9b Report, Q2 2020 Financial Performance
Item No. 9b _attach Meeting Date: August 11, 2020 PORT OF SEATTLE Q2 2020 FINANCIAL PERFORMANCE REPORT AS OF JUNE 30, 2020 Q2 2020 FINANCIAL & PERFORMANCE REPORT 06/30/20 TABLE OF CONTENTS PAGE I. Portwide Performance Report 3-7 II. Aviation Division Report 8-16 III. Maritime Division Report 17-21 IV. Economic Development Division Report 22-26 V. Central Services Division Report 27-31 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/20 I. PORTWIDE EXECUTIVE SUMMARY The COVID-19 pandemic continues to affect Port operations. On May 31, the Governor signed Proclamation 20- 25.4, which outlined the "Safe Start", a phased reopening approach that allows counties and the secretary of health to assess COVID-19 activity and ability of the county to respond when determining eligibility to advance to the next phase. Airport passenger levels dipped 94% in April compared to the prior year but improved to 78% in June as limited non-essential travel resumed. The 2020 cruise season has been cancelled due to the COVID-19 pandemic. The Port received $192M in CARES Act funding that will be used for Airport debt service and operating costs (primarily payroll). Additionally, the Port is applying for FEMA Reimbursement for all eligible costs related to COVID-19 response. PORTWIDE FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Actual vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual Budget Budget $ % $ % Aeronautical Revenues 147,570 175,927 163,722 194,483 194,483 (30,762) -15.8% (12,206) -6.9% Airport Non-Aero Revenues 118,864 124,604 64,225 61,128 131,864 3,097 5.1% (60,380) -48.5% Non-Airport Revenues 64,054 67,632 48,298 47,193 58,925 1,105 2.3% (19,334) -28.6% Total Operating Revenues 330,489 368,164 276,244 302,804 385,271 (26,560) -8.8% (91,920) -25.0% Total Operating Expenses 191,577 216,758 197,820 214,991 230,151 17,171 8.0% (18,937) -8.7% NOI before Depreciation 138,912 151,407 78,424 87,813 155,121 (9,389) -10.7% (72,983) -48.2% Depreciation 81,949 82,481 87,855 89,958 89,958 2,103 2.3% 5,374 6.5% NOI after Depreciation 56,963 68,926 (9,431) (2,145) 65,163 (7,286) 339.7% (78,357) -113.7% 2020 YTD Actuals vs. 2020 YTD Revised Budget: Total operating revenues for Q2 were down $26.6M compared to the revised budget due to reduced operations and lower airline passenger traffic. To mitigate the financial impacts of COVID-19, the Port instituted Portwide cost reduction measures which included cutting initiatives and discretionary spending and implementing a hiring freeze. The combination of delay in project/initiative spending and cost reduction measures resulted in a lower total operating expense of $17.2M compared to the revised budget. 2020 YTD Actuals vs. 2019 YTD Actuals: Compared to the same period in 2019, the Port's total operating revenues for Q2 2020 were down $91.2M primarily due to lower revenues in Public Parking, ADR & Terminal Leased Space, Ground Transportation, Rental Cars, Cruise, Conference & Event Centers, Grain, and NWSA Distributable Revenues. Total operating expenses for Q2 2020 was $18.9M lower due to cost reduction measures implemented in response to the COVID-19 pandemic. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/20 NON-AIRPORT FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Actual vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual Budget Budget $ % $ % NWSA Distributable Revenue 25,844 24,941 21,218 20,968 20,968 250 1.2% (3,723) -14.9% Maritime Revenues 26,257 27,368 18,338 18,214 28,465 124 0.7% (9,030) -33.0% EDD Revenues 9,765 10,384 5,359 6,450 7,930 (1,091) -16.9% (5,025) -48.4% SWU & Other 2,187 4,939 3,383 1,562 1,562 1,822 116.7% (1,556) -31.5% Total Operating Revenues 64,054 67,632 48,298 47,193 58,925 1,105 2.3% (19,334) -28.6% Total Operating Expenses 38,141 40,522 34,441 42,600 45,384 8,159 19.2% (6,082) -15.0% NOI before Depreciation 25,913 27,110 13,857 4,593 13,541 9,264 201.7% (13,252) -48.9% Depreciation 19,988 19,623 18,794 18,577 18,594 (217) -1.2% (829) -4.2% NOI after Depreciation 5,925 7,487 (4,936) (13,984) (5,053) 9,047 -64.7% (12,423) -165.9% 2020 YTD Actuals vs. 2020 YTD Revised Budget: Non-Airport Operating Revenue exceeded the revised budget by $1.1M due to NWSA Distributable Revenues, higher Grain and Fishing & Operations revenues, and unbudgeted Police Revenues. Total operating expenses were $8.2M lower than the revised budget because of spending delays and COVID-19 cost reduction measures. 2020 YTD Actuals vs. 2019 YTD Actuals: Non-airport operating revenues were $19.3M less compared to the same period in 2019 because of the cancellation of the cruise season, lower Conference and Event Center revenue, and NWSA Distributable revenue. The decline in NWSA Distributable Revenue was driven by lower container volumes and breakbulk tonnage as a result of tariff issues and COVID-19 disruptions. MAJOR OPERATING REVENUES SUMMARY Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Actual vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual Budget Budget $ % $ % Aeronautical Revenues 147,570 175,927 163,722 194,483 194,483 (30,762) -15.8% (12,206) -6.9% Public Parking 39,402 40,401 20,002 18,747 44,159 1,255 6.7% (20,399) -50.5% Rental Cars - Operations 14,922 15,560 7,591 7,376 15,593 216 2.9% (7,969) -51.2% Rental Cars - Operating CFC 5,497 4,505 - - 4,452 - 0.0% (4,505) -100.0% ADR & Terminal Leased Space 30,179 32,689 16,918 14,748 33,409 2,170 14.7% (15,771) -48.2% Ground Transportation 8,885 9,979 4,374 4,576 10,751 (202) -4.4% (5,605) -56.2% Employee Parking 5,191 5,193 4,678 3,348 5,049 1,330 39.7% (515) -9.9% Airport Commercial Properties 7,593 7,072 5,777 5,658 7,978 119 2.1% (1,295) -18.3% Airport Utilities 3,438 3,665 2,758 4,415 4,415 (1,657) -37.5% (907) -24.7% Clubs and Lounges 2,773 4,456 1,714 1,714 4,950 () 0.0% (2,741) -61.5% Cruise 6,806 8,473 133 49 10,300 84 173.2% (8,340) -98.4% Recreational Boating 6,068 6,228 6,211 6,607 6,607 (397) -6.0% (17) -0.3% Fishing & Operations 4,622 5,071 5,091 4,670 4,670 421 9.0% 20 0.4% Grain 3,123 2,567 2,005 1,756 1,756 249 14.2% (562) -21.9% Maritime Portfolio Management 5,628 5,019 4,884 5,127 5,127 (243) -4.7% (135) -2.7% Central Harbor Management 4,557 4,406 4,104 4,279 4,459 (175) -4.1% (302) -6.9% Conference & Event Centers 5,188 5,963 1,240 2,155 3,455 (915) -42.5% (4,723) -79.2% NWSA Distributable Revenue 25,844 24,941 21,218 20,968 20,968 250 1.2% (3,723) -14.9% Other 3,201 6,049 3,824 2,128 2,692 1,696 79.7% (2,225) -36.8% Total Operating Revenues (w/o Aero) 182,918 192,237 112,523 108,321 190,788 4,202 3.9% (79,714) -41.5% TOTAL 330,489 368,164 276,244 302,804 385,271 (26,560) -8.8% (91,920) -25.0% 4 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/20 MAJOR OPERATING EXPENSES SUMMARY Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Actual vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual Budget Budget $ % $ % Salaries & Benefits 62,507 66,098 71,427 72,681 74,470 1,254 1.7% 5,328 8.1% Wages & Benefits 60,073 64,034 67,147 66,281 66,028 (866) -1.3% 3,113 4.9% Payroll to Capital Projects 13,602 13,523 14,460 17,565 18,372 3,105 17.7% 937 6.9% Outside Services 38,271 43,951 45,545 54,566 60,166 9,022 16.5% 1,594 3.6% Utilities 13,453 13,103 12,104 14,975 15,159 2,871 19.2% (999) -7.6% Equipment Expense 3,866 4,481 4,211 4,217 5,021 7 0.2% (271) -6.0% Supplies & Stock 4,633 5,290 4,653 4,878 4,616 225 4.6% (637) -12.0% Travel & Other Employee Expenses 2,299 2,486 1,603 2,278 3,873 675 29.6% (883) -35.5% Third Party Mgmt Op Exp 5,273 6,494 3,228 3,507 5,542 278 7.9% (3,266) -50.3% B&O Taxes 2,181 2,226 1,716 1,874 2,380 158 8.4% (510) -22.9% Other Expenses 9,546 19,978 2,188 5,790 8,872 3,603 62.2% (17,791) -89.0% Charges to Capital Projects/Overhead Alloc (24,126) (24,908) (30,462) (33,622) (34,349) (3,160) 9.4% (5,554) 22.3% TOTAL 191,577 216,758 197,820 214,991 230,151 17,171 8.0% (18,937) -8.7% PORTWIDE FINANCIAL YEAR-END FORECAST SUMMARY Year-End Forecast: Operating Revenues $129.3M lower than the revised budget mainly due reduced airline activity, cancellation of the cruise season, and lower volumes in Recreational Boating and Conference and Events Center. Operating Expenses $13.4M lower than the revised budget due to project delays, less program spending and hiring freeze due to COVID-19 pandemic. NOI before depreciation $115.9M below the revised budget due to significant reduction in revenues, partially offset by lower operating costs. KEY PERFORMANCE METRICS Fav (UnFav) Incr (Decr) 2019 YTD 2020 YTD 2019 2020 2020 2020 Fcst vs. Revised Change from 2019 Revised Approved Budget Variance Actual Actual Actual Forecast Budget Budget Chg. % Chg. % Total Passengers (in 000's) 24,304 11,128 51,829 20,345 25,554 53,334 (5,209) -20.4% (31,484) -60.7% Landed Weight (lbs. in 000's) 14,903 9,791 31,562 18,903 23,630 31,413 (4,727) -20.0% (12,659) -40.1% Passenger CPE (in $) n/a n/a 12.85 26.21 13.92 13.92 12.28 88.2% 13.36 103.9% Grain Volume (metric tons in 000's) 1,988 1,513 3,404 3,004 3,004 3,004 - 0.0% (400) -11.7% Cruise Passenger (in 000's) 467 - 1,211 - 264.00 1,309 (264) -100.0% (1,211) -100.0% Shilshole Bay Marina Occupancy 95.0% 93.0% 94.7% 93.0% 94.7% 94.7% -1.7% -1.8% -1.7% -1.8% 5 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/20 KEY BUSINESS EVENTS During the second quarter, the Port Commission approved a 10-year supply contract for Renewable Natural Gas (RNG) which will allow the Port to reach its 2030 goal to reduce carbon emissions by 50 percent, almost 10 years ahead of schedule. RNG will be used to heat more than half of Seattle-Tacoma International Airport's (SEA) terminal and will also power all of its bus fleet. This will make SEA the first airport in the country to use RNG for heating. Additionally, the Port Commission authorized the construction of a new 13.5-acre Duwamish River park with 2,500 linear feet of shoreline. The Terminal 117 Habitat Restoration and Duwamish Shoreline Access Project supports the immediate salmon recovery needs while addressing long-standing community needs for increased greenspace. The Port also conducted the virtual innovation showcase that allowed the first cohort of the first maritime blue accelerator program to present their products/services to audience that included investment managers, financial advisors and individual investors. The virtual showcase marked the culmination of the four-month long program aimed at providing resources and supporting emerging businesses (cohort). Similarly, the Port has shifted to virtual PortGen workshops; these workshops provide connections and resources to small, disadvantaged, minority, and women-owned businesses interested in contracting with the Port. The Port Commission approved rent relief for tenants and customers throughout its maritime and landside properties. The rent deferrals are intended to offset the impacts of the COVID-19 pandemic and will help tenants continue their operations and retain their employees. The Port Commission also authorized the extensions of leases for current Airport Dining and Retail (ADR) tenants for up to three years. Additionally, the Port Commission extended the deferrals for rent, storage and other fees, and temporarily suspended the Minimum Annual Guarantee (MAG) payments and collection of the Airport Dining and Retail Tenant Marketing Fund through the end of 2020 for all ADR tenants. The Port Commission updated its 2020 construction plans which illustrates the Port's commitment in helping to jumpstart the region's economic recovery while enacting public health protocols developed with guidance from state and federal agencies. The Port will continue with approximately 20 construction projects worth approximately $1.5 billion to the local economy. As part of the effort to create jobs and encourage spending in the regional economy, Port Commission authorized an additional $3 million for community programs. Half of the investment would be spent on Opportunity Initiative while the other half would be spent on tourism programs that would help rebuild the economy. The Port has partnered with five local non-profit organizations for the Opportunity Initiative to provide summer jobs to 220 youth in underserved communities who have been disproportionately affected by the COVID-19 pandemic. The Port demonstrated its commitment to promoting racial equity by passing the proclamation that racism against Asian and Asian Americans will not be tolerated in any form. Race-based harassment, hate crimes and xenophobia have intensified in light of the COVID-19 pandemic, and the proclamation encourages the public to speak up in support of equity, justice, and inclusion. Additionally, recent events in our local community and across the country highlighted our checkered history of systemic racism. The Port's Office of Equity, Diversity, and Inclusion (OEDI) has provided resources for employees to deepen their understanding of institutional and structural racism. OEDI continues to conduct a series of caucuses to build community, explore ideas and strategies on how to fight racism, and develop action items. The Port will continue to implement policy platforms to create opportunities in historically underserved communities and to seek ways to reverse inequity such as providing more opportunities for small, local, and disadvantaged businesses. The Port has also announced changes to Port of Seattle Police Department protocols regarding hiring practices, commitment to diversity, and use of force such as the immediate ban on use of vascular or airway neck restraints. The policy changes and department assessment are not tied to complaint or specific incident. 6 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/20 CAPITAL SPENDING SUMMARY 2020 2020 2020 Fcst/Rvsd Budget YTD Year-End Revised YE Fcst vs. Revised $ in 000's Actual Forecast Budget $ % Aviation 235,734 501,490 489,182 (12,308) -2.5% Maritime 9,890 22,697 19,712 (2,985) -15.1% Economic Development 7,681 8,436 10,699 2,263 21.2% Central Services & Other (note 1) 4,153 11,056 15,991 4,935 30.9% TOTAL 257,458 543,679 535,584 (8,095) -1.5% Note: (1) "Other" includes Street Vacation projects and Storm Water Utility Small Capital projects. Total capital spending forecast is $543.7M, $8.1M above the revised budget mainly due to the acceleration of North Satellite projects and Baggage Optimization projects and the T117 Restoration project. PORTWIDE INVESTMENT PORTFOLIO During the second quarter of 2020, the investment portfolio earned 1.98% versus the benchmark's (the Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index) of 0.18%. Over the last twelve months, the portfolio and the benchmark have earned 2.11% and 0.92%, respectively. Since the Port became its own Treasurer in 2002, the life-to-date earnings of the Port's portfolio and the benchmark are 2.43% and 1.79%, respectively. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 II. AVIATION DIVISION FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved $ in 000's Actual Actual Forecast $ % $ % Budget Budget Operating Revenues: Aeronautical Revenues 291,268 357,598 297,373 401,342 401,342 (103,969) -25.9% (60,225) -16.8% Non-Aeronautical Revenues 257,707 269,037 115,448 135,074 283,167 (19,625) -14.5% (153,589) -57.1% Total Operating Revenues 548,975 626,636 412,821 536,416 684,510 (123,595) -23.0% (213,815) -34.1% Total Operating Expense 318,849 356,635 342,646 348,826 377,306 6,180 1.8% (13,988) -3.9% Net Operating Income 230,126 270,001 70,175 187,589 307,203 (117,415) -62.6% (199,826) -74.0% Capital Expenditures 579,135 573,598 501,490 489,182 (12,309) -2.5% (72,108) -12.6% 2020 Forecast vs. 2020 Revised Budget Net Operating Income (NOI) for 2020 is forecasted to be (-$117.4M or -62.6%) unfavorable to revised budget, driven by: o Decrease in Aeronautical revenue (-$104M or -25.9% unfavorable) due to no updated revised budget for cost recovery with COVID-19 impact based on 61% decline in passengers. See the Aeronautical tables for more details. o Decrease in Non-Aeronautical revenue (-$19.6M or -14.5% unfavorable) due to the COVID-19 impact affecting all Non-Aeronautical business lines, increased downturn in passenger expectations since revised budget. The revenue year-end forecast is based on a 61% decline in passengers. See the Non- Aeronautical tables for more details. o Total Operating Expenses are forecasted to be ($6.2M or 1.8%) favorable to revised budget based on forecasted for cost savings of $776K in Payroll, $4.9M in Utilities, $2.8M ERL, and $2.2M in allocations from other divisions. These cost savings are partially offset by increases in Outside Services ($854K) and Other Airport Expenses ($3.6M.) The additional cost savings are primarily a direct result of the COVID- 19 impact that prompted the airport to adjust operational expenses based on the changing environment and latest assumptions current forecast passenger assumptions are lower than original revised budget assumptions. 