 1.0 Net Change (1.5) Proposed 2014 Budget 166.8 55 Real Estate Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Incr (Decr) 2012 2013 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenues Operating Revenues 22,445 22,776 22,526 23,244 468 2.1% Conf & Event Ctr Revenue 8,863 9,740 7,827 8,132 (1,608) -16.5% Total Revenues 31,308 32,516 30,353 31,376 (1,140) -3.5% Expenses Real Estate Exp (excl Maint,P69,Conf) 10,564 10,800 10,225 11,553 753 7.0% Real Estate Division Contingency 0 500 0 0 (500) -100.0% Conf & Event Ctr Expense 6,816 7,642 6,478 6,858 (784) -10.3% Eastside Rail Corridor 293 177 115 170 (7) -3.7% Maintenance Expenses 9,110 9,630 9,269 9,311 (319) -3.3% P69 Facilities 198 178 178 126 (51) -28.9% Envir Services & Planning 883 882 882 856 (27) -3.0% Seaport Expenses (excl env srvs) 361 386 386 471 85 21.9% CDD Expenses 1,084 2,148 2,131 2,582 434 20.2% Police Expenses 1,374 1,412 1,377 1,391 (22) -1.5% Corporate Expenses 4,836 5,166 5,077 5,346 180 3.5% Envir Remediation Liability 6 80 80 600 520 650.0% Operating Expenses 35,525 39,002 36,197 39,265 263 0.7% Net Operating Income (4,217) (6,486) (5,845) (7,889) (1,403) -21.6% 56 Fishing & Commercial Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Fishing & Commercial Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 2,554 2,764 2,676 (88) -3.2% Total Revenues 2,554 2,764 2,676 (88) -3.2% Expenses Real Estate Exp (excl Maint,P69,Conf) 1,784 1,882 2,007 125 6.6% Real Estate Division Contingency 0 83 0 (83) -100.0% Maintenance Expenses 1,740 1,723 1,499 (224) -13.0% P69 Facilities 33 30 17 (13) -44.0% Envir Services & Planning 285 299 263 (36) -12.1% Seaport Expenses (excl env srvs) 77 71 67 (4) -5.7% CDD Expenses 301 1,204 1,534 331 27.5% Police Expenses 494 508 501 (7) -1.5% Corporate Expenses 892 942 814 (127) -13.5% Operating Expenses 5,607 6,741 6,702 (40) -0.6% Net Operating Income (3,053) (3,977) (4,026) (49) -1.2% 57 Recreational Boating Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Recreational Boating Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 8,979 8,924 9,386 462 5.2% Total Revenues 8,979 8,924 9,386 462 5.2% Expenses Real Estate Exp (excl Maint,P69,Conf) 2,896 3,052 3,134 82 2.7% Real Estate Division Contingency 0 205 0 (205) -100.0% Maintenance Expenses 1,902 2,131 2,365 234 11.0% P69 Facilities 81 73 45 (28) -37.9% Envir Services & Planning 197 263 268 5 1.9% Seaport Expenses (excl env srvs) 66 72 65 (7) -10.0% CDD Expenses 347 572 550 (23) -3.9% Police Expenses 396 407 401 (6) -1.5% Corporate Expenses 1,742 1,931 1,822 (110) -5.7% Operating Expenses 7,627 8,707 8,650 (57) -0.7% Net Operating Income 1,352 217 736 520 239.8% 58 Portfolio Management Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Portfolio Management Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 9,846 10,225 10,360 136 1.3% Conf & Event Ctr Revenue 8,863 9,740 8,132 (1,608) -16.5% Total Revenues 18,710 19,965 18,493 (1,472) -7.4% Expenses Real Estate Exp (excl Maint,P69,Conf) 5,072 4,922 5,416 494 10.0% Real Estate Division Contingency 0 184 0 (184) -100.0% Conf & Event Ctr Expense 6,816 7,642 6,858 (784) -10.3% Maintenance Expenses 5,003 5,237 4,946 (291) -5.6% P69 Facilities 72 65 57 (8) -11.9% Envir Services & Planning 230 228 233 5 2.2% Seaport Expenses (excl env srvs) 161 202 281 80 39.5% CDD Expenses 367 313 372 60 19.1% Police Expenses 484 497 489 (8) -1.6% Corporate Expenses 1,890 1,973 2,407 434 22.0% Operating Expenses 20,095 21,262 21,061 (201) -0.9% Net Operating Income (1,385) (1,297) (2,568) (1,271) -98.0% 59 Eastside Rail Corridor Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Eastside Rail Corridor Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 95 7 7 (0) -0.7% Total Revenues 95 7 7 (0) -0.7% Expenses Real Estate Exp (excl Maint,P69,Conf) 136 166 171 5 3.1% Eastside Rail Corridor 293 177 170 (7) -3.7% Maintenance Expenses 3 0 0 0 NA Envir Services & Planning 72 46 49 2 4.8% Seaport Expenses (excl env srvs) 0 0 0 0 NA CDD Expenses 14 3 2 (1) -22.1% Police Expenses 0 0 0 0 NA Corporate Expenses 10 21 15 (6) -27.4% Operating Expenses 527 413 407 (5) -1.3% Net Operating Income (433) (406) (401) 5 1.3% 60 Re Dev & Plan Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions RE Development & Planning Incr (Decr) 2012 2013 2014 '14-'13 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 884 853 812 (42) -4.9% Total Revenues 884 853 812 (42) -4.9% Expenses Real Estate Exp (excl Maint,P69,Conf) 676 779 825 46 6.0% Real Estate Division Contingency 0 28 0 (28) -100.0% Maintenance Expenses 375 536 498 (38) -7.2% P69 Facilities 11 10 7 (3) -25.9% Envir Services & Planning 99 46 44 (3) -5.7% Seaport Expenses (excl env srvs) 57 42 58 16 38.7% CDD Expenses 56 56 123 67 119.1% Police Expenses 0 0 0 (0) -100.0% Corporate Expenses 302 299 288 (11) -3.8% Operating Expenses 1,576 1,796 1,843 47 2.6% Net Operating Income (692) (943) (1,031) (89) -9.4% 61 Risks Potential higher vacancies in commercial properties and recreational marinas Conference and Event Center Activity Eastside Rail Corridor Maintenance costs Outside legal costs Tenant improvement allowances 62 Capital Development Division 2014 Preliminary Operating Budget Briefing October 8, 2013 Priority CDD Goals Deliver projects to operating division customers on time, within budget, meeting agreed scope, and with minimal and mutually-agreed impacts on operations Support divisions beyond projects: including budget plan development; business planning; asset management and reporting; community outreach; negotiations; and technical support and assistance. Provide contracting services. Be prepared for emergencies. Develop the talent, capabilities, motivation and well-being of CDD employees. Keep Port staff and contractor personnel working safely. 64 CDD Budget Comparisons 2013 YE 2012 Actual 2013 Budget Forecast 2014 Budget FTE 255.8 265.5 274.3 285.1 Total Salaries & Benefits $27,753,794 $ 30,989,009 30,422,923 $ 34,714,607 On-site consultants $3,074,221 $ 3,709,032 -- $ 6,268,910 Small Works Constr -- Contracts $592,146 $ 348,420 $ 744,750 Total Before Capital Charges $ 34,327,535 $ 38,987,922 37,500,130 $45,666,063 Sal/Wag to Capital $12,170,607 $ 14,932,455 -- $17,027,657 Capital Projects Overhead $5,463,986 $ 6,832,411 -- $ 8,809,619 On-site consultants to Capital $2,586,902 $ 2,443,257 -- $ 3,297,039 Total Charges to Capital $ (20,350,011) $ (24,208,123) (22,063,941) $ (29,134,316) Total