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ITEM NO: 7d attach 1 DATE OF MEETING: JUNE 9, 2015 MARITIME DIVISION 2016 BUSINESS PLAN June 9, 2015 MISSION: Enrich our maritime legacy by leveraging our properties to create waterfront opportunities and grow maritime jobs in a financially and environmentally sustainable way. VISION: A vibrant working waterfront generating economic vitality for the region MAJOR AND NEW INITATIVES: Seaport Alliance: Complete transition of marine cargo properties and portfolio management Port Stormwater Utility: Implement for port owned properties within the City of Seattle Dramatic Growth: Leverage maritime properties to grow net income and economic benefit o Fund and construct Shilshole Bay Marina's new bathrooms/ lockers/laundry facility o Develop Fisherman's Terminal Strategic Plan and obtain Commission approval o Modernize Pier 66 and Pier 91 for larger cruise ships (Big Ship Ready II) o Develop habitat restoration into a line of business (port owned waterfront habitat) High Performance Organization: Deliver operational excellence and develop our employees o Operational Excellence: Deliver safe, compliant operations and maintain port assets Integrate and optimize operations of the new Maritime Division Implement operational and safety practices to achieve zero injuries o Talent Development: Develop staff capabilities, bench strength and opportunities Identify and implement targeted training to increase employee capabilities Develop and implement employee development plans and career paths o Valued Communication: Provide information that is clear, concise and relevant Leverage technology to improve quality and efficiency of communications Develop and implement measures to improve Commission communications STRATEGIES - SUMMARY: Implement Century Agenda Strategies Position the Puget Sound Region as a premier international logistics hub Structure our relationships with Washington ports to optimize infrastructure investments and financial returns (still a work is process with need for support from service groups Double the economic value of the fishing and maritime cluster Implement Century Agenda Strategies Advance this region as a leading tourism destination and business gateway Double the economic value of cruise traffic to Washington State Implement Century Agenda Strategies Use our influence as an institution to promote small business growth and workforce development Increase the proportion of funds spent by the port with qualified small business firms on construction goods and services to 40% of eligible dollars spent Increase work force training, job and business opportunities for local communities in maritime, trade, travel, and logistics Page 1 Implement Century Agenda Strategies Be the greenest, and most energy efficient port in North America Meet all increased energy needs through conservation and renewable sources Meet or exceed agency requirements for stormwater leaving facilities owned or operated by the Port Reduce air pollutants and carbon emissions Anchor the Puget Sound urban industrial land use to prevent sprawl in less developed areas Restore, create and enhance 40 additional acres of habitat in the Green/Duwamish watershed and Elliot Bay Meet local, state, and federal environmental regulations as effectively and efficiently as possible Manage our finances responsibly "Optimize" Maritime Financial Performance Meet 2016 financial targets Grow Maritime Division net operating income Reduce Port's environmental liability through cost recovery Maintain existing assets and invest in new development to sustain and enhance Maritime vitality Provide timely, accurate and insightful financial information and analyses for the Commission, Executive and other Leadership teams for decision making Ensure compliance with Accounting policies and procedures, and standards High Performance Organization Align leadership, people and systems with strategic priorities and plans Strengthen a high integrity, continuous improvement culture Increase organizational/individual ownership for safe/secure work practices and healthy living DIVISION DESCRIPTION: The Maritime Division includes two major business groups: Cruise & Maritime Operations and Commercial & Recreational Marinas. It also includes three service groups: Environmental Services & Planning, Finance & Budget, and Marine Maintenance. These business and service groups oversee strategic planning, business and facility development, maritime security and the management and operations of maritime facilities including cruise, grain and multi-purpose terminals, commercial moorage, recreational marinas and related properties. The Maritime Division and its facilities serve a diverse mix of year round and seasonal activities. May through September, Smith Cove Cruise Terminal and Bell Harbor Cruise Terminal serve as homeport for cruise ships headed to Alaska. October through May, Fisherman's Terminal and Terminal 91, serve as homeport for the North Pacific fishing fleet and factory trawlers. Throughout the year, recreational boats are served at Bell Harbor Marina, Harbor Island Marina and Shilshole Bay Marina - home to a vibrant liveaboard community. The Maritime Division also operates the Maritime Industrial Center and leases Terminal 86, a fully automated grain terminal, along with other industrial properties connected with these maritime activities and businesses. INDUSTRY ASSESSMENTS: Cruise The global cruise market continues to grow with many lines increasing their focus and deployment in Asia. This market growth is supported by global fleet expansion with larger ships and new product innovations to meet the more sophisticated demands of consumers. The Alaskan cruising market remains strong with cruise lines deploying some of their best ships here in the Northwest. Maritime Operations Page 2 The industry continues to adapt to an evolving regulatory environment, fishing industry consolidation and more limited marine terminal options. The North American Emissions Control Area (ECA) requires more stringent emission reductions for ocean going vessels operating within coastal waters. This places a higher burden of compliance on vessels transiting between Seattle and Alaska because the entire voyage is within the ECA, when compared to vessels on transpacific voyages. In addition, ongoing consolidation of the commercial fishing fleet is driving changes in facilities and services to meet the needs of larger homeport operations. The availability of suitable and affordable marine terminals is growing increasingly scarce in the Northwest. Recreational Boating The Recreational Boating industry continues to face challenges such as the affordability of boats and boating, attracting younger generations and minorities, and the emerging regulatory restrictions through taxes and reduced access to water. For the first time in 16 years, the 2015 Seattle Boat Show reported the average age of attendees dropped from 51 to 48 years old. Boaters are demanding upscale moorage facilities including highend amenities, finishes, and architectural details with more customization, automation and personalization. Nationally, the industry experienced steady growth with the majority of marinas reporting improved margins, flat moorage rates and steady or improved occupancy. The largest increased revenues came from in-water rentals (kayaks, paddle boards, etc.), boat rentals, restaurants, leased slips, fuel, and boat sales. Washington experienced strong growth in new boat sales, although the used boat market still composes the majority of boat sales. Fishing and Commercial The Alaska commercial fishing industry remains strong with the Alaska fisheries recognized as the most successfully managed in the world. With sustainable fisheries in the Bering Sea and Gulf of Alaska fisheries, the commercial fishing industry that homeports in Seattle remains stable. Commercial fishing companies are revitalizing their fleets by building new boats to replace aging fishing vessels. Although Alaska ports are working to build better infrastructure to support the small boat fleets, Puget Sound continues to be very attractive for off season moorage for all sizes of commercial boats due to better weather conditions conducive to working on boats as well as an established parts supply and maintenance service network. Grain With a larger global supply of corn and a larger late season U.S. soybean crop, USDA is expecting lower crop prices. U.S. exports of corn and soybeans are projected to have modest growth potentially curbed by a strong US dollar and increased competition from record South American supplies. Global soybean trade will continue to be driven by China, which accounts for nearly two-thirds of the world trade. Industrial Properties The Seattle/Puget Sound industrial market has been consistent and steady. This trend is expected to continue in 2016 and regional employment growth is expected to be positive. With positive growth in both areas inching upward, absorption of industrial space has outpaced the delivery of new space driving the high occupancy and low vacancy numbers reported in the industrial properties market. Industrial rental rates will continue to be somewhat flat with the close-in large industrial markets experiencing some modest increases. BUSINESS ASSESSMENTS: Cruise Moderate growth is expected with several larger vessels already confirmed for Seattle in 2016. Revenue passenger counts are expected to increase to more than 900,000. Based on continued surveys, the level of satisfaction for Seattle cruise passengers exceeds industry standards. Passengers surveyed express a strong desire to return to Seattle again in the future. The number of pre and post cruise passenger visits is steadily increasing in the region. Page 3 Maritime Operations Fishing fleet homeport demand is expected to remain stable in 2016. Fishing, tug and barge companies are making significant investments in vessel improvements and system upgrades. Other marine industrial moorage is expected to remain stable with moderate growth over time. The energy sector is driving change in maritime facilities as forward effort continues in oil exploration in north Alaska and as liquefied natural gas (LNG) for marine vessels