7f attach
ITEM NO: __7f_Attach_1_______ DATE OF MEETING: August 23, 2016 PORT OF SEATTLE 2016 FINANCIAL & PERFORMANCE REPORT AS OF JUNE 30, 2016 TABLE OF CONTENTS Page I. Portwide Performance Report 3-5 II. Aviation Division Report 6-14 III. Maritime Division Report 15-19 IV. Economic Development Division Report 20-25 V. Corporate Report 26-29 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/16 EXECUTIVE SUMMARY Financial Summary The Port's overall operating revenues for the first half of 2016 were $279.4M, which is $5.7M above budget and $11.0M higher than the same period in 2015. Excluding Aeronautical revenues, which are based on cost recovery, other operating revenues were $161.7M, $9.4M above budget and also $9.4M over the same period last year mainly due to higher revenues from Public Parking, Rental Cars, Airport Dining and Retail, Ground Transportation, Employee Parking, Maritime Operations, and Licensed NWSA Assets. Total operating expenses were $147.9M, $20.7M below budget mainly due to vacant positions, hiring delays, timing of spending, and actual budget savings. Operating income before depreciation was $131.5M, $26.5M above budget. For the full year, we are anticipating operating revenues without Aeronautical to be $344.5M, $17.4M over budget and operating expenses to be $336.6M, $699K above budget. The Port-wide capital spending is forecasted to be $199.3M for the year, $82.7M below the budgeted $282.0M. Operating Summary At the Airport, enplanements for the first two quarters were 9.6% higher and landed weight was 11.0% higher than the same period in 2015. The enplanements growth for domestic and international was 9.6% and 10.1%, respectively. Total cargo metric tons were 0.8% above Q2 2015. For the Maritime division, Grain volumes were 13.4% lower than the same period in 2015. Cruise passengers were 15K more than the same period last year, and we are anticipating a record year of passengers in 2016. For the Economic Development division, occupancy levels at Shilshole Bay Marina were at 94.4%, below 96.6% in the same period last year. Fishermen's Terminal was at 85.8% average occupancy, below the 87.6% in Q2 2015. Conference and Event Center revenue exceeded budget due to strong sales and delayed construction at Pier 66 Cruise Terminal. Key Business Events The Port implemented the new goal from Commissioners to significantly increase the number of intern opportunities at the Port in 2016 and coordinated eight minority community outreach meetings for the CEO to discuss issues and contracting opportunities with the Port. At the Airport, we hired security checkpoint queue management contractor and reduced in peak period wait times significantly. Volaris Airlines initiated new air service from Seattle to Guadalajara, Mexico. DHL moved cargo operations from Boeing Field to Sea-Tac while Lufthansa Cargo began a new weekly freighter connecting Seattle to Frankfurt, Germany. We executed Phase II & Phase III ground leases of Des Moines Creek Business Park. We also completed the Stormwater Utility negotiations with the City of Seattle. The Port hosted successfully Clipper Round the World event at Bell Harbor Marina in April. The 2016 cruise season started successfully with the addition of the larger vessel at Terminal 91. Finally, we completed the first tourism grant program and awarded almost $100,000 to 13 recipients throughout the state. Major Capital Projects The Port contributed to regional transportation partner investments with the second contribution to the State's Alaskan Way Viaduct Replacement Program and the final contribution to King County's South Park Bridge. We completed Runway closures for reconstruction ahead of schedule and began preliminary construction on North Satellite project. We also completed design and preparation of Terminal 5 Modernization project civil/structural permitting documents to the City of Seattle. The Port replaced the Parking Revenue Control System that would improve scalability and flexibility in introducing new parking programs and increase security. Finally, we continued to expand the Satellite Transit System (STS) Train to the South Loop and Shuttle train stations to display the location of the trains and a countdown time of arrival. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/16 PORTWIDE FINANCIAL SUMMARY Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Yea-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Aeronautical Revenues 117,973 119,553 123,204 (3,651) -3.0% 254,215 261,019 (6,804) -2.6% SLOA III Incentive (1,788) (1,788) (1,788) - 0.0% (3,576) (3,576) - 0.0% Other Operating Revenues 152,245 161,658 152,274 9,384 6.2% 344,494 327,135 17,359 5.3% Total Operating Revenues 268,430 279,422 273,689 5,733 2.1% 595,133 584,578 10,555 1.8% Total Operating Expenses 146,100 147,874 168,621 20,747 12.3% 336,642 335,943 (699) -0.2% NOI before Depreciation 122,330 131,549 105,069 26,480 25.2% 258,491 248,635 9,856 4.0% Depreciation 81,861 82,277 81,206 (1,072) -1.3% 164,451 162,451 (2,000) -1.2% NOI after Depreciation 40,469 49,271 23,863 25,408 106.5% 94,040 86,184 7,856 9.1% MAJOR OPERATING REVENUES SUMMARY Fav (UnFav) Incr (Decr) 2015 YTD 2016 Year-to-Date Budget Variance Change from 2015 $ in 000's Actual Actual Budget $ % $ % Aeronautical Revenues 117,973 119,553 123,204 (3,651) -3.0% 1,579 1.3% SLOA III Incentive (1,788) (1,788) (1,788) 0.0% 0.0% Public Parking 30,766 34,166 33,116 1,051 3.2% 3,400 11.1% Rental Cars - Operations 13,756 15,271 13,768 1,503 10.9% 1,515 11.0% Rental Cars - Operating CFC 3,576 3,872 3,787 85 2.2% 296 8.3% Airport Dining and Retail 23,621 25,952 25,329 624 2.5% 2,332 9.9% Employee Parking 3,860 4,563 4,001 562 14.1% 703 18.2% Ground Transportation 3,974 5,668 4,227 1,441 34.1% 1,693 42.6% Non-Airline Commercial Properties 3,747 4,951 5,320 (369) -6.9% 1,204 32.1% Airport Utilities 3,382 3,571 3,649 (79) -2.2% 189 5.6% Fishing & Commercial Vessels 1,491 1,500 1,485 15 1.0% 9 0.6% Maritime Operations 2,350 2,919 2,508 411 16.4% 570 24.2% Recreational Boating 4,789 5,083 5,178 (95) -1.8% 294 6.1% Cruise 5,362 5,410 5,386 23 0.4% 47 0.9% Grain 2,446 2,010 2,659 (649) -24.4% (436) -17.8% Maritime Industrial 3,022 3,075 3,038 37 1.2% 54 1.8% Marina Office & Retail 1,944 2,024 1,941 83 4.3% 80 4.1% Central Harbor Management 3,367 3,393 3,324 69 2.1% 26 0.8% Conference & Event Centers 4,453 4,518 3,462 1,057 30.5% 65 1.5% Licensed NWSA Assets - 28,991 25,568 3,423 13.4% 28,991 0.0% Other 36,338 4,719 4,528 191 4.2% (31,619) -87.0% Total Operating Revenues (w/o Aero) 152,245 161,658 152,274 9,384 6.2% 9,413 6.2% TOTAL 268,430 279,422 273,689 5,733 2.1% 10,992 4.1% 4 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/16 MAJOR OPERATING EXPENSES SUMMARY Fav (UnFav) Incr (Decr) 2015 YTD 2016 Year-to-Date Budget Variance Change from 2015 $ in 000's Actual Actual Budget $ % $ % Salaries & Benefits 48,887 51,795 55,214 3,419 6.2% 2,908 5.9% Wages & Benefits 46,868 48,261 50,750 2,490 4.9% 1,393 3.0% Payroll to Capital Projects 11,713 10,040 13,792 3,753 27.2% (1,673) -14.3% Equipment Expense 2,594 2,923 2,741 (181) -6.6% 329 12.7% Supplies & Stock 3,350 3,454 3,608 154 4.3% 104 3.1% Outside Services 23,864 25,663 39,620 13,957 35.2% 1,799 7.5% Utilities 9,988 10,510 10,877 366 3.4% 523 5.2% Travel & Other Employee Exps 2,001 1,879 2,997 1,118 37.3% (122) -6.1% Promotional Expenses 453 362 436 74 17.0% (92) -20.2% Other Expenses 13,948 8,450 12,029 3,579 29.8% (5,498) -39.4% Charges to Capital Projects (17,567) (15,463) (23,445) (7,982) 34.0% 2,104 -12.0% TOTAL 146,100 147,874 168,621 20,747 12.3% 1,774 1.2% KEY PERFORMANCE METRICS Fav (UnFav) Incr (Decr) 2015 YTD 2016 YTD 2015 2016 2016 Forecast/Budget Change from 2015 Actual Actual Actual Forecast Budget Chg. % Chg. % Enplanements (in 000's) 9,731 10,668 21,109 23,009 22,214 795 3.6% 1,900 9.0% Landed Weight (lbs. in 000's) 11,568 12,835 24,757 26,126 26,126 - 0.0% 1,369 5.5% Passenger CPE (in $) n/a n/a 10.12 10.68 11.00 0.32 2.9% 0.6 5.5% Grain Volume (metric tons in 000's) 2,019 1,749 3,778 3,200 4,000 (800) -20.0% (578) -15.3% Cruise Passenger (in 000's) 340 355 898 960 960 - 0.0% 62 6.9% Shilshole Bay Marina Occupancy 96.6% 94.4% 96.5% 95.4% 95.9% -0.5% -0.5% -1.1% -1.2% Fishermen's Terminal Occupancy 87.6% 85.8% 84.2% 84.9% 83.2% 1.6% 2.0% 0.6% 0.7% CAPITAL SPENDING RESULTS 2016 YTD 2016 2016 Budget Variance $ in 000's Actual Forecast Budget $ % Aviation 53,437 173,444 245,241 71,797 29.3% Maritime 3,097 11,633 15,660 4,027 25.7% Economic Development 1,041 5,182 8,751 3,569 40.8% Corporate & Other (note 1) 1,976 9,058 12,396 3,338 26.9% TOTAL 59,551 199,317 282,048 82,731 29.3% Note: (1) "Other" includes Street Vacation projects and Storm Water Utility Small Capital projects. PORTWIDE INVESTMENT PORTFOLIO During the second quarter of 2016, the investment portfolio earned 1.14% versus the benchmark's (the Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index) 0.61%. Over the last twelve months the portfolio and the benchmark have earned 1.08% and 0.77%, respectively. Since the Port became its own Treasurer in 2002, the life-to-date earnings of the Port's portfolio and the benchmark are 2.62% and 1.83%, respectively. 