2020 Forecast vs. 2019 Actuals Net Operating Income for 2020 is forecasted to be (-$200M or -74%) lower than prior year primarily driven by: o Lower Operating Revenue (-$213.8M or -34.1%) compared to prior year due to: Lower Aeronautical revenue (-$60.2M lower) due to decreased rate-based costs associated with COVID-19 and the elimination of revenue sharing for the remainder of SLOA IV. Drastically lower projection of Non-Aeronautical revenue performance ($153.6M lower) for all non- airline business such as Port Clubs and Lounges, Ground Transportation, Non-Arline Terminal Lease Spaces, Public Parking, Commercial Properties, and Airport Dining & Retail. o Lower Operating Expenses ($-14.0M or -3.8%) compared to prior year is primarily driven by $17.8M in lower Environmental Remediation Liability costs in 2020, $1.3M lower Airport Direct Charges, partially offset by higher projection of charges from other divisions of $7.2M 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 A. BUSINESS EVENTS Covid-19 pandemic has dramatically reduced operations and passenger traffic, impacting all businesses at the airport Currently projecting a 61% reduction in passengers in 2020 compared to 2019, although forecasts are periodically updated. Forecast reflects receipt of $192 million in CARES grant (non-operating). CPE and Non-aeronautical NOI goals for 2020 will likely not be met B. KEY PERFORMANCE METRICS % Change YTD 2018 YTD 2019 YTD 2020 from 2019 Total Passengers (000's) Domestic 20,897 21,616 10,074 -53.4% International 2,611 2,689 1,054 -60.8% Total 23,508 24,304 11,128 -54.2% Operations 210,722 214,749 142,657 -33.6% Landed Weight (In Millions of lbs.) Cargo 1,147 1,165 1,254 7.6% All other 13,328 13,738 8,537 -37.9% Total 14,476 14,903 9,791 -34.3% Cargo - Metric Tons Domestic freight 114,627 118,401 161,957 36.8% International freight 64,749 63,388 47,466 -25.1% Mail 28,326 28,314 - -100.0% Total 207,702 210,103 209,423 -0.3% *Mail weight for 2020 forward is incorporated in freight Key Performance Measures Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 Budget Vairance Change from 2019 Actual Actual Forecast Approved $ % $ % Budget Key Performance Metrics Cost per Enplanement (CPE) 10.79 12.85 26.21 13.92 (12.28) -88.2% 13.36 103.9% Non-Aeronautical NOI (in 000's) 149,959 150,752 4,097 154,660 (162,050)-97.5% (146,655)-97.3% Other Performance Metrics O&M Cost per Enplanement 12.81 13.78 33.68 14.15 (20.60) -157.5% 19.90 144.4% Non-Aero Revenue per Enplanement 10.35 10.40 11.35 10.62 6.28 124.1% 0.95 9.1% Debt per Enplanement (in $) 133 133 322 122.95 (199) -162.2% 189 142.3% Debt Service Coverage 1.66 1.68 1.36 1.80 -0.43 -24.2% (0.32) -18.9% Days cash on hand (10 months = 304 days) 235 314 309 332 -23 -6.8% (5) -1.7% Aeronautical Revenue Sharing ($ in 000's) (36,863) (17,146) - - - 0.0% 17,146 100.0% Activity (in 000's) Enplanements 24,894 25,874 10,172 26,667 (16,495) -61.9% (15,702) -60.7% 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 Key Performance Metrics 2020 Forecast vs. 2020 Budget: Cost per Enplanement (CPE) Forecast: o Forecasted CPE is ($-12.28, or -88.2%) unfavorable driven primarily by lower airline activity that started in March impacted by COVID-19, and 61% lower passenger activity assumptions for the year. o Non-Aero NOI forecast is expected to be ($-162M or -97.5%) unfavorable to budget due to lower revenues across all Non-Aeronautical business lines based on current enplanement forecast of -61% decline in passenger volumes compared to prior year. See the Non-Aeronautical tables for more details. 2020 Forecast vs. 2019 Actuals: Forecasted CPE is $13.36 higher compared to prior year due to lower airline activity and the elimination of revenue sharing under SLOA IV. Non-Aero NOI forecast is expected to be $146.6M lower than prior year due to drastically lower non-airline revenues as a result of the COVID-19 impact. C. OPERATING RESULTS Division Summary YTD Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Budget Variance Change from 2019 Revised Approved $ in 000's Actual Actual Actual $ % $ % Budget Budget Operating Revenues: Aeronautical Revenues (1) 147,570 175,927 163,722 194,483 194,483 (30,762) -15.8% (12,206) -6.9% Non-Aeronautical Revenues 118,864 124,604 64,225 61,128 131,864 3,097 5.1% (60,380) -48.5% Total Operating Revenues 266,435 300,532 227,946 255,611 326,347 (27,665) -10.8% (72,586) -24.2% Operating Expenses: Payroll 67,619 72,996 77,615 76,753 77,918 (862) -1.1% 4,620 6.3% Outside Services 25,837 28,933 29,634 34,585 38,343 4,951 14.3% 700 2.4% Utilities 9,628 9,328 8,757 10,748 10,927 1,991 18.5% (571) -6.1% Other Airport Expenses 2,791 7,307 2,092 (893) 2,802 (2,985) 334.4% (5,215) -71.4% Total Airport Direct Charges 105,874 118,564 118,099 121,193 129,990 3,094 2.6% (466) -0.4% Environmental Remediation Liability 4,484 12,543 (2,776) 286 1,581 3,062 1070.8% (15,319) -122.1% Capital to Expense 8 83 - - - - N/A (83) -100.0% Total Exceptions 4,492 12,627 (2,776) 286 1,581 3,062 1070.8% (15,402) -122.0% Total Airport Expenses 110,366 131,191 115,323 121,479 131,571 6,156 5.1% (15,868) -12.1% 9.4% Police Costs 10,659 11,117 12,162 13,096 13,169 933 7.1% 1,046 Other Central Services 30,534 32,093 34,300 35,972 37,904 1,672 4.6% 2,207 6.9% Maritime/Economic Development 1,877 1,834 1,595 1,844 2,123 250 13.5% (240) -13.1% Total Charges from Other Divisions 43,070 45,044 48,057 50,912 53,196 2,856 5.6% 3,012 6.7% Total Operating Expense 153,436 176,235 163,380 172,391 184,767 9,012 5.2% (12,855) -7.3% Net Operating Income 112,999 124,297 64,566 83,219 141,580 (18,653) -22.4% (59,730) -48.1% (1) Aero revenues are net of revenue sharing. Operating Expenses 2020 YTD Actuals vs. 2020 YTD Revised Budget ($9.0M or 5.2% favorable): YTD Airport Expenses under-run ($6.2M or 5.1% favorable) is driven by underspending in Outside Services on consultants and other contracted services, Utilities, and Environmental Remediation expenses. 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 Division Summary YE Forecast Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved $ in 000's Actual Actual Forecast $ % $ % Budget Budget Operating Revenues: Aeronautical Revenues 291,268 357,598 297,373 401,342 401,342 (103,969) -25.9% (60,225) -16.8% Non-Aeronautical Revenues 257,707 269,037 115,448 135,074 283,167 (19,625) -14.5% (153,589) -57.1% Total Operating Revenues 548,975 626,636 412,821 536,416 684,510 (123,595) -23.0% (213,815) -34.1% Operating Expenses: Payroll 133,999 147,076 156,050 156,826 160,340 776 0.5% 8,974 6.1% Outside Services 65,475 68,801 71,255 70,401 79,889 (854) -1.2% 2,454 3.6% Utilities 18,306 18,180 15,787 20,642 21,180 4,856 23.5% (2,394) -13.2% Other Airport Expenses 3,966 12,272 1,958 (1,682) 5,224 (3,640) 216.5% (10,314) -84.0% Total Airport Direct Charges 221,746 246,329 245,049 246,187 266,634 1,138 0.5% (1,279) -0.5% Environmental Remediation Liability 6,233 15,900 (1,967) 878 2,648 2,845 324.0% (17,867) -112.4% Capital to Expense 6,891 2,089 - - - - 0.0% (2,089) -100.0% Total Exceptions 13,124 17,989 (1,967) 878 2,648 2,845 324.0% (19,956) -110.9% Total Airport Expenses 234,870 264,318 243,083 247,065 269,282 3,983 1.6% (21,236) -8.0% Police Costs 19,231 22,290 25,024 26,122 26,233 1,098 4.2% 2,734 12.3% Other Central Services 60,659 65,671 70,546 71,646 77,460 1,100 1.5% 4,875 7.4% Maritime/Economic Development 4,088 4,355 3,993 3,993 4,331 0 0.0% (362) -8.3% Total Charges from Other Divisions 83,979 92,316 99,564 101,761 108,025 2,198 2.2% 7,247 7.9% Total Operating Expense 318,849 356,635 342,646 348,826 377,306 6,180 1.8% (13,988) -3.9% Net Operating Income 230,126 270,001 70,175 187,589 307,203 (117,415) -62.6% (199,826) -74.0% CFC Surplus (7,724) (6,834) - (4,128) (4,128) 4,128 100.0% 6,834 100.0% Net Non-Operating Items in / out from ADF (3) 4,406 6,272 5,308 5,156 - 152 3.0% (964) -15.4% SLOA III Incentive Straight Line Adj - - - - - - 0.0% - n/a Debt Service (136,218) (160,243) (89,586) (171,474) (171,474) 81,888 -47.8% 70,657 44.1% Adjusted Net Cash Flow 90,590 109,195 (14,103) 17,143 131,601 (31,246) -182.3% (123,299) -112.9% Operating Expenses 2020 Forecast vs. 2020 Revised Budget ($6.2M or 1.8% favorable): Total Operating Expenses is forecasted to under-run Revised Budget by $6.2M which reflects additional cost savings due to the COVID-19 impact based on enplanement decrease assumptions since revised budget impacting the business environment. The majority of the savings come from underspending in Utility commodities that are tied to usage and demand from the business areas in the Terminal, lowered forecast in Environmental Remediation Liability expenses, and from less charges coming through to the Aviation division from other divisions. The areas forecasted for cost savings are: $776K in Payroll, $4.9M in Utilities, $2.8M ERL, and $2.2M in allocations from other divisions. These cost savings are partially offset by increases in: Outside Services $854K and Other Airport Expenses $3.6M. 