Operating Expense $ 13,977,525 $ 14,779,799 15,436,189 $ 16,531,748 65 CDD 2014 Operating Budget In 000 dollars 2012 2013 2013 2014 Budget Actual Budget Forecast Budget Change $ % AVPMG 2,042 2,532 2,501 2,601 69 2.7 CPO 2,861 3,001 2,945 3,069 608 20.3 ENG 4,160 4,229 5,198 5,021 792 18.7 PCS 3,244 2,266 2,590 3,310 1,044 46.1 SPM 1,278 2,370 1,823 1,587 (782) (33.0) CDD Admin 362 382 379 404 22 5.6 Total 13,978 14,780 15,436 16,532 1,752 11.9 66 CDD 2014 by Department O9000: Capital CDD All CDD Development ENG PCS AVPMG SPMG CPO Admn Total FTE 120.5 50.3 57.3 18 37 2 285.1 Payroll to Capital 8,015,586 3,333,923 3,580,138 940,267 1,157,742 17,027,657 Projects Total Salaries & Benefits 14,285,135 6,004,927 7,227,436 2,496,814 4,312,723 387,571 34,714,607 64140 On-site 653,088 5,615,822 6,268,910 Consultants Total Before Capital 15,877,864 7,556,412 13,260,292 3,235,669 5,332,075 403,751 45,666,063 Charges Total Charges to Capital (1,648,292 (10,856,512) (4,246,645) (10,659,331) (1,723,534) (29,134,316) Projects ) TOTAL OPERATING 5,021,352 3,309,767 2,600,961 1,587,377 3,608,540 403,751 16,531,748 EXPENSE 67 CDD 2014 FTEs Capital Development FTE Summary - 2014 Budget 2013 2013 Mid 2013 2013 2014 2014 2014 2014 Approved Internal Year Eliminated Revised Eliminated Internal New Prelim FTE Change DEPARTMENT Budget Transfer Approval / Layoff Total / Layoff Transfer Request Budget Change % Notes By Departments: Aviation Project Management 48.0 - 2.0 (1.2) 48.8 - (1.0) 9.5 57.3 9.3 19.4% See Notes 1 - 3, 12 - 23 Central Procurement Office 37.0 - - - 37.0 37.0 0.0 0.0% Engineering 111.5 - 8.0 119.5 1.0 120.5 9.0 8.1% See Notes 4 - 11, 24 Port Construction Services 50.0 - - - 50.0 - 0.3 50.3 0.3 0.5% See Notes 25 - 26 Seaport Project Management 17.0 - - - 17.0 1.0 18.0 1.0 5.9% See Note 27 CDD Administration 2.0 - 2.0 2.0 0.0 0.0% - - - - - - - - 0.0 0.0% TOTAL DIVISION 265.5 - 10.0 (1.2) 274.3 - (1.0) 11.8 285.1 19.6 7.4% Notes: 1. Emergency Hire Program Leader (Position #4062), hired/deleted 2013 8. Construction Coordinator 15. Capital Project Manager 4 (IAF) 22. Cap. Proj. Mgr 3 (#4092) changed 2. Mechanical Engineer (Baggage) 9. Construction Coordinator 16. Senior Administrative Assistant 23. Program Controls Manager (#4092) 3. Capital Project Manager 4 adjust to .8 FTE 10. Construction Coordinator 17. Contract Administration Specialist 24. Construction Safety Manager 4. Senior Inspector 11. Assistant Resident Engineer 18. Cost Engineer/Analyst 25. Chg'd 1.0 Wage Reg. FTE to Temp. FTE 5. Senior Inspector - Night 12. Capital Project Manager 1 (Terminal) 19. Graduate Intern (IAF) 26. .25 Intern 6. Project Assistant 13. Capital Project Manager 2 (Tenant) 20. College Intern (Infra-Baggage) 27. Assistant Project Manager 7. Project Assisant 14. Capital Project Manager 3 (Baggage) 21. College Intern (Airfield-Cargo) 68 CDD 2014 New FTEs Dept. Position FTE Budget % Notes Exp AVPMG Capital PM I Terminal 1.0 $86,147 70% Eff. 4/14. If not approved, on-site consultant expense must be increased. AVPMG Capital PM III Tenant 1.0 $110,049 10% Eff. 4/14. If not approved, on-site consultant expense must be increased. AVPMG Capital PM II - Baggage 1.0 $99,842 10% Eff. 4/14. If not