5 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 $ in 000's Actual Forecast Budget $ % $ % Operating Revenues: Aeronautical Revenues 229,624 254,215 261,019 (6,804) -2.6% 24,591 10.7% SLOA III Incentive Straight Line Adj (1) (3,576) (3,576) (3,576) - 0.0% - 0.0% Non-Aeronautical Revenues 196,844 223,613 208,321 15,292 7.3% 26,769 13.6% Total Operating Revenues 422,892 474,252 465,764 8,488 1.8% 51,360 12.1% Total Operating Expense 238,140 268,742 267,803 (939) -0.4% 30,602 12.9% Net Operating Income 184,752 205,510 197,962 7,548 3.8% 20,758 11.2% Capital Expenditures 164,931 173,444 245,241 71,797 29.3% 8,513 5.2% (1) Annual non-cash amortization of $17.9M lease incentive credited in 2013. Division Summary 2016 Forecast vs 2016 Budget Net Operating Income for 2016 is forecasted to be $7.5M higher than budget (3.8% favorable) o Operating Revenue is expected to be $8.5M higher than budget (1.8% favorable) primarily due to higher Non-Aero revenue ($15.3M) driven by increased passenger volumes with strong performance in ground transportation, public parking, and rental cars, as well as an unanticipated lump sum payment from DMCBP Phase II for pre-paid frontage fees. The increase in Non-Aero revenue is partially offset by lower Aeronautical revenue from higher revenue sharing. o Operating Expenses are expected to be $0.9M higher than budget (0.4% unfavorable) due to $5.2M increase in ERL reserve for Lora Lake (Lake) project, $3.6M amortization of previously paid frontage fees associated with the DMCBP Phase II lump sum payment (net $1.8M increase to NOI), $2.7M increase for passenger screening queue management contract, and $1.3M increase for full employee screening. These cost increases are partially offset by forecasted payroll savings ($3.9M), and lower charges from Corporate and other divisions ($4.9M). Division Summary 2016 Forecast vs 2015 Actuals 2015 Net Operating Income is forecasted to be $20.8M higher than prior year (11.2% higher NOI) o 2016 Operating Revenue is expected to be $51.4M higher than prior year (12.1% higher) due to growth in Aeronautical revenue ($24.6M) and higher Non-Aero revenue ($26.8M), which is driven by increased passenger volumes with strong performance in public parking, airport dining & retail, and rental cars, as well as a $5.4M unanticipated lump sum payment from DMCBP Phase II for pre-paid frontage fees. Increase in Aero rate based revenue is primarily due to cost recovery on new assets placed in service and higher operating expenses to support increased airline activity, partially offset by higher revenue sharing in 2016. o 2016 Operating Expenses are expected to be $30.6M higher than prior year (12.9% higher) due to higher airport direct charges ($18.3M) including DMCBP Phase II lump sum amortization ($3.2M), payroll costs ($3.1M), and the passenger security checkpoint queueing management contract ($2.7M), higher forecasted charges from Corporate departments ($10.2M), and higher exceptions to Baseline ($2.1M), driven by the Lora Lake environmental reserve adjustment ($5.2M). A. BUSINESS EVENTS Customer Service: o Hired security checkpoint queue management contractor realizing significant reduction in peak period wait times o Q2 Airport Service Quality (ASQ) survey overall score dropped to 4.06 from 4.10 in Q1. 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 New air service: Volaris Airlines initiated service to Guadalajara, Mexico New cargo services: o DHL moved operations from Boeing Field to Sea-Tac o Lufthansa Cargo o ABX Air Capital project milestone: began preliminary construction on North Satellite Airport Dining and Retail awarded lease group #2 DMCBP executed Phase II & Phase III ground leases B. KEY PERFORMANCE METRICS YTD 2015 YTD 2016 % Change Passengers: Enplaned Passengers (000's) Alaska +9% Domestic 8,714 9,548 9.6% Delta +19% Southwest +8% International 1,018 1,120 10.1% United -5% Total 9,731 10,668 9.6% Operations 177,649 197,152 11.0% Growth in Operations Landed Weight (million lbs.) trails enplaned passengers due to 2016 Cargo 799 843 5.5% YTD Load Factor down All other 10,769 11,993 11.4% 2.4 points from last year. Total 11,568 12,835 11.0% Cargo - metric tons 2016 YTD International Domestic freight 79,419 83,079 4.6% Freight tons trailing prior International freight 59,131 55,287 -6.5% year due to peak volume Mail 26,021 27,562 5.9% in 2015 during Port shutdown. Total 164,571 165,928 0.8% Key Performance Measures Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 Actual Forecast Budget $ % $ % Performance Metrics Cost per Enplanement (CPE) 10.12 10.68 11.00 0.32 2.9% 0.56 5.6% O&M Cost per Enplanement 11.28 11.68 12.06 0.38 3.1% 0.40 3.5% Non-Aero Revenue per Enplanement 9.33 9.72 9.38 0.34 3.6% 0.39 4.2% Debt per Enplanement 119 108 111 3 3.0% (11) -9.5% Debt Service Coverage 1.49 1.51 1.46 0.06 3.8% 0.03 1.9% Days cash on hand (10 months = 304 days) 468 354 309 45 14.4% (114) -24.4% Aeronautical Revenue Sharing ($ in 000's) 29,450 35,676 28,055 (7,621) -27.2% 6,226 21.1% Activity (in 000's) Enplanements 21,109 23,009 22,214 794 3.6% 1,900 9.0% Notes: Reduction in CPE reflects lower airline costs due to higher revenue sharing (driven by increased non-airline revenues), and increased enplaned passengers. Improved debt service coverage compared to budget reflects increased cash flow from growth in enplanements. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 C. OPERATING RESULTS Division Summary Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Operating Revenues: Aeronautical Revenues (1) 117,973 119,553 123,204 (3,651) -3.0% 254,215 261,019 (6,804) -2.6% SLOA III Incentive Straight Line Adj (2) (1,788) (1,788) (1,788) 0 0.0% (3,576) (3,576) - 0.0% Non-Aeronautical Revenues 88,401 100,336 95,426 4,909 5.1% 223,613 208,321 15,292 7.3% Total Operating Revenues 204,586 218,100 216,842 1,258 0.6% 474,252 465,764 8,488 1.8% Operating Expenses: Payroll 47,229 49,708 52,623 2,915 5.5% 102,733 106,659 3,926 3.7% Outside Services 13,580 15,736 19,539 3,803 19.5% 40,769 39,915 (854) -2.1% Utilities 6,822 7,358 7,655 297 3.9% 14,858 14,686 (172) -1.2% Other Airport Expenses 7,399 9,132 7,684 (1,448) -18.8% 22,560 16,911 (5,649) -33.4% Total Airport Direct Charges 75,030 81,934 87,501 5,567 6.4% 180,920 178,171 (2,749) -1.5% Environmental Remediation Liability 2,844 33 3,196 3,163 99.0% 6,383 3,246 (3,137) -96.7% Capital to Expense 61 - - - n/a - - - 0.0% Total Exceptions 2,905 33 3,196 3,163 99.0% 6,383 3,246 (3,137) -96.7% Total Airport Expenses 77,935 81,968 90,697 8,730 9.6% 187,304 181,417 (5,887) -3.2% Corporate 19,757 22,723 27,427 4,704 17.2% 51,209 52,424 1,215 2.3% Police Costs 8,305 8,943 9,342 400 4.3% 18,712 18,728 15 0.1% Capital Development 3,018 3,358 5,164 1,806 35.0% 8,029 11,746 3,717 31.6% Maritime/Economic Development 1,655 1,826 1,801 (24) -1.4% 3,488 3,488 - 0.0% Total Charges from Other Divisions 32,736 36,849 43,734 6,885 15.7% 81,438 86,386 4,947 5.7% Total Operating Expense 110,671 118,817 134,432 15,615 11.6% 268,742 267,803 (939) -0.4% Net Operating Income 93,915 99,283 82,410 16,873 20.5% 205,510 197,962 7,548 3.8% CFC Surplus (6,219) (5,146) (1,073) -20.9% Net Non-Operating Items in / out from ADF (3) 2,462 1,099 1,364 124.1% SLOA III Incentive Straight Line Adj 3,576 3,576 - 0.0% Debt Service (135,723) (135,217) (505) 0.4% Adjusted Net Cash Flow 69,607 62,273 7,334 11.8% (1) Aero revenues are net of revenue sharing. (2) Annual non-cash amortization of $17.9M lease incentive credited in 2013. (3) Per SLOA III definition of Net Revenues. 