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 Aeronautical Business Unit Summary - YTD Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Budget Variance Change from 2019 Revised Approved $ in 000's Actual Actual Actual $ % $ % Budget Budget Revenues: Movement Area 59,656 61,289 54,693 63,160 63,160 (8,466) -13.4% (6,596) -10.8% Apron Area 8,209 9,883 9,575 10,618 10,618 (1,043) -9.8% (308) -3.1% Terminal Rents 83,956 100,229 77,111 103,711 103,711 (26,601) -25.6% (23,118) -23.1% Federal Inspection Services (FIS) 6,641 7,271 14,621 8,946 8,946 5,676 63.4% 7,351 101.1% Total Rate Base Revenues 158,462 178,672 156,000 186,435 186,435 (30,434) -16.3% (22,672) -12.7% Commercial Area 5,072 5,569 7,720 8,048 8,048 (328) -4.1% 2,151 38.6% Subtotal before Revenue Sharing 163,534 184,241 163,720 194,483 194,483 (30,763) -15.8% (20,521) -11.1% Revenue Sharing (15,964) (8,314) 1 - - 1 0.0% 8,315 100.0% Total Aeronautical Revenues 147,570 175,927 163,722 194,483 194,483 (30,762) -15.8% (12,206) -6.9% Total Aeronautical Expenses 112,401 118,910 108,286 115,573 121,288 7,288 6.3% (10,625) -8.9% Net Operating Income 35,169 57,017 55,436 78,910 73,195 (23,474) -29.7% (1,581) -2.8% Aeronautical 2020 YTD Actuals vs. 2020 YTD Revised Budget Net Operating Income for Q2 2020 is (-$23.5M or -29.7%) unfavorable to revised budget primarily due to lower aeronautical costs to recover driven by a large drop in airline activity starting in March due to the COVID-19 impact. All areas are lower than revised budget, with the exception of increases in FIS driven primarily by reduction in PFC offset hitting this cost center. Aeronautical 2020 YTD Actuals vs. 2019 YTD Actuals Net Operating Income for Q2 2020 is ($1.6M or 2.8%) lower than Q2 2019 due to higher aeronautical revenue because of revenue sharing elimination in 2020 and lower aeronautical costs to recover driven by COVID-19. 12 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 Aeronautical Business Unit Summary - YE Forecast Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved $ in 000's Actual Actual Forecast $ % $ % Budget Budget Revenues: Movement Area 116,703 123,436 84,217 132,128 132,128 (47,911) -36.3% (39,218) -31.8% Apron Area 15,627 22,016 9,837 22,011 22,011 (12,175) -55.3% (12,180) -55.3% Terminal Rents 169,318 205,283 161,140 212,943 212,943 (51,803) -24.3% (44,143) -21.5% Federal Inspection Services (FIS) 16,226 12,321 25,685 18,162 18,162 7,523 41.4% 13,364 108.5% Total Rate Base Revenues 317,874 363,057 280,879 385,245 385,245 (104,366) -27.1% (82,177) -22.6% 41.1% Commercial Area 10,257 11,687 16,493 16,097 16,097 396 2.5% 4,806 Subtotal before Revenue Sharing 328,131 374,744 297,373 401,342 401,342 (103,969) -25.9% (77,371) -20.6% Revenue Sharing (36,863) (17,146) - - - - 0.0% 17,146 100.0% Other Prior Year Revenues - - - - - - - - Total Aeronautical Revenues 291,268 357,598 297,373 401,342 401,342 (103,969) -25.9% (60,225) -16.8% Total Aeronautical Expenses 236,630 238,349 231,295 235,196 248,799 3,901 1.7% (7,054) -3.0% Net Operating Income 54,638 119,249 66,078 166,147 152,544 (100,068) -60.2% (53,171) -44.6% Debt Service (1) (91,673) (110,945) (58,762) (121,410) (121,410) 62,647 51.6% 52,182 47.0% Net Cash Flow (37,035) 8,305 7,316 44,737 31,134 (37,421) 83.6% (989) 11.9% Airline Rate Base Cost Drivers 2020 2020 2020 Aero Revenue Aero Revenue Budget Vs Re quire me nts Re quire me nts Forecast $ in 000's Budge t Forecast O&M $ 242,981 $ 224,628 $ 18,353 Debt Service Gross $ 174,455 $ 169,890 $ 4,565 Debt Service PFC Offset $ (62,998) $ (26,412) $ (36,587) Debt Service Coverage $ - CARES Grant Payroll $ (37,086) $ 37,086 CARES Grant Debt Service $ (77,992) $ 77,992 Amortization $ 32,326 $ 32,493 $ (167) Space Vacancy $ (490) $ (914) $ 424 TSA Operating Grant and Other $ (1,028) $ (3,727) $ 2,699 Rate Base Revenues $ 385,246 $ 280,879 $ 104,366 Commercial area $ 16,097 $ 16,493 $ (396) Total Aero Revenues $ 401,343 $ 297,373 $ 103,970 Aeronautical 2020 Forecast vs. 2020 Budget Aeronautical net operating income is forecasted to be (-$100.1M or -60.2%) unfavorable to budget driven by lower Aeronautical revenues to be collected based on lower airline activity due to the COVID-19 impact coupled with projected cost savings in O&M and debt service that will be potentially lowered due to the CARES grant. Aeronautical 2020 Forecast vs. 2019 Actuals Net Operating Income for 2020 is forecasted to be (-$53.2M or -47.0%) lower than prior year due to: o $82.2M lower revenue from rate-based costs to recover decreased airline activity. 13 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 Non-Aero Business Unit Summary YTD Fav (UnFav) Incr (Decr) 2019 YTD 2020 YTD 2020 YTD 2020 YTD Budget Variance Change from 2019 Revised Approved $ in 000's Actual Actual $ % $ % Budget Budget Non-Aero Revenues Rental Cars - Operations 15,560 7,591 7,376 15,593 216 2.9% (7,969) -51.2% Rental Cars - Operating CFC 4,505 - - 4,452 - N/A (4,505) -100.0% Public Parking 40,401 20,002 18,747 44,159 1,255 6.7% (20,399) -50.5% Ground Transportation 9,979 4,374 4,576 10,751 (202) -4.4% (5,605) -56.2% Airport Dining & Retail 29,581 13,856 12,019 30,617 1,837 15.3% (15,726) -53.2% Non-Airline Terminal Leased Space 3,108 3,063 2,729 2,791 334 12.2% (45) -1.5% Commercial Properties 7,072 5,777 5,658 7,978 119 2.1% (1,295) -18.3% Utilities 3,665 2,758 4,415 4,415 (1,657) -37.5% (907) -24.7% Employee Parking 5,193 4,678 3,348 5,049 1,330 39.7% (515) -9.9% Clubs and Lounges 4,456 1,714 1,714 4,950 (0) 0.0% (2,741) -61.5% Other 1,085 411 545 1,109 (134) -24.5% (674) -62.1% Total Non-Aero Revenues 124,604 64,225 61,128 131,864 3,097 5.1% (60,380) -48.5% Total Non-Aero Expenses 57,316 55,094 56,818 63,479 1,724 3.0% (2,222) -3.9% Net Operating Income 67,288 9,131 4,310 68,385 4,821 111.9% (58,158) -86.4% Non-Aeronautical 2020 YTD Actuals vs. 2020 YTD Revised Budget Net Operating Income for Q2 2020 is ($4.8M or 111.9%) favorable to revised budget driven by: o COVID-19 impact to Non-Aero Revenue, slightly improved performance in ADR and the Parking Businesses as businesses started to open back up on a limited basis in May and June. o Non-Aeronautical operating expenses is ($1.7M or 3.0%) favorable due to overall underspending in Outside Services on consultants and other contracted services, utilities, and charges from other divisions. Non-Aeronautical 2020 YTD Actuals vs. 2019 YTD Actuals Net Operating Income for Q2 2020 is (-$58.2M or -86.4%) lower than Q1 2019 driven by: o A dramatic impact to Non-Aero Revenue from COVID-19 evident starting in March and continuing through June with a 54.2% decline in enplanements compared to the same month last year. Many Non- Aero tenants have closed operations until passenger volume begins to recover. Although ADR and Parking businesses have started to open back up in May and June on a limited basis, tenants continue to report drastic decline in activity compared to last year. 14 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 Non-Aero Business Unit Summary - YE Forecast Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved $ in 000's Actual Actual Forecast $ % $ % Budget Budget Non-Aero Revenues Rental Cars - Operations 37,306 36,793 15,100 19,209 37,363 (4,109) -21.4% (21,693) -59.0% Rental Cars - Operating CFC 16,263 15,773 - - 13,786 - N/A (15,773) -100.0% Public Parking 80,212 82,125 33,500 40,813 89,485 (7,313) -17.9% (48,625) -59.2% Ground Transportation 18,772 20,765 8,200 11,092 22,299 (2,892) -26.1% (12,565) -60.5% Airport Dining & Retail 59,021 61,615 24,600 27,753 66,145 (3,153) -11.4% (37,015) -60.1% Non-Airline Terminal Leased Space 5,302 6,398 5,600 5,152 5,700 448 8.7% (798) -12.5% Commercial Properties 15,434 15,773 10,900 11,854 16,660 (954) -8.1% (4,873) -30.9% Utilities 7,206 7,431 5,663 8,831 8,831 (3,168) -35.9% (1,768) -23.8% Employee Parking 10,269 10,438 7,700 5,100 10,137 2,600 51.0% (2,738) -26.2% Clubs and Lounges 6,802 10,274 3,400 4,441 10,536 (1,041) -23.4% (6,874) -66.9% Other 1,119 1,653 785 829 2,225 (44) -5.3% (868) -52.5% Total Non-Aero Revenues 257,707 269,037 115,448 135,074 283,167 (19,625) -14.5% (153,589) -57.1% Total Non-Aero Expenses 82,219 118,286 111,352 113,631 128,508 2,279 2.0% (6,934) -5.9% Net Operating Income 175,488 150,752 4,097 21,443 154,660 (17,346) -80.9% (146,655) -97.3% Less: CFC (Surplus) / Deficit (1) (7,724) (6,834) - (4,128) (4,128) 4,128 100.0% 6,834 100.0% Adjusted Non-Aero NOI 167,764 143,917 4,097 17,315 150,531 (13,218) -76.3% (139,821) -97.2% Debt Service (1) (44,545) (49,299) (30,824) (50,064) (30,824) 19,240 38.4% 18,475 37.5% Net Cash Flow 123,219 94,619 (26,727) (32,749) 119,707 6,022 -18.4% (121,346) -128.2% Non-Aeronautical 2020 Forecast vs. 2020 Revised Budget Non-Aeronautical net operating income is forecasted to be (-$17.3M or -80.9%) unfavorable to revised budget. All non-airlines businesses are impacted by COVID-19. There is force majeure language in many nonaeronautical concession agreements (tied to reduction in passenger volume) that provides contractual relief of a minimum annual guaranteed rent. Revenue forecast is based on 61% decline in passenger volume scenario compared to prior year. Lower planned spending ($2.3M or 2.0%) favorable reflects additional cost cutting measures in response to COVID-19. Non-Aeronautical 2020 Forecast vs. 2019 Actuals Net Operating Income for 2020 is forecasted to be ($146.6M or 97.3%) lower compared to prior year for the reasons mentioned above. 