becomes more prevalent in our region. Shilshole Bay Marina The monthly moorage occupancy at Shilshole Bay Marina remains strong, achieving over 95%. The continued high level of success is attributed to the marina's location, docks with good maneuverability and wide navigation channels, a strong and active liveaboard community, and strong customer focus. Over the next five years, several marina improvements are planned or underway including replacement of 1960's era restroom/shower/laundry buildings that are not adequate by today's standards; repairs to utilities, parking lot pavement and the 1962 fuel dock building; and rehabilitation of two docks omitted from the 2006-2008 Dock Replacement Project. The commercial property occupancy rate at Shilshole Bay Marina is currently at 100%. The main focus throughout 2016 will be to retain existing tenants and maintain property values. Fishermen's Terminal and the Maritime Industrial Center Commercial fishing vessel moorage demand remains steady with annual occupancy over 80%, even with the majority of customers leaving to work in Alaska for various parts of the year. The small commercial fishing boats (<40') market is most at risk due to the expense of operating a boat, owners retiring and boats relocating. This loss of commercial fishing moorage business is somewhat offset by monthly moorage for smaller recreational vessels which do not require year round moorage. The commercial property occupancy at both Fishermen's Terminal and the Maritime Industrial Center is 97%; better than the office industry wide average long term occupancy rate of 95%. The main focus throughout 2016 will be to retain existing tenants and maintain property values. Continuous efforts will be made in offering excellent customer service, increasing rental rates levels on renewals and accommodating space reductions and expansions while improving space for quality tenants. Dock and moorage assets at Fishermen's Terminal are all fairly new with the exception of the Northwest Dock, which is the oldest dock and now approaching thirty years old. Available shore power systems for the various sizes of boats set us apart from our competition. Over the next ten years, the capital plan for the entire Fishermen's Terminal property calls for up to $90M in projects including the NW Dock improvements, Docks 3 and 4 rehabilitation, corrosion protection to seawalls, Net Shed buildings roof replacements, and the Maritime Industrial Center west and central pier resurfacing. These projects are subject to the overall Port of Seattle capital plan funding priorities. The financial outlook is projected to be stable as staff continues to look at Fishermen's Terminal in an enterprenial fashion for revenue generating opportunities. Revenue gains are expected from an increased number of recreational vessels, while the recapitalization of the large vessel fishing fleet replaces old vessels with new ones; not necessarily adding vessels to their respective fleets. Moorage rates at the terminal for fishing and commercial vessels are at market when compared to other Puget Sound public ports. Recreational vessel rates at the terminal are at market as compared to local marinas. Grain The Pier 86 Grain Terminal handles corn and soy beans from the upper Midwest states primarily for export to China. Despite its age, operational improvements and automation help keep this facility competitive with the Tacoma facility and several other facilities on the Columbia River. Although capacity is increasing at other northwest grain facilities, the overall market projection is very strong and our terminal should remain competitive and productive for a long time. With soybeans and corn export activity close to the volumes prior to the 2012/2013 U.S. drought, this trend is expected to continue well into the 2015 harvest year, particularly for soybean exports. For 2015, the U.S. share of global trade is likely to remain at the 2014 level even with Page 4 higher competition from South America. (US Department of Agriculture, Grains and Oilseeds Outlook, Feb 2014). Industrial Properties Consistent with the regional figures discussed under the Industry Assessment, the forecast for the Seattle Close-In industrial market is for lease rates to remain steady, with slight upticks in rents possible. Demand for Seaport industrial properties is expected to remain consistent. The Maritime Industrial portfolio management staff will continue to manage the industrial portfolio for the purpose of maximizing revenue by balancing rental rates (demand) with fluctuating supply to match the performance of local Seattle Close-In market. CHALLENGES AND OPPORTUNITIES: Cruise Challenges Aggressive schedule of cruise line customers to expand facility passenger capacity by 2017 Controlling the cost of building, maintaining and operating marine terminals Limited capital capacity for investment in cruise terminal modernization to support larger ships Cruise Opportunity Increased demand for shorter cruise itineraries Customer interest in bringing larger cruise ships to homeport in Seattle Maritime Challenges Adapting facilities and operations to meet dynamic regulatory environment Attracting new maritime customers and vessel homeport bases with changing land use environment Maritime Opportunity Capability to set up short term Transportation Worker Identification Credential (TWIC) berths Opportunities for attracting vessel homeport bases for seafood, tug and barge fleets Recreational Marina Challenges Retaining customers and facility availability during upcoming capital improvement projects including Seattle waterfront construction projects. Maintaining assets responsibly within the Port system while still controlling costs Designing and rebuilding the Shilshole multi-use service buildings (restrooms/showers/laundry) in a way that will meet the long term needs of our customers and boost our current revenue streams. Identify and implement new revenue opportunities that take into consideration marina customer needs Recreational Marina Opportunity Implement new revenue opportunities that take into consideration marina customer needs Leverage new technologies to create efficiencies such as marina software update and handheld technology Leverage partnerships to create opportunities with organizations such as the Corinthian Yacht Club, The Adventuress, Seattle Yacht Club, and the Northwest Marine Trade Association. Fishing and Commercial Challenges Potential for further slow decline of the small fishing boat fleet (<40') due to market conditions Capturing the new business from the revitalized large commercial boat fleet is essential to remain the homeport of the North Pacific Fishing Fleet The revitalized fleet is out fishing longer, in port shorter. Small recreational boat owners are discouraged from taking moorage when summer weather is poor Page 5 Future planning and capital investment in properties with aging infrastructure and implementing energy conservation improvements to improve operating efficiencies and retain customers Fishing and Commercial Opportunity Retain business from commercial fishing customers who are recapitalizing their fleets Continue to grow recreational vessel fleet during off-season as space allows Promote legislation that would incentivise continued growth within the fishing and maritime industry Grain Challenge and Opportunity Grain volume can fluctuate significantly from year to year due to weather and market conditions Revenues from the grain terminal include a minimum annual guarantee and otherwise are subject to upside and downside depending on volume STRATEGIES AND OBJECTIVES STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES POSITION THE PUGET SOUND REGION AS A PREMIER INTERNATIONAL LOGISTICS HUB Objective: Grow Seaport annual container volume to more than 3.5M TEU's (Big Ship Ready) Performance Measures Performance Target Actions Co-Manage the East and 2017 - work with USACE Transition project to The Northwest West Waterways towards 2017 Feasibility Seaport Alliance accountability: deepening project with Completion Contribute information and coordinate as the U.S. Army Corps of 2020 - obtain project needed by USACE Engineers (USACE) authorization and initiate Draft Feasibility Study which will identify the planning and design phase tentative deepening plan in 2016 Acquire permit for Terminal 5 Meet February Transition project to The Northwest Seaport Terminal 5 modifications 2016 deadline Alliance accountability: Complete environmental review Prepare and submit permits Manage the permitting process Objective: Structure our relationships with Washington ports to optimize infrastructure investments and financial returns Performance Measures Performance Target Actions Support Washington Complete transition of Transition into contracting with the Northwest ports partnership marine cargo properties and Seaport Alliance to: initiative portfolio management Provide requested services and expertise Provide requested financial information and financial analyses Page 6 Objective: Double the economic value of the fishing and maritime cluster Performance Measures Performance Target Actions Grow existing and attract Increase/expand existing Support existing customer base efforts to grow new seafood value seafood customers. Survey current customers at Terminal 91 to determine what additional operational requirements would be of benefit to them Attract new seafood Recruit new seafood companies to the Port customers. Develop Fishermen's Return to Commission by Obtain consultant, perform outreach, and Terminal Strategic Plan end of Q4 with design develop concept alternatives and obtain Commission concepts approval STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES ADVANCE THIS REGION AS A LEADING TOURISM DESTINATION AND BUSINESS GATEWAY Objective: Double the economic value of cruise traffic to Washington State Performance Measures Performance Target Actions Grow our market share in Commitment from Provide POS representation in the Cruise Lines homeport cruise industry customers for shorter International Association (CLIA) Executive itineraries for 2017 and Partner Program at annual CLIA events beyond including the Leadership Forum, Congressional Commitment from new Caucus