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 3 ;TABLE CONTENTS Page Portwide Performance Report Aviation Division Report III. Maritime Division Report IV. Economic Development Division Report Corporate Report PORTWIDE FINANCIAL PERFORMANCE REPORT 12/31/16 EXECUTIVE SUMMARY Financial Summary The Port’s operating revenues for 2016 were $ 598.5 M, which is $ 13.9M above budget and $ 39.5 M higher than the same period in 2015. Excluding Aeronautical revenues, which are based on cost recovery, othe r operating revenues were $ M, $ 27.1M above budget and $ 21.3 over 2015 mainly due to higher revenues from Public Parking, Rental Cars, Airpo rt Dining and Retail, Ground Transportation, Employee Parking, Maritime Operations, Cruise, Grain, and NWSA Distributable Revenue ota l operating expenses were $ 325.3M, $10.7 below budget mainly due to savings from payroll and outside services Operating incom e before depreciation was $ 273.2M, $24.5 above budget and $32.1M over The Port wide capital spe nding was $169.5 for the year, $ below the budgeted $282.0M. Operating Summary At the Airport the enplanement growth for 2016 was 8.0% and landed weight was 9.9%, making Sea Tac from the busiest airport in North America in 2015 to the place for 2016 (based on passenger volume). The enplanements growth for do mestic and international was % and %, respective ly. Key Business Events The Port continued to hold events and tours to help build community awareness and support for the Port including fence line communities and throughout King County. completed biofuels infrastructure and feasibility study at the Airport AirBridge Cargo from Russia initiated new cargo service in October 2016; and Eurowings announced new seasonal air service to Cologne, Germany beginning in July 2017. The Port was named the Best North American Homeport by Cruise Critic . We f inalized 5 year agreements with Muckleshoot and Suquamish Tribes. We also r eceived final, signed Stormwater Utility inter Major Capital Projects The Port contributed to regional transportat ion partner investments with the $147.7M s econd contribution to the State’s Alaskan Way Viaduct Replacement Program; and the $2.1M second and final contribution to King County’s South Park Bridge. We began construction on International Arrivals Facility. We also executed the contract amendment wit h North Satellite contractor for building expansion preliminary construction; and the Commission authorized construction of Phase 1 of baggage screening optimization project. We completed TNC Tracking System which includes accepting monthly and real time activity data from Uber, Lyft, and Wingz . We mplemented the North Satellite Transit System Train D isplay and developed displays for Checkpoint Security Wait times. We also r eplaced the Parking Revenue Control System and completed the Runway reconstruction ahead of schedule. ompleted Terminal 5 Modernization Project test pile field installation and Statnamic tests. Finally, we started the construction of Pier 66 Tenant Improvement in September 2016 PORTWIDE FINANCIAL PERFORMANCE REPORT 12/31/16 PORTWIDE FINANCIAL SUMMARY MAJOR OPERATING REVENUES SUMMARY 2016 2016 Fav (UnFav) Incr (Decr) Total Operating Revenues (w/o Aero) TOTAL Fav (UnFav) Incr (Decr) PORTWIDE FINANCIAL PERFORMANCE REPORT 12/31/16 MAJOR OPERATING EXPENSES SUMMARY KEY PERFORMANCE METRICS CAPITAL SPENDING RESULTS PORTWIDE INVESTMENT PORTFOLIO During the fourth quarter of 2016, the investment portfolio earned 1.28% versus the benchmark’s (the Bank of America Merrill Lynch 1 3 Year US Treasury & Agency Index) 1.19%. Over the last twelve months the portfolio and the benchmark have earned 1.17% and 0.84%, respectively. Since the Port became its own Treasurer in 2002, the life date earnings of the Port’s portfolio and the benchmark are 2.57% and 1.80%, respectively. 2016 2016 $ in 000's Actual Actual Budget Salaries & Benefits 106,591 102,873 111,779 8,906 8.0% (3,718) -3.5% Wages & Benefits 94,981 99,917 101,652 1,735 1.7% 4,936 5.2% Payroll to Capital Projects 24,783 21,744 27,969 6,225 22.3% (3,040) -12.3% Equipment Expense 6,996 7,106 5,724 (1,382) -24.1% 1.6% Supplies & Stock 7,654 8,792 6,992 (1,799) -25.7% 1,138 14.9% Outside Services 58,275 70,116 77,904 7,788 10.0% 11,842 20.3% Utilities 20,317 21,123 21,190 0.3% 4.0% Travel & Other Employee Expenses 4,286 4,200 5,276 1,076 20.4% -2.0% Promotional Expenses 1,151 1,178 -19.6% 2.3% Other Expenses 33,063 25,118 23,746 (1,372) -5.8% (7,944) -24.0% Charges to Capital Projects (40,291) (36,880) (47,274) (10,393) 22.0% 3,410 -8.5% TOTAL 317,806 325,285 335,943 10,658 3.2% 7,479 2.4% Fav (UnFav) Incr (Decr) Fav (UnFav) Incr (Decr) Budget Variance Change from 2015 Actual Actual Budget Chg. Chg. Enplanements (in 000's) 21,109 22,796 22,214 2.6% 1,687 8.0% Landed Weight (lbs. in 000's) 24,757 27,202 26,126 1,075 4.1% 2,445 9.9% Passenger CPE (in $) 10.12 10.10 11.00 0.90 8.2% (0.02) -0.2% Grain Volume (metric tons in 000's) 3,778 4,389 4,000 9.7% 16.2% Cruise Passenger (in 000's) 2.5% 9.5% Shilshole Bay Marina Occupancy 96.5% 94.6% 95.8% -1.2% -1.3% -1.9% -2.0% Fishermen's Terminal Occupancy 84.2% 86.0% 83.2% 2.8% 3.3% 1.8% 2.1% 2016 2016 $ in 000's Actual Actual Aviation 164,931 153,887 