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ITEM NO: 7f_Supp_1 DATE OF MEETING: August 23, 2016 Port of Seattle Q2 2016 Financial Performance Report Commission Meeting August 23, 2016 Portwide Operating Income 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% Excluding Aeronautical revenues, other operating revenues were $161.7M, $9.4M, or 6.2%, higher than budget; and we are anticipating $17.4M above budget for the full year. Total Operating Expenses were $147.9M, $20.7M below budget; and we are forecasting an unfavorable budget variance of $699K for the full year. NOI before Depreciation was $131.5M, 26.5M over budget, for the first half of the year. NOI before Depreciation forecasted to be $9.8M or 4.0% above budget 2 Capital Summary by Division 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. Forecasted to spend $199.3M or 70.7% of the capital budget 3 Aviation Division Q2 2016 Financial Performance Report Commission Meeting August 23, 2016 Aviation Business Highlights Customer Service: Hired security checkpoint queue management contractor realizing significant reduction in peak period wait times Q2 Airport Service Quality (ASQ) survey overall score dropped to 4.06 from 4.10 in Q1. New air service: Volaris Airlines initiated service to Guadalajara, Mexico New cargo services: DHL moved operations from Boeing Field to Sea-Tac Lufthansa Cargo 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 Progress on major initiatives 5 Airport Activity YTD 2015 YTD 2016 % Change YTD Passenger Growth Enplaned Passengers (000's) Alaska +9% Domestic 8,714 9,548 9.6% Delta +19% International 1,018 1,120 10.1% Southwest +8% Total 9,731 10,668 9.6% United -5% Operations 177,649 197,152 11.0% Landed Weight (million lbs.) 2016 YTD Load Factor Cargo 799 843 5.5% down 2.4 points from All other 10,769 11,993 11.4% 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 International freight 59,131 55,287 -6.5% prior year due to peak Mail 26,021 27,562 5.9% volume in 2015 during Total 164,571 165,928 0.8% Port shutdown. Increase in enplanements driven by Delta and Alaska 6 Aviation 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 (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% 2016 NOI forecast to be $20.5M higher than 2015 7 Aviation Capital Summary $ 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. 2016 spending is projected to be 70% of budget 8 Maritime Division Q2 2016 Financial Performance Report Commission Meeting August 23, 2016 Maritime Business Highlights Fishermen's Terminal Long Range Strategic Plan finalized and moving to implementation Stormwater Utility negotiations with the City of Seattle completed New line of business for Maritime division Successfully hosted Clipper Round the World at Bell Harbor Marina providing worldwide showcasing of our harbor & city Cruise line of business promoting economic vitality to the region and working with EDD on the Tourism Cooperative Program SBM restaurant RFP a success and negotiations underway Port businesses and properties driving economic vitality to the region 10 Maritime Financial Summary 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% YTD Revenue variance driven by unfavorable Grain/Bulk ($649K), partially offset by a $319K Fishing and Operations $319K favorable to budget from higher moorage occupancy and rates in previously under utilized properties. YTD Expenses $2,360K favorable to budget due primarily to timing of divisional expenses and lower than budgeted corporate expenses. Year end NOI forecast to budget with favorable revenue and corporate expense projections offset by Cruise related mitigation expenses. Strong maritime ops revenue and timing of expenses driving favorable NOI 11 Maritime Capital Summary $ in 000's 2016 YTD 2016 2016 Budget Variance Actual Forecast Budget $ % Maritime 3,097 11,633 15,660 4,010 26% Significant Variances: Major capital variances on hold