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Operating Expenses 2016 YTD Actuals compared to 2016 YTD Budget: Total Operating Expenses are lower than the YTD 2016 budget by $15.6 million due to the net of the following: YTD Aviation Direct Operating Expenses are lower than budget by $5.6 million due to the following: Positive Variance of $7.0M Negative Variance of $1.4M Payroll - vacancies & hiring delays $2.9M Other Aviation Expenses $1.4M Outside Services $3.8M Litigated & Non-litigated Damages 0.9M Delayed spending expected to clear by year-end 0.9M Lower charges to Capital Projects 0.9M NERA 3 grant (FAA pilot program) 0.4M All other Aviation Expenses (0.4M) SSAT lounge - wall configuration project 0.2M Environmental contracts 0.2M ADR consultant 0.1M Savings and/or work deferred to future year: 2.7M Advance Planning IDIQ for Master Plan 1.0M Environmental Review for Master Plan 0.7M Maintenance contract savings 0.4M Airport Obstruction Removal - reduced scope 0.2M Rental Cars - curbside assistance not utilized 0.2M Cargo building mgmt - performed internally 0.1M Noise program feasibility study 0.1M All other Outside Services 0.2M Utilities (lower usage due to mild weather) $0.3M YTD Operating Expenses Exceptions are lower than budget by $3.2 million due to the following: Positive Variance of $3.2M Negative Variance - no material variance Environmental Remediation Liability $3.2M RMM adjustments to active projects 0.7M RMM projects deferred to future years 1.3M Phase 2 - eGSE Electric charging stations Alternate utility facility (emergency backup) Central terminal stairs Budget savings - project accelerated to PY 0.5M Tenant Zone 7 ATO RMM project delayed to later in 2016 0.7M Tenant Zone 7 ATO YTD Operating Expense charges from Corporate and other divisions are lower than budget by $6.9 million due to the following: Positive Variance of $6.9M Negative Variance - no material variance Corporate savings $4.7M CPO 3.0M Office of Strategic Initiatives 0.7M HR 0.3M AFR 0.3M ICT (0.4M) All other - Corp 0.8M Police savings $0.4M CDD savings $1.8M Aviation PMG 1.8M PCS 0.2M Engineering 0.2M Construction Services (0.5M) All other - CDD 0.1M 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Operating Expenses 2016 YTD Actuals compared to YTD 2015: Total Operating Expenses increased in YTD 2016 by $8.1 million due to the net of the following: YTD Aviation Direct Operating Expenses increased in 2016 by $6.9 million due to the following: Increase of $6.9M Decrease - no material amount Payroll $2.5M Outside Services $2.2M Janitorial (due to higher enplanements) 1.1M Checkpoint queue mgmt contract 0.4M All other Outside Services 0.7M Utilities $0.5M Other Aviation expenses $1.7M Litigated & Non-litigated Damages 0.9M Credit card fees (on higher revenue) 0.3M B&O tax (on higher revenue) 0.2M Other general expenses 0.3M YTD Operating Expense Exceptions decreased in YTD 2016 by $2.9 million due to the following: Increase - no material amount Decrease of $2.9M Environmental Remediation Liability $2.8M Lora Lake (Lake parcel) 1.4M Delta build-out 1.2M All other RMM adjustments 0.2M Capital Projects to Operating Expense $0.1M YTD Operating Expense charges from Corporate and other divisions increased by $4.1 million in 2016 due to the following: Increase of $4.1M Decrease - no material amount Corporate departments $3.0M ICT 0.9M HRD 0.7M Office of Strategic Initiatives 0.5M Business Intelligence (new in 2016) 0.3M CPO 0.3M Health & Safety (0.4M) All Other - Corp 0.7M Police $0.6M CDD $0.3M Construction Services 0.2M Survey & Mapping 0.2M PCS 0.2M Aviation PMG (0.1M) All other - CDD (0.2M) Maritime & EDD $0.2M Workforce development 0.5M Marine Maintenance (Pier 69 related) 0.2M Office of Social Responsibility (0.5M) 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Operating Expenses 2016 Forecast compared to 2016 Budget: Total Operating Expenses are forecasted to be higher than the 2016 budget by $0.9 million due to the net of the following: Aviation Direct Operating Expenses are forecasted to be higher than budget by $2.7 million due to the following: Positive Variance of $3.9M Negative Variance of $6.7M Payroll - vacancies & hiring delays $3.9M Outside Services $0.9M Security checkpoint queueing mgmt contract 2.7M Full employee security screening contract 1.0M SAMP environmental review deferred (1.3M) Advance Planning - Master Plan deferred (1.0M) Airport obstruction removal - reduced scope (0.6M) RCF curbside assistance - not used (0.4M) All other Outside Services 0.5M Utilities (water usage due to increased passengers) $0.2M Other Aviation Divisional expenses $5.6M DMCBP Phase II amortization (frontage fees) 3.2M Litigated & Non-litigated Damages 0.9M International Incentive - new routes 0.6M Inventory reduction (buy down) 0.7M Infrastructure for full employee screening 0.3M All other expenses (0.1M) Operating Expense Exceptions are forecasted to be higher than budget by $3.1 million due to the following: Positive Variance - no material variance Negative Variance - $3.1M unfavorable variance Environmental Remediation Liability $3.1M Lora Lake (lake parcel) cost estimate adj 5.2M RMM projects deferred to future years (1.3M) Phase 2 - eGSE Electric charging stations Alternate utility facility (emergency backup) Central terminal stairs Budget savings - project accelerated to PY (0.5M) Tenant Zone 7 ATO RMM adjustments to active projects (0.3M) Operating Expense charges from Corporate and other divisions are forecasted to be lower than budget by $4.9 million due to the following: Positive Variance of $4.9M Decrease - no material amount Corporate savings $1.2M Office of Strategic Initiatives 0.5M HR 0.3M All other - Corp 0.4M CDD savings $3.7M Aviation PMG 2.8M PCS 0.1M Engineering 0.8M 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Aeronautical Business Unit Summary Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Revenues: Movement Area 36,678 45,551 44,322 1,230 2.8% 100,462 95,220 5,242 5.5% Apron Area 6,159 6,088 6,599 (510) -7.7% 14,291 14,120 171 1.2% Terminal Rents 76,384 75,640 76,719 (1,079) -1.4% 155,101 159,593 (4,491) -2.8% Federal Inspection Services (FIS) 5,820 5,174 4,930 243 4.9% 10,839 10,836 4 0.0% Total Rate Base Revenues 125,041 132,453 132,569 (116) -0.1% 280,694 279,768 926 0.3% Commercial Area 4,811 4,479 4,662 (183) -3.9% 9,197 9,306 (109) -1.2% Subtotal before Revenue Sharing 129,852 136,932 137,231 (300) -0.2% 289,891 289,074 817 0.3% Revenue Sharing (11,878) (17,379) (14,028) (3,352) -23.9% (35,676) (28,055) (7,621) -27.2% Total Aeronautical Revenues 117,973 119,553 123,204 (3,651) -3.0% 254,215 261,019 (6,804) -2.6% Total Airport Direct Charges 52,547 57,092 60,457 3,365 5.6% 124,908 123,710 (1,197) -1.0% Total Exceptions 2,533 30 2,654 2,625 98.9% 6,136 2,675 (3,462) -129.4% Total Charges from Other Divisions 16,504 18,951 22,287 3,337 15.0% 41,517 43,964 2,446 5.6% Total Aeronautical Expenses 71,583 76,073 85,399 9,326 10.9% 172,562 170,349 (2,213) -1.3% Net Operating Income 46,390 43,480 37,805 5,675 15.0% 81,653 90,670 (9,017) -9.9% Debt Service (1) (91,351) (91,723) 373 0.4% Net Cash Flow (9,697) (1,053) (8,644) 821.0% NOTE: (1) Debt service is forecasted/budgeted on an annual basis only. Thus, quarterly data is not available. Airline Rate Base Cost Drivers Impact on Aero Revenues 2015 2016 2016 'Budget vs Forecast $ in 000's Actual Forecast Budget $ % O&M (1) 150,286 168,648 166,776 1,872 1.1% Debt Service Gross 111,477 120,311 120,668 (357) -0.3% Debt Service PFC Offset (32,454) (32,859) (32,583) (276) 0.8% Amortization 24,853 28,217 28,338 (121) -0.4% Space Vacancy (3,469) (2,785) (2,431) (354) 14.6% TSA Operating Grant and Other (1,099) (838) (1,000) 162 -16.2% Rate Base Revenues 249,594 280,694 279,768 926 0.3% Commercial area 9,519 9,197 9,306 (109) -1.2% Total Aero Revenues 259,113 289,891 289,074 817 0.3% Aeronautical YTD Budget Variance Aeronautical YTD net operating income is $5.7M higher than budget. o Aeronautical revenue is $3.7M lower than budget due to higher revenue sharing. YTD Aero revenue includes an accrual for YTD share of forecasted revenue sharing based on higher non-aero revenue. o Aeronautical operating expenses are $9.3M lower than YTD budget: Airport Direct Charges - $3.4M lower than budget due to savings in payroll ($1.4M), divisional allocations ($0.5M), General Expenses ($0.2M), Outside Services ($0.2M), and other expenses ($1.1M). Exceptions $2.6M lower than budget due to timing delays in planned Environmental Remediation Liability projects. Charges from other divisions - $3.3M in savings from Corporate departments. 