245,241 91,354 37.3% Maritime 6,252 5,746 15,660 9,914 63.3% Economic Development 2,098 4,757 8,751 3,994 45.6% 6,539 5,097 12,396 7,299 58.9% TOTAL 179,820 169,487 282,048 112,561 39.9% AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 FINANCIAL SUMMARY Division Summary 2016 Actuals vs 2016 Budget et Operating Income for 2016 is $6.1M higher than budget (3.1% favorable) Operating Revenue is $0.5M higher than budget (0.1% favorable) primarily due to higher Non Aero revenue ($12.7M) driven by increased passenger volumes with strong performance in ground transportation, public parking, rental cars, and airport dining & ret ail. The increase in Non Aero revenue is more than offset by lower Aeronautical revenue ($13.2M) from lower aero costs and higher revenue sharing. Operating Expenses are $6.6M lower than budget (2.5% favorable) primarily due to lower charges from Corp orate and other divisions ($4.8M savings) and lower than anticipated Aviation direct costs ($3.1M) despite significant unplanned expenditures for the passenger screening queue management contract and higher janitorial costs in response to increased passeng er volumes, partially offset by higher than anticipated costs for Environmental Remediation Liability expense. Division Summary 2016 Actuals vs 2015 Actuals 2016 Net Operating Income is $19.3M higher than prior year (10.4% higher NOI) 2016 Operating Revenue is $42.4M higher than prior year (10.0% higher) due to strong growth in Aeronautical revenue ($18.2M) and higher Non Aero revenue ($24.2M). The increase in Aero rate based revenue is primarily due to cost recovery on new assets pl aced in service and higher operating expenses to support increased airline activity, partially offset by higher revenue sharing in 2016. The growth in Non Aero revenue is driven by higher passenger volumes with strong performance in ground transportation, public parking, rental cars, and airport dining & retail. 2016 Operating Expenses are $23.1M higher than prior year (9.7% higher) due to higher airport direct charges ($12.8M) primarily due to increased passenger volumes, and higher charges from Corpo rate departments and other divisions ($10.0M). BUSINESS EVENTS Passenger growth of 8.0% propelled Sea Tac into position as the 9 busiest airport in North America for 2016 (based on passenger volume), from 13 place in 2015. Customer Service: achieved ASQ score of 4.12 for Q4. Result for full year 2016 was below target, but significant progress realized. New cargo service: AirBridge Cargo from Russia initiated new service on Oct 7, 2016. New air service: Eurowings announced new seasonal servi ce to Cologne, Germany beginning in July 2017. Environmental: completed biofuels infrastructure and feasibility study. $ in 000's Actual Actual Budget Operating Revenues: Aeronautical Revenues 229,624 247,811 261,019 (13,208) -5.1% 18,187 7.9% SLOA III Incentive Straight Line Adj (1) (3,576) (3,576) (3,576) 0.0% 0.0% Non-Aeronautical Revenues 196,844 221,021 208,321 12,700 6.1% 24,177 12.3% Total Operating Revenues 422,892 465,256 465,764 (508) -0.1% 42,364 10.0% Total Operating Expense 238,140 261,226 267,803 6,576 2.5% 23,086 9.7% Net Operating Income 184,752 204,030 197,962 6,069 3.1% 19,278 10.4% Capital Expenditures 164,931 153,887 245,241 91,354 37.3% (11,044) -6.7% Fav (UnFav) Incr (Decr) Budget Variance Change from 2015 (1) Annual non-cash 5yr amortization of $17.9M lease incentive effective 2013 through 2017. AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 Key Performance Measures Notes: Reduction in CPE reflects lower airline costs due to higher revenue sharing (driven by increased non airline revenues), and increased enplaned passengers. % Change Enplaned Passengers (000's) Domestic 18,944 20,385 7.6% International 2,165 2,411 11.4% Total 21,109 22,796 8.0% Operations 381,408 412,170 8.1% Landed Weight (million lbs.) Cargo 1,588 1,888 18.9% All other 23,169 25,314 9.3% Total 24,757 27,202 9.9% Cargo - metric tons Domestic freight 162,013 194,754 20.2% International freight 115,357 114,349 -0.9% Mail 55,266 57,326 3.7% Total 332,636 366,429 10.2% Actual Actual Budget Performance Metrics Cost per Enplanement (CPE) 10.12 10.10 11.00 0.90 8.2% (0.02) -0.2% O&M Cost per Enplanement 11.28 11.46 12.06 0.60 4.9% 0.18 1.6% Non-Aero Revenue per Enplanement 9.33 9.70 9.38 0.32 3.4% 0.37 4.0% Debt per Enplanement (in $) 6.1% (15) -12.4% Debt Service Coverage 1.49 1.53 1.46 0.07 4.9% 0.04 2.9% Days cash on hand (10 months = 304 days) 34.5% (52) -11.1% Aeronautical Revenue Sharing ($ in 000's) 29,450 37,395 28,055 (9,340) -33.3% 7,945 27.0% Activity (in 000's) Enplanements 21,109 22,796 22,214 2.6% 1,687 8.0% Budget Variance Change from 2015 Fav (UnFav) Incr (Decr) Passengers: Alaska +5% Delta +11% Southwest +6% American +7% United flat 2016 Load Factor down 1.7 points from last year 2016 international Freight tons trailing prior year due to peak volume in 2015 during Port shutdown. AVIATION DIVI SION FINANCIAL PERFORMANCE REPORT 12/31/16 OPERATING RESULTS Division Summary $ in 000's Actual Actual Budget Operating Revenues: Aeronautical Revenues (1) 229,624 247,811 261,019 (13,208) -5.1% 18,187 7.9% SLOA III Incentive Straight Line Adj (2) (3,576) (3,576) (3,576) 0.0% 