or moved to future years Shilshole Bay Marina Restroom and Services Building Replacement $644K Maintenance North Office Site Improvement $500K Pier 91 South End Fender $464K 2016 Small Projects $1,259K Favorable variances partially offset by Fleet Replacement capital expense higher than budget Forecasted to spend 74% of Capital Budget 12 Economic Development Division Q2 2016 Financial Performance Report Commission Meeting August 23, 2016 EDD Business Highlights Economic Development Partnership Program Completed the first Tourism Grant Program Financials YTD quarter net operating income (NOI) is $3.3M higher than budget. Full-year NOI is forecasted to exceed budget. Occupancy Strong! Portfolio Management properties at 97% occupancy at end of Q2, above target of 90%. Conference and Event Center Q2 revenue exceeded budget due to strong sales and delayed construction at P-66 Cruise Terminal. Real Estate Draft Strategic Plan presented to Commissioners Strong Occupancy and NOI 14 . EDD Financial Summary 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% Net Operating Income (875) (1,615) (4,868) 3,253 67% (8,446) (9,702) 1,256 13% Favorable sales activity at P-66 Conference & Events Center, resulting in higher revenues & expenses. Favorable variances in direct expenses for Tourism, Workforce Development, and Maintenance were due to timing of expenditures. Corporate Expenses were under budget due to lower charges/allocations from Public Affairs, Accounting & Financial Reporting and Office of Strategic Initiatives. Conference & Event Center Revenue 31% favorable to budget 15 EDD Capital Summary $ in 000's 2016 YTD 2016 2016 Budget Variance Actual Forecast Budget $ % Econ Dev 1,041 5,182 8,751 3,569 41% Significant Variances: 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. T102 Building Roof HVAC Replacement: potential construction extension based on current contractor performance. Forecasted to spend 59% of EDD Capital Budget due timing of projects 16 Corporate Q2 2016 Financial Performance Report Commission Meeting August 23, 2016 Corporate Business Highlights 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. Contributed to regional transportation partner investments with 2nd contribution to the State's Alaskan Way Viaduct Replacement Program; and the final contribution to King County's South Park Bridge. Implemented new goal from Commissioners to significantly increase the number of intern opportunities at the Port in 2016. Continued to coordinate with SDOT and the Seattle Police Department to address significant truck traffic in key choke points in vicinity of P46. Held Port leader development conference, "Be the Change". Received the 2016 Distinguished Budget Presentation Award from the Government Finance Officers Association (GFOA) for 9th consecutive year. Achieved a number of accomplishments in Q2 18 Financial Summary by Dept. Part 1 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 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% Strong positive financial performance results in Q2 19 Financial Summary by Dept. Part 2 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 $ % 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% Operating Expenses forecasted to be $7.3M favorable to budget 20 Appendix Portwide Major Revenue Variances 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-Aero 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% Operating Revenues w/o Aeronautical $9.4M or 6.2% favorable to budget 22 Portwide Major Expense Variances 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% Operating expenses were $20.7M below budget mainly due to savings in Payroll, Outside Services, and Travel & Other Employee expenses. Operating Expenses $20.7M favorable to budget 23 EDD Contribution 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% EDD making significant contribution to other divisionsQ1 net contribution to