15 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 D. CAPITAL RESULTS Capital Variance 1. Delays and complications related to the pedestrian walkway have pushed work to the right. Updated schedule slides the IAF substantial completion date 6 months to the right and the pedestrian walkway into Q1 2021. 2. Increase due to added construction costs associated with work pulled forward (Operation Silver Cloud) that would have been performed in 2021, plus processing a significant amount of construction change orders for work already executed. 3. MII Rejection at the beginning of the year led to uncertainty whether the project would rebid, so the spending was pushed out of the baseline. Now the contract has been executed and spending will be accelerated. 4. Construction is expedited to take advantage of downturn in air traffic operation, and transfer of scope from 2025 Pavement Improvement program. 5. COVID impacts and change order cost in Phase 2 for unforeseen conditions increased the expenditures for 2020 6. New estimate has significant reduction as a result of value engineering, and bid came in lower than engineering estimate 7. Accelerated work due to more available space because of low volume of passengers 8. Phase 2 delayed 9. Project savings 10. 2020 Plan based on a "HOT' project, but the requested to be 'slowed', due to COVID-19 11. Delayed work, moved 2 bridge installs until next year 12. Commission directed acceleration of the sound insulation projects in Q1 2020. Highline insulation is funded by 67% AIP grants, 16% tax levy, and 17% airport funds 13. Favorable bid 14. Reduced the negative amount to $36,362 (original was $72,000) as much of the underspending for the year was included in the cash flow updates as of Q2. 16 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 III. MARITIME DIVISION FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Forecast Budget Budget $ % $ % Total Revenues 57,575 59,289 40,405 42,585 62,938 (2,180) -5% (18,884) -32% Total Operating Expenses 43,252 48,644 51,145 52,191 54,396 1,046 2% 2,501 5% Net Operating Income 14,323 10,644 (10,740) (9,606) 8,541 (1,134) -12% (21,385) -201% Capital Expenditures 20,489 7,887 22,697 19,712 (2,985) -15% 14,810 188% 2020 Forecast vs. 2020 Revised Budget Operating Revenues are $2.2M lower than revised budget driven by Cruise moving from delay to cancellation for the 2020 season. Operating Expenses forecasted $1M lower than budget from additional reductions in Port Valet (cruise bag handling service) expenses. Net Operating Income Planned $1.1M unfavorable to budget. Capital Spending forecasted at 115% of $19.7M revised budget driven by expedited schedule of T117 habitat restoration project. 2020 Forecast vs. 2019 Actuals Operating Revenues expected $18.9M lower than 2019 due COVID-19 impacts in Cruise. Increases in Recreational boating revenue offset by reductions in Grain, Maritime Portfolio Management, and Elliott Bay Fishing and Commercial. Operating Expenses forecasted $2.5M higher than 2019 actual driven primarily by $1.9M ILA payment NWSA, $1.9M favorable one-time pension adjustment in 2019, offset by favorable police allocations and COVID-19 related cost cutting initiatives. Net Operating Income forecasted $21.4M below 2019 actual. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2019 YTD 2020 YTD 2020 YTD 2020 YTD Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Budget Budget $ % $ % Ship Canal Fishing & Operations (800) (513) (1,386) (1,496) 983 66% 287 36% Elliott Bay Fishing & Commercial Operations 515 (266) (797) (900) 634 70% (781) NA Recreational Boating 1,045 1,094 922 705 389 55% 49 5% Cruise 3,216 (5,555) (6,605) 3,117 (8,672) -278% (8,771) -273% Bulk 1,737 1,348 870 843 505 60% (389) -22% Maritime Portfolio (435) 71 (948) (1,129) 1,199 106% 506 -116% All Other (218) (151) (282) (22) (129) -595% 67 31% Total Maritime 5,058 (3,973) (8,227) 1,119 (5,092) -455% (9,031) -179% 17 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 A. BUSINESS EVENTS Cruise Working with constituencies to develop guiding protocols for recommencing of 2021 Cruise season . The F/V St. Jude conducted whole tuna sales at Fishermen's Terminal. The vessels held several days of sales which attracted over 1000 customers per day. Additionally, this encouraged purchases from other fishermen and Wild Salmon Seafood. Shilshole Bay Marina Customer Service Facilities and repaving project progresses with slight delays. All new buildings are scheduled to open early in Q3. Maritime Environmental o Managed 'stand-down' process for T46 Cruise EIS to get consultants to a logical stopping point. o Completed all permitting tasks for Terminal 117 Habitat Restoration and Public Shoreline Access project. o Signed an Order with EPA to perform an Engineering Evaluation / Cost analysis for investigation and cleanup at T108. o Reviewed and submitted comments on City of Seattle stormwater codes and manuals, and on the Federal multi-sector general permit revisions . o Awarded $6.6M (75% match is $5M) from DOE for NWSA T5 Stormwater. B. KEY PERFORMANCE METRICS Grain Volume Metric Tons in 000's Cruise Passengers in 000's 18 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 C. OPERATING RESULTS Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual Budget Budget $ % $ % Ship Canal Fishing & Operations 1,610 2,004 2,182 2,122 2,122 61 3% 178 9% Elliott Bay Fishing & Commercial Operations 3,012 3,067 2,908 2,548 2,548 360 14% (158) -5% Recreational Boating 6,068 6,228 6,211 6,607 6,607 (397) -6% (17) 0% Cruise 6,806 8,473 133 49 10,300 84 173% (8,340) -98% Grain 3,123 2,567 2,005 1,756 1,756 249 14% (562) -22% Maritime Portfolio Management 5,628 5,019 4,884 5,127 5,127 (243) -5% (135) -3% Other 11 10 15 5 5 9 173% 5 45% Total Revenue 26,257 27,368 18,338 18,214 28,465 124 1% (9,030) -33% Expenses Maritime (Excl. Maint) 5,852 5,745 6,869 8,301 8,506 1,432 17% 1,124 20% Economic Development 2,351 2,369 2,325 2,920 2,996 595 20% (44) -2% Total Direct 8,202 8,114 9,194 11,220 11,502 2,026 18% 1,080 13% Maintenance Expenses 5,576 5,521 4,879 6,438 6,635 1,559 24% (642) -12% Envir Services & Planning 502 1,055 1,226 1,162 1,296 (65) -6% 172 16% Seaport Project Management 160 130 188 163 178 (26) -16% 58 45% Total Support Services 6,238 6,705 6,294 7,762 8,109 1,469 19% (412) -6% IT 1,367 1,320 1,393 1,424 1,428 30 2% 74 6% Police Expenses 2,169 1,988 1,569 1,689 1,698 119 7% (418) -21% External Relations 628 751 615 748 812 134 18% (136) -18% Other Central Services 3,007 3,298 3,109 3,441 3,680 332 10% (189) -6% Aviation Division / Other 105 135 137 157 117 20 13% 2 2% Total Central Services / Other 7,276 7,491 6,823 7,458 7,735 635 9% (667) -9% Total Expense 21,716 22,310 22,311 26,441 27,347 4,130 16% 1 0% NOI Before Depreciation 4,541 5,058 (3,973) (8,227) 1,119 4,254 52% (9,031) -179% Depreciation 8,823 8,911 8,781 8,651 8,649 (130) -2% (130) -1% NOI After Depreciation (4,281) (3,853) (12,754) (16,878) (7,530) 4,124 24% (8,901) -231% 2020 Actuals vs. 2020 Revised Budget Operating Revenues were $124K higher than budget: 1) Ship Canal Fishing & Operations and Elliott Bay Fishing & Commercial Operations $421K higher from closure to the Ballard Locks. 2) Recreational Boating lower $397K due to COVID-19 transition delays. 3) Grain $249K higher with 17% more metric tons YTD. 4) Maritime Portfolio Management $243K lower due to vacancy at Maritime Industrial Center. Operating Expenses were $4,130K lower than budget: 1) Direct Expenses were $2,026K lower than budget Recreational Marinas and Commercial Operations $652K under from lower utilities and outside security services. Maritime Marketing $327K below budget from event cancellations. Division Management was $107K under budget due to open planning positions. Portfolio Management $636K favorable from salaries and open headcount. Received $186K benefit in Environmental Remediation liability All other Direct Expenses net to $12K under budget. 