0.0% Non-Aeronautical Revenues 196,844 221,021 208,321 12,700 6.1% 24,177 12.3% Total Operating Revenues 422,892 465,256 465,764 (508) -0.1% 42,364 10.0% Operating Expenses: Payroll 99,327 101,879 106,659 4,781 4.5% 2,551 2.6% Outside Services 31,801 37,863 39,915 2,052 5.1% 6,062 19.1% Utilities 13,682 14,690 14,686 (3) 0.0% 1,007 7.4% Other Airport Expenses 17,457 20,655 16,911 (3,745) -22.1% 3,199 18.3% Total Airport Direct Charges 162,267 175,087 178,171 3,084 1.7% 12,819 7.9% Environmental Remediation Liability 4,222 4,463 3,246 (1,217) -37.5% 5.7% Capital to Expense (129) n/a 111.3% Total Exceptions 4,283 4,592 3,246 (1,346) -41.5% 7.2% Total Airport Expenses 166,551 179,679 181,417 1,738 1.0% 13,128 7.9% Corporate 44,065 50,099 52,424 2,325 4.4% 6,034 13.7% Police Costs 15,815 18,183 18,728 2.9% 2,369 15.0% Capital Development 7,828 9,319 11,746 2,427 20.7% 1,491 19.0% Maritime/Economic Development 3,882 3,946 3,488 (458) -13.1% 1.6% Total Charges from Other Divisions 71,589 81,547 86,386 4,838 5.6% 9,958 13.9% Total Operating Expense 238,140 261,226 267,803 6,576 2.5% 23,086 9.7% Net Operating Income 184,752 204,030 197,962 6,069 3.1% 19,278 10.4% CFC Surplus (5,159) (4,899) (5,146) (247) 4.8% -5.0% Net Non-Operating Items in / out from ADF (3) 2,690 2,148 1,099 (1,049) -95.5% (542) -20.2% SLOA III Incentive Straight Line Adj 3,576 3,576 3,576 0.0% (0) 0.0% Debt Service (125,153) (133,982) (135,217) (1,236) 0.9% (8,829) 7.1% Adjusted Net Cash Flow 60,706 70,873 62,273 (8,600) -13.8% 10,167 16.7% Fav (UnFav) Incr (Decr) Budget Variance Change from 2015 AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 Operating Expenses 2016 Actuals compared to 2016 Budget: Total Operating Expenses are lower than the 2016 budget by $6.6 million due to the net of the following: Aviation Direct Operating Expenses are lower than budget by $3.1 million due to the following: Operating Expenses Exceptions are higher than budget by $ million due to the following: Operating Expense charges from Corporate and other divisions are lower than budget by $ million due to the following: Positive Variance of $6.9M Negative Variance of $3.7M Payroll - vacancies & hiring delays $4.8M Other Aviation Expenses $3.7M Vacancies & hiring delays 3.1M Litigated & Non-litigated Damages 1.7M GASB 68 adjustment 1.2M Lower charges to Capital Projects 1.5M YE benefits adjustment 0.5M Maintenance Materials (passenger volume) 1.5M Outside Services (savings & work deferred to future year) $2.1M Aviation Contingency (budget only) (1.5M) Advance Planning IDIQ for Master Plan 2.0M All other Aviation Expenses 0.5M Environmental Review for Master Plan 1.8M Security Checkpoint Queue Mgmt contract (2.2M) Janitorial (passenger volume/scope increase) (1.0M) NERA 3 grant (FAA pilot program) 0.4M Airport Obstruction Removal - delayed 0.6M CISS - Prop 1 wage impact (0.4M) Rental Cars - curbside assistance not utilized 0.4M Cargo building mgmt - performed internally 0.3M All other Outside Services 0.2M Positive Variance - no material variance Negative Variance of $2.1M Environmental Remediation Liability $1.2M Lora Lake (lake parcel) estimate increase 4.1M RMM projects not anticipated in 2016 Budget 0.4M RMM projects deferred to future years (1.7M) Budget savings - projects accelerated to 2015 (0.5M) New RMM projects favorable to budget (0.4M) RMM adjustments to active projects (0.7M) Capital to Expense $0.1M Positive Variance of $5.3M Negative Variance of $0.5M Corporate savings $2.0M Maritime Division $0.6M 0.9M Economic Development Division ($0.1M) Office of Strategic Initiatives 0.7M AFR 0.7M All other Corporate (0.3M) Police savings $0.5M CDD savings $2.7M Aviation PMG 2.0M Engineering 0.9M All other CDD (0.2M) AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 Operating Expenses 2016 Actuals compared to 2015 Actuals: Total Operating Expenses increased in 2016 by $23. million due to the net of the following: Aviation Direct Operating Expenses increased in 2016 by $ million due to the following: Operating Expense Exceptions increased in 2016 by $ million due to the f ollowing: Operating Expense charges from Corporate and other divisions increased by $ 10.0 million in 2016 due to the following: Increase of $12.8M Decrease - no material amount Payroll $2.6M Vacancies & hiring delays 2.9M GASB 68 adjustment (0.4M) Benefits adjustment (Represented FTE's) 0.1M Outside Services $6.1M Checkpoint queue mgmt contract 2.2M Janitorial (due to higher enplanements) 2.5M NERA 3 grant (FAA pilot program) 1.1M CISS increase includes Prop 1 wage impact 0.5M SAMP (0.6M) All other Outside Services 0.4M Utilities $1.0M Other Aviation expenses $3.2M Litigated & Non-litigated Damages 0.8M Maintenance Materials (passenger volume) 0.8M B&O tax (on higher revenue) 0.5M All other Aviation expenses 1.1M Increase of $0.3M Decrease - no material amount Environmental Remediation Liability $0.2M Lora Lake (lake parcel) increase in 2016 2.3M Delta build-out in 2015 (1.5M) All other RMM adjustments (0.6M) Capital to Expense $0.1M Increase of $10.0M Decrease - no material amount Corporate departments $6.3M CPO 3.7M (0.5M) Business Intelligence (new in 2016) 0.9M Office of Strategic Initiatives 0.7M All other Corporate 1.5M Police $2.4M GASB 68 adjustment (Police) 1.1M All other Police expense 1.3M CDD $1.2M Aviation PMG 0.9M All other CDD 0.3M Maritime & Economic Dev Division $0.1M AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 Aeronautical Business Unit Summary Airline Rate Base Cost Drivers Aeronautical Budget Variance Aeronautical net operating income is $11.9M lower than budget. Aeronautical revenue is $1 .2M lower than budget: $ in 000's Actual Actual Budget Revenues: Movement Area 78,326 94,725 95,220 (495) -0.5% 16,399 20.9% Apron Area 10,840 14,028 14,144 (116) -0.8% 3,188 29.4% Terminal Rents 150,449 155,852 159,569 (3,717) -2.3% 5,403 3.6% Federal Inspection Services (FIS) 9,979 11,227 10,836 3.6% 1,249 12.5% Total Rate Base Revenues 249,594 275,832 279,768 (3,936) -1.4% 26,239 10.5% Commercial Area 9,519 9,379 9,306 0.8% (140) -1.5% Subtotal before Revenue Sharing 259,113 285,211 289,074 (3,863) -1.3% 26,099 10.1% Revenue Sharing (29,453) (37,395) (28,055) (9,340) -33.3% (7,942) 27.0% Other Prior Year Revenues (35) (5) (5) 0.0% -85.1% Total Aeronautical Revenues 229,624 247,811 261,019 (13,208) -5.1% 18,187 7.9% Total Airport Direct Charges 114,262 122,573 123,506 0.8% 8,311 7.3% Total Exceptions 3,642 4,315 2,681 (1,634) -61.0% 18.5% Total Charges from Other Divisions 36,011 42,149 44,163 2,013 4.6% 6,139 17.0% Total Aeronautical Expenses 153,914 169,037 170,350 1,313 0.8% 15,123 9.8% Net Operating Income 75,710 78,774 90,669 (11,895) -13.1% 3,064 4.0% Debt Service (82,341) (89,997) (91,723) (1,726) 1.9% (7,657) 9.3% Net Cash Flow (6,631) (11,224) (1,054) 10,169 -964.5% (4,593) 69.3% Budget Variance Change from 2015 Fav (UnFav) Incr (Decr) $ in 000's Actual Actual Budget O&M (1) 150,286 165,427 166,776 (1,349) -0.8% 15,141 10.1% Debt Service Gross 111,477 118,641 120,668 (2,027) -1.7% 7,164 6.4% Rate Base Revenues 249,594 275,832 279,768 (3,936) -1.4% 26,239 10.5% Commercial area 9,519 9,379 9,306 0.8% (140) -1.5% Total Aero Revenues 259,113 285,211 289,074 (3,863) -1.3% 26,099 10.1% Fav (UnFav) Budget Variance Incr (Decr) 'Change from 2015 AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 Aeron autical operating expenses are $ M lower than budget: Airport Direct Charges lower than budget despite significant unplanned expenditures for the passenger screening queue management contract and higher janitorial costs in response to increased passenger volumes. Exceptions 1.6 M higher than budget primarily due to ERL reserve i ncrease for Lora Lake (Lake parcel) project Charges from other divisions 2.0M lower than budget charges from Corporate departments. Aeronautical Year over Year Changes Aeronautical net operating income is $3 M higher than 2015. Aeronautical revenu es are $1 .2 higher year over year AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 Non Aero Business Unit Summary Non Aero Budget Variance Non Aeronautical net operating income is $ 18.0M higher than budget. Non Aeronautical revenues are $12.7 higher than budget: Strong perfo rmance in Ground Transportation ($4.5M), Public Parking ($2.7M), and Airport Dining and Retail ($2.9M). Non Aeronautical operating expenses are $5.3M lower than budget: Airport Direct Charges $2.2M lower than budget due to savings in Payroll and Outside Services which includes delayed spending on the Advance Planning IDIQ/Environmental review of the Master Plan and the NERA 3 FAA pilot program, partially offset by higher than anticipated charges for litigated and non litigated damages. Exceptions lower than budget due to planned ERL projects deferred to next year. Charges from other divisions $2.8M in savings from Corporate departments. Non Aero Year over Year Changes Non Aeronautical net operating income is $16.2 higher than 2015 Non Aeronautical revenues in 2016 are $24.2M higher than 2015 due to strong performance in Public Parking ($6.5M), Airport Dining & Retail and other terminal leased space ($6.0M), Ground Transportation ($4.0M), Rental Cars ($2.7M), and Commercial Propert ies ($2.0M). Non Aeronautical operating expenses in 2016 are $8.0M higher than 2015: Airport Direct Charges $4.5M higher than prior year due to higher payroll costs, NERA 3 grant (FAA pilot program) spending, and other expenses related to increased pa ssenger volumes, partially offset by charges for litigated and non litigated damages. $ in 000's Actual Budget Non-Aero Revenues Rental Cars - Operations 33,851 37,082 35,398 1,683 4.8% 3,231 9.5% Rental Cars - Operating CFC 12,663 12,122 12,767 (645) -5.1% (542) -4.3% Public Parking 63,059 69,540 66,847 2,693 4.0% 6,482 10.3% Ground Transportation 8,809 12,803 8,327 4,477 53.8% 3,994 45.3% Non-Aero Expenses Total Airport Direct Charges 48,006 52,514 54,664 2,151 3.9% 4,508 9.4% Total Exceptions 51.0% (364) -56.8% Total Charges from Other Divisions 35,578 39,398 42,223 2,825 6.7% 3,819 10.7% Total Non-Aero Expenses 84,226 92,189 97,452 5,264 5.4% 7,963 9.5% Net Operating Income 112,618 128,833 110,869 17,964 16.2% 16,215 14.4% Less: CFC (Surplus) / Deficit (5,159) (4,899) (5,146) 4.8% -5.0% Adjusted Non-Aero NOI 107,459 123,934 105,723 18,211 17.2% 16,474 15.3% Debt Service (42,812) (43,984) (43,494) -1.1% (1,172) 2.7% Net Cash Flow 64,647 79,949 62,229 (17,721) -28.5% 15,302 23.7% Actual Fav (UnFav) Incr (Decr) Budget Variance Change from 2015 AVIATION DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 Exceptions $0.4M lower ERL costs in 2016 primarily due to ERL costs for Delta build out in prior year. Charges from other divisions $3.8M higher than 2015. CAPITAL RESULTS (1) Early work packages delayed 3 months. (2) Delays resulting from scope and design changes . Purchase of PLBs delayed due to procurement strategies and phasing constraints. (3) Program delays, technical issues with chargers, and coordination among project team resulted in spending delays. (4) Milestone based contract deferred payments to later in the development cycle. Budget was developed fore a vendor had been selected. (5) Delays in spending on the design service directive. 