other divisions: $13.6M 24 Stormwater Utility Financial Summary 2015 YTD 2016 YTD 2016 YTD Bud Var Year End Projections 2016 Bud Var $ in 000's Actual Actual Budget $ % Forecast Budget $ % NH Alliance SW 1,644 1,630 1,588 41 3% 3,260 3,177 83 3% Maritime SW 247 484 346 139 40% 969 691 277 40% EconDev SW 298 248 224 24 11% 496 449 47 11% Other 0 7 0 7 NA 14 0 14 NA Total Revenue 2,189 2,369 2,158 211 10% 4,738 4,317 421 10% Expenses NH Alliance SW 19 25 200 175 88% 399 399 0 0% Maritime SW 1 1 42 41 97% 85 85 0 0% EconDev SW 1 1 28 27 98% 56 56 0 0% SW Admin 0 24 71 47 66% 50 142 92 65% Maintenance Expenses 0 321 759 438 58% 1,080 1,518 438 29% Other Maritime Expenses 0 3 0 (3) NA 0 0 0 NA Environmental (Excl SWU) 0 11 108 97 90% 293 293 0 0% CDD Expenses 0 20 1 (19) -2508% 20 2 (18) -1201% Total Expense 21 407 1,209 803 66% 1,983 2,495 512 21% NOI Before Depreciation 2,168 1,963 949 1,013 107% 2,755 1,822 933 51% Depreciation 492 445 548 103 19% 889 1,096 207 19% NOI After Depreciation 1,675 1,518 401 1,117 278% 1,866 726 1,140 157% Revenue $211K favorable due to applying new rates reflected in the charter on more accurately measured areas through GIS system instead of historical tax parcels. Expenses favorable mainly due to the work progress delay resulting from timing of receiving the Camera Inspection truck in order to access the lines. Truck is has been delivered, so spending will pick up in 2nd half of the year. Full Year Net Operating Income forecasted at $933 thousand favorable to budget 25 AV Appendix Significant Financial Drivers 2016 Forecast vs. Budget Revenue key items only $5.0M Non-Aero - DMCBP Phase II lump sum payment $10.1M Higher Non-Aero revenue due to higher enplanements ($7.6M) Offset by higher revenue sharing Expense key items only $5.2M Lora Lake ERL increase airfield rate base $3.2M Amortization of DMCBP Phase II frontage fees $2.7M Security Checkpoint queue management contract $1.3M Full employee screening Reflected in 2016 Forecasted Results 27 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% 2016 enplaned passengers forecasted to be up 9.0% above 2015. This reflects new scheduled flights, primarily by Delta and Alaska. 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. Enplanement growth drives improved performance 28 Aviation Expense 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 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% 2016 total expenses forecasted to be unfavorable by $0.9M 29 Non-Aeronautical Business 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% 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 (44,372) (43,494) (878) -2.0% Net Cash Flow 76,842 62,227 14,615 23.5% Revenue growth driven by increased enplanements 30 Aeronautical Business 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 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 (91,351) (91,723) 373 0.4% Net Cash Flow (9,697) (1,053) (8,644) 821.0% Expense savings and higher revenue sharing compared to Budget 31 Aero 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% O&M, Debt Service Gross, and Amortization do not include commercial area costs or the international incentive expenses (1) Higher O&M costs than Budget due to increased Lora Lake environmental reserve, Security Checkpoint Queue Management and Full Employee Screening contracts. These expenses are largely offset by savings from CDD and Corporate divisions, SAMP NEPA/SEPA & IDIQ master planning delays, Airport Obstruction Removal project savings, and payroll savings in AV division. Aero rate base revenues based on cost recovery formulas 32 Rental Car Performance (in $000's) 2015 YTD 2016 YTD 2016 YTD 2015 2016 2016 Rental Car - Concession Revenue Actual Actual Budget Actual Forecast Budget RCF Concession Revenue to Port 11,985 13,474 11,974 30,662 33,455 31,781 Gross Sales by Operators 124,496 129,105 130,003 301,439 334,400 317,562 Total Transactions 