9c. Q2 Financial Performance Report
Item No. 9c_attach . Meeting Date: August 13, 2019 PORT OF SEATTLE 2019 FINANCIAL PERFORMANCE REPORT AS OF JUNE 30, 2019 TABLE OF CONTENTS Page I. Portwide Performance Report 3-6 II. Aviation Division Report 7-18 III. Maritime Division Report 19-24 IV. Economic Development Division Report 25-30 V. Central Services Division Report 31-36 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 EXECUTIVE SUMMARY Financial Summary The Port's operating results for the second quarter of 2019 were very strong. Total operating revenues were $368.2M, $7.9M above budget and $37.7M higher than the same period in 2018. Excluding Aeronautical revenues, which are based on cost recovery, other operating revenues were $192.2M, $9.0M above budget and $9.3M higher than the 2018 actuals mainly due to higher revenues in ADR & Terminal Leased Space, Ground Transportation, Rental Cars, Clubs & Lounges, and Conference & Event Centers. Total operating expenses were $216.8M and $16.0M below budget mainly due to vacancies and project delays. Operating income before depreciation was $151.4M, $23.9M above budget and $12.5M higher than the 2018 actuals. The Port-wide capital spending is projected to be $696.5M for 2019. Operating Summary At the Airport, the total enplanement growth for the second quarter of 2019 was 3.4% comprised of 3.4% for domestic passengers and 3.0% for international passengers. The total landed weight for the second quarter of 2019 was 3.0% higher than the same period last year while total cargo (in metric tons) was 1.2% above the 2018 second quarter numbers. For the Maritime division, the number of cruise passengers is expected to reach 1.2M in 2019 similar to 2018. The occupancy rate at Shilshole Bay Marina for the second quarter was at 95%, a slight decrease of 1% compared to the same period last year. Grain volumes were impacted by tariffs and weather resulting in a decrease of 700K metric tons. For the Economic Development division, the building occupancy rate for the second quarter was 100% at Terminal 91 Uplands, 95% at Maritime Industrial, 86% at Central Harbor, and 85% at Marina Office and Retail. Key Business Events In April, the Port officially kicked off the cruise season with the arrival of Celebrity's Eclipse at Pier 66. This year marks the Port's 20th year as a homeport, and 213 vessels and 1.2M passengers are expected again this year. The Port also completed RFQ process for new cruise terminal with three finalists. Also in April, Port Commission adopted its Energy and Sustainability workplan focusing on key areas that will improve environmental and community health in Puget Sound as well as combat climate change. At the airport, new non-stop services to Hong Kong (via Cathay Pacific Airways), Tokyo-Narita (Japan Airlines), and Osaka (Delta) were launched in response to the growing air travel demand. The Port awarded thirty establishments with tourism grants and twenty four organizations including Lewis County, Suquamish Tribal Museum, Sequim Lavender Farmers, Long Beach Visitors Bureau and Methow Trails received Airport Spotlight advertising grants. Major Capital Projects Phase 1 of the North Satellite Modernization project was completed during the second quarter of 2019 which included the opening of ten new gates, Nursing Suite and Alaska Lounge. Meanwhile, the solar panel installation at the Port's Pier 69 headquarters was completed during the second quarter of this year; this project was funded in part from the Washington State Department of Commerce grant. The new photovoltaic system is expected to generate over 127,000 kwh annually which will offset greenhouse gas emissions by 1.8 metric tons of carbon dioxide. Port Commission also approved the lease and construction funding for T-5 Berth Modernization project and for construction to commence at the Bell Harbor Conference center. Construction project closeouts were issued for several projects: Pier 69 Commission chambers refresh, west side water main repair and Automated Vehicle ID (AVI) replacement. Several more projects were placed under the substantial completion category which includes: video systems upgrade/terminal cameras project, electrical power for Concourses B and C holdroom seating project, and central terminal infrastructure upgrade project. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 PORTWIDE FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Aeronautical Revenues 127,780 147,570 175,927 177,039 (1,112) -0.6% 28,357 19.2% Airport Non-Aero Revenues 112,761 118,864 124,604 121,045 3,560 2.9% 5,740 4.8% Non-Airport Revenues 61,548 64,054 67,632 62,229 5,403 8.7% 3,578 5.6% Total Operating Revenues 302,088 330,489 368,164 360,313 7,851 2.2% 37,676 11.4% Total Operating Expenses 174,104 191,577 216,758 232,756 15,999 6.9% 25,181 13.1% NOI before Depreciation 127,984 138,912 151,407 127,557 23,850 18.7% 12,495 9.0% Depreciation 81,860 81,949 82,481 81,933 (548) -0.7% 532 0.6% NOI after Depreciation 46,124 56,963 68,926 45,624 23,302 51.1% 11,963 21.0% NON- AIRPORT FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % NWSA Distributable Revenue 27,283 25,844 24,941 21,955 2,986 13.6% (903) -3.5% Maritime Revenues 24,525 26,257 27,368 27,918 (550) -2.0% 1,110 4.2% EDD Revenues 7,727 9,765 10,384 10,017 367 3.7% 619 6.3% SWU & Other 2,012 2,187 4,939 2,338 2,601 111.2% 2,752 125.8% Total Operating Revenues 61,548 64,054 67,632 62,229 5,403 8.7% 3,578 5.6% Total Operating Expenses 33,783 38,141 40,522 45,171 4,649 10.3% 2,381 6.2% NOI before Depreciation 27,765 25,913 27,110 17,058 10,051 58.9% 1,197 4.6% Depreciation 20,272 19,988 19,623 18,909 (715) -3.8% (365) -1.8% NOI after Depreciation 7,493 5,925 7,487 (1,850) 9,337 -504.7% 1,562 26.4% MAJOR OPERATING REVENUES SUMMARY Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Aeronautical Revenues 127,780 147,570 175,927 177,039 (1,112) -0.6% 28,357 19.2% - - - Public Parking 36,958 39,402 40,401 40,969 (568) -1.4% 999 2.5% Rental Cars - Operations 14,514 14,922 15,560 15,123 437 2.9% 637 4.3% Rental Cars - Operating CFC 3,284 5,497 4,505 4,657 (153) -3.3% (993) -18.1% ADR & Terminal Leased Space 28,420 30,179 32,689 30,754 1,936 6.3% 2,510 8.3% Ground Transportation 7,633 8,885 9,979 9,413 567 6.0% 1,094 12.3% Employee Parking 4,674 5,191 5,193 4,876 317 6.5% 2 0.0% Airport Commercial Properties 10,708 7,593 7,072 6,703 369 5.5% (521) -6.9% Airport Utilities 3,423 3,438 3,665 3,932 (267) -6.8% 227 6.6% Clubs and Lounges 2,173 2,773 4,456 3,626 830 22.9% 1,683 60.7% Cruise 6,325 6,806 8,473 9,114 (641) -7.0% 1,668 24.5% Recreational Boating 5,438 6,125 6,228 6,358 (131) -2.1% 102 1.7% Fishing & Operations 4,440 4,565 5,071 4,972 99 2.0% 506 11.1% Grain 3,042 3,123 2,567 2,423 144 5.9% (556) -17.8% Maritime Portfolio Management 5,267 5,628 5,019 5,052 (33) -0.6% (609) -10.8% Central Harbor Management 4,161 4,557 4,406 4,399 7 0.2% (151) -3.3% Conference & Event Centers 3,545 5,188 5,963 5,604 360 6.4% 775 14.9% NWSA Distributable Revenue 27,283 25,844 24,941 21,955 2,986 13.6% (903) -3.5% Other 3,021 3,201 6,049 3,346 2,703 80.8% 2,848 89.0% Total Operating Revenues (w/o Aero) 174,309 182,918 192,237 183,274 8,963 4.9% 9,318 5.1% TOTAL 302,088 330,489 368,164 360,313 7,851 2.2% 37,676 11.4% 4 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 MAJOR OPERATING EXPENSES SUMMARY Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Salaries & Benefits 56,338 62,772 66,334 69,636 3,302 4.7% 3,562 5.7% Wages & Benefits 52,948 60,075 64,035 63,866 (169) -0.3% 3,960 6.6% Payroll to Capital Projects 12,873 13,602 13,523 16,640 3,117 18.7% (79) -0.6% Equipment Expense 4,311 3,866 4,484 4,136 (347) -8.4% 618 16.0% Supplies & Stock 4,616 4,633 5,290 4,452 (838) -18.8% 657 14.2% Outside Services 32,969 38,460 43,951 55,365 11,415 20.6% 5,491 14.3% Utilities 11,911 13,453 13,103 14,963 1,860 12.4% (350) -2.6% Travel & Other Employee Expenses 2,338 2,303 2,487 3,909 1,422 36.4% 184 8.0% Promotional Expenses 460 964 890 1,360 470 34.6% (74) -7.7% Other Expenses 16,865 15,550 27,560 27,939 379 1.4% 12,010 77.2% Charges to Capital Projects/Overhead Alloc (21,524) (24,100) (24,898) (29,511) (4,613) 15.6% (798) 3.3% TOTAL 174,104 191,577 216,758 232,756 15,999 6.9% 25,181 13.1% The 2019 second quarter actuals are $25.2M higher than the 2018 actuals primarily due to the following: Payroll: $7.5M higher mainly due to the addition of new FTEs and pay for performance increase. Outside Services: $5.5M higher largely due to more consultant expenses, more capital and expense projects, and some capital to expense write-offs. Other Expenses: $12.0M higher due to Environmental Remediation Liabilities, Litigated Injuries & Damages Expense, Third Party Management Operating Expense which would be more than offset by higher revenues. PORTWIDE FINANCIAL YEAR-END FORECAST SUMMARY Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Aeronautical Revenues 264,114 291,268 364,646 365,604 (958) -0.3% 73,378 25.2% Airport Non-Aero Revenues 236,803 257,707 270,014 259,537 10,477 4.0% 12,307 4.8% Non-Airport Revenues 131,114 140,415 133,328 128,115 5,213 4.1% (7,087) -5.0% Total Operating Revenues 632,031 689,390 767,988 753,255 14,733 2.0% 78,598 11.4% Total Operating Expenses 372,982 397,638 448,162 454,986 6,824 1.5% 50,524 12.7% NOI before Depreciation 259,049 291,752 319,826 298,269 21,557 7.2% 28,074 9.6% Depreciation 165,021 164,362 168,676 168,676 - 0.0% 4,314 2.6% NOI after Depreciation 94,028 127,390 151,150 129,593 21,557 16.6% 23,760 18.7% Year-End Forecast: Operating Revenues $14.7M higher than budget mainly due to revenue growth in Rental Car, Airport Dining and Retail, Clubs and Lounges, Ground Transportation, Conference and Event Centers, NWSA Distributable Revenue. Operating Expenses $6.8M lower than budget due to project delays, less program spending and staff vacancies. NOI before depreciation $21.6M above budget due to higher revenues while effectively managing operating costs. 