2017 budget developed in early stages of the project. (6) Major construction contract was cancelled as a result of roof site conditions. Clear Bag Reconciliation project was cancelled; TSA Search Room was delayed due to irregular bid; and Security Zone Tracking Enhancements project was delayed due to contract execution issues with CPO. $ in 000's Description Actual Budget International Arrivals Fac-IAF (1) 40,488 57,612 17,124 29.7% NS NSAT Renov NSTS Lobbies (2) 27,310 43,200 15,890 36.8% GSE Electrical Chrg Stations (3) 1,769 5,100 3,331 65.3% Parking System Replacement (4) 3,900 3,295 84.5% Checked Bag Recap/Optimization (5) 5,231 8,257 3,026 36.6% 2015-2016 C Conc Roof Replace (6) 3,775 3,010 79.7% Interim Baggage System Program (7) 7,140 10,000 2,860 28.6% B2 Expansion for DL Club 11,083 9,000 (2,083) -23.1% Construction Logistics Expansn 5,527 6,865 1,338 19.5% RW16C-34C Design and Reconst 11,042 11,755 6.1% All Other 42,927 85,777 42,850 50.0% Total Spending 153,887 245,241 91,354 37.3% Budget Variance MARITIME DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 FINANCIAL SUMMARY Total Maritime Revenues were K favorable to budget in 2016. A $578K favorable variance in Fishing & Operations primarily from improved utilization of Dockage, Berthage, and Moorage; a $311K favorable variance in Maritime Portfolio Management; and a $380K favorable Grain variance due to high summer volumes being slightly offset by ($188K) unfavorable var iance in Recreational Boating, due to lower occupancy than budgeted. Total Operating Expenses were $2,201K favorable to budget in 2016 primarily due to lower maintenance BUSINESS EVENTS Successful 2016 cruise season with 983,539 passengers, 9.5% above 2015 levels Port of Seattle named Best North American Homeport by Cruise Critic P66 Tenant Improvement demolition and construction on sche dule Finalized 5 year agreements with Tribes Muckleshoot and Suquamish. NWSA, POS, a nd Tribal councils all approved. Fishing & Operations revenue growth of 8% driven by expa Fav (UnFav) Incr (Decr) 2015 2016 2016 Change from 2015 $ in 000's Actual Actual Budget Revenues: Operating Revenue 47,268 50,810 49,314 1,496 3% 3,542 7% Security Grants Total Revenues 47,268 50,810 49,314 1,496 3% 3,542 7% Total Operating Expenses 33,443 40,268 42,469 2,201 5% 6,825 20% Net Operating Income 13,825 10,542 6,845 3,697 54% (3,283) -24% Capital Expenditures 6,252 5,746 15,660 9,914 63% (506) -8% Budget Variance 2015 2016 2016 Change from 2015 $ in 000's Actual Actual Budget Fishing & Operations (4,204) (3,149) (4,238) 1,089 -26% 1,055 -25% Recreational Boating 1,049 1,016 684 332 49% (33) -3% Cruise 7,737 8,326 7,681 645 8% 589 8% Bulk 4,111 4,215 3,674 541 -15% 103 3% Maritime Portfolio 5,245 249 (754) 1,004 133% (4,996) 95% All Other (114) (115) (202) 87 (1) -1% Total Maritime 13,825 10,542 6,845 3,697 54% (3,283) -24% Incr (Decr) Fav (UnFav) 2016 Bud Var MARITIME DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 KEY INDICATORS Grain Volume Metric Tons in 000’s Cruise Passengers in 000’s 1,000 2,000 3,000 4,000 5,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 Actuals 2016 Budget 2016 Actuals 200 400 600 800 1000 1200 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 Actuals 2016 Budget 2016 Actuals MARITIME DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 OPERATING RESULTS Maritime Division Revenues were $1, K favorable to budget. Key variances are as follows: Fishing & Operations favorable $578K $562K favorable to budget for Maritime Ops, largely from Dockage, Berthage & Moorage of $323K, due to greater occupancy, $105K for Space Rental, $65K favorable for Security Service, and $30K Utility revenue mainly due to sale of electricity. $15K favorab le to budget for Fishermen’s Terminal and MIC, with Rec Boating favorability offsetting fishing vessel moorage. Cruise Operations favorable $26K Port Directed Cruise Fees favorable $502K or 3.5%, the result of higher passenger counts than budgeted. Other Revenue is unfavorable ($500K) due to payment received from NCLH for ½ of CTA termination payment was booked as an expense reduction rather than revenue, as budgeted. Recreational Boating unfavorable ($188K) Shilshole Bay Marina ($181K) unfavorable due to shortfall in moorage and utility revenues. Bell Harbor Marina ($2K) unfavorable with lower guest moorage than budgeted. Harbor Island Marina ($9K) unfavorable with lower guest moorage than budgeted. Bulk favorable $381K Unusually high second half volume resulted in