12 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Aeronautical Year over Year YTD Changes Aeronautical net operating income is $2.9M lower than YTD 2015. o Aeronautical revenues are $1.6M higher year over year higher rate based revenues are offset by higher revenue sharing: Higher rate based revenue ($7.4M) primarily due to cost recovery on new assets placed in service and higher operating expenses to support increased airline activity. Higher revenue sharing ($5.5M) mostly due to increase in non-aero revenues driven by increased passenger volumes. o Aeronautical operating expenses in YTD 2016 are $4.5M higher than YTD 2015: Airport Direct Charges - $4.5M higher than prior year primarily due to higher outside services spending ($2.0M), divisional allocations ($1.5M), payroll ($0.6M), and supplies ($0.2M). Exceptions - $2.5M lower than prior year due to lower Environmental Remediation Liability expense. Charges from other divisions - $2.4M higher than YTD 2015. Non-Aero Business Unit Summary Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projection Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Non-Aero Revenues Rental Cars - Operations 13,756 15,271 13,768 1,503 10.9% 37,072 35,398 1,674 4.7% Rental Cars - Operating CFC 3,576 3,872 3,787 85 2.2% 12,940 12,767 173 1.4% Public Parking 30,766 34,166 33,116 1,051 3.2% 69,767 66,847 2,920 4.4% Ground Transportation 3,974 5,668 4,227 1,441 34.1% 12,618 8,327 4,291 51.5% Airport Dining & Retail 23,621 26,452 25,753 700 2.7% 54,598 54,429 169 0.3% Commercial Properties 3,540 4,286 4,757 (471) -9.9% 15,708 10,251 5,457 53.2% Non-Airline Terminal Leased Space 207 665 563 103 18.2% 1,201 1,125 76 6.7% Utilities 3,382 3,571 3,649 (79) -2.2% 7,348 7,626 (278) -3.7% Employee Parking 3,860 4,563 4,001 562 14.1% 8,921 8,249 672 8.1% Clubs and Lounges 895 1,378 1,431 (53) -3.7% 2,578 2,578 - 0.0% Other 822 443 375 69 18.4% 861 723 138 19.1% Total Non-Aero Revenues 88,401 100,336 95,426 4,909 5.1% 223,613 208,321 15,292 7.3% Non-Aero Expenses Total Airport Direct Charges 22,483 24,842 27,044 2,202 8.1% 56,405 54,853 (1,552) -2.8% Total Exceptions 372 4 542 538 99.3% 247 571 324 56.8% Total Charges from Other Divisions 16,232 17,898 21,447 3,548 16.5% 39,528 42,029 2,501 6.0% Total Non-Aero Expenses 39,088 42,744 49,032 6,289 12.8% 96,180 97,454 1,274 1.3% Net Operating Income 49,313 57,592 46,394 11,198 24.1% 127,433 110,867 16,565 14.9% Less: CFC (Surplus) / Deficit (757) (430) (38) (392) -1037.3% (6,219) (5,146) (1,073) -20.9% Adjusted Non-Aero NOI 48,556 57,162 46,356 10,806 23.3% 121,214 105,721 15,492 14.7% Debt Service (1) (44,372) (43,494) (878) -2.0% Net Cash Flow 76,842 62,227 14,615 23.5% Note: (1) Debt service is forecasted/budgeted on an annual basis only. Thus, quarterly data is not available. Non-Aero YTD Budget Variance Non-Aeronautical net operating income is $11.2M higher than YTD budget. o Non-Aeronautical revenues are $4.9M higher than budget: Strong performance in Rental Cars ($1.6M), Ground Transportation ($1.4M), Public Parking ($1.1M), Airport Dining and Retail ($0.7M), and Employee Parking ($0.6M), offset by lower revenue in Commercial Properties ($0.5M). Lower revenue in Commercial Properties is due to the timing delay in execution of the DMCBP Phase II ground lease. This unfavorable variance will reverse by year-end. 13 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 o Non-Aeronautical operating expenses are $6.3M lower than YTD budget: Airport Direct Charges - $2.2M lower than budget due to savings from payroll vacancies ($1.5M), delayed spending on the NERA 3 FAA pilot program grant ($0.8M), and RCF curbside assistance contract not utilized in 2016 ($0.2M), partially offset by increased reserve for Litigated & Non- Litigated damages ($0.9M). Exceptions - $0.5M lower than budget due to planned ERL projects deferred to new year. Charges from other divisions - $3.5M in savings from Corporate departments. Non-Aero Year over Year YTD Changes Non-Aeronautical net operating income is $8.3M higher than YTD 2015. o Non-Aeronautical revenues in YTD 2016 are $11.9M higher than YTD 2015 due to strong performance in Public Parking ($3.4M), Airport Dining & Retail ($2.8M), Rental Cars ($1.8M), Ground Transportation ($1.7M), Commercial Properties ($0.7M), and Employee Parking ($0.7M). o Non-Aeronautical operating expenses in YTD 2016 are $3.7M higher than YTD 2015: Airport Direct Charges - $2.4M higher than prior year due to higher payroll costs ($1.8M) and Utilities ($0.6M). Exceptions - $0.4M lower ERL costs in YTD 2016 primarily due to ERL costs for Delta buildout in prior year. Charges from other divisions - $1.7M higher than YTD 2015. D. CAPITAL SPENDING RESULTS Capital Variance $ in 000's 2016 2016 2016 Budget Variance Description YTD Actual Forecast Budget $ % International Arrivals Fac-IAF (1) 14,693 41,527 57,612 16,085 27.9% NS NSAT Renov NSTS Lobbies (2) 8,385 27,364 43,200 15,836 36.7% Interim Baggage System Program (3) 1,256 5,256 10,000 4,744 47.4% B2 Expansion for DL Club (4) 408 5,908 9,000 3,092 34.4% Checked Bag Recap/Optimization (5) 1,921 5,421 8,257 2,836 34.3% RW16C-34C Design and Reconst 7,057 9,057 11,755 2,698 23.0% GSE Electrical Chrg Stations 199 4,199 5,100 901 17.7% Construction Logistics Expansion 2,812 6,202 6,865 663 9.7% All Other 16,706 68,510 93,452 24,942 26.7% Total Spending 53,437 173,444 245,241 71,797 29.3% (1) Spending deferred from 2016 to 2017. Design Builder revised projections for General Conditions to a less aggressive ramp up. (2) Delays to construction due to a rebid of the PWP#1 construction effort. (3) Delays in spending due to irregular bid and contract execution issues with CPO. (4) Modifications to reimbursement approval caused a delay in reimbursements to Delta. (5) Returned to Commission to increase Service Agreement, which resulted in delayed spending. 14 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 $ in 000's Actual Forecast Budget $ % $ % Revenues: Operating Revenue 47,249 49,714 49,314 400 1% 2,465 5% Security Grants 0 0 0 0 NA 0 NA Total Revenues 47,249 49,714 49,314 400 1% 2,465 5% Total Operating Expenses 33,424 42,569 42,469 (100) 0% 9,145 27% Net Operating Income 13,825 7,145 6,845 300 4% (6,680) -48% Capital Expenditures 6,252 11,633 15,660 4,027 26% 5,381 86% Total Maritime Revenues were ($170K) unfavorable to budget through Q2 2016. A $426K favorable variance in Fishing & Operations primarily from improved utilization of Dockage, Berthage, and Moorage was offset by ($649K) unfavorable Q1/Q2 grain volumes and rates. We are seeing grain volumes and rates pick up in Q3. Total Revenues are forecast to exceed budget in 2016 by $400K. Total Operating Expenses were $2,360K favorable to budget through Q2 2016 primarily due to timing of divisional expenses and lower than budgeted corporate allocated expenses. Expenses are forecast ed to be ($100K) unfavorable to budget from unexpected stormwater permit management issues and mitigation costs related to the P66 cruise terminal build out, offset by favorable corporate expenses. Net Operating Income before Depreciation was $2,191K favorable to budget YTD, and forecast to be $300K favorable. Capital Expenses forecast in 2016 at $11.6M, 74% of the approved annual budget amount of $15.7M. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2015 YTD 2016 YTD 2016 YTD 2016 Bud Var Change from 2015 $ in 000's Actual Actual Budget $ % $ % Fishing & Operations (2,186) (1,563) (2,433) 870 -36% 623 -28% Recreational Boating 892 748 168 580 346% (144) -16% Cruise 2,324 2,223 1,985 238 12% (101) -4% Bulk 2,174 1,442 1,987 (545) 27% (732) -34% Maritime Portfolio 2,780 450 (443) 893 202% (2,330) 84% All Other (258) (48) (202) 154 NA 210 81% Total Maritime 5,725 3,252 1,061 2,191 206% (2,473) -43% 15 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 A. BUSINESS EVENTS Stormwater Utility negotiations with the City of Seattle completed. Grain volume of 1,749K metric tons, 13% below 2015 and 18% below 2016 budget. Volumes to pick up in July. Successfully hosted Clipper Round the World event at Bell Harbor Marina in April. First ever Marina 101 Tour held on May 13th at Shilshole Bay Marina in conjunction with Maritime Fest. Created sail event with Schooner Adventures June 10th to emphasize common goals of protecting the environment and promoting maritime jobs & education. Successful start of the 2016 cruise season with the addition of the larger vessel at Terminal 91. Cruise line of business promoted economic vitality to the region by: o Presenting at the Norwegian Cruise Line Familiarization Weekend. o Running a booth at CLIA Cruise 360. o Serving on selection committee for the Tourism Cooperative Program. Barge moorage at North End of Harbor Island, T25 South, T108, and T107 Kellogg Island continue to be fully utilized. Pier 34 dolphins is seeing light spot demand for moorage though we are seeing added spot moorage at T91 to support repair and maintenance. B. KEY INDICATORS Grain Volume Metric Tons in 000's 5,000 4,000 3,000 2015 Actuals 2016 Budget 2,000 2016 Actuals 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cruise Passengers in 000's 1200 1000 800 2015 Actuals 600 2016 Budget 400 2016 Actuals 200 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 16 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 C. OPERATING RESULTS Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Operating Revenue 21,407 22,027 22,196 (170) -1% 49,714 49,314 400 1% Security Grants 0 0 0 0 NA 0 0 0 NA Total Revenues 21,407 22,027 22,196 (170) -1% 49,714 49,314 400 1% Maritime Expenses (excl Maint) 4,340 4,993 5,249 255 5% 11,724 11,382 (342) -3% Maintenance Expenses 4,276 4,716 5,418 702 13% 10,576 10,576 0 0% P69 Facilities Expenses 74 134 149 15 10% 294 294 0 0% Other ED Expenses 1,521 1,710 1,973 263 13% 3,819 3,819 0 0% Environmental & Sustainability 481 303 610 307 50% 1,430 1,430 0 0% CDD Expenses 699 522 486 (36) -7% 1,029 1,029 0 0% Police Expenses 1,339 1,925 2,007 82 4% 4,023 4,023 0 0% Corporate Expenses 2,693 4,423 5,040 618 12% 9,471 9,713 242 2% Envir Remed Liability 258 48 202 154 76% 202 202 0 0% Total Expenses 15,682 18,775 21,135 2,360 11% 42,569 42,469 (100) 0% NOI Before Depreciation 5,725 3,252 1,061 2,191 206% 7,145 6,845 300 4% Depreciation 8,466 8,655 8,593 (62) -1% 17,139 17,139 0 0% NOI After Depreciation (2,741) (5,403) (7,532) 2,129 -28% (9,994) (10,294) 300 3% Maritime Division Revenues were ($170K) unfavorable to budget. Key variances are as follows: Fishing & Operations favorable $427K $258K favorable to budget for Dockage, Berthage & Moorage due to greater occupancy, $71K favorable for Wharfage & $55K Utility revenue mainly due to sale of electricity. $43K favorable to budget due to Recreational Boating which is offset by ($28K) unfavorable due to Fishing & Commercial. Recreational Boating unfavorable ($95K) Shilshole Bay Marina ($90K) unfavorable due to shortfall in moorage and utility revenues. Bell Harbor Marina $2K favorable from higher guest moorage than budgeted. Harbor Island Marina ($7K) unfavorable. Bulk unfavorable ($649K) Lower than budgeted grain volume in first half of 2016 driving a rate based adjustment. Volumes and revenue forecasted to pick up in second half of 2016 and meet budget. Maritime Portfolio Management favorable $120K FT Office & Retail - $52K favorable to budget with $45K from higher Concession Rents. MIC Office & Retail - $4K favorable to budget. SBM Office & Retail - $27K favorable from $25K prepayment. Total Maritime Division Expenses were $2,360K favorable to budget. Key variances are as follows: Maritime Expenses (Excluding Maintenance) were $255K favorable to budget. Major variances were as follows: Salaries & Benefits were $162K favorable due to open positions in Fishing & Operations. Equipment ($12K) favorable due to timing of furniture purchase for cruise at T91 and rec boating at SBM. 17 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Outside Services were $149K favorable due to variances associated with the Terminal 91 Maintenance Dredging project. Maintenance Expenses were $702K favorable to budget from unfilled positions and underspend in wages and benefits. Corporate Expenses were $618K favorable to budget. Other Economic Development Expenses $263K favorable due to lighter than expected outside services. 2016 Full Year Forecast Revenue $400K Favorable Higher than budgeted revenue in moorage and dockage. Expenses Unfavorable by $100K Corp allocated expenses offset by unbudgeted P66 cruise mitigation payments. Change from 2015 YTD Actual Net Operating Income (NOI) before Depreciation for 2016 decreased by ($2,473K) Higher revenue offset by higher expenses from change in allocation process. Revenue increased by $620K - Revenue from the Grain terminal decreased ($436K). Fishing & Operations revenue increased $579K from better moorage utilization and rate increases. Recreational Boating increased $294K from rate increases. Maritime Portfolio Management increased $133K from rent and utilities at SBM, T91, and FT. Expenses, direct and allocated, increased by ($3,092K) - Variance driven by a ($2,308K) in Corp allocations and Police ($310K) from change in methodology with the creation of the NWSA. Maritime expenses ($924K) unfavorable from increased utility and outside services expenses. D. CAPITAL SPENDING RESULTS Budget Variance 2016 YTD 2016 2016 Actual Forecast Budget $ % $ in 000's Small Projects 1 508 2,101 3,772 1,671 44% Contingency Renewal & Replace. 0 2,000 2,000 0 0% T91 Substation Upgrades 1,223 1,533 1,381 (152) -11% Cruise Terminal Tenant Improv 2 2 2,002 1,350 (652) -48% Maritime Fleet Replacement 529 1,550 1,623 73 4% SBM Restrms/Service Bldgs Rep 3 98 373 1,017 644 63% C15 Building Tunnel Improvmnt 4 0 0 700 700 100% P91 South End Fender 5 21 191 655 464 71% Maint N Office Site Improvement 6 0 0 500 500 100% Marina Mgt Sys Replacement 0 450 450 0 0% All Other 716 1,433 2,212 779 35% Total Maritime 3,097 11,633 15,660 4,027 26% Comments on Key Projects: For Q2 2016, Maritime spent 20% of the annual approved budget. Full year estimate is expected to be 74% of the annual approved budget. 18 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Projects with significant changes in spending were: 1. Small Projects: multiple project spending moves to next year such as T91 Portable Paint & Oil Containment Units, T91 Sewer Lift Station #7 replacement, C15 2nd Flr N Face Window replacement; and FT lighting upgrade moves start date to Q4. 2. Cruise Terminal Tenant Improvement: higher spending expected for construction by NCL contractor this year. 3. Shilshole Bay Marina Restroom and Services Building Replacement: scope and design are under review and delay in spending. 4. C15 Building Tunnel Improvement: project delayed until next year 5. Pier 91 South End Fender: project is delayed in design although construction is expected to be on schedule in 2017. 6. Maintenance North Office Site Improvement: project delayed until 2017. 7. All Other: P66 Fall project delayed and contractor rebate for FT C15 HVAC improvement project. 