approved, on-site consultant expense must be increased. AVPMG Capital PM IV - IAF 1.0 $121,325 10% Eff. 4/14. If not approved, on-site consultant expense must be increased. AVPMG Senior Administrative 1.0 $74,013 10% Eff. 4/14. If not approved, workload must be Assistant redistributed to current staff. AVPMG Contract Administrative 1.0 $74,013 10% Eff. 4/14. If not approved, workload must be Specialist redistributed to current staff. AVPMG Cost Engineer/Analyst 1.0 $80,731 35% Eff. 4/14. If not approved, on-site consultant expense must be increased. AVPMG Graduate Intern IAF .5 $10,010 5% Provides a development opportunity for students. AVPMG College Intern Infra-Baggage .5 $9,470 5% Provides a development opportunity for students. AVPMG College Intern Airfield- .5 $9,470 5% Provides a development opportunity for students. Cargo ENG Construction Safety Manager 1.0 $94,468 33% Eff. 4/14. If not approved, on-site consultant expense must be increased. PCS Intern 0.3 $4,500 100% Provides a development opportunity for students. SPM Assistant Project Mgr (LD) 1 $84,121 70% Eff. 4/14. Total 10.8 69 CDD 2013 Unfilled Positions Position Title Position # Date of Vacancy Salary & Benefits 1) SPM - Capital Project Manager III 444 2012 $145,769 2) SPM - Capital Project Manager IV 2118 2/1/2013 $166,094 3) AVPMG - Airfield Project Manager II 4093 1/1/2013 $123,599 4) AVPMG Scheduler 2453 6/11/2007 $123,599 5) AVPMG - Program Controls Manager 4092 1/1/2013 $137,289 6) AVPMG - Mechanical Engineer (PM III) (Baggage) Approved 9/18/2013 $134,893 7) EN - Assistant Resident Engineer 1630 4080 12/28/2012 $117,258 8) EN - Senior Construction Inspector 1630 2496 9/1/2013 $112,670 9) EN- Resident Engineer 3 1630 2497 7/30/2013 $144,614 10) EN - Assistant Civil Engineer Technician 1640 2248 5/1/2010 $78,950 11) EN - Senior Civil Engineer Technician 1640 2273 5/1/2012 $96,179 12) EN - Survey CAD Technician 1640 2421 4/1/2012 $91,130 13) EN - Survey Project Manager - 1640 1016 4/22/2013 $107,444 Total $1,579,488 70 CDD 2014 Expense Projects Division Impact Projects Aviation $5,002,752 Long-term cell phone lot Jet line surveys 2014 Concessions tenant support FAA ASDE antennae relocation Activation Planning NSAT Landside operations support Concourse D roof replacement Airfield pavement management system AV terminal TI RCF/Landside TI Airfield Activities TI Concourse C Vertical Circulation eGSE; PLB C14 NSAT baggage refurbishment AV electric vehicle stalls AV small jobs S. 169th Street GT lot AV O&M South Link plus Capital Projects with Expense RW 16C/34C panel replacement Components Seaport $425,692 T-5 Phase II SBM site plan T-18 Maintenance Dredging Viaduct project T-18 Remove IHI Cranes Viaduct project and Dock system P91 E. Cruise Maintenance Dredging condition assessment Drainage rework T-5 overpass SP small jobs Argo Element III Gate SP O&M Real $1,141,062 Recreational boaters pump out FT Net Sheds stations flow meters (Harbor Island P69 Leed Certification Estate Marina & FT Recreational Boating) RE small jobs FT Net Shed code compliance RE O&M AVPMG $1,577,500 CPO $1,328,000 ENG $709,378 Total CDD $6,569,506 PCS $2,724,831 SPM$229,797 71 Corporate 2014 Preliminary Operating Budget Briefing