2) Total Support Services were $1,469K favorable to budget. Maintenance $1,559K favorable due to project spend and lower burden rate from emergency paid leave. Environmental Services and Planning were $65K higher than budget due to unplanned derelict vessel. Seaport Project management $26K unfavorable to budget. 3) Total Central Services / Other were $635K favorable to budget. Net Operating Income was $4,254K favorable to budget. 19 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 2020 Actuals vs. 2019 Actuals Operating Revenues were $9M lower than 2019 due to cancellation of the Cruise season and reductions in volumes at the Grain terminal. Operating Expenses were flat to 2019: 1. First year of ILA Payments to NWSA at T46, $956K higher 2. Changing in Maintenance Allocation, $642K lower 3. Increase in salary and wage rates offset by cost reductions Net Operating Income was $1,465K below 2019 actual. 2020 Forecast vs. 2020 Revised Budget Operating Revenues are $2.2M lower than revised budget driven by Cruise moving from delay to cancellation for the 2020 season. Operating Expenses forecasted $1M lower than budget from additional reductions in Port Valet (cruise bag handling service) expenses. Net Operating Income Planned $4.1M unfavorable to budget. 2020 Forecast vs. 2019 Actuals Operating Revenues expected $18.9M lower than 2019 due COVID-19 impacts in Cruise. Increases in Recreational boating revenue offset by reductions in Grain, Maritime Portfolio Management, and Elliott Bay Fishing and Commercial. Operating Expenses forecasted $2.5M higher than 2019 actual driven primarily by $1.9M ILA payment NWSA, $1.9M favorable one-time pension adjustment in 2019, offset by favorable police allocations and COVID-19 related cost cutting initiatives. Net Operating Income forecasted $21.4M below 2019 actual. 20 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 D. CAPITAL RESULTS 2020 2020 2020 Fcst/Rvsd Budget YTD Year-End Revised $ % $ in 000's Actual Forecast Budge t New Cruise Terminal 1,194 1,569 1,259 (310) -24.6% FT Gateway Building 278 678 700 22 3.1% T91 Berth 6 & 8 Redev 34 183 460 277 60.2% P66 Shore Power 64 201 470 269 57.2% FT Maritime Innovation Center 125 425 700 275 39.3% T117 Restoration 958 8,342 5,000 (3,342) -66.8% SBM Restrms/Service Bldgs Rep 5,258 8,657 9,400 743 7.9% T91 New Cruise Gangway - 20 30 10 33.3% T91 Northwest Fender 52 97 785 688 87.6% T102 HIM E Dock 7 75 110 35 31.8% SBM Paving 416 1,664 1,810 146 8.1% FT Docks 3,4,5 Fixed Pier Imp 527 528 510 (18) -3.5% All Other 965 7,758 5,978 (1,780) -29.8% Subtotal 9,878 30,197 27,212 (2,985) -11.0% CIP Cashflow Mgmt Reserve - (7,500) (7,500) 0 0.0% Total Spending 9,878 22,697 19,712 (2,985) -15.1% Comments on Key Projects: New Cruise Terminal project placed on hold. Will be evaluating post-COVID-19 effects on cruise. SBM Paving/Restrooms Foundation work completed, reducing amount of project contingency. T117 Restoration costs moved forward with expedited schedule from contractor. T91 Northwest Fender construction spending delayed to Q1 2021. 21 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Forecast Budget Budget $ % $ % Total Revenues 20,705 21,151 10,517 15,658 19,110 (5,141) -33% (10,634) -50% Total Operating Expenses 27,028 27,156 21,227 27,222 29,368 5,995 22% (5,928) -22% Net Operating Income (6,323) (6,005) (10,711) (11,564) (10,258) 854 7% (4,706) -78% Capital Expenditures 2,066 3,121 8,436 10,699 2,263 21% 5,315 170% 2020 Forecast vs. 2020 Revised Budget Operating Revenues forecasted to $5.1M unfavorable to revised budget due to deeper cuts in volumes at the Conference & Event Center related to COVID-19 cancellations and variable revenue at restaurants and parking facilities. Operating Expenses $6M favorable to budget due to cost impact of conference cancellations and port-wide cost cutting initiatives. Net Operating Income forecasted at $854K above budget. Capital spending forecasted to 79% of $10.7M revised budget. 2020 Forecast vs. 2019 Actuals Operating Revenues forecasted to $10.6M below 2019 due to lower volumes at the Conference & Event Center related to both Bell Harbor Modernization construction and COVID-19 cancellations. Operating Expenses $5.9M lower than 2019 with lower variable conference and event center costs and the port-wide cost cutting initiatives offset by a 2019 favorable pension adjustment new Tourism program. Net Operating Income forecasted $4.7M below 2019 actual. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 Year-to-Date 2020 Bud Var Change from 2019 $ in 000's Actual Actual Actual Budget $ % $ % Portfolio Management (954) (563) (556) (852) 296 35% 7 1% Conference & Event Centers (124) (362) (1,118) (1,056) (61) -6% (756) -209% Tourism (247) (199) (212) (355) 142 40% (14) -7% EDD Grants (6) 54 57 (50) 107 NA 3 NA Env Grants/Remed Liab/ERC (2) (118) (130) (326) 196 NA (12) 10% Total Econ Dev (1,334) (1,187) (1,959) (2,639) 680 26% (772) -65% 22 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 A. BUSINESS EVENTS Real Estate Development Finalized Pier 86 agreement with DFW. Completed 30% design on Fishermen's Terminal projects. Finalized Des Moines Creek RFP. Real Estate Strategic Plan at 50%. Pier 69 coronavirus response measures: Installed signage, floor markings, and barriers to encourage good hygiene and physical distancing. Portfolio Management Executed first amendment to the lease with Mad Anthony's and third amendment with Dukes at Shilshole Bay Marina. Provided rent relief to landside tenants. The Maritime Blue innovation accelerator cohort finished its program. Eleven entrepreneurs advanced through the four-month program which concluded with an online showcase where each emerging business pitched its products or services to over 200 virtual attendees. Tourism Developed Cruise & Stay training videos and press releases to keep Seattle and WA top of mind for British, Australian and German markets. The videos are being utilized by CLIA international offices and cruise tour operator specialists promoting 2021 Alaska season. Diversity in Contracting As of Q2, the Port is currently exceeding its 2020 Port wide WMBE (Non- Construction) goal of 14.4%, obtaining 15% WMBE utilization. Conversely, construction achieved 4.7% WMBE utilization. B. KEY PERFORMANCE METRICS Building Occupancy by Location: 23 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 C. OPERATING RESULTS Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual Budget Budget $ % $ % Revenue 4,577 4,421 4,119 4,295 4,475 (176) -4% (302) -7% Conf & Event Centers 5,188 5,963 1,240 2,155 3,455 (915) -42% (4,723) -79% Total Revenue 9,765 10,384 5,359 6,450 7,930 (1,091) -17% (5,025) -48% Expenses Portfolio Management 1,952 1,922 1,583 2,125 2,138 542 26% (339) -18% Conf & Event Centers 4,306 4,833 2,378 2,714 3,621 336 12% (2,455) -51% P69 Facilities Expenses 114 92 119 117 119 (2) -2% 27 30% RE Dev & Planning 74 48 91 63 103 (28) -45% 43 89% EconDev Expenses Other 473 352 488 337 487 (152) -45% 136 39% Maintenance Expenses 1,995 1,563 1,170 1,814 1,912 644 35% (393) -25% Maritime Expenses (Excl Maint) 117 106 229 257 264 28 11% 123 115% Total EDD & Maritime Expenses 9,033 8,916 6,058 7,426 8,644 1,368 18% (2,857) -32% Diversity in Contracting 37 99 50 85 100 35 41% (48) -49% Tourism 620 526 374 638 747 264 41% (152) -29% EDD Grants 28 (4) (27) 555 555 582 105% (24) 679% Total EDD Initiatives 685 621 397 1,278 1,402 881 69% (224) -36% Environmental & Sustainability 121 173 101 127 153 26 20% (72) -41% Police Expenses 81 101 108 116 117 8 7% 7 6% Other Central Services 2,558 2,819 2,760 3,430 3,574 671 20% (59) -2% Aviation Division 79 53 69 81 58 13 15% 15 29% Total Central Services & Aviation 2,839 3,147 3,037 3,755 3,902 718 19% (109) -3% Envir Remed Liability 0 0 0 0 0 0 NA 0 NA Total Expense 12,557 12,684 9,493 12,459 13,948 2,966 24% (3,191) -25% NOI Before Depreciation (2,791) (2,300) (4,134) (6,009) (6,018) 1,875 31% (1,834) -80% Depreciation 1,980 1,833 1,774 1,705 1,704 (68) -4% (59) -3% NOI After Depreciation (4,771) (4,133) (5,908) (7,715) (7,722) 1,807 23% (1,775) -43% 2020 Actuals vs. 2020 Revised Budget Operating revenue were $1,091K unfavorable to budget due primarily to additional event cancellations at the Conference and Event Centers as a result of government mandates caused by COVID-19 pandemic. Operating Expenses were $2,966K favorable to budget: 1) Portfolio Management $542K favorable from open FTE and deferral of fire, electrical, and signage upgrades and enhancements. 2) Conference and Event Center $336K favorable from lower activity related to cancelled events. 3) Maintenance Expenses $644K favorable due to timing. 4) EDD Initiatives $881K favorable due to timing of spend related to COVID-19. 5) Central Services $718K below budget. 