19 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2015 2016 2016 Budget Variance Change from 2015 $ in 000's Actual Forecast Budget $ % $ % Revenues: Operating Revenue 18,164 14,991 13,745 1,246 9% (3,173) -17% Total Revenues 18,164 14,991 13,745 1,246 9% (3,173) -17% Total Operating Expenses 19,206 23,437 23,447 10 0% 4,231 22% Net Operating Income (1,042) (8,446) (9,702) 1,256 13% (7,404) -711% Capital Expenditures 2,098 5,182 8,751 3,569 41% 3,084 147% Total Economic Development Division (EDD) revenues were $1,217K or about 17% favorable to budget through the second quarter primarily due to stronger sales activities at Conference and Event Centers than budgeted. For the full year, revenue is expected to be $1,246K favorable to budget also primarily due to favorable Conference and Event Centers' revenue. Total Operating Expenses were $2,036K or 17% favorable through the second quarter due to lower spending than budgeted across all groups except for unfavorable variances for Conference and Event Center and CDD Expenses. For the full year, EDD is forecasting Operating Expenses to be $10K favorable to budget due to projected lower spending in most areas which is offset by higher activity at the Conference and Events Center. Net Operating Income year-to-date for 2016 was $3,253K favorable to budget and $740K above 2015 Actual primarily due to higher divisional and corporate allocations. For the full year, EDD is forecasting Net Operating Income of $1,256K favorable to budget. At the end of the second quarter, capital spending for full year 2016 is forecasted to be $5.2 million or 59% of the approved budget of $8.8 million. A. BUSINESS EVENTS Economic Development Partnership Program providing cities in King County up to $65K to advance local economic development approved by Commission in June. Completed the first tourism grant program and awarded almost $100,000 to 13 recipients throughout the state. Celebrated Victoria Clipper's 30th Anniversary with a commission proclamation and presentation. Clipper has sailed from Pier 69 since 1986 and has been a tenant of the Port for nearly 30 years. Real Estate Strategic Plan is ongoing and receiving positive feedback. Overall occupancy of buildings managed by Portfolio Management was at 97% at the end of the second quarter of 2016, above the 90% target for 2016. Portfolio Management's occupancy is above the average of 93% for the comparable office markets and near the average of 98% for comparable industrial markets.1 Conference and Event Center activity exceeded budget year-to-date due to a strong sales team and healthy regional economy. 1 Market averages are calculated based on Costar building occupancies reported for: Office: Class B & C office space in Ballard/U District, Queen Anne/Magnolia, Belltown/Denny Regrade, Pioneer Square/Waterfront, and South Seattle. Industrial: Georgetown/Duwamish North, SoDo, and West Seattle 20 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 B. KEY INDICATORS Building Occupancy by Location: 105% 100% Central Harbor 95% T-91 Uplands Marina Office & Retail 90% T-91 Industrial T-106 Warehouse 85% 80% Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2015 YTD 2016 YTD 2016 YTD 2016 Bud Var Change from 2015 $ in 000's Actual Actual Budget $ % $ % Central Harbor Management (206) (776) (1,613) 837 52% (570) -277% Conference & Event Centers 330 643 (309) 953 308% 313 -95% Eastside Rail (143) (135) (118) (17) -14% 7 5% RE Dev & Planning (326) (751) (1,457) 706 48% (424) -130% Tourism (384) (432) (680) 248 36% (48) -12% Workforce Dev (146) (177) (710) 533 75% (31) -21% Env Grants/Remed Liab/FTZ (0) 12 19 (7) -36% 12 -11664% Total Econ Dev (875) (1,615) (4,868) 3,253 67% (740) -85% 21 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 C. OPERATING RESULTS Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Revenue 3,776 3,819 3,659 160 4% 7,639 7,449 190 3% Conf & Event Ctr Revenue 4,453 4,518 3,462 1,057 31% 7,352 6,296 1,057 17% Total Revenue 8,229 8,338 7,120 1,217 17% 14,991 13,745 1,246 9% Central Harbor 1,145 1,104 1,373 269 20% 2,721 2,746 25 1% Conf & Event Centers 3,823 3,665 3,420 (245) -7% 6,952 6,439 (513) -8% Eastside Rail Corridor 13 8 72 64 90% 24 144 120 83% P69 Facilities Expenses 19 81 90 9 10% 177 177 0 0% Small Business 157 9 61 52 85% 120 120 0 0% Workforce Development 0 150 668 518 78% 1,421 1,558 138 9% Tourism 377 420 671 251 37% 1,082 1,174 92 8% EconDev Expenses Other 715 1,047 1,339 292 22% 2,800 2,800 0 0% Maintenance Expenses 1,477 1,253 1,670 418 25% 3,153 3,153 0 0% Maritime Expenses (Excl Maint) 6 14 14 (1) -4% 28 28 (0) 0% Environmental & Sustainability 116 9 56 47 84% 140 126 (14) -11% CDD Expenses 59 153 105 (48) -46% 182 248 66 27% Police Expenses 221 81 84 4 4% 169 169 0 0% Corporate Expenses 977 1,959 2,366 407 17% 4,469 4,565 96 2% Envir Remed Liability 0 0 0 (0) NA 0 0 0 NA Total Expense 9,103 9,952 11,989 2,036 17% 23,437 23,447 10 0% NOI Before Depreciation (875) (1,615) (4,868) 3,253 67% (8,446) (9,702) 1,256 13% Depreciation 1,678 1,881 1,720 (161) -9% 3,461 3,461 0 0% NOI After Depreciation (2,553) (3,496) (6,589) 3,093 47% (11,907) (13,163) 1,256 10% Total Economic Development Division Revenue was $1,217K favorable to budget. Key variances: Portfolio Management $1,218K favorable Conference & Event Centers were $1,057K favorable due to strong sales activities at Bell Harbor International Conference Center (BHICC) for the effort of utilizing not yet restricted spaces by the pending Cruise Terminal expansion project, high sponsorship sales at World Trade Center Seattle (WTC-S) resulting from the positive guest favorability for the facility and services, and partially the new program at Smith Cove Center (SCCT) in Q1. Real Estate Development & Planning was $97K favorable primarily due to: an unbudgeted $29K payment in January from King County Wastewater Treatment for space rental at T-91 Uplands, full occupancy at T- 91 uplands as a result of lease to FiSC LLC for C-155, and $44K in unbudgeted revenues from Carter Motors.2 Central Harbor Management Group was $69K favorable mainly due to an unbudgeted rate increase at the Bell Street Garage $40K and higher than anticipated occupancy at T-102 Marina Corporate Center $39K. The favorable variance was offset by a loss of revenue for Bell Street Retail leases ($13K) due to vacancies associated with upcoming Cruise Terminal construction. Total Economic Development Expenses were $2,036K favorable to budget. Key variances: Central Harbor were $269K favorable due to: lower outside services $145K ($82K uncompleted tenant improvements, $42K broker fees, and $24K space planning), $38K in lower management expenses for WTC West, $65K lower than budgeted salaries & benefits (due to higher charges to Eastside Rail & T-91 Uplands), and $20K in favorable utility expenses (surface water and sewer). Conference & Event Centers were ($245K) unfavorable mainly due the higher operating expenses and management fee related to the higher sales activities. 2 T-91 Uplands is managed by Portfolio Management and will be moved to Portfolio Management in 2017. However, it cannot be moved in 2016 due to established allocation calculations. 22 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 Workforce Development was $518K favorable due to timing of spending for Workforce Development programs. Tourism was $251K favorable primarily due to timing of Visit Seattle Agreement payment, timing of spending in marketing costs, and a Director Position vacancy in the first quarter. Economic Development Other (excluding the above direct expenses) were favorable $292K. Major account variances were as follows: RE Development & Planning was $531K favorable due to $275K Opportunity Fund, $116K timing of expenses for strategic planning consultant services, $100K in salaries and benefits due to unfilled positions, and $47K of misbudgeted membership dues for the King County Economic Development Council (offset by expenditure from RE Div. Admin). RE Division Management was $121K unfavorable due to Tourism grants charged to ED Admin Contingency, Sponsorship expense for the Good Business Network, and misbudgeted membership dues for the Economic Development Council of King County. Divisional Allocations were $121K unfavorable to Central Harbor, Development & Planning, and Conference & Events Center. Maintenance expenses were $418K favorable due to later start than expected on planned maintenance work at virtually all facilities. Corporate costs, direct and allocated, were favorable $407K primarily due to lower than anticipated direct charges and allocations from Central Procurement $201K, Public Affairs $75K, Accounting & Financial Reporting $45K, and Office of Strategic Initiatives $44K. All other variances net to a favorable variance of $127K. NOI before Depreciation was $3,253K favorable to budget. Depreciation was ($161K) or 9% unfavorable to budget. NOI after Depreciation was $3,093K favorable to budget. 