October 8, 2013 Corporate Budget Overview Goal was to tightly manage Corporate cost growth ' Overall increase of 1.5% vs. 2013 budget ' Includes transfer of Asian Business Development function from Seaport to Executive, adjusting for this the net increase is 1.2% ' Three largest departments' (Police, ICT, Accounting) budgets are essentially flat (less than 0.5%) ' Change in allocation formula shifts additional Corporate costs to Aviation Division Net increase of 1.4 FTEs ' 3.3 FTE reduction; 4.7 FTE addition, including 3 ICT contractors to be converted to FTEs, resulting in expense savings Key Expense Drivers: ' Baseline payroll increases ' Payroll increases partially offset by net $840 thousand reduction in non-payroll expenses 73 2014 Corporate Budget By Expense Type 2013 2014 '14-'13 Bud Chg ($ in 000's) Budget Budget $ % Explanations Payroll Expenses Total Payroll Expenses 57,917 59,947 2,030 3.5% New FTEs and pay & benefits increase Non-Payroll Expenses Equipment Expense 1,479 1,146 (332) -22.5% To accommodate requested reductions Supplies & Stock 629 551 (77) -12.3% Outside Services 11,344 10,901 (442) -3.9% Removal of Economic Impact Study Travel & Other Employee Expense 2,743 2,653 (89) -3.3% Promotional Expense 400 466 65 16.4% International Tourism Promotion Telecommunications 665 642 (23) -3.4% Due to retiring legacy equipment Insurance Expense 2,300 2,300 0.0% Contingencies 450 450 0.0% Other 881 940 59 6.6% Century Agenda implementation Total Non-Payroll Expenses 20,890 20,050 (840) -4.0% TOTAL 78,807 79,997 1,190 1.5% 74 2014 Corporate Budget By Department 2012 2013 2013 2014 Budget Change (in $ 000's) Actual Budget Forecast Budget $ % TOTAL REVENUES 444 155 190 155 0 0.0% EXPENSES Executive 1,585 1,552 1,806 1,818 266 17.1% Commission 799 1,483 1,297 1,545 62 4.2% Legal 3,083 3,012 3,389 3,214 203 6.7% Risk Management 2,648 3,186 3,100 3,173 -13 -0.4% Health & Safety 1,009 1,138 1,107 1,190 52 4.6% Public Affairs 5,860 5,946 5,817 6,069 123 2.1% Human Resources & Development 5,227 5,468 5,326 5,655 187 3.4% Labor Relations 1,094 1,198 1,134 1,319 120 10.1% Information & Communications Tech. 19,486 20,805 20,205 20,850 45 0.2% Finance & Budget 1,467 1,877 1,567 1,656 -221 -11.8% Accounting & Financial Reporting 6,056 7,055 6,413 7,081 26 0.4% Internal Audit 1,334 1,361 1,340 1,422 61 4.5% Office of Social Responsibility 1,448 1,702 1,682 1,897 195 11.5% Contingency 367 450 450 450 0.0% Police 21,793 22,574 22,016 22,658 84 0.4% Total Corporate Costs 73,263 78,807 76,650 79,997 1,190 1.5% 75 2014 Corporate FTE Summary FTE's 2013 Approved Budget 449.2 Changes in 2013: Internal Transfer from Seaport 1.0 Added 0.8 intern positions 0.8 ICT eliminated a limited duration Software Developer position -1.0 2013 Baseline 450.0 2014 Proposed New FTEs: Commission Office eliminated the Policy Analyst position -1.0 Legal deleted the Senior Investigator position -1.0 Police deleted the Communications System Manager position -1.0 OSR eliminated a high school intern -0.3 Legal added a Public Disclosure Manager position 1.0 ICT converted 3 contractor positions to regular full-time 3.0 Added 0.7 intern positions 0.7 Change in FTEs for 2014 1.4 2014 Budget Proposed FTEs 451.4 