and Cruise3Sixty tourism/ travel trade customer for homeport show. CLIA provides forum to influence vessel for 2017 and beyond positive outcomes through engaged participation of stakeholders, aligning messaging on critical issues to speak through one voice Support Cruise Shipping Miami- Seatrade Miami, West Coast Collaborative, Cruise the West (CTW). Work with other ports in CTW to promote West Coast/ Alaska and Hawaii cruise markets at annual industry conference and trade show. Cost of booth shared with other Ports Work with other Pacific Northwest ports on joint marketing efforts to promote shorter cruise itineraries. Prepare Port of Seattle for Identify operational Work with the airport staff to improve the changes occurring in improvements to increase passenger/bag efficiencies and logistics between the cruise Industry passenger terminal P66, SCCT and STIA Larger ships will efficiencies Work with Customs Border Patrol (CBP) to eventually be on the West improve passenger processing efficiencies (i.e. Coast explore onboard clearance) at P66, SCCT and STIA Page 7 Advance conceptual design Work with SPM, AV and consultants to development, estimate cost, increase/optimize P66 passenger processing schedule and permitting capacity and utilization requirements for potential Seek long-term berthing commitment from cruise terminal expansion cruise line for future large ship Complete dredge of east Complete work with agencies to permit cruise berth at Terminal 91 dredging project Increase pre and post Increase the awareness of Partner with Visit Seattle, Washington Tourism cruise passenger stays in the travel industry and top Alliance and local business on familiarization Seattle and the region selling cruise travel agents events and cruise line visits. Coordinate work on Seattle and the region with Port tourism effort STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES USE OUR INFLUENCE AS AN INSTITUTION TO PROMOTE SMALL BUSINESS GROWTH AND WORKFORCE DEVELOPMENT Objective: Increase the proportion of funds spent by the port with qualified small business firms on construction goods and services to 40% of eligible dollars spent Performance Measures Performance Target Actions Maintain high level of Continue record of more Execute contracts that support achieving target contract and consultant than 40% of funds spent by work performed by small the Maritime Division on businesses contracting going to small businesses Objective: Increase work force training, job and business opportunities for local communities in maritime, trade, travel and logistics Performance Measures Performance Target Actions Support workforce Support workforce Interface with Manufacturing Industrial Council development in maritime development in maritime of Seatttle cluster cluster STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES BE THE GREENEST AND MOST ENERGY EFFICIENT PORT IN NORTH AMERICA Objective: Meet all increased energy needs through conservation and renewable sources Performance Measures Performance Target Actions Reduce electrical energy No increase in electrical Install outdoor lighting upgrades at needs through energy use from 2011 Fishermen's Terminal and Jack Block Park conservation with baseline by 2020 in 2016 positive financial metrics Perform energy audit at one other Maritime facility per energy performance plan for inclusion in 2017 Capital Budget Page 8 Increase use of renewable Include cost effective Identify one cost effective renewable energy energy renewable energy project in project by Q4 2016 2017 Capital Budget Objective: Meet or exceed agency requirements for storm water leaving facilities owned or operated by the port Performance Measures Performance Target Actions Meet conditions of Port No non-compliance Prepare annual report to Ecology to demonstrate Phase I municipal conditions 2015 compliance. Track 2016 compliance for National Pollutant 2017 report. Discharge Elimination System (NPDES) permit Implement and manage Assess and survey condition Collect stormwater fees for Port Stormwater Port Stormwater Utility of all stormwater Utility accurately, correctly, and verifiably to deliver efficient and conveyance by 2018 and beginning on January 1, 2016 effective stormwater complete maintenance of Extend utility billing/lease boundary services 30% of stormwater system database system to all sites by end of 2016 by 2020 Assess 40% of stormwater infrastructure by Q4 Identify and plan for rehabilitation of stormwater system for 200 acres Objective: Reduce air pollutants and carbon emissions Performance Measures Performance Target Actions Meet Northwest Ports Admin-1: Port Admin-1: Complete fuel efficiency (including Clean Air Strategy goals Administration fuel anti-idling and other operational measures) plan efficiency plan (including for Port fleet anti-idling and other operational measures) for for Port vehicle fleet maintained Reduce carbon emissions Conduct 2015 The Climate Complete TCR inventory and submit to TCR from port operations Registry (TCR) inventory by Q3 2016 Downward trend in total Analyze results and trends in Green House Green House Gases (GHG) Gases emissions emissions reported to The Update energy performance plan to ensure Climate Registry continued downward trend in Green House Gases emissions Page 9 Objective: Anchor the Puget Sound urban-industrial land use to prevent sprawl in less developed areas Performance Measures Performance Target Actions Industrial land use Replace Industrial Engage in in City public process associated with regulations in City's Commercial "IC" zoning land use studies and processes by Comprehensive Plan with a new industrial zone advocating with City staff, update and in City land concept that better use code support a incentivizes industrial writing comment letters as opportunities growing maritime development and maritime- arise, business related development. Target providing public testimony at City Council 2016 meetings, and; City's Comprehensive Plan collaborating with a wide range of update process retains stakeholders aligned with industrial and/or improves the preservation and coordinate mutual actions preservation of industrial as appropriate land use policies and protects freight corridors. Target: Annually City's arena triggered land use studies result in no residential or lodging uses in the stadium overlay district and that these studies result in enhanced industrial friendly land use regulations in the Duwamish manufacturing/ industrial center. Target: 2016-2018 Objective: Restore, create and enhance 40 additional acres of habitat in the Green/Duwamish watershed and Elliot Bay Performance Measures Performance Target Actions Create 13 acres of habitat Construction underway by (assumes Trustee negotiations completed in at T117 by 2017 Q3 2015) Bid and award T117 project by Q1 2016 Start construction T117 project by Q3 2016 Develop habitat Develop a wetland habitat Prospectus approved by interagency review restoration into a line of mitigation bank and team Q1 2016 business evaluate other opportunities Instrument approved Q3 2016 for revenue generation Investigate potential of using habitat sites for City of Seattle ILF program mitigation Page 10 Objective: Pursue better ways to address and implement environmental regulations Performance Measures Performance Target Actions Implement Lower Duwamish 1. Activated carbon study construction in 2016. Comprehensive Waterway Monitor results in 2017-2019 Environmental Response, 1. Complete Lower Compensation, and Duwamish Agreed Order Liability Act (CERCLA) work by end of 2019 and Model Toxics Control Act (MTCA) 2. T115N Remedial 2. Submit draft report by Q2 projects as efficiently and Investigation and Feasibility Study. effectively as possible Submittal of draft Remedial Investigation in 2016 East Waterway 3. Draft final report resubmitted to EPA by end 3. East Waterway of Q2. Feasibility Study finalized in 2016. EPA signs Record of Decision (ROD) and design phase initiated by 2020. 4. Design and implement 4. Complete design by Q4 the remedial action at T30 cleanup site by Q4 2017 STRATEGY: MANAGE O UR FINANCES RESPONSI BLY - OPTIMIZE MARITIME FINANCIAL PERFORMANCE Objective: Meet 2016 fin ancial targets Performance Measures Performance Target Actions Maritime Division 2016 Net Operating Income of Continually monitor potential risks to Net Net Operating Income $TBD Million at Operating Income 12/31/2016 Develop plans to mitigate or offset potential losses resulting from these risks Maintain and enhance Match occupancy targets of Meet or exceed property occupancy targets that Maritime Industrial/ Seattle close-in market for match Seattle close-in market for our Commercial Property industrial and commercial industrial/commercial property Occupancy Rates and properties Key negotiations include option to extend lease Budgeted Revenue with Marel Seattle Inc. consisting of three leases at Terminal 91 and option to renew lease with WSDOT at Terminal 106 East Page 11 Achieve average moorage Recreational Marinas 95% All staff continue to provide an extraordinary occupancy target for year customer service experience (GEM-Going the Fishing and Commercial Extra Mile) facilities (Fishermen's Terminal/Maritime Operations and Marketing staff review monthly Industrial Center) 80% occupancy, demand, and trends together. Adjust action plans as needed. Objective: Grow Maritime Division Net Operating Income Performance Measures Performance Target Actions Complete Street Vacation Complete all T18 Reach agreement with City on Street Vacations obligations to the City of requirements by the end of conditions Seattle for Terminal 18 2016 Objective: Reduce the Port's environmental liability through cost recovery Performance Measures Performance Target Actions Partner reimbursements Port partners are invoiced Timely preparation of partner billings invoiced and partners pay within 30 days after month- Monitor timeliness of partner payment with in a timely manner end follow-up on any deliquencies Department of Ecology Submissions are completed Proper set up of processes to to efficiently and Grants are processed and reviewed within 30 effectively comply with grant requirements quarterly days after quarter-end Timely preparation and review of grant