5 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 KEY PERFORMANCE METRICS Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2018 2019 2019 Budget Variance Change from 2018 Actual Actual Actual Forecast Budget Chg. % Chg. % Enplanements (in 000's) 11,688 12,079 24,894 25,890 25,394 496 2.0% 996 4.0% Landed Weight (lbs. in 000's) 14,476 14,903 30,350 30,637 30,986 (349) -1.1% 288 0.9% Passenger CPE (in $) n/a n/a 10.79 13.09 13.39 0.30 2.2% 2.30 21.3% Grain Volume (metric tons in 000's) 2,688 1,988 4,379 3,488 3,580 (92) -2.6% (891) -20.3% Cruise Passenger (in 000's) 403 467 1,115 1,204 1,203 1 0.1% 89 8.0% Shilshole Bay Marina Occupancy 96.0% 95.0% 96.4% 96.2% 96.2% 0.0% 0.0% -0.2% -0.2% CAPITAL SPENDING RESULTS 2019 YTD 2019 2019 Budget Variance $ in 000's Actual Forecast Budget $ % Aviation 280,124 659,813 767,732 107,919 14.1% Maritime 1,879 15,105 17,638 2,533 14.4% Economic Development 1,444 5,040 5,713 673 11.8% Central Services & Other (note 1) 4,007 16,581 25,203 8,622 34.2% TOTAL 287,454 696,539 816,286 119,747 14.7% Note: (1) "Other" includes Street Vacation projects and Storm Water Utility Small Capital projects. PORTWIDE INVESTMENT PORTFOLIO During the Second quarter of 2019, the investment portfolio earned 2.16% versus the benchmark's (the Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index) 1.80%. Over the last twelve months the portfolio and the benchmark have earned 2.12% and 2.36%, respectively. Since the Port became its own Treasurer in 2002, the life-to-date earnings of the Port's portfolio and the benchmark are 2.45% and 1.84%, respectively. 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Operating Revenues: Aeronautical Revenues 264,114 291,268 364,646 365,604 (957) -0.3% 73,378 25.2% Non-Aeronautical Revenues 236,803 257,707 270,014 259,537 10,477 4.0% 12,307 4.8% Total Operating Revenues 500,916 548,975 634,660 625,140 9,520 1.5% 85,685 15.6% Total Operating Expense 299,114 318,849 363,640 366,105 2,465 0.7% 44,791 14.0% Net Operating Income 201,802 230,126 271,020 259,036 11,985 4.6% 40,894 17.8% Capital Expenditures 293,785 579,135 659,813 767,732 107,919 14.1% 80,678 13.9% (1) Annual non-cash amortization of $17.9M lease incentive related to the 5 year SLOA III agreement which ended in 2017. Division Summary 2019 Forecast vs. 2019 Budget Net Operating Income (NOI) for 2019 is forecasted to be ($12M or 4.6%) favorable to budget, driven by: o Increase in Non-Aeronautical revenue (10.5M or 4% favorable) where we are seeing stronger performance on the Landside, particularly in Public Parking due to increased parking ticket rates and continued growth in Ground Transportation (TNCs). Inside the terminals, strong performance continues in Clubs and Lounges and Al Clear revenues. In-flight sales revenue is also experiencing strong growth due to longer wait times in the TSA and concession lines. o Operating Expenses are forecasted to be ($2.5M or 0.7%) favorable to budget based on forecasted cost savings of $5.3M in allocations from other divisions, largely from Central Services and due to spending delays in Capital Development (AVPMG), which absorbed over-runs in direct airport expenses that was due to Snow removal disruptions earlier in the year of approximately $2.5M. Division Summary 2019 Forecast vs. 2018 Actuals Net Operating Income for 2019 is forecasted to be ($40.9M or 17.8%) higher than prior year primarily driven by: o Higher Operating Revenue ($85.7M or 15.6%) compared to prior year due to: Higher Aeronautical revenue ($73.4M higher) due to increased rate based costs and lower revenue sharing. Stronger Non-Aeronautical revenue performance ($12.3M higher) in Public Parking, Clubs and Lounges, Commercial Properties, Ground Transportation, Non-Arline Terminal Lease Spaces, and Airport Dining & Retail. o Higher Operating Expenses ($44.8M or 14.0%) compared to prior year due to: Higher payroll costs related to increased staffing of approximately $16M. Higher outside services expenses of approximately $13.8M primarily due to non-recurring expenses focused on addressing strategic initiatives throughout the airport. Higher charges from other divisions of $12M and Environmental Liability Expense of $8.6M, offset by lower Capital to Expense costs of $6.9M. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 A. BUSINESS EVENTS Safety: o Airfield composite safety score of 20.5 exceeds annual target of 18 o Major ground incidents YTD = 32 vs. annual goal 67 o Individual not going home: Q2 YTD 19 vs. 2019 goal < 52 (on track) o Developed policy for standardized personal protective equipment required in Bagwell Security: o Phase II Employee Screening authorized in May o Implemented new Credentialing Office processes to reduce wait times to receive badge Employee Engagement: o Goal is to increase employee engagement in the Aviation Division as evidenced by a 3% increase over the 2018 survey results by Q4 2019. o Create department specific survey action plans by end of Q2 (in progress) Innovations & Efficiencies: o Preparation for second Shark Tank innovations forum (held July 30) o Implement two efficiencies or innovations in each department (in process) Asset Management: o Asset condition assessment inventory (in process) Social Responsibility: o Airport Concessions Disadvantaged Business Enterprise (ACDBE) share of sales = 22.5% vs. goal of 22% o Disadvantaged Business Enterprise (DBE) share of 13.9% vs. goal of 8% o Women and Minority Business Enterprise share of spending on personal services contracts = 14.2% vs. goal of 12% Customer Service: o Through Q2 exceeding five-year average for 2 of 6 key measures (goal is 2) o Q2 increase for washroom cleanliness and internet access/wi-fi o 76% of AV Division staff completed WE ARE customer service training Environment and Sustainability: o Completed A&E/Construction contract for condo sound insulation o Reviewing proposals for purchase of renewable natural gas o Completed sound insulation for 9 single family homes Financial Performance: o Forecasting to achieve both 2019 goals: o Non-aeronautical NOI of $149.2M vs. budget of $136.6M o Airline costs (CPE) of $13.09 vs. budget of $13.39 o Commission authorized Concessions Lease Group 5 in June Capital Project, Planning, and SAMP: o SAMP: Submitted revised NEPA scope of work and forecast report Commission authorized $10 million for project planning and preliminary design for SAMP projects (July) o Briefed Commission on main terminal optimization plan (MTOP) in July o Completed phase 1 of North Satellite and opening of Alaska Lounge (July) 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 B. KEY PERFORMANCE METRICS % Change YTD 2017 YTD 2018 YTD 2019 from 2018 Total Passengers (000's) Domestic 19,666 20,897 21,616 3.4% International 2,484 2,611 2,689 3.0% Total 22,150 23,508 24,304 3.4% Operations 199,610 210,722 214,749 1.9% Landed Weight (In Millions of lbs.) Cargo 1,025 1,147 1,165 1.5% All other 12,416 13,328 13,738 3.1% Total 13,441 14,476 14,903 3.0% Cargo - Metric Tons Domestic freight 110,915 114,627 118,401 3.3% International freight 57,633 64,749 63,388 -2.1% Mail 28,882 28,326 28,314 0.0% Total 197,430 207,702 210,103 1.2% Key Performance Measures Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Vairance Change from 2018 Actual Actual Forecast Budget $ % $ % Key Performance Metrics Cost per Enplanement (CPE) 10.52 10.79 13.09 13.39 0.29 2.2% 2.31 21.4% Non-Aeronautical NOI (in 000's) 133,101 149,959 149,250 136,534 12,716 9.3% (709) -0.5% Other Performance Metrics O&M Cost per Enplanement 12.77 12.81 14.05 14.42 0.37 2.6% 1.24 9.7% Non-Aero Revenue per Enplanement 10.11 10.35 10.43 10.22 0.21 2.1% 0.08 0.8% Debt per Enplanement (in $) 114 133 121 123 2 1.6% (12) -8.9% Debt Service Coverage 1.57 1.66 1.67 1.65 0.03 1.6% 0.02 1.0% Days cash on hand (10 months = 304 days) 379 235 298 278 20 7.1% 63 26.6% Aeronautical Revenue Sharing ($ in 000's) (42,311) (36,863) (17,192) (15,682) (1,510) -9.6% 19,672 53.4% Activity (in 000's) Enplanements 23,416 24,894 25,890 25,394 496 2.0% 996 4.0% Key Performance Metrics 2019 Forecast compared to 2019 Budget: Cost per Enplanement (CPE) Forecast: o Forecasted CPE is ($0.29, or 2.2%) favorable to 2019 budget. o Forecasted CPE is $2.31 higher compared to prior year due to increase in rate based costs and decrease in revenue sharing (from 40% to 20%) percentage under SLOA IV. Non-Aero NOI: o Non-Aero NOI forecast is expected to be ($12.7M or 9.3%) favorable to budget due to both higher revenues and deferred expenses. o Non-Aero NOI forecast is expected to be $709K lower than prior year due to higher expenses to be incurred in 2019 compared to the rate of growth in revenue. The increases are primarily from new FTEs added for 2019 and non-recurring expenses focused on addressing strategic initiatives throughout the airport. 