2016 Full Year Forecast As of the end of the 2nd Quarter 2016, the Economic Development Division anticipates ending the year $1,256K favorable to budget for Net Operating Income (NOI) Before Depreciation. The variance reflects above budget revenue of $1,246K and favorable expense variance of $10K. Revenue is forecasted to be $1,246K favorable due to higher revenue for the Conference & Event Centers $1,057K during the first half of the year primarily due to stronger sales than budgeted at Bell Harbor International Conference & Event Center for the effort of utilizing not yet restricted spaces by the pending Cruise Terminal expansion project. The favorable expense variance of $10K is primarily due to projected favorable variances in most areas which are offset by an unfavorable variance for Conference & Event Centers. Change from 2015 YTD Actual Net Operating Income before Depreciation decreased by $740K between 2016 and 2015 as a result of higher revenue $109K and higher expenses ($849K) primarily due to higher corporate and divisional allocations. Revenues increased by $109K due to higher revenue from Conference & Events Center $65K, Central Harbor $26K, and FTZ $15K. Expenses increased by $849K. Conference and Event Center Expenses had a net decrease of ($158K). Eastside Rail expenses decreased ($5K). Maintenance expenses decreased ($224K) primarily due to lower charges to Conference and Event Centers. CDD expenses increased $93K due to higher charges from Engineering, Port Construction Services and Seaport Project Management. Corporate expenses increased $982K mainly due to higher percentage of Corporate Costs being charged to Economic Development Division since the creation of Northwest Seaport Alliance. 23 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 CONTRIBUTIONS TO OTHER DIVISIONS Fav (UnFav) Incr (Decr) 2015 YTD 2016 Year-to-Date Budget Variance Change from 2015 $ in 000's Actual Actual Budget $ % $ % Revenues: Airport Dining & Retail 23,621 25,952 25,329 624 2% 2,332 10% Airport Properties 3,748 4,962 5,320 (358) -7% 1,214 32% Business Development 1,529 2,072 2,043 29 1% 542 35% Business Development & Mgmt 28,898 32,986 32,691 295 1% 4,088 14% Maritime Industrial 3,022 3,075 3,038 37 1% 54 2% Marina Office & Retail 1,944 2,024 1,941 83 4% 80 4% Maritime Portfolio Management 4,966 5,100 4,979 120 2% 134 3% Total Revenues to Other Divisions 33,864 38,086 37,671 415 1% 4,221 12% Expenses to Other Divisions Business Development & Mgmt 3,279 3,787 5,257 1,471 28% 507 15% Maritime Portfolio Mgmt 1,182 1,394 1,714 320 19% 212 18% Total Expenses to Other Divisions 4,462 5,180 6,971 1,791 26% 719 16% 24 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/16 D. CAPITAL SPENDING RESULTS Budget Variance 2016 YTD 2016 2016 Actual Forecast Budget $ % $ in 000's T102 Bldg Roof HVAC Replacemt 211 1,961 2,850 889 31% P66 Elevator 2,3,4 Upgrades 24 174 1,440 1,266 88% Tenant Improvements -Capital 80 300 1,178 878 75% P69 Roof Beam Rehabilitation 426 950 950 0 0% RE: Contingency Renew.&Replace 0 500 500 0 0% Small Projects 231 722 585 (137) -23% RE BHICC Roof Fall Protection 0 25 409 384 94% All Others 69 575 839 264 31% Total Economic Development 1,041 5,182 8,751 3,569 41% Comments on Key Projects: Through the 2nd quarter of 2016, Economic Development spent 12% of the annual approved capital budget. Full year spending is estimated to be 59% of budget. Projects with significant changes in spending were: T102 Bldg. Roof HVAC Replacement: potential construction extension based on current contractor performance. P66 Elevator 2, 3, 4 Upgrades: budget variance due to modernizations for elevators 3 and 4 have been postponed until after the NCL cruise terminal work is completed. Tenant Improvements Capital: reimbursement of $797K to Anthony's for Boiler system was recorded in Non-Ops. Boiler System was originally recorded as a Donated Asset in 2014. Small Projects: budget variance is due to addition of P69 Exterior Security lighting and move forward with the higher bids related to World Trade Center West projects including VAV Controller Upgrade and Roof Deck Replacement. RE BHICC Roof Fall Protection: project is delayed for consideration. 25 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 06/30/16 A. BUSINESS EVENTS Coordinated eight minority community outreach meetings for the CEO to discuss issues and contracting opportunities with the Port. Developed and executed the Centers of Expertise for the Port. Implemented GovDelivery to provide digital communications via e-mail. Continued to provide ongoing support and proactively work through accounting/financial reporting set-up and scenarios for the Northwest Seaport Alliance (NWSA). Recovered or collected $281K on all damages owed to the Port from damage caused by liable third parties. Continued to receive plan design input from employees and Commissioners for the Incentive Pay Plan. Implemented new goal from Commissioners to significantly increase the number of intern opportunities at the Port in 2016. Held Port leader development conference, "Be the Change". Prepared, negotiated and implemented collective bargaining agreements and provided consultation on administration of collective bargaining agreements to Port divisions and oversight committees. Continued to provide strong financial management while delivering new technology solutions that fulfill business needs and enhance business processes, efficiently and effectively. Continued to implement standards and best practices for network, systems, and information security. The Port achieved a clean, unqualified independent Certified Public Accountant (CPA) audit opinion on the Port's 2015 financial statements from the Certified Public Accounting (CPA) firm, Moss Adams. Completed the Cat III competitive selection process for a finance team to provide on-going information for the Port's debt management program and to participate in individual debt transactions through a negotiated sale process. Presented the First Reading and Second Reading and Final Passage of Bond Resolutions 3721 and 3722 to the Port Commission. Port of Seattle grant application for NWSA Freight Intelligent Transportation System (ITS) project was successful in regional grant process, to be affirmed in elected official boards' process this summer. Completed all the financial reporting changes for the Phase II Re-org. Received the 2016 Distinguished Budget Presentation Award from the Government Finance Officers Association (GFOA) of the United States and Canada for 9 consecutive years. Continued working with TSA and other Port of Seattle partners to reduce increasing screening checkpoint times as well as the threat created by long public dwell times in the airports unsecured common areas. Continued to coordinate with SDOT and the Seattle Police Department to address significant truck traffic in key choke points in vicinity of Pier 46. Contributed to regional transportation partner investments with 2nd contribution to the State's Alaskan Way Viaduct Replacement Program, 2nd and final contribution to King County's South Park Bridge. Completed Runway closures for reconstruction ahead of schedule. Completed design and preparation of Terminal 5 Modernization project civil/structural permitting documents to the City of Seattle. Replaced the Parking Revenue Control System which will improve scalability and flexibility in introducing new parking programs and increase security. Implemented a new PeopleSoft Performance Management System that supports the Port's new PerformanceLink process for performance management, which includes employee performance goals and quarterly progress documentation. Continued to expand the Satellite Transit System (STS) Train to the South Loop and Shuttle train stations to display the location of the trains and a countdown time of arrival. Developed digital capital projects map. 26 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 06/30/16 B. KEY PERFORMANCE METRICS Key Performance Indicators/Measures YTD 2016 YTD 2015/Notes A. Implement Century Agenda Strategies 1. Small Business Participation Annual / Small Works (port-wide) 90% 2. Small Business Participation Annual / Major Construction (port- 39% wide) 3. Small Business Participation Annual / Goods & Services (CD- 24% only) 4. Small Business Participation Service Agreements (CD and CD- 23% managed) - Annual B. Consistently Live by Our Values Through Our Actions and Priorities 10 classes, 84 8 classes, 50 1. MIS and Clarity Training attendees attendees 129 425, decreased by 2. Employee Development Class Attendees/Structured Learning 296 46% 79%, decreased by 3. Required Safety Training 33% 4. Request of information and guidelines for integrity & business 118 114, increased by conduct 4 5. Occupational Injury Rate 5.05 4.26 305 days; 374 days; 6. Total Lost work days 1.05 LWCIR 1.42 LWCIR C. Manage Our Finances Responsibly 1. Corporate costs as a % of Total Operating Expenses 34.5% 32.8% 2. Clean independent CPA audits involving AFR yes yes 3. Timely process disbursement payment requests 4 days 3 days 4. Keep receivables collections 85% current (within 30 days) 96% 96% 5. Investment Portfolio Yield 1.14% 0.79% 6. Litigation and Claim Reserves (in $ thousand) $1.9 $2.8 D. Exceed Customer Expectations 1. Respond to Public Disclosure Requests 225 220, increased by 5 2. Information and Communication Technology System Availability 99.7% 99.4% 3. IT Network Availability 99.9.% 99.9% 4. Service Desk % First Call Resolution 40% 42% 5. Customer Survey for Police Service Excellent or Very Good 92% 88% E. Support Port Mission with Implementation of Port Divisions' Business Plan 1. Oversee Implementation and Administration of CBAs agreements 48 90 2. Number of Jobs Openings 214 181 3. Percent of annual audit work plan completed each year 20% 28% 27 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 06/30/16 C. OPERATING RESULTS Fav (UnFav) Fav (UnFav) 2015 YTD 2016 Year-to-Date Budget Variance Year-End Projections Budget Variance $ in 000's Actual Actual Budget $ % Forecast Budget $ % Total Revenues 113 75 285 (210) -73.7% 570 570 - 0.0% Executive 954 1,019 1,000 (19) -1.9% 1,589 1,569 (20) -1.3% Commission 680 723 852 129 15.1% 1,540 1,635 95 5.8% Legal 1,648 1,510 1,627 116 7.2% 3,116 3,219 103 3.2% Public Affairs 2,061 2,795 3,234 440 13.6% 6,463 6,447 (15) -0.2% Human Resources & Development 3,008 3,294 3,686 392 10.6% 7,211 7,634 422 5.5% Labor Relations 433 568 574 6 1.1% 1,131 1,126 (5) -0.4% Internal Audit 614 673 840 167 19.9% 1,603 1,620 17 1.0% Office of Strategic Initiatives 1,374 2,235 6,778 4,543 67.0% 8,459 9,059 600 6.6% Police 10,924 11,312 11,767 455 3.9% 23,568 23,587 19 0.1% Contingency 417 126 250 124 49.7% 400 500 100 20.0% Capital Development - 0.0% - 0.0% Engineering 1,642 2,227 1,940 (287) -14.8% 4,901 5,913 1,012 17.1% Port Construction Services 1,395 1,182 1,441 259 17.9% 2,747 2,862 115 4.0% Aviation PMG 674 560 2,389 1,829 76.6% 1,695 4,543 2,848 62.7% Seaport PMG 229 566 405 (161) -39.7% 893 789 (104) -13.2% Capital Development Admin 196 212 213 1 0.7% 431 430 (1) -0.2% Sub-Total 4,138 4,747 6,388 1,641 25.7% 10,668 14,538 3,870 26.6% Finance Accounting & Financial Reporting 3,272 3,364 3,773 409 10.8% 7,270 7,570 300 4.0% Information & Communication Technology 9,134 10,228 9,677 (551) -5.7% 21,127 21,127 - 0.0% Finance & Budget 2,194 2,378 2,452 74 3.0% 4,898 4,933 35 0.7% Business Intelligence - 416 470 54 11.5% 1,077 917 (160) -17.5% Risk Services 1,536 1,619 1,722 103 6.0% 3,446 3,449 3 0.1% Sub-Total 16,135 18,006 18,095 89 0.5% 37,818 37,995 177 0.5% Security and Preparedness Emergency Management 172 167 195 28 14.4% 358 393 35 8.9% ICT Information Security 381 405 459 54 11.8% 927 927 - 0.0% Maritime Security 73 75 77 2 2.0% 161 161 - 0.0% Sub-Total 625 647 731 84 11.5% 1,445 1,480 35 2.4% Environment & Sustainability Aviation Environmental & Planning 3,224 2,470 4,529 2,059 45.5% 7,925 10,064 2,139 21.3% Maritime Environmental & Planning 1,392 484 1,101 617 56.1% 2,871 2,587 (284) -11.0% Noise Programs 252 348 441 93 21.1% 821 891 70 7.9% Environment & Sustainability - 1 - (1) 0.0% 1 - (1) 0.0% Sub-Total 4,868 3,303 6,072 2,769 45.6% 11,619 13,542 1,924 14.2% Total Expenses 47,878 50,957 61,893 10,936 17.7% 116,629 123,951 7,322 5.9% Corporate revenues were $210K unfavorable compared to budget due to lower operating grants. Corporate expenses for the first six months of 2016 were $51.0M, $10.9M or 17.7% favorable compared to budget and $3.1M or 6.4% higher than the same period a year ago. The $10.9M favorable variance is due primarily to cost savings in vacant positions, delay hiring and timing of spending. All corporate departments have a favorable variance except for: Executive unfavorable variance of $19K is due to contribution to the pension plan for the retirement of the International Business Protocol Liaison. Engineering unfavorable variance of $287K is due to charging less to capital projects than originally anticipated due to delayed projects. Seaport Project Management unfavorable variance of $161K is due to charging less to capital projects than originally anticipated due to delayed projects. Information & Communication Technology unfavorable variance of $551K is due to timing of spending which should be resolved by the end of the year. 28 V. CORPORATE FINANCIAL & PERFORMANCE REPORT 06/30/16 Year-end spending is projected to be $7.3M under budget due primarily to: Executive unfavorable variance is due to contribution to the pension plan for the retirement of the International Business Protocol Liaison. Commission savings due to a vacant position. Legal savings in Outside Legal and a vacant position. Public Affairs unfavorable variance is due to unbudgeted positions. Human Resources and Development savings due to vacant positions, Travel Expenses and Tuition Reimbursement. Labor Relations unfavorable variance is due to remodel of office space. Internal Audit savings due to vacant positions. Office of Strategic Initiative savings in Salaries and Benefits and Outside Services for consulting services for Honsha LEAN. Police savings in Payroll. Contingency anticipate not using all funds. Capital Development savings due to vacant positions and Outside Services. Accounting and Financial Reporting Services savings due to vacant positions, Travel and General Expenses. Information & Communication Technology anticipate being on budget. Finance & Budget savings due to a vacant position. Business Intelligence unfavorable variance due to 2 new unbudgeted business analyst positions. Risk Services savings due to lower Insurance Broker Fees. Security and Preparedness savings in Telecommunications, Travel and Supplies and Stock Expenses. Environment & Sustainability savings in Outside Services, primarily SAMP. D. CAPITAL SPENDING RESULTS 2016 YTD 2016 2016 Budget Variance $ in 000's Actual Forecast Budget $ % Infrastructure - Small Cap 837 1,836 1,836 0 0.0% Service Tech - Small Cap 71 1,132 1,500 368 24.5% Constr Doc Mgmt Sys Repl. 15 538 538 0 0.0% Maximo Upgrade 257 913 991 78 7.9% PMIS Replacement 0 200 500 300 60.0% Remote Data Ctr Bus Continuity 22 720 1,200 480 40.0% PeopleSoft BU Configuration 0 0 1,400 1,400 100.0% Capital Dev Fleet Replacement 206 686 815 129 15.8% All Other (note 1) 563 2,498 2,946 448 15.2% TOTAL 1,971 8,523 11,726 3,203 27.3% Note: (1) "All Other" includes remaining ICT projects, other Corporate fleet replacement, and small cap. 29
Limitations of Translatable Documents
PDF files are created with text and images are placed at an exact position on a page of a fixed size.
Web pages are fluid in nature, and the exact positioning of PDF text creates presentation problems.
PDFs that are full page graphics, or scanned pages are generally unable to be made accessible, In these cases, viewing whatever plain text could be extracted is the only alternative.