submissions Insurance submittals are Submissions are completed Proper set up of processes to efficiently and completed monthly and reviewed within 45 effectively meet insurance requirements days after month-end. Timely preparation and review of insurance submissions Objective: Maintain existing assets and invest in new developments to sustain and enhance Maritime Division vitality Performance Measures Performance Target Actions Implement capital Shishole Bay Marina Work with Project Management to assist projects Restroom Buildings: completion of projects per plans. Complete design and begin construction by Q3 2016 Comprehensive Maritime Expand plan to include Have updated list of needed projects available Division Asset Commercial and for budget process Stewardship Program Recreational Marinas Monitor plan and implement minor repairs per Maritime Division Asset Stewardship Program. Page 12 STRATEGY: HIGH PERFORMANCE ORGANIZATION Objective: Align leadership, people and systems with strategic priorities and plans Performance Measures Performance Target Actions Alignment of Maritime Maritime Division staff Maritime Division "All-Hands" meetings are Division staff with have been briefed on held on a monthly basis where staff is briefed on strategic priorities and Maritime strategic priorities current events including at least annually plans and plans Maritime Division Strategic Plan. Develop staff capabilities, Identify and implement Provide introductory LEAN training bench strength and targeted training to increase Provide other targeted training as identified opportunities employee capabilities Objective: Strengthen a high integrity, continuous improvement culture Performance Measures Performance Target Actions Work process Staff is process Leadership reinforces need to continually look improvements improvement oriented for ways to do things more effectively and implementing small efficiently, even with small changes improvements as well as Celebrate successes in implementing process more significant items. improvements both big and small Objective: Increase organizational/individual ownership for safe/secure work practices and healthy living Performance Measures Performance Target Actions Maritime Security Provide support in Provide information and tools needed for each Program Manager developing and maintaining department to develop COOP supports Non-Aviation COOP Information sharing for individuals to be Departments with their prepared at home and within their own work Continuity of Operations environment Plans (COOP) Attain perfect score on 100% on year-end 2016 100% of Commercial and Recreational Marina the Health and Safety Safety Plan audit (published employees complete all requirements and Plan audit for marinas Q1) training as specified in the facility safety plans Page 13 This page is intentionally left blank APPENDIX MARITIME DIVISION BUSINESS AND SERVICE GROUPS MARITIME DIVISION 2016 BUSINESS PLAN Appendix containing 2016 Business Plan Documents for: Cruise & Maritime Operations Pages A1-A6 Commercial & Recreational Marinas Pages A7-A17 Environmental Services & Planning Pages A18-A23 Marine Maintenance Pages A24-A26 Maritime Finance Pages A27-A31 APPENDIX MARITIME DIVISION BUSINESS AND SERVICE GROUPS This page is intentionally left blank APPENDIX MARITIME DIVISION BUSINESS AND SERVICE GROUPS CRUISE & MARITIME OPERATIONS 2016 BUSINESS PLAN MISSION: Provide safe, secure and efficient cruise ship terminals and cargo handling maritime facilities which include large vessel berthing docks for moorage, working apron areas and related equipment, cruise passenger terminals, utilities and services to encourage current and new customers to move greater amounts of marine tonnage and cruise passengers through the Port of Seattle. Market and provide cruise ship services and facilities that maintain and grow the cruise business in the Seattle area. These facilities and services will enhance the economy of the region, protect jobs and provide a reasonable rate of return to the Port of Seattle and the citizens of King County while advancing the Port's Century Agenda Goals. DESCRIPTION: Cruise & Maritime Operations is made up of multiple deep water commercial moorage facilities in and around the harbor with over 17,000 lineal feet of large vessel berth moorage including two cruise passenger terminals. Maritime Facilities include: T91 piers 90 and 91, T46 North; plus vessel berths at P2, P17, 18N, P25, P28, P34, P69, and other maritime facilities. The two cruise terminals include a single cruise vessel berth facility at Pier 66, the Bell Street Pier Cruise Terminal, and a two berth facility at Terminal 91, the Smith Cove Cruise Terminal. Customers include cruise lines, cruise terminal operator, charter and excursion vessels, tug and barge companies, large fishing and commercial vessels, ships of state and other government vessels. Industry sectors served include cruise, marine transportation, staging and transport, stevedoring service providers, the commercial seafood industry, bunker and distillate fuel distribution, and tug and barge services. STRATEGY: 2016 Business Strategy will focus on continued outreach to potential maritime business sectors in efforts to increase utilization levels of Maritime facilities. Staff will continue to seek opportunities to grow our port's market share of maritime business activity which aligns with the Century Agenda goals of supporting job growth in our region. For 2016 overall strategy for Cruise & Maritime Operations will focus on growth opportunities, increasing revenue and securing long term business commitments. Identifying synergies between all sectors of the newly reformed Maritime Division Cruise: For the cruise business, our strategy is to market Seattle as a homeport and a port of call to cruise lines serving Alaska and the Pacific Northwest. Our goal is to maintain and grow our market share, increase cruise passenger volumes and annual number of ship calls. We also create value for our customers by making our cruise terminals more efficient and cost effective; working with the Airport and logistic providers along with our cruise terminal operator to improve the operations and passenger experience at the cruise terminals and Airport; and working with the tourism and business community so that we maximize economic impact from visiting passengers and cruise ships. A priority focus for 2016 will be expansion/ renovation/ redevelopment opportunities of Port cruise facilities. Maritime Operations: For docks/commercial moorage facilities, we will work with the terminal operators, tugboat, fishing industry, stevedoring companies, vessel agents and other dock users to maximize the use of vessel berthing and dock facilities providing net income to the port. We focus on providing customer value through building and maintaining relationships with our key customers, and continually strive to better understand and anticipate their business needs. Retaining our current customers across all maritime sectors continues to be a key focus. We also invest in strategic capital improvements to maintain and improve facilities, accommodate current customers' needs, attract new business, and enhance revenue from our facilities. Page A-1 Focus for the coming year will be on retaining customers and growing core business, asset stewardship-- annual maintenance procedures and condition monitoring, advancing capital improvement programs that align with competing Maritime Division priorities, completing projects underway and expanding our green gateway strategy. This will include identifying storm water improvements needed at T91 along with seeking energy efficiencies and reducing operating costs through use of new technology in energy efficient yard lighting and security equipment. Maritime Security: The focus of Maritime Security will be to maintain compliance with regulations and policy, reduce security risks and to enhance business through identifying potential security technologies to improve the efficiency of our Port and customer operations and to reduce cost-of-investment when possible through the effective use of any available grants. Maritime Security will continue to provide security services to the Corporate, Economic Development and Maritime Divisions. Emergency Preparedness: In connection with the Airport Emergency Management program which covers the entire organization, Maritime will support Non-Aviation Departments in developing and maintaining their department Continuity of Operations Plans (COOP), Emergency Response Plans and Preparedness and assist in response to Non-Aviation emergencies. Updates will be made to the Maritime Emergency Preparedness program, and information sharing and education will be provided to Non-Aviation staff to better prepare themselves for an emergency situation. INDUSTRY ASSESSMENTS: Cruise Global industry growth expected to continue in 2016. According to recent CLIA report, in the U.S. alone the cruise industry contributes $44 billion in positive economic benefits, including 363,000 jobs with direct and indirect employment paying more than$18 billion in wages. Market growth supported with global fleet expansion, larger ships with new product innovations to meet the high demands of consumers. Alaska Cruising market remains strong. Cruise lines continue to present some of their best products here in the North West. 2016 vessel schedule for Seattle brings a larger RCI ship to the collective fleet. Maritime Operations Heightened regulatory and environmental standards driving industry change. Requirement for cleaner fuel for ocean going vessels operating within the Emission Control Area (ECA). Supply of suitable and affordable marine terminals is growing increasingly scarce in the NW. Ongoing consolidation of the commercial fishing fleets will require changes in facilities and services to meet demand of larger homeport operations. BUSINESS ASSESSMENTS: Cruise Expecting moderate growth for Seattle in 2016. Larger vessels confirmed. Revenue passenger counts expected to increase to more than 900,000. Based on continued surveys Seattle cruise passengers level of satisfaction exceeds industry standards. Passengers surveyed have expressed strong desire to return to Seattle again in the