6) All other expenses net to $155K above budget. Net Operating Income was $1,875K above budget. 2020 Actuals vs. 2019 Actuals Operating Revenues were $5,025K lower than 2019 actual due to reduced volumes at the Conference and Event Centers as well as Bell Street Garage Operating Expenses were $3,191K lower than 2019 actual: 1) Portfolio Management $339K lower due to hiring freeze on open headcounts 2) Conference and Event Centers $2,455K lower than 2019 due to variable costs associated with lower Conference and Event Center volumes as a result of government mandates caused by COVID-19 pandemic. 3) Maintenance Expenses $393K lower than 2019. 4) All other Expenses net to $170K above 2019. Net Operating Income was $1,832K below 2019 actual. 24 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Forecast Budget Budget $ % $ % Revenue 9,002 8,912 8,020 8,824 9,124 (804) -9% (892) -10% Conf & Event Centers 11,703 12,239 2,496 6,833 9,985 (4,337) -63% (9,742) -80% Total Revenue 20,705 21,151 10,517 15,658 19,110 (5,141) -33% (10,634) -50% Expenses Portfolio Management 3,571 3,732 3,853 3,988 4,008 135 3% 122 3% Conf & Event Centers 9,889 10,218 2,098 6,703 8,902 4,605 69% (8,120) -79% P69 Facilities Expenses 235 215 226 226 230 0 0% 11 5% RE Dev & Planning 149 136 145 145 208 0 0% 9 6% EconDev Expenses Other 785 930 632 632 932 0 0% (298) -32% Maintenance Expenses 3,914 3,145 3,476 3,476 3,819 0 0% 330 10% Maritime Expenses (Excl Maint) 281 253 512 512 524 0 0% 259 103% Total EDD & Maritime Expenses 18,824 18,630 10,943 15,682 18,624 4,740 30% (7,687) -41% Diversity in Contracting 132 152 151 151 197 0 0% (1) -1% Tourism 1,408 1,337 2,342 2,842 1,536 500 18% 1,005 75% EDD Grants 838 785 810 1,110 1,110 300 27% 25 3% Total EDD Initiatives 2,378 2,274 3,303 4,103 2,843 800 19% 1,029 45% Environmental & Sustainability 281 344 265 260 323 (5) -2% (79) -23% Police Expenses (76) 61 222 232 233 10 4% 161 266% Other Central Services 5,466 5,732 6,302 6,752 7,223 450 7% 570 10% Aviation Division 155 114 193 193 123 0 0% 78 69% Total Central Services & Aviation 5,825 6,251 6,982 7,437 7,901 455 6% 730 12% Envir Remed Liability 0 0 0 0 0 0 NA 0 NA Total Expense 27,028 27,156 21,227 27,222 29,368 5,995 22% (5,928) -22% NOI Before Depreciation (6,323) (6,005) (10,711) (11,564) (10,258) 854 7% (4,706) -78% Depreciation 3,948 3,647 3,389 3,392 3,389 2 0% (258) -7% NOI After Depreciation (10,271) (9,651) (14,100) (14,956) (13,647) 856 6% (4,448) -46% 2020 Forecast vs. 2020 Revised Budget Operating Revenues forecasted to $5.1M unfavorable to revised budget due to deeper cuts in volumes at the Conference & Event Center related to COVID-19 cancellations and variable revenue at restaurants and parking facilities. Operating Expenses $6M favorable to budget due to cost impact of conference cancellations and port-wide cost cutting initiatives. Net Operating Income forecasted at $854K above budget. 2020 Forecast vs. 2019 Actuals Operating Revenues forecasted to $10.6M below 2019 due to lower volumes at the Conference & Event Center related to both Bell Harbor Modernization construction and COVID-19 cancellations. Operating Expenses $5.9M lower than 2019 with lower variable conference and event center costs and the port-wide cost cutting initiatives offset by a 2019 favorable pension adjustment new Tourism program. Net Operating Income forecasted $4.7M below 2019 actual. 25 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 D. CAPITAL RESULTS 2020 2020 2020 Fcst/Rvsd Budget YTD Year-End Revised $ % $ in 000's Actual Forecast Budge t T91 Uplands Development 96 396 1,000 604 60.4% P66 BHICC Interior Modernize 6,784 8,084 8,358 274 3.3% WTC HVAC Replacement 156 231 260 29 11.2% P66 HVAC Systems Upgrade 298 466 912 446 48.9% P66 Roof Upgrades - 60 50 (10) -20.0% CW Bridge Elev Modernizations 29 104 350 246 70.3% All Other 318 1,595 1,769 174 9.8% Subtotal 7,681 10,936 12,699 1,763 13.9% CIP Cashflow Mgmt Reserve - (2,500) (2,000) 500 -25.0% Total Spending 7,681 8,436 10,699 2,263 21.2% Comments on Key Projects: T91 Upland Industrial Unanticipated delays in the finalization of the design contract. BHICC Modernization Project expected to close out in Q3. P66 HVAC Costs shifted to future due to delay in projected hand over from Marine Maintenance to Seaport Project Management 26 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 V. CENTRAL SERVICES DIVISION FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 YTD 2019 YTD 2020 YTD 2020 YTD 2020 YTD Actual vs. Revised Change from 2019 Revised Approve d Budget Variance $ in 000's Actual Actual Actual Budge t Budge t $ % $ % Total Operating Revenues 81 331 1,640 20 20 1,620 8101.4% 1,309 395.7% Core Central Support Services 37,027 38,479 41,186 43,566 45,683 2,380 5.5% 2,707 7.0% P olic e 13,188 13,997 14,819 15,697 15,784 878 5.6% 822 5.9% Capital Development 4,453 5,164 4,773 5,457 6,171 684 12.5% (391) -7.6% Environment & Sustainability 2,954 4,551 4,999 5,091 5,911 92 1.8% 448 9.9% Total Operating Expenses 57,621 62,191 65,777 69,812 73,549 4,035 5.8% 3,586 5.8% 2020 YTD Actuals vs. 2020 YTD Budget Operating Revenues favorable due primarily to Police forfeiture seizures of $1.6M. Operating Expenses $4M favorable to budget mainly due to staffing vacancies, projects spending delays, and delayed Outside Services costs. 2020 YTD Actuals vs. 2019 YTD Actuals Operating Revenues $1.3M above 2019 mainly due to higher Police forfeiture seizures in 2020 of $1.6M. Operating Expenses $3.6M higher than 2019 mainly due to higher payroll, Outside Services, and lower charges to Capital Projects. A. BUSINESS EVENTS Delivered ICT services to enable work-at-home policy, Port wide communication, and team collaboration in response to the COVID-19. Rapidly aligned the cybersecurity strategy to accommodate the increase in remote workforce capability driven by the COVID-19 global pandemic. Developed and deployed the Self-Check Health Survey in a record 4 weeks. This system allows any Port employee, volunteer, or non-construction contractor to affirm no known COVID-19 exposure or symptoms each day prior to visiting a Port facility. POSPD deployed to provide mutual aid to the Seattle Police Department for a protest on May 31, 2020. May 31 to June 4, Port officers along with our Valley partners deployed to Seattle, STIA, Kent, Renton, Auburn, and Federal Way in response to the major civil unrest. POSPD participated in the annual Special Olympics Torch Run on 6/6. This year the run was performed in virtual teams due to COVID-19 restrictions. The Office of Equity, Diversity and Inclusion collaborated with Port staff to ensure COVID-19 safety information met the language needs of Port construction workers and through community feedback, developed a three-year workforce development strategic plan for 2021-2023. Completed the Port's new budget planning system implementation in June after more than two years of planning. HR implemented a new Applicant Management System, Taleo, to replace BrassRing as the Port's Recruiting/Applicant Management System. PeopleSoft Financials People Tools Upgrade: This upgrade finished earlier than expected, in Q2, continuing support and providing new features to enhance operations and the user-experience. Conducted Career Readiness Workshops for ten Duwamish Valley youth for POS spring and summer virtual internship program. Held media availability on June 25 to introduce nonprofits working with the Port to sponsor 220 Opportunity Initiative youth jobs this summer. 