633,157 654,740 658,751 1,390,169 1,457,407 1,448,928 Average Ticket $ 196.63 $ 197.18 $ 197.35 $ 216.84 $ 229.45 $ 219.17 Average Length of Stay 4.05 4.15 4.12 4.34 4.32 4.34 Transactions/O&D Enplanements 9.32% 8.79% 8.63% 9.44% 9.07% 8.85% CFC Revenue Summary Total Transaction Days 2,561,631 2,714,894 2,711,403 6,033,825 6,295,998 6,288,348 CFC Rate per Transaction Day $ 6.00 $ 6.00 $ 6.00 $ 6.00 $ 6.00 $ 6.00 Total CFC Revenue Earned 15,370 16,289 16,268 36,203 37,776 37,730 Reserve for debt service and CP interest: (11,794) (10,918) (10,982) (20,540) (21,836) (21,963) Reserve for CP principal payment: - (1,500) (1,500) (3,000) (3,000) (3,000) Debt Service Reserve Requirement (11,794) (12,418) (12,482) (23,540) (24,836) (24,963) Residual - CFC Operating Revenue: 3,576 3,872 3,787 12,663 12,940 12,767 (in $000's) 2015 YTD 2016 YTD 2016 YTD 2015 2016 2016 Rental Car - Revenue Summary Actual Actual Budget Actual Forecast Budget RCF Concession Revenue to Port 11,985 13,474 11,974 30,662 33,455 31,781 Residual - CFC Operating Revenue: 3,576 3,872 3,787 12,663 12,940 12,767 Land Rent/Space Rent/Other 1,771 1,797 1,793 3,189 3,617 3,617 Total Rental Cars Operating Revenue 17,332 19,143 17,555 46,515 50,013 48,166 RCF Concession Revenue Increased by 12.4% compared to YTD 2015 33 Ground Transportation Revenue to Port 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 $ % Ground Transportation Revenues Transportation Network Companies - 907 - 907 n/a 2,727 - 2,727 n/a On Demand Taxis 1,819 2,449 1,819 631 34.7% 5,367 3,637 1,730 47.6% On Demand Limos 416 414 465 (52) -11.1% 872 1,037 (166) -16.0% All other Operators (cost recovery) 1,642 1,753 1,874 (121) -6.5% 3,515 3,515 - 0.0% Other Misc Revenues 98 145 68 76 111.1% 137 137 (0) 0.0% Total GT Revenue 3,974 5,668 4,227 1,441 34.1% 12,618 8,327 4,291 51.5% Trip Activity 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 # % Ground Transportation Trips Transportation Network Companies - 149 - 149 100% 513 - 513 100% On Demand Taxis 441 438 453 (16) -3.4% 869 928 (59) -6.4% On Demand Limos 41 39 42 (3) -8.0% 75 89 (14) -15.7% All other Operators (cost recovery) 831 958 768 191 24.9% 1,815 1,578 237 15.0% Total GT Trip Activity 1,314 1,585 1,263 321 25.4% 3,272 2,595 677 26.1% GT Trip Volume Increased by 20.6% compared to YTD 2015 34 Airport Dining & Retail Fav / (Unfav) Incr / (Decr) from Airport Dining & Retail 2015 2016 2016 Budget Variance 2015 Org Basis (in 000's) Actual Forecast Budget $ % $ % ADR Revenue Food & Beverage 17,427 20,218 18,657 1,561 8.4% 2,791 16.0% Retail 12,127 12,619 13,128 (510) -3.9% 492 4.1% Duty Free 6,769 6,080 7,412 (1,332) -18.0% (689) -10.2% Advertising 6,460 6,761 6,754 7 0.1% 301 4.7% Foreign Currency Exchange 1,219 1,224 1,224 - 0.0% 5 0.4% All other ADR revenue 6,563 6,637 6,243 393 6.3% 73 1.1% Total ADR Revenue 50,566 53,538 53,419 119 0.2% 2,973 5.9% Expenses ADR expenses 2,465 2,542 2,612 70 2.7% 77 3.1% Income from Operations 48,100 50,996 50,807 189 0.4% 2,896 6.0% Primary Concession Gross Sales (in $000's) 240,556 265,830 263,282 2,548 1.0% 25,273 10.5% Enplanements (in 000's) 21,109 23,009 22,214 794 3.6% 1,900 9.0% Sales per Enplanement (SPE) $ 11.40 $ 11.55 $ 11.85 $ (0.30) -2.5% $ 0.16 1.4% Food & Beverage gross sales growing at twice the rate of enplanement growth. Retail sales negatively impacted by long wait times at security checkpoints during Q1. Sales began rebounding in Q2, expected to continue to improve. Duty Fee significantly impacted by international gate assignments to Concourse A with smaller Duty Free store, and new China regulation limiting duty free merchandise value to ~$700/person (effective April 2016). Food & Beverage UP, Retail & Duty Free DOWN 35 Commercial Properties Fav / (Unfav) Incr / (Decr) from Commercial Properties 2015 2016 2016 Budget Variance 2015 Org Basis (in 000's) Actual Forecast Budget $ % $ % DMCBP Revenue Option Area Rent 120 