future. The number of pre and post cruise passenger visits is steadily increasing in the region. Maritime Operations Fishing fleet homeport demand is expected to remain stable in 2016. Fishing, tug and barge companies making significant investment in vessel improvements and system upgrades. Other marine industrial moorage is expected to remain stable with moderate growth overtime. Energy sector driving change in maritime facilities, as forward effort continues in oil exploration north Alaska and LNG for marine vessels becomes more prevalent in our region. Page A-2 CHALLENGES AND OPPORTUNITIES: Challenges Aggressive schedule of Cruise Line customers to expand facility passenger capacity by 2017. Controlling the cost of building, maintaining and operating marine terminals. Limited capital capacity for investment in cruise terminal modernization for larger ships and new technology. Opportunities Increased demand for shorter cruise itineraries. Customer expressed desire to bring larger Cruise ships to Homeport out of Seattle Ability to set up short term TWIC berths. Opportunities for homeport bases supporting seafood, tug and barge fleets, mega yachts and Commercial vessels 2016 STRATEGIES AND OBJECTIVES STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES POSITION THE PUGET SOUND REGION AS A PREMIER INTERNATIONAL LOGISTICS HUB Objective: Structure our relationships with Washington ports to optimize infrastructure investments and financial returns Performance Measures Performance Target Actions NWMTA/CAPA meeting Maintain engaged Provide POS representation from business group participation participation through and legal department in all meetings of discussions with WA and NWMTA and CAPA/NWMTA regarding rates CA port authorities to and terminal investments advance common interests Objective: Triple the value of our outbound cargo to over $50 billion Performance Measures Performance Target Actions Increased frozen seafood Grow volume to over Partner with Seafood customers to attract more cargo volume 50,000 MT cargo through Port Facilities. Ensure port use fees reflect current market consistent with value. Perform survey of NW ports fee structures Objective: Double the economic value of the fishing and maritime cluster Performance Measures Performance Target Actions Grow existing seafood Increase/expand existing Support existing customer base efforts to grow. value seafood customers Survey current customers at T91regarding what additional operational requirments users of the facility would benefit from Attract new seafood Attract new seafood Recruit new seafood companies to the Port value customers Page A-3 Additional dry storage Meet fishing and maritime Complete an analysis to develop a new portable facilities T91 customer on site dry storage dry storage facility at T91 by year end size and needs in support their placement location TBD operations at T91 Review market demand Determine feasibility and for Dry Boat staorage Determine demand through Market analysis cost and location to develop dry boat storage Complete rehabilitation Redevelopment of berths 6 Complete an analysis to make a decision of Pier 90 structure. and 8 with adjacent uplands. regarding prioritization/funding plan for the design and permitting. Consider other use for this area. STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES ADVANCE THIS REGION AS A LEADING TOURISM DESTINATION AND BUSINESS GATEWAY Objective: Double the economic value of cruise traffic to Washington State Performance Measures Performance Target Actions Grow our market share in Commitment from Provide POS representation in the CLIA homeport cruise industry. customers for shorter Executive Partner Program at annual CLIA itineraries for 2017 and events including the Leadership Forum, beyond. Congressional Caucus and Cruise 3 Sixty tourism/ travel trade show. CLIA provides Commitment from new forum to influence positive outcomes through customer for homeport engaged participation of stakeholders , aligning vessel for 2017 and beyond messaging on critical issues to speak through one voice Support CSM- Seatrade MIAMI West coast port collaboration "Cruise the West Assoc CTW " Work with other ports in CTW to promote West Coast/ Alaska and Hawaii Cruise Markets at annual Industry Conference and Trade Show. Cost of booth shared with other Ports Work with other PNW ports on joint marketing efforts to promote shorter cruise itineraries. Prepare Port of Seattle for Identify operational Work with the airport staff to improve the changes occurring in improvements to increase passenger/bag efficiencies and logistics between the cruise Industry passenger terminal P66, SCCT and STIA Larger ships deployed to efficiencies Work with Customs Border Patrol (CBP) to the West Coast Market improve passenger processing efficiencies (i.e. explore onboard clearance) at P66, SCCT and STIA Page A-4 Advance conceptual design Work with SPM, AV and consultants to development, estimate cost, increase/optimize P66 passenger processing schedule and permitting capacity and utilization requirements for potential Secure long-term berthing commitment from cruise terminal expansion cruise line for future large ship. Complete dredge of east Complete work with agencies to permit cruise berth at Terminal 91 dredging project. Increase pre and post Increase the awareness of Participate with Visit Seattle, Washington cruise passenger stays in the travel industry and top Tourism Alliance and local business on Seattle and the region. selling cruise travel agents familiarization events and cruise line visits. on Seattle and the region. Coordinate work with Port Tourism effort STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES USE OUR INFLUENCE AS AN INSTITUTION TO PROMOTE SMALL BUSINESS GROWTH AND WORKFORCE DEVELOPMENT Objective: Increase the proportion of funds spent by the port with qualified small business firms on construction goods and services to 40% of eligible dollars spent Performance Measures Performance Target Actions Review maintenance and Identify small business Select small business contractors from CPO small cap work for small contractors business list when need for outside services is business opportunities necessary Objective: Increase work force training, job and business opportunities for local communities in maritime, trade, travel and logistics Performance Measures Performance Target Actions Veterans fellowship Hire one Veterans Fellow in Seek opportunites to hire a Veterans Fellow in program 2016 the Maritime Division STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES BE THE GREENEST AND MOST ENERGY EFFICIENT PORT IN NORTH AMERICA Objective: Collaborate with industry to reduce environmental impact while enhancing our competitive advantage Performance Measures Performance Target Actions Represent the maritime Reach agreement between Facilitate communication with all parties, Port Division in Memorandum the three signatories of the Commission and staff and the cruise lines and of Understanding MOU on crafting participate in meetings and conference calls between the Port of amendments to improve the Seattle, CLIA-NWC and program Ecology Page A-5 STRATEGY: MANAGE OUR FINANCES RESPONSIBLY OPTIMIZE MARITIME FINANCIAL PERFORMANCE Objective: Grow Maritime revenue Performance Measures Performance Target Actions Revenue growth Commerical moorage Market available berth space. Seek new use of increase P69 Berth Secure lease agreement for P-34 Dolphins Revenue growth Identify new business Advance marketing efforts for attracting Mega prospects Yacht business Revenue growth Identify new business Determine feasibility for passenger water taxi prospects T91 to down town STRATEGY: HIGH PERFORMANCE ORGANIZATION Objective: Align leadership, people and systems with strategic priorities and plans Performance Measures Performance Target Actions PREPs aligned with Port 100% of CMOS annual Ensure all staff Performance Plans incorporate priorities PREPs include metrics tied at least one metric tied to Port Strategic to Port priorities Priorities and Plans Employee development Objective: Strengthen a high integrity, continuous improvement culture Performance Measures Performance Target Actions Continuous Process One new idea for CPI Review Maritime Operations billing procedures. Improvement (CPI) evauluation Adopt, Implement new methods Embrace CPI improvements CMOS aware of emerging new processes, and adopted by Maritime adopts when appropriate Division Objective: Increase organizational and individual ownership for safe and secure work practices and healthy living Performance Measures Performance Target Actions Support Non-Aviation Provide support in Provide information and tools needed for each Departments with their developing and maintaining department to develop COOP. Continuity of Operations COOP Information sharing for individuals to be Plans (COOP) prepared at home and within their own work environment Personal Protective 100% compliance/ Safety CMOS staff utilizes appropriate PPE when on Equipment (PPE) on terminals/construction sites. No Injuries jobsites Page A-6 COMMERCIAL AND RECREATIONAL MARINAS 2016 BUSINESS PLAN MISSION: To operate recreational marinas, commercial fishing harbors and commercial properties in a way that distinguishes us from other marinas by: offering a full-range of products and services of value; delivering extraordinary customer service; using our creativity to provide amenities and events that make us unique; operating efficiently and cost-effectively; maximizing the assets that we manage for the Port; ensuring compliance with all legal, financial, and regulatory aspects of ownership; providing a rewarding work environment for our employees; and promoting a spirit of partnership within the communities that we serve. Our goals will be accomplished with professionalism, integrity, and respect for the environment in support of the mission of the Maritime Division and in alignment with the Port's Century Agenda. DESCRIPTION: The Commercial and Recreational Marinas' Group includes five marinas serving commercial and recreational vessels as well as tenants of commercial buildings. The two commercial fishing moorage facilities, home to the North Pacific Fishing Fleet, provide space for more than 