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 C. OPERATING RESULTS Division Summary YTD Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Operating Revenues: Aeronautical Revenues (1) 127,780 147,570 175,927 177,039 (1,112) -0.6% 28,357 19.2% Non-Aeronautical Revenues 112,761 118,864 124,604 121,045 3,560 2.9% 5,740 4.8% Total Operating Revenues 240,540 266,435 300,532 298,084 2,448 0.8% 34,097 12.8% Operating Expenses: Payroll 55,798 63,139 68,388 68,833 445 0.6% 5,249 8.3% Outside Services 17,203 21,015 24,456 29,412 4,956 16.9% 3,441 16.4% Utilities 8,389 9,589 9,288 10,683 1,395 13.1% (300) -3.1% Other Airport Expenses 13,680 9,788 14,240 11,605 (2,636) -22.7% 4,452 45.5% Total Airport Direct Charges 95,070 103,530 116,372 120,533 4,161 3.5% 12,842 12.4% Environmental Remediation Liability 2,714 4,484 12,543 14,204 1,661 11.7% 8,060 179.8% Capital to Expense 24 8 83 - (83) N/A 75 937.6% Total Exceptions 2,738 4,492 12,627 14,204 1,578 11.1% 8,135 181.1% Total Airport Expenses 97,808 108,021 128,998 134,737 5,739 4.3% 20,977 19.4% Police Costs 9,146 10,659 11,117 12,589 1,472 11.7% 458 4.3% Capital Development 6,486 6,072 6,860 8,265 1,405 17.0% 788 13.0% Other Central Services 25,000 26,714 27,221 29,416 2,195 7.5% 507 1.9% Maritime/Economic Development 1,879 1,970 2,039 2,578 540 20.9% 69 3.5% Total Charges from Other Divisions 42,512 45,414 47,237 52,848 5,612 10.6% 1,823 4.0% Total Operating Expense 140,320 153,436 176,235 187,585 11,350 6.1% 22,799 14.9% Net Operating Income 100,220 112,999 124,297 110,498 13,798 12.5% 11,298 10.0% (1) Aero revenues are net of revenue sharing. Operating Expenses 2019 YTD Actuals compared to 2019 YTD Budget: Total Operating Expenses are ($11.4M or 6.1%) favorable to YTD Budget due to the net of the following: YTD Aviation Direct Operating Expenses are favorable to budget by $4.2M Positive Variance of $6.8M Negative Variance of $2.6M Payroll - vacancies & hiring delays $0.4M Other Airport Expenses $2.6M Vacancies & hiring delays 1.4M Snow Removal Impact 1.5M Snow Removal Impact (1.0M) Increase in Legal Reserves 0.8M Outside Services $5.0M Other expenses 0.3M Suspension of the Airspace Study project 1.0M Facilities and Infrastructure Project Delays 1.3M Capital Program Accrual Adjustments 1.0M Other Outside Services Savings 1.7M Utilities $1.4M Surface Water run rate lower than budgeted 1.4M Natural Gas - PSE additional delivery cost (0.3M) Suspension or delays of projects 0.4M Other (0.1M) 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Operating Expenses 2019 YTD Actuals compared to 2019 YTD Budget - continued: YTD Operating Expenses Exceptions are ($1.6M or 11.1%) favorable to budget by $1.6M Positive Variance of $1.6M Negative Variance - none Environmental Remediation Liability $1.6M Soils -NSAT Contaminated Soils Removal 0.6M Asbestos - IAF- SSAT Interior Corridor Extension 0.8M Other ERL savings or deferrals 0.2M YTD Operating Expense charges from Central Services and other divisions are ($5.6M or 10.6%) favorable to budget by $5.6M Positive Variance of $5.6M Negative Variance - none Other Central Services savings $2.2M Police savings $1.5M Maritime/Economic savings $0.5M CDD savings $1.4M Aviation PMG (projects delayed/deferred) 1.3M Port Construction Services (0.5M) Other 0.6M Operating Expenses 2019 YTD Actuals compared to 2018 YTD Actuals: Total Operating Expenses are ($22.8M or 14.9%) higher than YTD 2018 Actuals due to the net of the following: YTD Aviation Direct Operating Expenses are higher than YTD 2018 Actuals by $12.8M Increase of $13.1M Decrease of $0.3M Payroll $5.2M Utilities $0.3M Increased staffing 4.2M Snow Removal Impact (1.0M) Outside Services $3.4M Other Aviation Expenses $4.5M YTD Operating Expenses Exceptions are higher than 2018 YTD Actuals by $8.1M Increase of $8.1M Decrease - no material amount Environmental Remediation Liability $8.1M YTD Operating Expense charges from Central Services and other divisions are higher than YTD 2018 Actuals by $1.8M Increase of $1.8M Decrease - none Capital Development $0.8M Police $0.5M Other Central Services $0.5M 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Division Summary YE Forecast Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Operating Revenues: Aeronautical Revenues 264,114 291,268 364,646 365,604 (957) -0.3% 73,378 25.2% Non-Aeronautical Revenues 236,803 257,707 270,014 259,537 10,477 4.0% 12,307 4.8% Total Operating Revenues 500,916 548,975 634,660 625,140 9,520 1.5% 85,685 15.6% Operating Expenses: Payroll 114,463 125,341 141,341 141,316 (25) 0.0% 15,999 12.8% Outside Services 41,055 47,638 61,428 60,950 (479) -0.8% 13,791 28.9% Utilities 16,374 18,237 18,949 20,235 1,285 6.4% 712 3.9% Other Airport Expenses 28,292 25,125 25,710 22,692 (3,018) -13.3% 586 2.3% Total Airport Direct Charges 200,184 216,341 247,429 245,192 (2,237) -0.9% 31,088 14.4% Environmental Remediation Liability 8,812 6,233 14,865 14,259 (605) -4.2% 8,632 138.5% Capital to Expense 2,856 6,891 - - - 0.0% (6,891) -100.0% Total Exceptions 11,668 13,124 14,865 14,259 (605) -4.2% 1,741 13.3% Total Airport Expenses 211,852 229,465 262,294 259,451 (2,842) -1.1% 32,829 14.3% Police Costs 17,652 19,231 25,137 25,137 - 0.0% 5,906 30.7% Capital Development 14,701 12,607 13,196 16,242 3,047 18.8% 588 4.7% Other Central Services 51,004 53,121 57,869 60,129 2,260 3.8% 4,748 8.9% Maritime/Economic Development 3,904 4,425 5,145 5,145 1 0.0% 720 16.3% Total Charges from Other Divisions 87,262 89,384 101,346 106,654 5,307 5.0% 11,962 13.4% Total Operating Expense 299,114 318,849 363,640 366,105 2,465 0.7% 44,791 14.0% Net Operating Income 201,802 230,126 271,020 259,036 11,985 4.6% 40,894 17.8% CFC Surplus (2,750) (6,157) (4,683) (3,993) (689) -17.3% 1,474 23.9% Net Non-Operating Items in / out from ADF (3) 3,481 4,406 6,069 6,069 - 0.0% 1,664 37.8% SLOA III Incentive Straight Line Adj 3,576 - - - - 0.0% - n/a Debt Service (131,060) (136,218) (161,132) (158,696) (2,436) 1.5% (24,913) -18.3% Adjusted Net Cash Flow 75,050 92,157 111,275 102,416 8,859 8.6% 19,119 20.7% Operating Expenses 2019 YE Forecast compared to 2019 YE Budget: Total Operating Expenses are forecasted to be ($2.5M or .7%) favorable to Budget due to the net of the following: Aviation Direct Operating Expenses are forecasted to be ($2.2M or 0.9%) unfavorable to Budget Positive Variance of $1.3M Negative Variance of $3.5M Payroll $0.0M Outside Services $0.5M Vacancies & hiring delays 1.0M Snow Removal Impact in Apron Area 1.2M Snow Removal Impact (1.0M) Snow Removal Impact on Landside 0.4M Utilities $1.3M Airfield Study Project Savings (1.0M) Surface Water & Water Utility run rate is lower than budgeted 1.8M FSS Cust. Svc. Seasonal Staffing Savings (0.5M) Late 2018 invoices for Sewer and Natural Gas (0.5M) Curbside assistance for taxi in Q4 based on SP+ estimates.0.5M Other offsets to over-runs (0.1M) Other Aviation Expenses $3.0M Legal Reserve Increase 1.0M Maintenance Deicer for Airfield and Landside 0.9M Commercial Management Food Prep Labor Tax 0.5M Under-accrued Airline Incentives 0.2M Other 0.4M 12 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aviation Operating Expense Exceptions are forecasted to be ($0.6M or 4.2%) unfavorable to Budget Positive Variance - no variance Negative Variance of $0.6M Environmental Remediation Liability $0.6M NSAT Contaminated Soils Removal Savings (0.6M) Asbestos - IAF- SSAT Interior Corridor and Other 1.1M Other ERL Expenses 0.1M Operating Expense charges from Central Services and other divisions are forecasted to be ($5.3M or 5%) favorable to Budget Positive Variance of $5.3M Negative Variance - none Central Services savings $2.3M CDD savings (projects delayed/deffered) $3.0M Operating Expenses 2019 YE Forecast compared to 2018 YE Actuals: Total Operating Expenses are forecasted to be ($44.8M or 14%) higher than 2018 Actuals due to the net of the following: Aviation Direct Operating Expenses are forecasted to be higher than 2018 Actuals by $31M Increase of $31.1M Decrease - none Payroll $16.0M Increased Staffing 15.0M Snow Removal Impact 1.0M Outside Services $13.8M Advance Planning 0.8M Seasonal Customer Service Staff & Other 3.1M Master Planning Infrastructure Systems 3.0M Executive Program Management Consulting Support 1.6M SAMP Environment Review Planning 1.2M Snow Removal Impact 1.6M Other Ourside Services 2.5M Utilities $0.7M Other Airport Expenses $0.6M Operating Expense Exceptions are forecasted to be higher than 2018 Actuals by $1.7M Increase of $8.6M Decrease of $6.9M Environmental Remediation Liability $8.6M Capital to Expense $6.9M Operating Expense charges from Central Services and other divisions are forecasted to be higher than 2018 Actuals by $12M Increase of $12.0M Decrease - no material amount Police $5.9M CDD $0.6M Other Central Services $4.7M Maritime/Economic Development divisions $0.7M 13 