76 Century Agenda Support Small Business Program ' Results $20.6 million or 29% of eligible expenditures to small business through June 2013 For 2014, we expect to reach greater than 30% small business participation ' 2014 Outreach Efforts Include Century Agenda Goals Disparity study expected to be completed by July 2014 Continue internal efforts including s/b goals on projects Ethnic chambers of commerce and media campaign Interaction with and participation in advocacy groups events Participation in relevant small business events Small business stakeholders group working with staff Recognition and direct interaction with small businesses 77 Century Agenda Support Workforce Development ' Lead Port's workforce strategy development group ' Port Jobs Contract 2014 Extension Support Apprenticeship Opportunity Project (AOP) Continue to help thousands of individuals get jobs at SeaTac Provided training to airport workers and job seekers ' Port Apprenticeship Program Apprentice utilization rate 14.5% through Sep-13 Over $600/K in apprentice wages through Sep-13 In 2014 new PLA should impact utilization policy ' Maritime Sector Workforce Efforts Manage a workforce needs study Continue to build partnerships with area stakeholders 78 Century Agenda Support Tourism 2013 Successes: 2014 Plan: Focus on cruise-plus Cruise-plus and more ' Germany ' UK, Germany, Japan, ' UK France 68 in-bound fam trips Highlight new air service YTD from 5 markets Leverage partnerships More than $21m in media Industry leadership coverage In kind will exceed $500,000 79 Potential Budget Additions Economic Impact Study ($200K) Airport Job Office Furniture and Equipment ($70K) Construction Labor Market Study with City of Seattle ($25K) Workforce Development Strategy and Career Pathways ($75K) 80 Portwide Rollup 2014 Preliminary Operating Budget Briefing October 8, 2013 Non-Represented Payroll Assumptions 3% average merit pay increase consistent with regional market Market based salary range increases up to 2.0% (minimal cost impact) Medical/dental cost increase*: 1.9% Employer's PERS contribution: 9.21% vs. 8.16% average rate in 2013 *Includes some represented groups on Port sponsored plan 82 2014 Preliminary Budget 2012 2013 2013 2014 Budget Change ($ in '000s) Actual Budget Forecast Budget $ % Operating Revenues Aeronautical 233,000 249,799 248,549 241,938 -7,861 -3.1% SLOA III Incentive Adj. - - - -3,576 -3,576 n/a Non-Aeronautical 153,022 157,826 156,972 164,410 6,584 4.2% Aviation 386,022 407,625 405,521 402,772 -4,853 -1.2% Seaport 103,941 110,283 97,576 102,425 -7,858 -7.1% Real Estate 31,308 32,516 30,353 31,376 -1,140 -3.5% CDD 32 - - - n/a Corporate 403 155 155 155 0.0% Other Operating Revenues 135,684 142,954 128,084 133,956 -8,998 -6.3% Total 521,706 550,579 533,605 536,728 -13,851 -2.5% Operating Expenses Aviation 156,004 176,291 179,229 163,497 -12,794 -7.3% Seaport 19,366 20,498 19,884 22,883 2,385 11.6% Real Estate 35,559 38,536 36,304 39,312 776 2.0% CDD 13,978 14,780 15,556 16,532 1,752 11.9% Corporate 73,263 78,807 76,650 79,997 1,190 1.5% Total 298,169 328,912 327,623 322,221 -6,691 -2.0% Net Operating Income 223,537 221,668 205,982 214,507 -7,161 -3.2% 83 Income Summary by Division 