600 commercial fishing vessels, commercial and Tribal work vessels as well as recreational vessels. The three recreational marinas provide facilities for more than 1,600 recreational, commercial fishing, and commercial pleasure vessels and 13,000+ guest boaters. The waterside facilities provide floating moorage slips, fixed piers, inside and outside storage, cranes/hoists, fuel dock/store and other products and amenities. Landside facilities are comprised of 219,000 square feet of commercial buildings that include 85 offices, industrial and retail leases, which include a shipyard, two boatyards, a marine transportation operation, retail shops, restaurants, sailing clubs, yacht brokers and more. Port facilities are: Bell Harbor Marina - a recreational marina on the Seattle Central Waterfront Fishermen's Terminal the Homeport of the North Pacific Fishing Fleet is primarily a commercial marina with commercial buildings that also accomodates recreational vessels, located at the north end of Seattle on the Lake Washington Ship Canal The Maritime Industrial Center - a commercial marina with commercial buildings to the west of Fishermen's Terminal on the Lake Washington Ship Canal Harbor Island Marina - a recreational marina at the southwest end of Seattle at Terminal 102 Shilshole Bay Marina - a recreational marina in the north end of Seattle, west of Ballard, next door to Golden Gardens Park Providing extraordinary customer service (GEM-Going the Extra Mile) is our primary focus. Customers include: office, industrial and retail tenants, commercial and sport fishermen; commercial pleasure and work boat operators; recreational boaters including mega-yacht owners; Tribal members; and other commercial businesses including boating charters, sailing clubs, yacht brokers, parasail operator, kayak rental, a fuel dock operator and more. There is a strong link between each of the facilities and our neighboring communities of Ballard, Magnolia, Central Seattle Waterfront and West Seattle. Page A-7 STRATEGIES: Meet or exceed net operating income targets by maintaining market rates and achieving our occupancy goals. Focus on new revenue streams and expense reduction opportunities. Respond to changing market conditions and enhance the value of each asset by continuing to selectively evaluate the various assets within our portfolio to identify and pursue new opportunities, such as strategic redevelopment plans, for existing assets. Maintain and manage assets to meet market demands, while focusing on earning a greater return on the publics' investments. Analyze future capital improvement alternatives considering total cost of ownership and impact to the bottom line. Focus on effective expense controls while meeting the needs of our tenants and customers. Be a leader in innovation and creativity within the Northwest recreational marina industry by continually looking at ways to add value to our customer's experience and to the marina industry. Support the Century Agenda and its maritime jobs objective by growing boating through partnerships with organizations involved in the engagement of youth in maritime activities/events and boating programs. Promote environmental stewardship by operating clean and green marinas/harbors and further educating customers and the public. Maintain safe and secure facilities via safety programs and employee vigilance; thereby minimizing the potential economic and physical loss to the Port. Develop and mentor our employees to enhance their skills and to better serve our customers. INDUSTRY ASSESSMENT: The Commercial and Recreational Marinas Group encompasses three different specialties: Commercial real estate management; fishing and commercial vessel moorage and services management; and recreational vessel moorage and services management. Commercial Properties Ship Canal/Ballard Submarket (Reference: Kidder Mathews 4th Q. 2014, Colliers 4th Q 2014, and CBRE 4st Q 2014) The commercial buildings at Fishermen's Terminal, the Maritime Industrial Center and Shilshole Bay Marina are located within the Ship Canal/Ballard submarket and are generally considered to be Class B and C properties due to their age and condition. The effects of the recession have subsided and according to local market reports we will experience steady improvements throughout 2016. Class B and C vacancy has continued to decrease in the Ship Canal Market and was at 4.4% in the 4th Quarter of 2014. Rates in lower Queen Anne/Lake Union dropped from 8.9% to below 7.0%. As Seattle's Central Business District recovers and the vacancies there decrease, the attractiveness and popularity of Fremont, Magnolia, Ballard and Wallingford are factors that have allowed many buildings in the area to retain tenants and sustain more demand than some of the other office submarkets. There are plans for a 500,000 sf office campus to be built along the Lake Washington Ship Canal in Ballard. Tech companies like Google and Tableau Software have been filling up buildings in nearby Fremont and the developer is banking on the property's waterfront location to draw tenants. Joining in this rush of tech companies moving to Seattle is Expedia, who recently announced its plans to move their headquarters from Bellevue to the 42 acre Amgen campus in Interbay. According to Colliers there is little to no new office space available in Ballard. Construction of new development won't start until some of the space is pre-leased. Page A-8 Class B and C Office The vacancy rate for Class B and C office space in the Ship Canal submarket is 4.5% compared to 6.5 % vacancy rate in the Queen Anne/Magnolia submarket and a 10.0% overall vacancy rate for the Puget Sound region. Market rent rates for Class B office spaces are slightly higher than those in 2014 and range from $16.50 - $19.50/sf /NNN for nicer well-kept Class B office space. Brokers indicated that a landlord would be fortunate to get $16.50/sf/NNN today for Class B space with aging improvements. Some landlords are starting to pull back on concession packages but many in this sub-market are still offering concessions that include a combination of abated rent and up to $40.00/SF for tenant improvements, particularly in buildings with lower occupancy. The Maritime Industry has a large presence is the Ship Canal/Ballard submarket and has not been lured away due to the need to be in close proximity to the commercial fishing fleets located there. According to most reports and to local brokers, rent and occupancy rates should continue to increase as consistent leasing and positive absorption ease pressure on landlords. Industrial The Puget Sound Industrial market has rebounded in the past two years and has been showing steady absorption which is expected to continue through 2016. Demand for industrial users remains high, especially for larger warehouse space in the 50,000 100,000 sf range. Rental rates rose during 2014 and are expected to hold steady in 2015 and 2016. For the third time in four years, the Puget Sound industrial total vacancy rate is well below 7.0%. Total vacancy in the Kent Valley is 5.8% and in the Seattle/Close-In market the total vacancy rate is 5.7%. The available quarterly reporting on industrial property focuses on the Kent Valley, where average rates for warehouse/distribution are $.40-$.50/sf/mo for spaces under 10,000 sf. In the Seattle/Close-In market, average rates are $.45-$1.00/sf/mo for medium to high grade buildings. These rates are both expected to increase slightly in 2016. Average warehouse rates in the Ship Canal area are around $.55/sf/mo. Land in this submarket is ranging from $.15-.20/sf/mo, which is the same range as land in the Seattle/Close-In submarket. In general the Ship Canal submarket, Ballard in particular, is an extremely tight market and warehouse space remains scarce. The warehouse vacancy rate reported in the Interbay submarket was 2.2%. A lot of buildings are owned and occupied by businesses that have been there for decades. . Recreational Boating Nationwide, marinas are experiencing steady growth in the recreational boating industry. For 2014 nationwide: 82% of marinas reported that they maintained their previous occupancy or improved it over the previous year and 52% of marinas reported higher gross profits in 2014. However, a majority of the facilities reported that their moorage rates remained at the 2013 level. Facilities saw the largest increased revenues with in-water rentals (kayaks, paddle boards, etc.), boat rentals, restaurants, leased slips, fuel, and boat sales. For Washington State, the 4th Quarter of 2014 out sold the 4th quarter in 2013 by 98 boats. This was a 75% increase for new boat sales. The used boat market still composes the majority of boat sales and they outperformed 2013 by 492 boats. The industry continues to be challenged by trending barriers such as the affordability of boats and boating, attracting younger generations and minorities, and the emerging regulatory restrictions through taxes and reduced access to water. However, the 2015 Seattle Boat Show registered a drop in average age of attendees from 51 to 48 years old, which was the first drop of this metric in sixteen years. In addition, boaters' expectations are driving up marina operating costs by demanding moorage facilities to be more innovative in their approach toward customization, automation and personalization. Amenities, finishes, and architectural details once considered high-end and reserved for the most luxurious marinas are making their way into the mainstream. Fishing and Commercial The long-term financial forecast for the commercial fishing industry is stable mainly due to sustainable fisheries in the Bering Sea and Gulf of Alaska. The Alaska fisheries are recognized as the most successfully managed fisheries in the world, ensuring the success of the industry in the future. Page A-9 Fishing and commercial boat operations continue to remain strong in the Puget Sound region. Revitalization of the large boat fleet is a good indicator of the health of the industry and commercial fishing companies continue to plan for, and are starting to build, new boats to replace aging fishing vessels. In addition to new vessel construction, the Puget Sound region benefits from dollars spent on maintenance and