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aeronautical Business Unit Summary - YTD Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Revenues: Movement Area 50,849 59,656 61,289 61,987 (697) -1.1% 1,634 2.7% Apron Area 7,636 8,209 9,883 9,456 427 4.5% 1,674 20.4% Terminal Rents 78,051 83,956 100,229 100,032 197 0.2% 16,272 19.4% Federal Inspection Services (FIS) 6,708 6,641 7,271 7,086 185 2.6% 630 9.5% Total Rate Base Revenues 143,243 158,462 178,672 178,561 111 0.1% 20,210 12.8% Commercial Area 4,959 5,072 5,569 6,319 (750) -11.9% 497 9.8% Subtotal before Revenue Sharing 148,202 163,534 184,241 184,880 (639) -0.3% 20,707 12.7% Revenue Sharing (18,635) (15,964) (8,314) (7,841) (473) -6.0% 7,650 47.9% Total Aeronautical Revenues 129,567 147,570 175,927 177,039 (1,112) -0.6% 28,357 19.2% Total Aeronautical Expenses 91,209 100,511 106,581 112,212 5,630 5.0% 6,070 6.0% Net Operating Income 38,358 47,059 69,346 64,827 4,519 7.0% 22,287 47.4% Aeronautical Q2 2019 Actuals vs. Q2 2019 Budget Net Operating Income for Q2 2019 is ($4.5M or 7.0%) favorable to budget primarily due to savings in Aeronautical expenses due to spending and timing delays in Outside Services and lower charges from other divisions. Aeronautical Q2 2019 Actual vs. Q2 2018 Actual Net Operating Income for Q2 2019 is ($22.3M or 47.4%) higher than Q2 2018 due mainly to higher revenues ($28.4M or 19.2% increase) from rate-based costs to recover for increased airline activity and lower revenue sharing to the Airlines due to reduction in revenue sharing percentage under SLOA IV. Operating Expenses are ($6.1M or 6.0%) higher than Q2 2018 due to higher airport direct operating expenses to support increased airline activity. 14 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aeronautical Business Unit Summary - YE Forecast Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Revenues: Movement Area 108,638 116,703 128,896 130,873 (1,976) -1.5% 12,194 10.4% Apron Area 16,771 15,627 12,380 19,714 (7,334) -37.2% (3,246) -20.8% Terminal Rents 155,431 169,318 212,274 203,319 8,956 4.4% 42,956 25.4% Federal Inspection Services (FIS) 18,612 16,226 15,171 14,521 650 4.5% (1,055) -6.5% Total Rate Base Revenues 299,452 317,874 368,722 368,426 296 0.1% 50,848 16.0% Commercial Area 10,574 10,257 13,116 12,859 256 2.0% 2,858 27.9% Subtotal before Revenue Sharing 310,026 328,131 381,838 381,286 552 0.1% 53,707 16.4% Revenue Sharing (42,311) (36,863) (17,192) (15,682) (1,510) -9.6% 19,672 53.4% Other Prior Year Revenues (26) - - - - 0.0% - Total Aeronautical Revenues 267,690 291,268 364,646 365,604 (957) -0.3% 73,378 25.2% Total Aeronautical Expenses 195,414 211,101 242,808 243,102 294 0.1% 31,706 15.0% Net Operating Income 72,276 80,167 121,839 122,502 (663) -0.5% 41,672 52.0% Debt Service (1) (86,564) (91,673) (111,673) (109,343) (2,330) -2.1% (20,000) -21.8% Net Cash Flow (14,288) (11,506) 10,166 13,159 (2,993) 22.7% 21,672 188.4% Airline Rate Base Cost Drivers Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % O&M 192,188 206,076 236,175 237,387 (1,212) -0.5% 30,099 14.6% Debt Service Gross 113,832 115,419 137,696 136,513 1,183 0.9% 22,277 19.3% Debt Service PFC Offset (33,057) (32,987) (33,060) (33,045) (15) 0.0% (73) 0.2% Amortization 29,654 32,371 30,583 30,121 463 1.5% (1,787) -5.5% Space Vacancy (2,264) (2,132) (1,614) (1,521) (93) 6.1% 518 -24.3% TSA Operating Grant and Other (901) (873) (1,058) (1,028) (30) 2.9% (185) 21.2% Rate Base Revenues 299,452 317,874 368,722 368,426 296 0.1% 50,848 16.0% Commercial area 10,574 10,257 13,116 12,859 256 2.0% 2,858 27.9% Total Aero Revenues 310,026 328,131 381,838 381,286 553 0.1% 53,707 16.4% Aeronautical 2019 YE Forecast vs. 2019 YE Budget Aeronautical net operating income is forecasted to be ($0.7M or 0.5%) slightly unfavorable to budget driven by: o Lower forecasted Aeronautical revenues of approximately $1M or .3% lower than budget due to higher revenue sharing to the Airlines based on higher projected Non-Aeronautical revenues, despite the decrease in revenue sharing percentage (from 40% in 2018 to 20% in 2019) per SLOA IV. Aeronautical expenses are forecasted to be ($0.3M or 0.1%) nearly in-line with budget driven by lower cost allocations from other divisions due to delayed spending from Capital Development programs which helped to absorb overruns in Airport expenses due to snow removal costs from Q1 that impacted the Airfield Movement area. 15 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aeronautical 2019 YE Forecast vs. 2018 YE Actuals Net Operating Income for 2019 is forecasted to be ($41.7M or 52%) higher than prior year due to: o $74.3M higher revenue from rate-based costs to recover increased airline activity, and due to lower revenue sharing to the Airlines per SLOA IV airline. o $31.7M higher expenses due to increased airport direct operating expenses to support increased airline activity and higher charges from other divisions (Central Services and Capital Development). Non-Aero Business Unit Summary YTD Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Non-Aero Revenues Rental Cars - Operations 14,514 14,922 15,560 15,123 437 2.9% 637 4.3% Rental Cars - Operating CFC 3,284 5,497 4,505 4,657 (153) -3.3% (993) -18.1% Public Parking 36,958 39,402 40,401 40,969 (568) -1.4% 999 2.5% Ground Transportation 7,633 8,885 9,979 9,413 567 6.0% 1,094 12.3% Airport Dining & Retail 26,349 27,694 29,581 28,199 1,383 4.9% 1,887 6.8% Non-Airline Terminal Leased Space 2,071 2,485 3,108 2,555 553 21.6% 623 25.1% Commercial Properties 10,708 7,593 7,072 6,703 369 5.5% (521) -6.9% Utilities 3,423 3,438 3,665 3,932 (267) -6.8% 227 6.6% Employee Parking 4,674 5,191 5,193 4,876 317 6.5% 2 0.0% Clubs and Lounges 2,173 2,773 4,456 3,626 830 22.9% 1,683 60.7% Other 973 983 1,085 993 92 9.3% 102 10.4% Total Non-Aero Revenues 112,761 118,864 124,604 121,045 3,560 2.9% 5,740 4.8% Total Non-Aero Expenses 49,111 52,925 57,316 62,229 4,913 7.9% 4,391 8.3% Net Operating Income 63,649 65,940 67,288 58,816 8,472 14.4% 1,349 2.0% Non-Aeronautical Q2 2019 Actuals vs. Q2 2019 Budget Net Operating Income for Q2 2019 is ($8.5M or 14.4%) favorable to budget driven by a combination of: o Higher Operating Revenue due to strong YTD performance in Clubs and Lounges, Al Clear, Airport Dining & Retail, and Ground Transportation. o Lower Operating Expenses due to slower than anticipated project expense charges from other divisions (primarily in Capital Development). Non-Aeronautical Q2 2019 Actual vs. Q2 2018 Actual Net Operating Income for Q2 2019 is ($1.3M or 2%) higher than Q2 2018 (2.0% higher) driven by: o Strong revenue performance in both Food and Beverage and Retail sales despite transitions to new leases. Clubs and Lounges have also outperformed expectations, along with increased TNC activity in Ground Transportation, and increased transactions in Public Parking. While revenue was (4.8% higher) compared to prior YTD, it was offset by higher expenses (8.3% higher) which reflected planned initiatives in the 2019 budget and snow removal related costs earlier in the year. 16 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Non-Aero Business Unit Summary - YE Forecast Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Non-Aero Revenues Rental Cars - Operations 35,051 37,306 37,663 36,455 1,208 3.3% 357 1.0% Rental Cars - Operating CFC 10,641 16,263 13,624 13,624 - 0.0% (2,639) -16.2% Public Parking 75,106 80,212 86,070 82,350 3,720 4.5% 5,859 7.3% Ground Transportation 15,684 18,772 20,706 19,734 972 4.9% 1,934 10.3% Airport Dining & Retail 54,611 59,021 59,962 59,484 478 0.8% 941 1.6% Non-Airline Terminal Leased Space 4,369 5,302 5,879 4,909 970 19.8% 577 10.9% Commercial Properties 18,042 15,434 15,471 14,219 1,251 8.8% 37 0.2% Utilities 7,018 7,206 8,026 8,058 (32) -0.4% 820 11.4% Employee Parking 9,617 10,269 10,134 10,134 - 0.0% (135) -1.3% Clubs and Lounges 5,041 6,802 10,329 8,520 1,809 21.2% 3,527 51.9% Other 1,624 1,119 2,150 2,049 101 4.9% 1,030 92.1% Total Non-Aero Revenues 236,803 257,707 270,014 259,537 10,477 4.0% 12,307 4.8% Total Non-Aero Expenses 103,702 107,748 120,832 123,003 2,171 1.8% 13,085 12.1% Net Operating Income 133,101 149,959 149,181 136,534 12,648 9.3% (778) -0.5% Less: CFC (Surplus) / Deficit (1) (2,750) (6,157) (4,683) (3,993) (689) -17.3% 1,474 23.9% Adjusted Non-Aero NOI 130,351 143,802 144,499 132,540 11,958 9.0% 696 0.5% Debt Service (1) (44,495) (44,545) (49,459) (49,352) (107) -0.2% (4,914) -11.0% Net Cash Flow 85,856 99,257 95,040 83,188 11,852 14.2% (4,217) -4.2% (1) CFC excess and Debit service are forecasted/budgeted on an annual basis only. Thus, quarterly data is not available. Non-Aeronautical 2019 Forecast vs. 2019 Budget Non-Aeronautical net operating income is forecasted to be ($12.7M or 9.3%) favorable to budget due to a combination of: o Higher projected revenues ($10.5M or 4% higher) in the following areas: Public Parking due to increased parking ticket rates and continued growth in Ground Transportation (TNCs); inside the terminals, strong performance continues in Clubs and Lounges and Al Clear revenues; and In-flight sales revenue is also experiencing strong growth due to longer wait times in the TSA and concession lines. o Lower projected expenses ($2.2M or 1.8% lower) due largely to forecasted cost savings in allocations from other divisions which absorbed impact of snow removal costs to Landside in Q1. Non-Aeronautical 2019 Forecast vs. 2018 Actuals Net Operating Income growth for 2019 is forecasted to be ($0.7M or 0.5%) flat compared to prior year despite higher forecasted revenues in Airport Dining & Retail, Public Parking, Ground Transportation, and Clubs and Lounges. While growth in revenue is forecasted to be ($12.3M or 4.8%) higher, expenses are anticipated to be ($13.1M or 12.1%) higher due to higher payroll costs related to increase in staffing, higher outside services expense primarily due to non-recurring expenses focused on addressing strategic initiatives throughout the airport, and higher charges from other divisions. 