year to date metric tons of 4,389,089 which is 10% higher than budget of 4,000,000 metric tons. Maritime Portfolio Management favorable $311K FT Office & Retail $12K favorable to budget. Fav (UnFav) Incr (Decr) Budget Variance Change from 2015 $ in 000's Actual Actual Budget Operating Revenue Security Grants Total Revenues Maritime Expenses (excl Maint) Maintenance Expenses P69 Facilities Expenses Other ED Expenses Environmental & Sustainability CDD Expenses Police Expenses Corporate Expenses Envir Remed Liability Total Expenses NOI Before Depreciation Depreciation NOI After Depreciation MARITIME DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 hange from 2015 MARITIME DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 CAPITAL SPENDING RESULTS $ in 000's Small Projects 1,279 3,772 2,493 Contingency Renewal & Replace. 2,000 2,000 T91 Substation Upgrades 1,291 1,381 Cruise Terminal Tenant Improv 1,350 1,258 Actual Budget Budget Variance Comments on Key Projects For 2016, Maritime spent 37% of the annual approved budget. Pro jects with significant changes in spending were Small Projects : multiple project spending moves to next year such as T91 Portable Paint & Oil Containment Units, T91 Sewer Lift Station #7 replacement, and C15 2 nd Flr N Face Window replacement. Shilshole Bay Marina Restroom and Services Building Replacement : scope and design are under review and delay in spending. C15 Building Tunnel Improvement project delayed until next year. Cruise Tenant Improvement : unfavorable due to timing of the payments. Pier 91 South End Fender: project is delayed in design although construction is expected to be on schedule in 2017. Maintenance North Office Site Improv ement: project delayed to 2017 All Other: P66 Fall project delayed. ECONOMIC DEVELOPMENT DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2015 2016 2016 Change from 2015 $ in 000's Actual Actual Budget Revenues: Operating Revenue 18,164 15,903 13,745 2,159 16% (2,260) -12% Total Revenues 18,164 15,903 13,745 2,159 16% (2,260) -12% Total Operating Expenses 19,206 21,135 23,447 2,312 10% 1,929 10% Net Operating Income (1,043) (5,232) (9,702) 4,470 46% (4,189) -402% Capital Expenditures 2,098 4,757 8,751 3,994 46% 2,659 127% Budget Variance Total Economic Development Division (EDD) revenues were $2,159K or about 16% favorable to budget for 2016 primarily due to stronger sales activities at Conference and Event Centers than budgeted. Total Operating Expenses were $2,312K or 10% favorable for 2016 due to lower spending than budgeted across all groups except for the Conference and Event Center. Net Operating Income for 2016 was $4,470K favorable to budget and $4,189K below 2015 primarily due to lower revenues from the Conference and Event Cen ters and higher divisional and corporate allocations. Capital spending for full year 2016 was $4.8 million or 54% of the approved budget of $8.8 million. BUSINESS EVEN TS A total of $1 070K in grants to 31 King County cities and 14 Tourism non profits were made in 2016 to support local economic development partnership initiatives. Continued implementation of Real Estate Strategic Plan, including completion of NERA 2/3 RFP, property acqu isition due diligence, and ongoing planning for FT/T 91 Redevelopment. Portfolio Management exceeded its year end occupancy goal of 95% with 97% occupancy while maintaining ECONOMIC DEVELOPMENT DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 KEY PERFORMANCE INDICATORS Building Occupancy by Location: Fav (UnFav) Incr (Decr) 2016 Bud Var Change from 2015 $ in 000's Actual Actual Budget Central Harbor Management Conference & Event Centers Eastside Rail RE Dev & Planning Tourism Workforce Dev Env Grants/Remed Liab/FTZ Total Econ Dev 80% 82% 84% 86% 88% 90% 92% 94% 96% 98% 100% Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Central Harbor T-91 Uplands Marina Office & Retail T-91 Industrial T-106 Warehouse ECONOMIC DEVELOPMENT DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 OPERATING RESULTS Fav (UnFav) Budget Variance $ in 000's Actual Actual Budget Revenue Conf & Event Ctr Revenue Total Revenue Central Harbor Conf & Event Centers Eastside Rail Corridor P69 Facilities Expenses Small Business Workforce Development Tourism EconDev Expenses Other Maintenance Expenses Maritime Expenses (Excl Maint) Environmental & Sustainability CDD Expenses Police Expenses Corporate Expenses Envir Remed Liability Total Expense NOI Before Depreciation Depreciation NOI After Depreciation Incr (Decr) Change from 2015 Total Economic Development Division Revenue was $2,159K favorable to budget. Key variances: Conference & Event Centers were $1,727K favorable due to strong sales at Bell Harbor International Conference Center (BHICC) and greater utilization of space prior to initiation of P 66 Cruise Terminal expansion construction, high sponsorship sales at World Trade Center Seattle (WTC S), and higher than ECONOMIC DEVELOPMENT DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 NOI before Depreciation was $4,470K favorable to budget. Depreciation was ($221K) or 6% unfavorable to budget. NOI after Depreciation was $4,249K favorable to budget. Change from 2015 Actual Net Operating Income before Depreciation decreased by $4,189K between 