2013 2013 2014 Budget Change (In $ '000s) Budget Forecast Budget $ % Notes Aviation - Aeronautical Operating Revenues 249,799 248,549 238,362 (11,437) -4.6% Include incentive adjustment Operating Expenses 162,150 164,392 151,875 (10,275) -6.3% No Terminal Realignment expense Net Operating Income 87,649 84,157 86,487 (1,162) -1.3% Aviation - NonAero Operating Revenues 157,826 156,972 164,410 6,584 4.2% Higher Concessions & Public Parking Operating Expenses 79,552 78,007 86,133 6,581 8.3% Higher Corp and Terminal expense Net Operating Income 78,274 78,965 78,277 3 0.0% Seaport Operating Revenues 110,283 97,576 102,425 (7,858) -7.1% Lower Container & Grain revenues Operating Expenses 47,043 44,740 43,785 (3,258) -6.9% Lower Corp expense Net Operating Income 63,240 52,836 58,640 (4,600) -7.3% Real Estate Operating Revenues 32,516 30,353 31,376 (1,140) -3.5% Lower Conf & Event Ctr revenue Operating Expenses 39,002 36,197 39,265 263 0.7% Lower Conf & Event Ctr expense Net Operating Income (6,486) (5,844) (7,889) (1,403) 21.6% 84 Comprehensive Budget Summary 2012 2013 2014 '13-'12 Bud Chg ($ in '000s) Actual Budget Budget $ % Explanations Revenues 1. Aeronautical Revenues 233,000 249,799 238,362 (11,437) -4.6% Cost recovery under SLOA III 2. Other Operating Revenues 288,706 300,780 298,366 (2,414) -0.8% Lower revenues from Seaport and RE 3. Tax Levy 72,678 73,000 73,000 - 0.0% Assume no change from 2013 4. PFCs 62,385 64,844 67,352 2,508 3.9% Increase in enplanements 5. CFC Revenue for Debt Service 20,577 20,553 20,568 15 0.1% 6. Fuel Hydrant 8,123 7,839 6,953 (885) -11.3% Bond refunding 7. Non-Capital Grants and Donations 3,349 1,909 7,968 6,059 317.4% Grants for Clean Air initiative 8. Capital Contributions 30,714 17,068 10,393 (6,676) -39.1% Less LOI for 3rd runway from FAA 9. Interest Income 8,172 7,296 7,615 319 4.4% Higher General and ADF fund balance Total 727,704 743,088 730,576 (12,512) -1.7% Expenses 1. O&M Expense 298,169 328,912 322,221 (6,691) -2.0% No terminal realignment expenses 2. Depreciation 167,279 171,510 164,386 (7,124) -4.2% Some fully depreciated assets at the Airport 3. Revenue Bond Interest Expense 122,170 129,314 128,987 (327) -0.3% 4. GO Bond Interest Expense 14,447 13,291 9,806 (3,485) -26.2% Refunding of bonds 5. PFC Bond Interest Expense 6,778 6,367 5,953 (414) -6.5% 6. Non-Op Environmental Expense 14,358 4,800 9,300 4,500 93.8% Lower Duwamish and T91 cleanups 7. Public Expense 22,876 4,469 8,311 3,842 86.0% Clean Truck Program 8. Other Non-Op Rev/Expense 25,749 3,972 3,738 (234) -5.9% Total 671,826 662,635 652,702 (9,933) -1.5% Change In Net Assets 55,878 80,453 77,874 (2,579) -3.2% 85 Port-wide FTEs Summary Aviation Seaport Real Estate Capital Dev Corporate Totals 2013 Approved FTE's 846.8 60.0 168.3 265.5 449.2 1,789.8 Mid Year Approval 2.7 - - 10.0 0.8 13.5 Eliminated - - - (1.2) (1.0) (2.2) Transfers - (1.0) - - 1.0 - Adjusted 2013 FTE's 849.5 59.0 168.3 274.3 450.0 1,801.1 2014 Budget Eliminated - - (3.0) - (3.3) (6.3) Transfer - - - (1.0) - (1.0) New FTE's 9.0 - 1.5 11.8 4.7 27.0 Total 2014 Changes 9.0 - (1.5) 10.8 1.4 19.7 Proposed 2014 FTE's 858.5 59.0 166.8 285.1 451.4 1,820.8 86
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