17 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS Capital Variance $ in 000's 2019 2019 2019 Budget Variance Description YTD Actual Forecast Budget $ % International Arrivals Facility (1) 153,500 338,500 376,548 38,048 10.1% NS NSAT Renov NSTS Lobbies (2) 64,866 133,086 141,054 7,968 5.6% Service Tunnel Renewal/Replace (3) 5,083 11,083 15,000 3,917 26.1% SSAT Renovation Project (4) (3,426) (3,426) 100 3,526 3525.9% Arc Flash Mitigation (5) 29 189 3,636 3,448 94.8% Fire Station - Westside (6) 358 958 4,000 3,042 76.0% Highline School Insulation (7) 3 6,043 3,300 (2,743) -83.1% Electric Utility SCADA (8) 6 406 2,800 2,394 85.5% Parking Garage Elevators Modernization (9) 157 1,317 3,590 2,273 63.3% ASL Conversion at Checkpoints (10) 536 1,536 3,400 1,864 54.8% PLB Renew & Replace Phase 2 (11) 1,606 4,168 5,834 1,666 28.6% Perimeter Intrusion Detect Sys (12) 26 123 1,775 1,652 93.1% RCF Pavement Remediation (13) 173 3,573 5,200 1,627 31.3% All Other 57,206 162,257 201,494 39,237 19.5% Total Spending 280,124 659,813 767,732 107,919 14.1% 1. The Design Builder construction in place has lagged behind projections, primarily because of steel fabrication delays and overall manpower shortages. 2. One month lag on construction invoicing is contributing to positive variance. 3. Original estimate assumed traffic management change order was to be implemented which has not yet occurred. Estimate did not account for decrease in spending as work in the main garage is completed. 4. Project cancelled. 5. Design delays have deferred construction start to 2020. 6. A change in delivery method from two major works contracts to one contract has resulted in delaying the construction to start in Q1 2020. 7. FAA issued a grant, issuance of grant accelerated projected cash flows for the two schools. 8. Project delayed to address design deficiencies and additional scope. 9. Elevator shafts and vestibules are being delayed until 2020 construction season due to design delays and weather windows. 10. Work delays are due to the lack of electrical contracting and sprinkler damage delays with CP2/CP3. 11. Two bridges are pushed out from 2019 to 2020 due to gate S12 PLB failure. Payments to suppliers are later than forecasted. 12. RFP Took longer than originally anticipated to get off the ground. 13. Original estimate prepared prior to scope revision for fencing that delayed construction two months. 18 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Total Revenues 54,183 57,575 59,629 59,729 (100) 0% 2,055 4% Total Operating Expenses 42,164 43,252 48,481 50,822 2,341 5% 5,229 12% Net Operating Income 12,020 14,323 11,149 8,908 2,241 25% (3,174) 22% Capital Expenditures 5,746 20,489 15,105 17,638 2,533 14% (5,384) -26% Division Summary 2019 Forecast vs. 2019 Budget Operating Revenues are forecasted $100K below budget. Operating Expenses are forecasted to be $2.3M below budget with savings expected to be split between the Maritime Division ($1.8M) and Central Services ($0.5M). Net Operating Income forecasted to be $2.2M above budget. At the end of the 2nd quarter, capital spending for full year 2019 is forecasted to be $15.1 million or 86% of the approved budget of $17.6 million. Division Summary 2019 Forecast vs. 2018 Actuals Operating Revenues are forecast to be $2.1M above 2018 due to higher tariff rates primarily in Cruise. Operating Expenses are expected to be $5.2M greater than 2018 primarily from increased wage rates, one-time favorable 2018 pension adjustment, and higher expected Cruise outside services. Net Operating Income is forecasted to be $3.2M less than 2018. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Ship Canal Fishing & Operations (1,162) (1,148) (800) (1,215) 414 34% 348 30% Elliott Bay Fishing & Commercial Operations 355 13 515 (282) 797 282% 501 NA Recreational Boating 791 982 1,045 263 782 297% 62 6% Cruise 2,829 2,093 3,216 2,920 296 10% 1,123 54% Bulk 2,388 2,249 1,737 1,534 203 13% (513) -23% Maritime Portfolio 111 391 (435) (1,225) 790 64% (826) -211% All Other (478) (39) (219) (372) 153 41% (180) -456% Total Maritime 4,835 4,541 5,058 1,623 3,435 212% 516 11% 19 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 A. BUSINESS EVENTS Cruise Successful first arrival of the Norwegian Joy and Royal Caribbean's Ovation of the Seas. Eighty percent of business volume now under contracted commitment. Received feedback on RFQ and selected three entities to participate in the RFP process. Elliott Bay Fishing & Commercial Operations The 680' Ocean Phoenix fished her last season of Pollock. She has been a 30+year tenant of the port, employing 225 crew, and bringing 4,200 tons of product annually to Pier 90. The 367' M/V Excellence has been overhauled to help absorb the processing capacity of the Ocean Phoenix. Recreational Boating Bids closed for Shilshole Bay Marina's customer service facility buildings. Building on 4th year in a row with zero injuries. Seaport Environmental Completed installation of 390 solar panels, each with 300 watts at P69. Project came in under budget with 66% of costs recovered by the grant. Stormwater Utility Completed installation of a rain garden adjacent to the bike path at Terminal 86 and new drainage system in Cruise passenger area at Pier 91. B. KEY PERFORMANCE METRICS Grain Volume Metric Tons in 000's 600 500 2018 Actual 400 2019 Budget 300 2019 Actual 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cruise Passengers in 000's 400 300 2018 Actual 2019 Budget 200 2019 Actual 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 20 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 C. OPERATING RESULTS Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Ship Canal Fishing & Operations 1,456 1,610 2,004 2,010 (6) 0% 394 24% Elliott Bay Fishing & Commercial Operations 2,984 3,012 3,067 2,961 105 4% 55 2% Recreational Boating 5,438 6,068 6,228 6,358 (131) -2% 160 3% Cruise 6,325 6,806 8,473 9,114 (641) -7% 1,668 25% Bulk 3,042 3,123 2,567 2,423 144 6% (556) -18% Maritime Portfolio Management 5,267 5,628 5,019 5,052 (33) -1% (609) -11% Other 14 11 10 0 10 NA (1) -8% Total Revenue 24,525 26,257 27,368 27,918 (550) -2% 1,110 4% Expenses Ship Canal Fishing & Operations 1,021 1,183 1,227 1,493 266 18% 44 4% Elliott Bay Fishing & Commercial Operations 1,289 1,315 1,202 1,407 205 15% (113) -9% Rec Boating 1,857 1,952 2,027 2,312 285 12% 75 4% Cruise 427 1,136 998 2,307 1,309 57% (138) -12% Other Maritime 221 365 280 270 (11) -4% (85) -23% Maintenance Expenses 4,658 5,576 5,521 6,227 706 11% (55) -1% Portfolio Management 1,770 2,031 2,136 2,402 266 11% 105 5% Other ED Expenses 353 320 232 356 123 35% (87) -27% Total Maritime & EDD expenses 11,595 13,878 13,624 16,773 3,149 19% (254) -2% Enviromental & Sustainability 598 519 1,082 1,294 212 16% 563 108% CDD Expenses 419 437 415 420 5 1% (22) -5% Police Expenses 1,889 2,169 1,988 2,240 252 11% (181) -8% Other Central Services 4,725 4,707 5,055 5,461 406 7% 349 7% Aviation Division 93 105 135 107 (28) -26% 30 28% Total Central Services & Aviation 7,724 7,937 8,675 9,522 847 9% 738 9% Envir Remed Liability 371 (99) 11 0 (11) NA 110 -111% Total Expense 19,690 21,716 22,310 26,295 3,985 15% 594 3% NOI Before Depreciation 4,835 4,541 5,058 1,623 3,435 212% 516 11% Depreciation 8,442 8,823 8,911 8,804 (107) -1% 88 1% NOI After Depreciation (3,606) (4,281) (3,853) (7,181) 3,328 46% 429 10% 2019 YTD Actuals vs. Budget Operating Revenues were $550K lower than budget from Cruise sailing schedule and contractual changes after budget. The shortfall should be made up in Q2. Operating Expenses were $3,985K lower than budget: o Cruise $1,309K lower than budget due to timing of marketing spend and cancellation of consulting work. o Rec Boating $285K lower than budget due to open positions. o Ship Canal Fishing & Operations $266K favorable primarily due to open positions budgeted for Salmon Bay Marina. o Elliott Bay Fishing & Commercial Operations $205K lower than budget from timing of utility expense. o Portfolio Management $266K favorable from open headcount and timing of consulting. o Maintenance $706K favorable do to timing of project spend. o Environment & Sustainability $212K lower than budget due to vacant positions. o Police $252K under budget. o Other Central Services $406K lower than budget primarily due to lower charges from Public Affairs $78K, Human Resources $141K, and Exec $74K. All other expenses net to $78K lower than budget. Net Operating Income was $3,435 above budget. 