2016 and 2015 as a result of lower revenue ($2,260K) and higher expenses ($1,929K). Revenues decreased by ($2,260K) due to lower revenue from Conference & Events. Expenses increased by $1,929K primarily due to: Conference and Event Centers lower sales activity resulted in a decrease of $1,610K in operational expenses. EconDev Expenses O ther increase of $749K: RE Development & Planning: increase of $325K for consulting services for the Real Estate Strategic Plan and property appraisals/evaluations. EDD Admin: increase of $331K due to allocations to Business Groups which were in Real Estat Division in 2015 and are now in Maritime in 2016. Maintenance Expenses decreased by $545K due to less work cha ged to BHICC and WTC/Seattle. Corporate expenses increased $2,089K mainly due to higher percentage of Corporate Costs being charged to Economi c Development Division since the creation of Northwest Seaport Alliance. CONTRIBUTIONS TO OTHER DIVISIONS Fav (UnFav) Incr (Decr) 2015 2016 2016 Change from 2015 $ in 000's Actual Actual Budget Revenues: Airport Dining & Retail 50,566 55,196 53,419 1,777 3% 4,629 9% Airport Properties 8,795 12,167 11,376 792 7% 3,372 38% Business Development 3,780 4,587 3,936 650 17% 806 21% Business Development & Mgmt 63,142 71,950 68,731 3,219 5% 8,808 14% Maritime Industrial 6,091 6,306 5,968 339 6% 216 4% Marina Office & Retail 3,893 3,949 3,976 (27) -1% 56 1% Maritime Portfolio Management 9,983 10,255 9,944 311 3% 272 3% Total Revenues to Other Divisions 73,126 82,206 78,675 3,530 4% 9,080 12% Expenses to Other Divisions Business Development & Mgmt 7,508 8,482 10,503 2,021 19% 974 13% Maritime Portfolio Mgmt 2,446 2,817 3,299 482 15% 371 15% Total Expenses to Other Divisions 9,954 11,299 13,803 2,504 18% 1,346 14% Budget Variance ECONOMIC DEVELOPMENT DIVISION FINANCIAL PERFORMANCE REPORT 12/31/16 CAPITAL SPENDING RESULTS $ in 000's T102 Bldg Roof HVAC Replacemt 2,803 2,850 P66 Elevator 2,3,4 Upgrades 1,440 1,295 Tenant Improvements -Capital 1,178 1,098 P69 Roof Beam Rehabilitation 1,038 (88) -9% RE: Contingency Renew.&Replace Small Projects RE BHICC Roof Fall Protection Bell St Gar AI Elevtr Upgrade All Others Total Economic Development 4,757 8,751 3,994 Actual Budget Budget Variance Comments on Key Projects: For 2016, Economic Development spent 54% of the annual approved capital budget. Projects with significant changes in spending were: P66 Elevator 2, 3, 4 Upgrades: budget variance due to modernizations for elevators 3 and 4 have been postponed until the NCL cruise terminal work is completed. Tenant Improvements Capital: reimbursement of $797K to Anthony’s for Boiler system was recorded in Non CORPORATE FINANCIAL & PERFORMA NCE REPORT 12/31/16 BUSINESS EVENTS Executed events and tours to help build community awareness and support for the Port including fenceline communities and throughout King County. Head of the Shanghai Municipal Transportation Commission and his team visited Port of Seattle. Coordinated Norwegian Bliss deployment announcement in partnership with Norwegian Cruise Line executives. Conducted tour for Chinese Ports and US EPA officials. Designed and executed Commission’s community open house and public hearing on the Flight Corri dor Safety Program in City of SeaTac. Implemented Paid Parental Leave policy. sale process. The Port selected six firms for the senior manager pool and five firms for the small business pool. Finalized sale of a total of $249.2 million of bonds with a present value savings of $67.6 million. Completed all the financial reporting changes for the Phase II Re org. Filed the Port’s Statutory Budget with King County Council and Assessor as required b y law CORPORATE FINANCIAL PERFORMANCE REPORT 12/31/16 KEY PERFORMANCE METRICS Key Performance Indicators/Measures YTD 201 YTD 201 /Notes A. Implement Century Agenda Strategies Small Business Participation Annual / Small Works (port wide) 90% Small Business Participation Annual / Major Construction (port wide) including Mega projects Small Business Participation Annual / Goods & Services (port wide) Small Business Participation Service Agreements (port wide) Annual (including Legal department Service Agreements) B. Consistently Live by Our Values Through Our Actions and Priorities MIS and Clarity Training 17 classes, 136 attendees 16 classes, 117 attendees Employee Development Class Attendees/Structured Learning 1486, decreased by 1098 Required Safety Training 96%, decreased by Request of information and guidelines for integrity & business conduct 259, decreased by Occupational Injury Rate Total Lost work days C. Manage Our Finances Responsibly Corporate costs as a % of Total Operating Expenses Clean independent CPA audits involving AFR yes yes Timely process disbursement payment requests 4 days 3 days Keep receivables collections 85% current (within 30 days) Investment Portfolio Yield Litigation and Claim Reserves (in $ thousand) D. Exceed Customer Expectations Respond to Public Disclosure Requests creased by Information and Communication Technology System Availability IT Network Availability Service Desk % First Call Resolution 40% Customer Survey for Police Service Excellent or Very Good E. Support Port Mission with Implementation of Port Divisions' Business