41 59 (17) -29.9% (79) -65.8% DMCBP Phase I Phase I - Base Rent 43 373 418 (46) -10.9% 330 763.3% Construction phase Phase I - In-lieu Fees 121 221 221 - 0.0% 100 82.6% Phase II - Base Rent - 17 35 (18) -51.1% 17 n/a completed in May Phase II - In-lieu Fees - 5,434 486 4,948 1018.5% 5,434 n/a Phase III - Base Rent - 32 - 32 32 n/a Phase III - In-lieu Fees - 97 - 97 97 n/a DMCBP Phase II 208th St. Rent Credit (Phase I) - (450) (450) - 0.0% (450) n/a Lump sum payment of DMCBP Owner's Liaison Reimb - 100 100 - 0.0% 100 n/a Subtotal - DMCBP Revenue 284 5,864 868 4,996 575.5% 5,580 1963.6% in-lieu fees In-flight Kitchen Revenue 6,251 6,839 6,664 175 2.6% 588 9.4% $1.8M net impact to NERA 3 Grant Revenue - 1,350 1,350 - 0.0% 1,350 n/a NOI All other Commercial Properties revenue 1,387 1,472 1,368 104 7.6% 85 6.1% Commercial Properties Revenue 7,922 15,526 10,251 5,275 51.5% 7,604 96.0% DMCBP Phase III DMCBP Expenses Phase I prepaid frontage fee amort. 104 179 179 - 0.0% 74 71.5% Early activation of Phase II prepaid frontage fee amort. - 3,578 414 (3,164) -763.6% 3,578 n/a Phase III ground lease Phase III prepaid frontage fee amort. - 84 - (84) 84 n/a DMCBP Owner's Liaison expense 24 100 100 - 0.0% 76 309.2% Subtotal - DMCBP Expenses 129 3,941 693 (3,248) -468.7% 3,812 2965.2% NERA 3 Grant expenses - 1,500 1,500 - 0.0% 1,500 n/a All other Commercial Properties expenses 266 211 261 50 19.2% (55) -20.6% Commercial Properties Expenses 394 5,652 2,454 (3,198) -130.3% 5,257 1333.6% Income from Operations 7,528 9,874 7,797 2,077 26.6% 2,346 31.2% DMCBP all acreage under ground lease DMCBP all acreage under ground lease 36 Aero Revenue Sharing Impact on Aero 2015 2016 2016 Revenues 'Budget vs Forecast $ in 000's Actual Forecast Budget $ % Aero Revenues (incl' commercial) 259,113 289,891 289,074 817 0.3% Non-Aeronautical Revenues 196,844 223,613 208,321 15,292 7.3% Total O&M Expenses (238,140) (268,742) (268,216) (526) 0.2% Net Operating Income 217,816 244,762 229,179 15,583 6.8% ADF Interest Income 2,349 2,740 1,988 752 37.8% Security Checkpoint TSA Grant 1,102 1,000 1,000 - 0.0% Misc. Non-Operating Expenses (762) (1,278) (1,890) 612 -32.4% CFC Excess (5,159) (6,219) (5,146) (1,073) 20.9% Available for Debt Service [a] 215,347 241,006 225,132 15,874 7.1% Debt Service 125,153 135,723 135,217 505 0.4% Debt Service x 1.25 [b] 156,441 169,653 169,022 631 0.4% Available for revenue sharing [c]=[a]-[b] 58,906 71,352 56,110 15,242 27.2% Revenue Sharing [d]=[c]*0.5 29,453 35,676 28,055 7,621 27.2% Increased revenue sharing drives reduction in CPE 37 Expense Variances by Department Fav / (Unfav) 2016 2016 Budget Department Forecast Budget Variance Primary Drivers Landside 15,495 16,086 590 Curbside Assistants contract not utilized in 2016 Airfield 8,705 8,880 175 Cargo building maintenance contract savings Terminal 26,147 23,765 (2,382) Passenger Security checkpoint contract ($2.7M) and international incentives ($0.6M) Business Development 13,413 10,503 (2,910) DMBCP Phase II Amortization Utilities 15,303 15,252 (51) Aviation Executive 16,600 16,792 192 YTD Usage of contingency Airport Security 9,438 8,504 (934) Full Employee Screening Aviation Facilities 4,771 5,143 372 Vacancies & hiring delays Aviation Maintenance 57,701 58,485 784 Vacancies & hiring delays Aviation Planning 3,105 4,319 1,214 Advance Planning IDIQ Master Plan delayed start Aviation Environmental Group 4,717 5,745 1,028 SAMP environmental review savings ($1.3M), offset by Energy/Carbon Strategy and Biofuels projects ($0.3M) Aviation Risk Mgmt Expenses 2,799 1,873 (925) Update to legal reserves booked as of Q2 Aviation Environmental Reserve 6,383 3,246 (3,137) Reserve for Lora Lake Parcel, offset by deferred projects All Other Aviation Departments 2,761 2,823 63 Grand Total 187,304 181,417 (5,887) Airport Direct Expenses expected to exceed budget by $5.9M 38
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