21 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 YTD Actuals vs. 2018 YTD Actuals Operating Revenues were $1,110K higher than 2018 due to growth in Cruise and Fishing/Commercial/Recreational Marinas resulting from increased rates. This growth is offset by WSDOT lease expiration at T106 & T46 and reductions in volumes at the Grain terminal resulting from soybean tariffs. Operating Expenses were $594K higher than 2018 actual driven primarily by Environmental with a higher ratio of expense work and Central services from annual salary increases. Direct expenses went down Y/Y due to higher than expected open positions. Net Operating Income was $516K above 2018 actual. Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Ship Canal Fishing & Operations 2,854 3,502 4,021 4,021 0 0% 519 15% Elliott Bay Fishing & Commercial Operations 6,443 6,755 5,827 5,927 (100) -2% (928) -14% Recreational Boating 11,086 12,035 12,794 12,794 0 0% 760 6% Cruise 17,596 18,880 22,406 22,406 0 0% 3,526 19% Bulk 5,427 5,167 4,254 4,254 0 0% (913) -18% Maritime Portfolio Management 10,787 11,305 10,328 10,328 0 0% (977) -9% Other (9) (69) 0 0 0 NA 69 100% Total Revenue 54,183 57,575 59,629 59,729 (100) 0% 2,055 4% Expenses Ship Canal Fishing & Operations 2,011 2,261 2,554 2,804 250 9% 293 13% Elliott Bay Fishing & Commercial Operations 2,588 2,530 2,479 2,629 150 6% (51) -2% Rec Boating 3,814 3,609 3,995 4,395 400 9% 387 11% Cruise 2,674 2,683 3,637 4,212 575 14% 954 36% Other Maritime 462 721 564 564 0 0% (157) -22% Maintenance Expenses 10,420 11,416 11,980 11,980 0 0% 563 5% Portfolio Management 3,507 3,726 3,979 4,279 300 7% 252 7% Other ED Expenses 665 621 595 718 123 17% (26) -4% Total Maritime & EDD expenses 26,141 27,566 29,782 31,580 1,798 6% 2,216 8% Enviromental & Sustainability 1,125 1,588 2,436 2,622 186 7% 847 53% CDD Expenses 748 823 855 821 (34) -4% 33 4% Police Expenses 3,756 4,041 4,297 4,473 176 4% 256 6% Other Central Services 9,803 9,469 10,905 11,120 215 2% 1,437 15% Aviation Division 203 221 206 206 0 0% (15) -7% Total Central Services & Aviation 15,634 16,141 18,699 19,242 543 3% 2,558 16% Envir Remed Liability 389 (455) 0 0 0 NA 455 100% Total Expense 42,164 43,252 48,481 50,822 2,341 5% 5,229 12% NOI Before Depreciation 12,020 14,323 11,149 8,908 2,241 25% (3,174) -22% Depreciation 17,410 18,022 17,813 17,613 (200) -1% (209) -1% NOI After Depreciation (5,390) (3,699) (6,664) (8,705) 2,041 23% (2,965) -80% 2019 Forecast vs. 2019 Budget Operating Revenues are forecast $100K below budget from scheduling with Navy vessel during seafair. Operating Expenses are forecasted to be $2,341K lower than budget: o Fishing and Rec Boating are $800K below budget dues to YTD savings. o Cruise is favorable $575K with $750K consulting contract cancellation offset by a $175K capital write off on the P66 Cruise terminal faade. o Remaining $966K driven by open headcount payroll, not expected to be spent in 2nd half. 22 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 Forecast vs. 2018 Actuals Operating Revenues are forecasted to be $2.1M higher than 2018 actual: o Increased tariff offset by loss of WSDOT revenue. Operating Expenses are forecasted to be $5.2M higher than 2018 actual with increases seen in: o Cruise $1M due to higher execution and exterior faade write-off. o Central Services $2.6M up from wage increases, less open headcount, and favorable 2018 pension adjustment. o Maintenance up $563K from allocation change on P66 cruise building. Net Operating Income is forecasted to be $3.2M below 2018 actual. 23 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS Comments on Key Projects: Through the 1st half of 2019, Maritime spent 11% of the annual approved capital budget. Full year spending is estimated to be 86% of budget. Projects with significant changes in spending were: Small Projects Numerous projects within CIP are under feasibility discussions to either cancel or defer spending into 2020. T117 Restoration Schedule delayed due to delayed in Trustee negotiation. New Cruise Terminal - A site for the new cruise terminal became available sooner than expected. Design development proceeding earlier than anticipated. SBM Paving Construction delayed due to re-evaluation of project scope after bids received 33% over Engineer's estimate. Contract award expected in Q3 2019. Marina Management System Project on hold as vendor unable to meet security requirements. 24 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Total Revenues 17,791 20,705 19,725 19,725 0 0% (979) -5% Total Operating Expenses 25,397 27,651 29,172 31,114 1,942 6% 1,522 6% Net Operating Income (7,606) (6,946) (9,447) (11,389) 1,942 17% (2,501) -36% Capital Expenditures 3,739 2,066 4,980 5,713 733 13% 2,914 141% Division Summary 2019 Forecast vs. 2019 Budget Operating Revenues are forecasted to budget primarily due to Conference and Event Center favorable volumes in the 1st half, offset by construction/modernization related volumes in the 2nd half of 2019. Operating Expenses are forecasted to be $1,942K below budget primarily due to unfilled positions, Maintenance allocation changes, Workforce Development contract deferral, and timing of EDD Grants. Net Operating Income forecasted to be $1,942K above budget. At the end of the second quarter, capital spending for full year 2019 is forecasted to be $5.0M or 87% of the approved budget. Division Summary 2019 Forecast vs. 2018 Actuals Operating Revenues are expected to be $979K below 2018 primarily due to expiring lease with WSDOT at T106 and Conference and Event Center volumes. Operating Expenses are expected to be $1,522K greater than 2018 primarily due to increased execution of Economic Development Initiative programs. Net Operating Income is expected to be $2.5M less than 2018. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date 2019 Bud Var Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Portfolio Management (2,548) (2,062) (1,293) (3,093) 1,799 58% 769 37% Conference & Event Centers (483) (17) (162) (85) (78) -92% (145) -848% Tourism (528) (640) (505) (714) 208 29% 134 21% Workforce Development (353) (368) (596) (1,095) 499 46% (229) -62% EDD Grants (427) (28) 4 (624) 628 NA 32 NA Env Grants/Remed Liab/ERC (1) 0 (34) (60) 26 NA (34) NA Total Econ Dev (4,340) (3,115) (2,588) (5,670) 3,082 54% 527 17% 25 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 A. BUSINESS EVENTS Workforce Development Fourteen aspiring ironworkers graduated from the union's second pre-apprenticeship cohort. Thirteen are now enrolled apprentices. The group has earned $141K ($24+/hour) so far. Diversity in Contracting Published the first Diversity in Contracting Annual Report. It highlighted the Port's 2018 WMBE results (11.8%) and 2019 WMBE utilization goals (12.4% not including construction). Portfolio Management Received Commission authorization to start construction/modernization of Bell Harbor Conference Center. Tourism Thirty organizations received 2019 tourism grants from the Port of Seattle. New recipients include: Goldendale Chamber of Commerce promoting the Goldendale Observatory, the Suquamish Museum targeting travelers in Seattle hotels and Methow Trails will improve their website promoting outdoor winter activities. Selected Core Communications to provide tourism marketing programs on behalf of the Port's international tourism efforts. Real Estate Development Issued RFP to redevelop Terminal 106. Initiated Commission approval to surplus and sell small property on Harbor Avenue. B. KEY PERFORMANCE METRICS Building Occupancy by Location: 100% 95% 90% Central Harbor T-91 Uplands 85% Marina Office & Retail 80% T-91 Industrial T-106 Warehouse 75% 70% Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 26 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 C. OPERATING RESULTS Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Revenue 4,182 4,577 4,421 4,414 7 0% (156) -3% Conf & Event Centers 3,545 5,188 5,963 5,604 360 6% 775 15% Total Revenue 7,727 9,765 10,384 10,017 367 4% 619 6% Expenses Portfolio Management 2,050 1,952 1,922 2,156 234 11% (30) -2% Conf & Event Centers 3,660 4,306 4,833 4,687 (146) -3% 526 12% P69 Facilities Expenses 96 114 92 115 23 20% (22) -20% RE Dev & Planning 120 74 48 98 49 51% (26) -35% EconDev Expenses Other 396 473 352 644 292 45% (121) -26% Maintenance Expenses 1,492 1,996 1,563 2,160 597 28% (433) -22% Maritime Expenses (Excl Maint) 24 77 72 196 124 63% (5) -6% Total EDD & Maritime Expenses 7,838 8,992 8,882 10,055 1,174 12% (111) -1% Diversity in Contracting 26 37 99 106 7 7% 62 169% Workforce Development 228 228 474 959 485 51% 246 108% Tourism 514 620 526 761 235 31% (94) -15% EDD Grants 427 28 (4) 580 584 101% (32) -112% Total EDD Initiatives 1,195 912 1,095 2,406 1,311 54% 183 20% Environmental & Sustainability 130 121 173 193 20 10% 52 43% CDD Expenses 200 139 148 120 (28) -23% 9 6% Police Expenses 85 81 101 114 13 12% 20 24% Other Central Services 2,551 2,555 2,520 2,719 199 7% (35) -1% Aviation Division 69 79 54 80 27 33% (26) -32% Total Central Services & Aviation 3,034 2,976 2,995 3,226 231 7% 20 1% Envir Remed Liability 0 0 0 0 0 NA 0 NA Total Expense 12,067 12,880 12,972 15,688 2,716 17% 92 1% NOI Before Depreciation (4,340) (3,115) (2,588) (5,670) 3,082 54% 527 17% Depreciation 1,860 1,999 1,859 1,908 50 3% (141) -7% NOI After Depreciation (6,201) (5,114) (4,447) (7,579) 3,132 41% 668 13% 2019 YTD Actuals vs. Budget Operating Revenues were $367K higher than budget due to higher than anticipated volumes at the conference and event center. Operating Expenses were $2,716K lower than budget: o Portfolio Management $234K favorable from open headcount and timing of tenant improvement expenses. o Conference and Event Center costs $146K unfavorable due to higher volumes. o EconDev Other $292K lower than budget due to unspent Opportunity Fund and delayed hiring. o Maintenance Expenses $597K favorable from new allocation methodology at P66. o Workforce Development $485K lower than budget due to timing of spending for Construction Trades - Regional Partnership, K-12 Career Connected Learning, and Maritime Initiative, offset by moving up spending on Airport Career Pathways implementation. o Tourism $235K lower than budget from timing of Visit Seattle invoice and less travel expense than budgeted. o EDD Grants $584K favorable to budget due to timing of invoices. o Other Central Services $199K below budget with savings from open headcount. o All other expenses net to $56K above budget. Net Operating Income was $3,082K above budget. 