improvements to commercial fishing boats in the off season. According to a 2012 economic impact study by the Workforce Development Council of Seattle and King County, there were 57,700 workers and $30 billion impact by the maritime industry to our region. Although Alaska ports are working to build better infrastructure to support the small boat fleets, Puget Sound continues to be very attractive for off season moorage for all sizes of commerical boats due to better weather conditions conducive to working on boats as well as an established parts and service network. BUSINESS ASSESSMENT: Fis herm en' s Termi nal and The Mari ti me I ndust ri al Center - Waterside Commercial fishing vessel moorage demand remains steady with annual occupancy over 80%, even with the majority of our customers leaving to work in Alaska for various parts of the year. Small commercial fishing boats (<40') is the market that is most at risk due to the expense of operating a boat, owners retiring and boats relocating. We are able to compensate for this loss of business to some degree by providing monthly moorage for smaller recreational vessels which do not require year round moorage. Daily moorage demand for use of the loading docks on the West Wall and the Northwest Dock continue to exceed supply at certain times of the year. Because many of our customers work in the same fisheries, they all have the same deadlines and plans and accommodating all of them during key times of the year is challenging. Demand for gear storage, both inside and outside, continues to be strong and exceeds supply. Currently there are no ground floor storage lockers (net sheds) available and all outside fenced storage gear does not fit into the fenced storage areas resulting in net pallets loaded with gear being placed throughout the terminal. Dock and moorage assets at Fishermen's Terminal are all fairly new with the exception of the Northwest Dock, which is the oldest dock and now approaching thirty years old. Available shore power systems for the various sizes of boats continues to set us apart from our competition. Over the next ten years, the capital plan for the entire Fishermen's Terminal property calls for as much as $90 million in projects such as the NW Dock improvements, Docks 3 & 4 rehab, corrosion protection to seawalls, Net Shed buildings roof replacements, and the Maritime Industrial Center west and central pier resurfacing. These projects are subject to the overall Port of Seattle capital plan funding priorities. The financial outlook for the terminal is projected to continue to be stable. The opportunity for increasing revenues will come from increasing the number of recreational vessels, as the recapitalization of the distant water large vessel fishing fleet will, for the most part, replace old vessels with new ones, not necessarily adding vessels to their respective fleets. However, the recapitalization of the commercial fleet represents a stable and well managed industry. Moorage rates at the terminal for fishing and commercial vessels are at market when compared to other Puget Sound public ports. Recreational vessel rates at the terminal are at market as compared to local marinas. We continue to look at Fishermen's Terminal in an enterprenial fashion for revenue generating opportunities. Fis herm en' s Termi nal and The Mari ti me I ndust ri al Center - Landside The commercial property occupancy rate at Fishermen's Terminal is 97% and at the Maritime Industrial Center is also 97%. The office industry widely considers the average long term occupancy rate for office space to be 95%. The main focus throughout 2016 will be to remain creative in retaining existing tenants and maintaining property values. Continuous efforts will be made in offering excellent customer service, increasing rental rates levels on renewals and accommodating space reductions and expansions while improving space for quality tenants. Page A-10 Starting negotiations earlier to renew leases with existing tenants and providing rent abatement concessions in exchange for longer lease-term commitments will keep the rents at market rate and be a pro-active move in assuring tenants are not lured away by the new development of office space in nearby Ballard. There is a small amount of vacant office space that we will continue to market using the various MLS sites for commercial office space. We will also be working closely with the Commercial and Recreational Marinas Group to secure maritime related tenants that can use both the landside and waterside assets at the two facilities. Shilshole Bay Marina - Waterside Monthly moorage occupancy remains strong at over 95% at Shilshole Bay Marina which handles the majority of the port's monthly recreational moorage. The continued high level of success is attributed to the marina's location, state of the art docks designed with good maneuverability and wide navigation channels, a strong and active liveaboard community, and the customer focused experience the staff provides. Customer needs have led to new revenue generating ideas which require more study such as: Gear storage rental, off-season RV use, additional non-port events, expanding the liveaboard cap and adding food trucks. There are plans in place to analyze these ideas as well as to explore the following: Paid parking, providing Wi-Fi service to our customer which is now a common amenity in the industry; and soliciting development opportunities for an onsite restaurant (ground lease) to attract guest moorage customers and the public. The marina will be facing a number of major improvements over the next five years such as: replacement of the 1960's era restroom/shower/laundry buildings that do not meet the needs of many of our customers; repairs to utilities; repairs to the mile long parking lot/pavement; repair of the fuel dock building (built in 1962); and rehabilitation to two docks that were not addressed in the 2006-2008 Dock Replacement Project. Shilshole Bay Marina - Landside The commercial property occupancy rate at Shilshole Bay Marina is 100%. The main focus throughout 2016 will be to retain existing tenants and maintain property values. Continuous efforts will be made in offering excellent customer service, holding rental rates at current levels on renewals (if at market) and accommodating space reductions and expansions while improving space for quality tenants. Bell Harbor Marina relies on short-term guest moorage revenues and remains the only marina with easy access to the downtown corridor primarily. In the off season, a portion of guest moorage is changed over to monthly moorage in order to increase revenues. As the local economy is showing signs of recovery, there is an optimistic belief that Bell Harbor has the highest potential for future growth in terms of occupancy and revenue. New floatation has recently been added to the docks that will help extend the life of these assets. In addition, the marina office has been remodeled to better help meet the needs of our customers. BHM is facing capital improvement in the next few years to extend the life of the under pier pilings. The wavebreak panels will have to be addressed in the future: however, the panels recently underwent an assessment that indicated they have greater longevity than initially thought. BHM will eventually be affected by the waterfront construction which could have an impact on its revenues in the near future. Harbor Island Marina is an aging facility. Plans are in place to begin repairs of E-dock (float used by commercial tugs) in the fall of 2015. This dock is most in need of rehabilitation... Future dock repair projects are planned to follow every two years. Harbor Island Marina has a lower price point that is attractive to many cost-conscious boaters. This has led to the marina achieving a 94% occupancy rate, its highest rate in the past two years. We expect this improving occupancy trend to continue for at least another two years as we continue to make repairs. A challenge for marina pricing is its proximity to two concrete plants which produce dust on marina vessels. Page A-11 KEY CHALLENGES AND OPPORTUNITIES: Commercial Real Estate: Challenges Compliance with legal, financial and regulatory aspects of public entity ownership of real property can result in having a less competitive edge than the private sector in the commercial real estate market (contracting procedures, security deposit requirements, and limited flexibility in negotiations). This is likely to be reflected in achievable lease rates at the lower end of the market range and/or lengthier vacancies through missed opportunities. Having experienced high vacancy rates over an extended period, landlords of commercial real estate will continue to aggressively pursue tenants looking for commercial space. Well-positioned and maintained properties that offer attractive amenity packages more readily benefit from improving market conditions. Improving operating efficiencies in properties with aging infrastructure and implementing energy conservation improvements will involve forward planning and capital investment. Increasing regulatory requirements increase maintenance costs. Opportunities The current real estate market appears to be trending toward continuing recovery which suggests more opportunities for improving future revenue. Trends in lowering total operating expenses through maximizing building efficiency supports investments made in energy conservation initiatives. Upland redevelopment in connection with the Fishermen's Terminal Strategic Plan. Recreational Boating: Challenges Keeping facilities available, customers satisfied and revenues coming in, during upcoming capital improvement projects including Seattle waterfront construction projects. Maintaining assets responsibly within the Port system while still controlling costs. Designing and rebuilding the Shilshole multi-use service buildings (restrooms/showers/laundry) in a way that will meet the needs of our customers and boost our current revenue streams. Receiving timely services from our Port Partners. To be understood as a business that is built on leisure, hospitality, and fun. To provide all of the services that our 1600 + customers need and the work product that our leadership needs at