Plan Oversee Implementation and Administration of CBAs agreements Number of Jobs Openings 294, increased by CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/16 OPERATING RESULTS Corporate revenues were $ 760K favorable compared to budget due to higher miscellaneous revenues. Corporate expenses for the year ended were $ 113.3 or 8.6 favorable compared to budget and $ or 7.9 higher than the same period a year ago. The $10.7M favorable variance is to vacant positions during the year, delayed hiring, and cost savings realized in most departments The $8.3M increase from prior year is due to higher Outside Services and charging less to capital projects than orig inally anticipated due to delayed projects. Fav (UnFav) Incr (Decr) Budget Variance Change from 2015 $ in 000's Actual Actual Budget Total Revenues 82.1% Operating Expenses Executive (616) -39.3% -0.6% Commission 23.6% Legal (146) -4.5% -3.9% Public Affairs 1,605 36.2% Human Resources & Development 4.2% Labor Relations (142) -12.6% 6.5% Internal Audit 13.7% Office of Strategic Initiatives 4,870 139.7% Police 2,055 9.8% Security and Preparedness 3.9% Contingency -43.5% Finance Accounting & Financial Reporting Services -3.4% Information & Communication Technology -4.0% Finance & Budget 0.1% Finance & Budget -2.6% Aviation Finance & Budget (19) -1.0% -0.2% (626) -21.9% -2.2% Aviation PMG 1,212 75.3% Seaport PMG (210) -26.6% -2.0% Capital Development Admin -2.9% Sub-Total 1,295 11.9% Environment & Sustainability Aviation Environmental & Planning (1,291) -18.1% Maritime Environmental & Planning (1,247) -37.3% Noise Programs 6.6% Environment & Sustainability (148) 0.0% Sub-Total (2,346) -21.0% Total Expenses 8,332 7.9% CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/16 All corporate departments have a favorable variance except for: Executive unfavorable variance of $616K is due to the contribution to the pension plan for the retirement of the International Business Protocol Liaison, the unbudgeted Chief Operating Officer position and for the room rental for the Leadership conference. Legal unfavorable variance of $146K is due to unanticipated outside legal and litigation costs primarily for the FAA Audit , Occidental Street Vacation and Other Land Use Advice Labor Relations unfavorable variance of $142K is due to a temporary Labor Relations Manager position Litigated Expenses and remodel of office space. Business Intelligence unfavorable variance of $88K is due to 2 new unbudgeted usiness Intelligence nalyst positions. All other departments with favorable variance are: Commission favorable variance of $66K is due to savings in Payroll due to vacant positions during the year Public Affairs favorable variance of $ 414K is due to savings in Payroll due to vacant positions , Outside Services and Travel Expenses. Human Resources an d Development favorable variance of $633K is due to savings in Payroll due to vacant positions throughout the year, less tuition reimbursement than anticipated, lower Advertising and Executive decrease is due to lower Outside Services and Travel Expenses. Commission increase is due to higher Payroll Costs , Outside Services and Travel Expenses Legal decrease is due to lower Payroll and Outside Legal Costs. Public Affairs increase is due to higher Payroll Costs, Outside Services, Travel, Promotional and General Expenses Human Resources and Development increase is due to higher Payroll Costs , Outside Services and Travel Expenses. Labor Relations increase is due to higher ayroll osts for a temporary Labor Relations Manager and higher Litigated Expenses. CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/16 Internal Audit increase is due to higher Outside Services and Trade Business & Community Expenses Office of Strategic Initiatives increase is due to higher Outside Services for consulting services for Honsha LEAN. Police crease is due to higher Payroll Costs , Uniform and Protective Equipment, costs associated with King County Jail, Worker’s Compensation and Litigated Expenses. Contingency decrease is due to using fewer funds than anticipated Accounting and Financial Reporting Services decrease is due to lower Payroll Costs for several vacant positions throughout the year and Ou tside Services Information & Communication Technology decrease due to lower Payroll Costs, Equipment and Travel Expenses Finance & Budget increase is due higher Outside Services Costs. Business Intelligence increase is due to the unbudgeted costs for this new department. Risk Services decrease is due to lower Payroll Costs. Security and Preparedness increase is primarily due to higher Payroll Costs Capital Development increase is due to higher Outside Services Costs Environment & Sustainability decrease is due to lower Payroll, Outside Services and General Expenses CAPITAL SPENDING RESULTS $ in 000's Actual Infrastructure - Small Cap 1,755 1,836 4.4% Service Tech - Small Cap 1,500 1,278 85.2% Remote Data Ctr Bus Continuity 1,200 25.1% Maximo Upgrade 37.4% Constr Doc Mgmt Sys Repl. 79.4% Enterprise GIS - Small Cap 78.9% Project Cost Mgmt System Repl. 100.0% PeopleSoft BU Configuration 1,400 1,400 100.0% Contractor Data System Upgrade 5.5% Employee Performance Mgmt 29.0% TOTAL 4,859 11,726 6,867 58.6%