27 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 YTD Actuals vs. 2018 YTD Actuals Operating Revenues were $619K higher than 2018 actual due to stronger sales resulting from the completion of the Pier 66 Cruise Terminal Expansion Project that disrupted the availability of space for conference events. Operating Expenses were $92K higher than 2018 actual: o Conference and Event Center $526K greater than 2018 due to higher sales activity at Bell Harbor International Conference Center. o Portfolio Management lower $30K from elevator modernization in Q1 2018. o Maintenance Expenses $433K less than 2018 due to allocation methodology change at P66. o EDD Grants $32K lower, EconDev Other $121K lower, Workforce Development $246K higher, and Tourism $94K lower than 2018 due to timing of payments. o All other Expenses net to $30K above 2018. Net Operating Income was $527K above 2018 actual. 28 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Revenue 8,658 9,002 8,930 8,930 0 0% (72) -1% Conf & Event Centers 9,133 11,703 10,795 10,795 0 0% (908) -8% Total Revenue 17,791 20,705 19,725 19,725 0 0% (979) -5% Expenses Portfolio Management 3,879 3,571 3,894 4,128 234 6% 323 9% Conf & Event Centers 7,639 9,889 9,374 9,374 0 0% (516) -5% P69 Facilities Expenses 206 235 225 225 0 0% (11) -5% RE Dev & Planning 214 149 166 216 50 23% 17 11% EconDev Expenses Other 773 785 1,062 1,262 200 16% 277 35% Maintenance Expenses 3,666 3,915 3,571 4,071 500 12% (344) -9% Maritime Expenses (Excl Maint) 52 166 265 389 124 32% 99 59% Total EDD & Maritime Expenses 16,429 18,711 18,556 19,664 1,108 6% (155) -1% Diversity in Contracting 64 132 199 199 0 0% 67 50% Workforce Development 850 702 1,600 2,010 410 20% 898 128% Tourism 1,234 1,408 1,521 1,521 0 0% 112 8% EDD Grants 751 838 900 1,160 260 22% 62 7% Total EDD Initiatives 2,900 3,080 4,220 4,890 670 14% 1,139 37% Environmental & Sustainability 260 281 338 395 57 14% 58 21% CDD Expenses 387 283 247 235 (12) -5% (36) -13% Police Expenses 51 (76) 220 228 8 4% 296 -391% Other Central Services 5,257 5,259 5,436 5,547 111 2% 177 3% Aviation Division 113 113 155 155 0 0% 42 37% Total Central Services & Aviation 6,068 5,860 6,397 6,561 164 2% 538 9% Envir Remed Liability 0 0 0 0 0 NA 0 NA Total Expense 25,397 27,651 29,172 31,114 1,942 6% 1,522 6% NOI Before Depreciation (7,606) (6,946) (9,447) (11,389) 1,942 17% (2,501) -36% Depreciation 3,863 3,992 3,819 3,819 0 0% (173) -4% NOI After Depreciation (11,469) (10,938) (13,266) (15,208) 1,942 13% (2,328) -21% 2019 Forecast vs. 2019 Budget Operating Revenues are forecasted to budget with year to date favorability offset by construction at P66 Conference & Event Center. Operating Expenses are forecasted to be $1,942K below budget primarily due to unfilled positions and reduction in a couple initiative programs. 2019 Forecast vs. 2018 Actuals Operating Revenues are forecasted to be $979K lower than 2018 actual: o Loss of T106 WSDOT revenue in 2019. o Potential loss of Conference and Event Center space due to the capital modernization project. Operating Expenses are forecasted to be $1.5M higher than 2018 actual: Net Operating Income is forecasted to be $2.5M below 2018 actual. 29 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS Comments on Key Projects: Through the 1st half of 2019, Economic Development spent 25% of the annual approved capital budget. Full year spending is estimated to be 87% of budget. Projects with significant changes in spending were: Tenant Improvements - Capital Leases forecasted to expire will be renewed and require additional capital investment. Small Projects Upland Garage EV Charging Station project was cancelled by project sponsor for 2019. Project feasibility for 2020 under discussion T91 Upland Pre-Development Spending less in 2019 with more spending to occur in 2020 and 2021. 30 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Actual Actual Forecast Budget $ % $ % Total Operating Revenues 68 (500) 498 185 313 169.2% 998 -199.5% Core Central Support Services 71,071 73,576 81,157 82,710 1,552 1.9% 7,581 10.3% Police 22,095 23,908 29,578 30,778 1,200 3.9% 5,670 23.7% Capital Development 17,370 15,501 16,227 18,628 2,401 12.9% 726 4.7% Environment & Sustainability 6,975 8,770 12,101 13,224 1,123 8.5% 3,331 38.0% Total Operating Expenses 117,511 121,755 139,064 145,339 6,276 4.3% 17,308 14.2% 2019 Forecast vs. 2019 Budget Operating Revenues are forecasted to be favorable due primarily to Police forfeiture seizures. Operating Expenses are forecasted to be $6.3M favorable to budget mainly due to staffing vacancies, projects spending delay, and delayed Outside Services costs. Capital spending is forecasted to be $14.8M, 63.5% of the 2019 budget. 2019 Forecast vs. 2018 Actuals Operating Revenues are expected to be $1M above 2018 mainly due to higher Police forfeiture seizures in 2019 and ($863K) special funding LEOFF 2 received from the Washington State Department of Retirement Systems (DRS) in 2018. Operating Expenses are forecasted to be $17.3M higher than 2018 mainly due to higher payroll expenses and more expense projects. A. BUSINESS EVENTS Adopted the Duwamish Valley Community Equity Program and held the Duwamish Alive community restoration event at T117. Hosted a second Strategic Initiatives Learning Event featuring Hien Dung of King County Wastewater and Henry Maynard, Port Operating Maintenance Engineer. Completed Phase 2 of Port Website Redesign project which included adding the Maritime Moorage Application and filtered lists for Commission items. Replaced the Aviation Stormwater GIS which will allow for upstream or downstream stormwater contamination tracking along a properly constructed pipe network. A new Project Delivery system for smaller and major construction projects is being developed to replace two legacy project management solutions and streamline key processes. Hosted Career Awareness events with Mt. Rainier High School, Foster High School, and Highline High School. Proposal approved for the Port's first Disruption Summit. This is designed to improve the Port's ability to respond to potential opportunities and threats in a strategic and intentional way. Released the Comprehensive Annual Financial Report (CAFR), and received a clean independent Certified Public Accountant (CPA) audit opinion on financial statements. The Port Commission authorized the Airport bond issue. Met with credit rating agencies and prepared bond disclosure documents. The Police department instructors provided Rapid Response trainings to airport/airline employees. The Police department's Drug Interdiction Team has seized 250 lbs. of marijuana, over 19 oz. of meth and heroin, and over a million dollars of cash associated in drug trafficking through Sea-Tac Airport as of June 30th. 31 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 B. KEY PERFORMANCE METRICS Key Performance Indicators/Measures YTD 2017 YTD 2018 YTD 2019 A. Century Agenda Strategies 1. Minority/Women-Owned Business Participation in Capital Not Yet N/A 10.5% Development Contracts Available B. High Performance Organization - Customer Satisfaction 1. Respond to Public Disclosure Requests 264 305 450 2. Information and Communication Technology Network 99.9% 100% 99.9% Availability 3. Customer Survey for Police Service Excellent or Very 83% 88% 87% Good 4. Oversee Implementation and Administration of CBAs 147 122 74 agreements 5. Number of Jobs Openings 443 353 358 6. Percent of annual audit work plan completed each year 39% 50% 53% C. High Performance Organization - Talent Development & Safety 4 classes, 28 4 classes, 38 4 classes, 41 1. MIS and Clarity Training attendees attendees attendees 2. Employee Development Class Attendees/Structured 190 86 509 Learning 3. Required Safety Training 64% 54% 57% 4. Occupational Injury Rate 4.94 5.05 4.75 5. Days Away Severity Rate N/A 32.01 15.08 D. Financial Performance 1. Corporate costs as a % of Total Operating Expenses 32.8% 31.6% 29.7% 2. Construction Soft Costs - Total Soft Costs (36 months 28% 18% 16% avg.) 3. Clean independent CPA audits involving AFR Yes Yes Yes 4. Timely process disbursement payment requests 4 days 4 days 3 days 5. Keep receivables collections current (within 30 days) 95% 76% 74% 6. Investment Portfolio Yield 1.42% 1.69% 2.16% 7. Litigation and Claim Reserves (in $ thousand) $1.5M $348K $2.5M 32 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 C. OPERATING RESULTS Financial Summary (YTD) Fav (UnFav) Incr (Decr) 2017 YTD 2018 YTD 2019 Year-to-Date Budget Variance Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Total Operating Revenues 82 81 331 56 311 552.7% 250 308.5% Core Central Support Services 34,692 36,661 37,576 40,544 2,968 7.3% 915 2.5% Police 11,378 13,188 13,997 15,416 1,419 9.2% 809 6.1% Capital Development 7,763 7,733 8,155 9,489 1,334 14.1% 422 5.5% Environment & Sustainability 3,347 2,954 4,551 5,857 1,306 22.3% 1,597 54.1% Total Expenses 57,181 60,536 64,279 71,305 7,026 9.9% 3,743 6.2% 2019 YTD Actuals vs. Budget Operating Revenues were $311K favorable to budget due mainly to Police forfeitures revenues. Operating Expenses were $7.0M favorable to budget due primarily to staffing vacancies and lower Outside Services costs. 