27 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 B. KEY PERFORMANCE METRICS Key Performance Indicators/Measures 2018 2019 2020 A. Century Agenda Strategies 1. Prepare and negotiate the agreements for the Port's 24 bargaining units 293 411 83 2. Oversee Implementation/Administration of CBAs agreements 122 122 81 B. High Performance Organization - Customer Satisfaction 1. Respond to Public Disclosure Requests 305 285 248 2. Information Communication Technology Network Availability 100% 99.9 99.6% 3. Customer Survey for Police Service Excellent or Above Average 90% 83% 83% 4. Number of Job Openings Created 195 358 233 5. Percent of annual audit work plan completed each year 100% 100% N/A C. High Performance Organization - Talent Development & Safety 1. MIS and Clarity Training Classes 8 8 N/A 2. MIS and Clarity Training Attendees 76 93 N/A 3. Employee Development Class Attendees/Structured Learning 572 1067 2629 4. Total Recordable Incident Rate - TRIR (prev Occupational Injury Rate) 5.05 4.75 2.93 5. Lost Work Day Rate (previously Days Away Severity Rate) 32.01 15.08 46.43 D. Financial Performance 1. Corporate costs as a % of Total Operating Expenses 31% 29.1% 32.5% 2. Clean independent CPA audits involving AFR Yes Yes Yes 3. Timely process disbursement payment requests 4 days 3 days 3 days 4. Keep receivables collections current (within 30 days) 76% 88% 4% 5. Investment Portfolio Yield 1.69% 2.16% 1.98 6. Litigation and Claim Reserves $384K $2.5M $2M 7. Claims/Injury Damages Reserves $1.1M $435K $127K 28 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 C. OPERATING RESULTS Financial Summary (Year-End Forecast) Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Fore cas t Budge t Budge t $ % $ % Total Revenues (500) 1,282 1,665 40 40 1,625 4063.2% 383 29.9% Executive 2,136 2,018 2,228 2,253 2,355 25 1.1% 210 10.4% Commission 1,848 2,022 1,894 2,014 2,292 120 5.9% (127) -6.3% Legal 3,948 4,987 5,115 3,948 4,001 (1,167) -29.6% 128 2.6% External Relations 7,362 7,760 8,142 10,274 11,070 2,132 20.7% 382 4.9% Equity Diversity and Inclusion 1,561 2,337 4,864 5,328 4,465 465 8.7% 2,527 108.1% Human Resources 8,430 9,187 9,672 10,191 11,690 518 5.1% 485 5.3% Labor Relations 1,079 1,230 1,336 1,336 1,386 - 0.0% 106 8.6% Internal Audit 1,521 1,450 1,650 1,589 1,749 (61) -3.8% 200 13.8% Accounting & Financial Reporting Services 6,842 7,341 8,800 8,810 9,024 11 0.1% 1,459 19.9% Information & Communication Technology 21,961 23,014 25,445 25,695 26,013 250 1.0% 2,431 10.6% Information Security 934 1,203 1,903 1,915 1,968 12 0.6% 699 58.1% Finance & Budget 5,593 6,230 7,109 6,959 7,039 (150) -2.2% 879 14.1% Maritime Finance 1,445 1,605 1,870 1,870 1,942 - 0.0% 264 16.5% Finance & Budget 1,843 2,037 2,222 2,211 2,219 (11) -0.5% 185 9.1% Aviation Finance & Budget 2,305 2,587 3,018 2,878 2,878 (140) -4.9% 430 16.6% Business Intelligence 1,323 1,302 1,174 1,516 2,209 342 22.6% (129) -9.9% Risk Services 3,095 3,137 3,461 3,380 3,438 (81) -2.4% 323 10.3% Office of Strategic Initiatives 1,596 1,448 967 1,197 1,619 230 19.2% (482) -33.2% Central Procurement Office 4,630 4,453 5,739 5,289 5,988 (450) -8.5% 1,287 28.9% Contingency 185 39 (50) (100) (2,702) (50) 50.0% (89) -227.3% Industrial Development Corporation - 1 - - - - 0.0% (1) -100.0% Capital to Expense - 117 - - - - 0.0% (117) -100.0% Core Central Support Services 74,044 79,276 89,449 91,594 93,604 2,145 2.3% 10,173 12.8% P olic e 23,908 27,793 30,012 31,312 31,444 1,300 4.2% 2,219 8.0% Total Before Cap Dev & Environment 97,952 107,069 119,461 122,906 125,048 3,445 2.8% 12,392 11.6% Capital Development Engineering 5,478 5,696 5,291 5,143 8,765 (149) -2.9% (405) -7.1% Port Construction Services 3,522 4,341 3,596 3,468 3,748 (128) -3.7% (745) -17.2% Sub-Total 8,999 10,038 8,888 8,611 12,513 (277) -3.2% (1,150) -11.5% Environment & Sustainability Aviation Environmental 5,006 5,680 5,596 5,465 6,895 (132) -2.4% (83) -1.5% Maritime Environmental & Planning 2,418 3,275 2,968 2,908 3,420 (60) -2.1% (307) -9.4% Noise Programs 722 817 681 813 1,012 132 16.2% (136) -16.6% Environment & Sustainability 624 976 1,153 1,214 1,538 61 5.0% 177 18.1% Sub-Total 8,770 10,748 10,398 10,399 12,866 1 0.0% (350) -3.3% Total Expenses 115,721 127,855 138,747 141,916 150,427 3,170 2.2% 10,892 8.5% 29 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 2020 Forecast vs. 2020 Revised Budget Operating Expenses for 2020 are $3.2M under the revised budget due primarily to: Executive favorable variance of $25K mainly due to Payroll savings due to vacant positions of $25K. Commission favorable variance of $120K is mainly due to $100K Payroll savings from vacant positions and lower planned Travel of $20K. Legal unfavorable variance of ($1.2M) is primarily due to unpredictable Legal Expenses. External Relations favorable variance of $2.1M due to reduced Outside Services of $1.6M, lower Payroll from vacant positions of $300K, Promotional Expenses of $200K, reduced Travel of $150K offset by unplanned Property Rentals of ($26K) and lower charges to Capital Projects of ($104K). Equity, Diversity and Inclusion favorable variance of $465K primarily due to Workforce Development lower than planned Outside Services of $310K, lower Property Rental of $50K, Promo Expenses of $39K, and Office of EDI planned delays in hiring, saving $50K. Human Resources favorable variance of $518K primarily due to lower High School interns and Veteran Fellows of $200K, reduced Outside Services of $120K and lower General Expenses of $106K from reduced Advertising and planned credits from King County Metro. Labor Relations plans to be on target. Internal Audit unfavorable variance of $60K from higher Payroll for planned job refresh in 2020. Accounting and Financial Reporting Services favorable variance of $10.6K from $3K in lower Telecommunications, $2.5K lower Supplies & Stock, and $5K unplanned charges to Capital Projects. Information & Communication Technology favorable variance of $250K primarily due to planned increased charges to Capital Projects of $300K, lower Payroll of $250K, lower Travel of $30K and Telecommunications of $20K which are offset by higher Equipment of ($250K) and unexpected charges to Outside Services of $203K. Information Security favorable variance of $12K due to lower Outside Services of $20K offsetting some unplanned spending in General Expenses of ($7K). Finance & Budget unfavorable variance of ($150K) is primarily from AV Finance & Budget unbudgeted consultants in Outside Services of ($156K). Business Intelligence favorable variance of $342K primarily due to savings from Payroll due to vacancies of $50K and Outside Services contracts still being negotiated of $257K. Risk Services unfavorable variance of ($81K) due to ($193K) expected increase on Property Insurance renewal and unexpected temporary Outside Services of ($15K) offset by Payroll savings from vacancies of $128K. Office of Strategic Initiative favorable variance of $230K is due to delay in hiring two vacant positions of $139K and reductions in Outside services of $90K.. Central Procurement Office unfavorable variance of ($450K) primarily due to lower than planned charges to Capital Projects. Police $1.3M favorable variance primarily due to lower Payroll of $1.5M offset by unbudgeted higher Worker's Compensation of ($200K) and higher costs for Forfeiture Expenditures of ($60K). Engineering unfavorable variance of ($149K) is primarily due to ($715K) lower than planned charges to Capital Projects and lower Intra-department Allocations of ($164K) offset by lower Payroll of $324K, Equipment of $99K, Supplies & Stock of $58K, and reduction of Outside Services of $196K. PCS unfavorable variance of ($128K) primarily due to lower than planned charges to Capital Projects of ($750K). and higher Equipment of ($200K) for unbudgeted AV expense projects which were offset by overall cuts to Payroll of $325K, Supplies and Stock of $60K, Outside Services of $250K General Expenses of $50K, and lower Overhead Allocations of $50K. Environment & Sustainability plans to be on target. Contingency unfavorable variance of ($50K) due to reduced Credit Card Rebates for the year. 30 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/20 2020 Forecast vs. 2019 Actuals Operating Expenses for 2020 are forecasted to be $10.9M higher than 2019 actuals mainly due to: o Core Central Support Services $10.2M higher than 2019 primarily due to a DRS Pension Plan True-up credit of $9.9M in 2019. o Police $2.2M above 2019 due to the following: Received a DRS Pension Plan True-up credit of $2.8M in 2019. Holiday payout in January 2020 that were expected in December 2019. Higher than expected Worker's comp in 2020. o Capital Development $1.2M lower than 2019 primarily due to planned reductions in hiring in 2020 and multiple delays to Capital projects. o Environment & Sustainability $350K below 2019 due to planned reductions in hiring in 2020 and multiple delays in projects in Outside Services. D. CAPITAL RESULTS 2020 YTD 2020 2020 Fav (UnFav) Year-End Revised YE Fcst vs. Revised $ in 000's Actual Fore cas t Budge t $ % Infrastructure - Small Cap 984 2,100 2,100 0 0.0% Services Tech - Small Cap 979 1,350 1,350 0 0.0% Radio System Upgrade 328 3,079 3,687 608 16.5% New Budget System 151 317 583 266 45.6% Regional Workforce Tracking - - 500 500 100.0% Learning Management System - 150 400 250 62.5% Maximo Upgrade 279 394 462 68 14.7% Phone System Upgrade 34 900 900 0 0.0% Customer Relationship Mgmt 482 1,185 1,400 215 15.4% CDD Fleet Replacement 210 1,111 1,644 533 32.4% Corporate Fleet Replacement 225 245 1,065 820 77.0% CIP Cashflow Adjustment - (2,000) (3,000) (1,000) 33.3% Other (note 1) 353 956 1,600 644 40.3% TOTAL 4,025 9,787 12,691 2,904 22.9% Note: (1) "Other" includes remaining ICT projects and small capital projects/acquisitions. 31
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