2019 YTD Actuals vs. 2018 YTD Actuals Operating Revenues were $250K higher than 2018 level due to Police forfeitures revenue. Operating Expenses were $3.7M higher than last year primarily due to higher Salaries & Benefits and Outside Services costs. 33 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 Financial Summary (Year-End Forecast) Fav (UnFav) Incr (Decr) 2017 2018 2019 2019 Budget Variance Change from 2018 $ in 000's Notes Actual Actual Forecast Budget $ % $ % Total Revenues 68 (500) 498 185 313 169.2% 998 -199.5% Executive 1,287 2,136 1,995 1,995 - 0.0% (142) -6.6% Commission 1,685 1,848 2,133 2,153 20 0.9% 285 15.4% Legal 3,741 3,948 3,785 3,568 (217) -6.1% (163) -4.1% External Relations 1 7,112 7,362 8,202 8,367 165 2.0% 840 11.4% Equity Diversity and Inclusion 2 - - 251 351 100 28.5% 251 0.0% Human Resources 8,418 8,430 9,883 10,250 367 3.6% 1,453 17.2% Labor Relations 1,678 1,079 1,330 1,330 - 0.0% 251 23.3% Internal Audit 1,603 1,521 1,704 1,916 211 11.0% 184 12.1% Accounting & Financial Reporting Services 6,751 6,842 8,440 8,500 60 0.7% 1,598 23.4% Information & Communication Technology 21,633 21,961 23,966 23,966 - 0.0% 2,005 9.1% Information Security 3 726 934 1,559 1,774 215 12.1% 624 66.8% Finance & Budget 4,998 5,593 6,430 6,371 (59) -0.9% 837 15.0% Maritime Finance 1,229 1,445 1,623 1,623 - 0.0% 178 12.3% Finance & Budget 1,871 1,843 2,106 2,132 26 1.2% 263 14.3% Aviation Finance & Budget 1,897 2,305 2,701 2,616 (85) -3.2% 396 17.2% Business Intelligence 1,211 1,323 1,929 2,139 210 9.8% 607 45.9% Risk Services 3,077 3,095 3,255 3,328 73 2.2% 160 5.2% Office of Strategic Initiatives 1,882 1,596 1,568 1,776 207 11.7% (28) -1.8% Central Procurement Office 3,861 4,630 4,678 4,678 - 0.0% 48 1.0% Security and Preparedness 4 1,029 1,093 - - - 0.0% (1,093) -100.0% Contingency 381 185 50 250 200 80.0% (135) -73.0% Core Central Support Services 71,071 73,576 81,157 82,710 1,552 1.9% 7,581 10.3% Police 22,095 23,908 29,578 30,778 1,200 3.9% 5,670 23.7% Total Before Cap Dev & Environment 93,166 97,484 110,735 113,487 2,752 2.4% 13,251 13.6% Capital Development Engineering 5,284 5,477 6,801 7,530 730 9.7% 1,324 24.2% Port Construction Services 3,709 3,522 2,964 2,739 (226) -8.2% (557) -15.8% Aviation PMG 6,942 4,876 4,426 6,794 2,368 34.8% (450) -9.2% Seaport PMG 1,007 1,052 1,240 1,096 (144) -13.1% 188 17.9% Capital Development Facilities - - 333 (333) N/A 333 0.0% Capital Development Admin 428 574 464 470 6 1.3% (111) -19.3% Sub-Total 17,370 15,501 16,227 18,628 2,401 12.9% 727 4.7% Environment & Sustainability Aviation Environmental 3,779 5,006 6,225 6,510 285 4.4% 1,218 24.3% Maritime Environmental & Planning 2,157 2,418 3,297 3,447 150 4.4% 879 36.4% Noise Programs 670 722 825 811 (14) -1.8% 103 14.3% Environment & Sustainability 368 624 1,754 2,456 702 28.6% 1,131 181.2% Sub-Total 6,975 8,770 12,101 13,224 1,123 8.5% 3,331 38.0% Total Expenses 117,511 121,755 139,064 145,339 6,276 4.3% 17,309 14.2% Notes: 1) Previously known as "Public Affairs" 2) A new department created in 2019 3) Became a separate department in 2019. Used to be a part of Security and Preparedness. 4) Deactivated in 2019 34 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 Forecast vs. 2019 Budget Operating Expenses are forecasted to be $6.3M under budget due primarily to: o Executive plans on being on budget. o Commission favorable variance is due to lower Travel Expenses. o Legal unfavorable variance of $222K is due to Legal Expenses. o External Relations favorable variance is due to vacant positions, lower Outside Services, Travel and Advertising Expenses. o Equity, Diversity and Inclusion favorable variance is due to vacant positions. o Human Resources favorable variance is due to several vacant positions and delayed Outside Services. o Labor Relations plans on being on budget. o Internal Audit favorable variance is due to two vacant positions and lower Outside Services from one audit that came in below budget. o Accounting and Financial Reporting Services favorable variance due to delayed Travel Expenses and lower Outside Services. o Information & Communication Technology plans on being on budget. o Information Security favorable variance is due to vacant positions and delayed Outside Services. o Finance & Budget plans on being on budget. o Business Intelligence favorable variance is due to vacant positions. o Risk Services favorable variance is due to vacant positions and anticipates property insurance renewal and broker fees being lower. o Office of Strategic Initiative favorable variance is due to two vacant positions. o Central Procurement Office plans on being on budget. o Contingency favorable variance is due to less spending than anticipated. o Police favorable variance is due to vacant positions. o Capital Development favorable variance is due to vacant positions and lower Outside Services costs. o Environment & Sustainability favorable variance is due to the deferral of the Aviation Fuel & Air Emissions Program, lower than expected spending in Commission-directed COE contract, and delay in SAMP. 2019 Forecast vs. 2018 Actuals Operating Expenses are forecasted to be $17.3M higher than 2018 actuals mainly due to: o Central Services one-time $9.5M DRS Pension Plan True-up credit in 2018. o Capital Development forecast $727K above 2018 mainly due to the following: More project-related expense to support the operating divisions. Expenses offset by Aviation PMG Increasing charges to Capital by 3.8M. o Police forecast $5.7M above 2018 due to the following: Added 8 Traffic Support Specialist and 2 Drug Interdiction Officers during 2018 (2019 reflects the full-year costs). Added 4 FTEs, a Police Sergeant and 3 Explosive Airborne Scent Canine Officers which were requested by the airlines in 2019. Wages increase for the officers and sergeants in 2019. o Environment & Sustainability forecast $3.5M over 2018 due to the following: Added the following to the 2019 Budget which were not included in the 2018 Budget: Environmental and Sustainability department added $750K for South King County Support Program, $150K for the Sustainability Evaluation Framework and $8K for Environmental Excellence Awards. Maritime Environment and Planning added $200K for the Smith Cove Blue Carbon Pilot Project, $125K for Umbrella Mitigation, $135K for PORTfolio site maintenance/enhancements/support, $70K for Permitting related services, and $55K for Waste Management Program continuation. Aviation Environmental added $1.6M for the SAMP Environmental Review and Permitting (delayed from 2018 due to delayed FAA approval), $150K for MPU Wetland and stream monitoring, $125K to implement Sustainable Aviation Fuels (SAF) Workplan, $100K to Complete Airport's 5-year NPDES Permit Renewal Application, $100K for Contaminated Site Management, and an additional $326K for a number of environmental initiatives. 35 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS 2019 YTD 2019 2019 Budget Variance $ in 000's Actual Forecast Budget $ % Infrastructure - Small Cap 433 1,500 1,500 0 0.0% Services Tech - Small Cap 176 600 1,000 400 40.0% PeopleSoft Financials Upgrade 809 1,575 1,575 0 0.0% Radio System Upgrade 1,511 5,311 9,140 3,829 41.9% Police Records Mgmt System 0 300 800 500 62.5% New Budget System 0 500 600 100 16.7% Office Wi-Fi Refresh 0 250 500 250 50.0% Maximo Upgrade 0 30 500 470 94.0% STIA Network Redundancy 0 750 900 150 16.7% Fiber Channel 0 350 600 250 41.7% Phone System Upgrade 0 300 1,400 1,100 78.6% Customer Relationship Mgmt 0 400 0 (400) n/a CDD Fleet Replacement 125 1,149 1,439 290 20.2% Corporate Fleet Replacement 212 212 1,328 1,116 84.0% Other (note 1) 462 1,617 2,086 469 22.5% TOTAL 3,728 14,844 23,368 8,524 36.5% Note: (1) "Other" includes remaining ICT projects and small capital projects/acquisitions. 36
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