three marinas with 17 staff members who cover a 7 days/week operation schedule. To find and implement new revenue streams without making the customers feel like they are being nickled and dimed or being taken advantaged of. Opportunities Adding value to Shilshole Bay Marina and new revenues where possible through projects and grants such as: Seaview Boatyard expansion, customer service buildings (restrooms/showers/laundry), restaurant pad (ground lease), outdoor fitness trail, guest moorage kiosk, storage for boating equipment, paid parking and bringing in more boatshows and 3rd party events. Page A-12 Exploring new lines of business that were previously not within the Port's strategy such as: dry stack moorage, creating a new Recreational or Commercial Marina at Harbor Island Marina, etc. Leveraging partnerships to create opportunities with CorinthianYacht Club, The Adventuress, Seattle Yacht Club, Northwest Marine Trade Association, to name a few. Utilizing new technologies to create efficiencies, such as an updated marina software system and handheld technology. Provide reliable connectivity so that future income streams based on technology would be available to us. Determining what additional staff services that we could charge for while not causing a labor issue. An example would be pressure washing boats. Fishing and Commercial: Challenges: Potential for further slow decline of the small boat fishing fleet (<40'). The price of fuel to vessel operators traveling to and from Alaska, likely at a new normal level. Poor weather conditions in June, July and August discouraging small recreational boat owners from taking moorage. Capturing the new business from the revitalized large commercial boat fleet is essential to remain the homeport of the North Pacific Fishing Fleet However, with the revitalized fleet comes longer stays on the fishing grounds, as commercial fishing vessels are staying out of port longer to maximize economic returns by diversifying their use, i.e. from fishing to tendering. Opportunities: Retain business from commercial fishing customers who are recapitalizing their fleets. Continue to grow the recreational vessel fleet. Use visibility of the fishing and maritime industry economic impact results to promote legislation that would incentivise continued growth within the industry. 2016 STRATEGIES AND OBJECTIVES STRATEGY: MANAGE OUR FINANCES RESPONSIBLY OPTIMIZE MARITIME FINANCIAL PERFORMANCE Key Objective: Meet 2016 Financial Targets Performance Measure Performance Target Actions Commercial and NOI before depreciation Review performance monthly and adjust Recreational Marinas of ($TBD) spending to meet the target. Group Total Execute the Marketing Plan and the Operations Plan. Work collaboratively with Marine Maintenance to identify and implement efficiencies throughout the year. Analyze additional revenue streams and implement where feasible. Fishermen's Terminal NOI before depreciation Same actions as above. of ($TBD) Page A-13 Maritime Industrial Center NOI before depreciation Same actions as above. of $TBDK Shilshole Bay Marina NOI before depreciation Same actions as above. of ($TBD) Other Marinas NOI before depreciation Same actions as above. of ($TBD) Key Objective: Achieve Target Occupancy While Maintaining Market Rates Performance Measure Performance Target Actions Achieve moorage and BHM Moorage: 74% FT Develop and maintain an ongoing leasing commercial occupancy Commercial: 95% FT and marketing strategy for assets that targets by year-end. Moorage: 80% responds to current commercial real estate HIM Moorage: 95% market conditions that include recommendations for: marketing; asking MIC Commercial: 95% rates based on market conditions; MIC Moorage: 70% concessions (i.e. improvement allowances SBM Commercial: 95% and rent abatements); level of maintenance; SBM Moorage: 92% capital improvements & utilization of outside brokers All staff continue to provide an extraordinary customer service experience (GEM-Going the Extra Mile) through a welcoming attitude, clean facilities and docks, continuance of the GEM Program and events. Operations and Marketing staff together review monthly the occupancy, demand and trends. Adjust action plans as needed. Increase daily and monthly Increase daily and Continue to implement where possible recreational moorage at monthly recreational extending summer moorage availability at Fishermen's Terminal moorage over 2015 the beginning and end of the summer. Actual Continue recreational customer outreach for moorage availability and the quality of our product via boat shows, NMTA, meeting with customers and marine vendor groups. Increase guest moorage at Increase daily and Implement Marketing strategies/plans BHM and SBM. monthly recreational specifically targeting guest moorage at SBM & moorage over 2015 BHM through targeted marketing, event Actual advertising, creative partenerships and outreach. Key Objective: Identify and implement new revenue streams. Performance Measure Performance Target Actions Finding and fully vetting Have one new revenue Assemble list of revenue ideas and priotitize potential new revenue stream ready with plan to by potential impact to revenue. Q1 streams. implement by the start of Determine total costs and revenues for 3 of Q1 2017. the top ideas. Give Finance the data to do a long term analysis on ideas.Q3 Page A-14 Develop plan for the item with the greatest positive return.Q4 Begin revenue stream implementation Q1 2017. Q3 2017 develop plan for 2nd revenue stream. Objective: Maintain existing assets and invest in new developments to sustain and enhance Maritime Division vitality Performance Measure Performance Target Actions Implement capital projects Complete design and Gain Commission funding approval for all permitting for SBM projects meeting the threshold. Work with customer service Project Management to assist with center buildings completion of improvements per Plans. (restroom, showers, Continue Customer and Community laundry, storage) Q3. Communications and Coordination Plan Construction bids for working with Public Affairs. Customer Service Bldg. and start of construction by Q3. *Design for A-dock will only commence after Complete the remodel approval is granted by leadership. Any required of SBM Fuel Float Q1. construction will not be started until after Begin design of SBM restroom project is completed, May 2017. lower "A" Dock improvements Q4. Complete design of BHM Pile Wraps Q4 Complete the refurbishment of HIM Commercial E-Dock. Q1. Implement planning and design for FT Paving Project Q3 STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES USE OUR INFLUENCE AS AN INSTITUTION TO PROMOTE SMALL BUSINESS GROWTH AND WORKFORCE DEVELOPMENT Objective: Foster New Business Opportunities for Local Businesses Performance Measure Performance Target Actions Utilize small businesses 15% of direct expense. When feasible, utilize qualified small businesses. Objective: Increase Work Force Training for Local Communities in Trade, Travel and Logistics Develop a partnership with Q4 Work with Marine-related organizations such other maritime groups to as,Corinthian Yacht Club, Seattle Yacht Club, help expand youth maritime NW Marine Trade Association and/or the programs Adventuress, etc, to develop programs, events or relationships that will help expose youth to Page A-15 boating and the maritime industry. Hire interns Hire by Q2 Hire an intern at FT and create a maritime learning experience. STRATEGY: IMPLEMEN T CENTURY AGENDA STRATEGIES BE THE GREENEST, AND MOST ENERGY EFFICI ENT PORT IN NORTH AMERICA Objective: Integrate Busi ness Friendly Environmental Objectives into our Organization Performance Measure Performance Target Actions Provide more vehicle Determine method of SBM: Work with Environmental to analyze charging stations that will implementation. Q4 and determine the means and methods of support the growth of installing Electric Vehicle Charging electric car utilization Stations. Q3- based on completed design thereby improving the air and placement of restrooms, locate areas quality. that have easy utility access. Q4 - Analyze available options: Port Installed or Private vendor. 2017, Q1 Move forward with design and layout or begin RFP for Vendor solution.Q4 implement design plan or sign contract. 2018, Q1 project completed. . Utilize energy and resource Designer fully analyzes Work with Project Manager and designers to efficiencies in the design and discusses all investigate green options for the Customer and construction of the opportunities for energy Service Facility. Vet each relevant option SBM Customer Service efficiency, environmental through the help of the Finance Department. Facilities. impact and resources used. Objective: Conduct Business Activities in Environmentally Appropriate Ways Performance Measure Performance Target Actions Maintain Clean Marina Certification maintained FT: Maintain regulatory requirements to Washington/EnviroStar and/or achieved Q4 achieve EnviroStar recertification by year- Certifications end SBM/BHM/HIM: Maintain standards to satisfy regulatory certification requirements (certified every three years; 2014 last certification) Enforce Marina Best Zero regulatory Marina staff continually educate customers Management Practices violations. about the BMP's & agency regulations (BMP's) & agency including enforcement. regulations. BMP Update Q4 Review FT & Recreational BMP's annually with Environmental and update as needed Page A-16 STRATEGY: HIGH PERFORMANCE ORGANIZATION Objective: Increase Organizational and Individual Ownership for Safe and Secure Work Practices and Healthy Living Performance Measure Performance Target Actions Attain perfect score on the 100% on YE 2015 Safety 100% of employees complete all requirements Health & Safety Plan audit Plan audit (published Q1) and training as specified in the facility Safety Plans Objective: Align Leadership, People and Systems with Strategic Priorities and Plans Performance Measure Performance Target Actions PREP Plans include clear Complete meetings Managers meet with employees to ensure accountabilities, measures, with 100% of understanding of accountabilities, measures participation in Port employees by end of including linkages of their work to the 2016 diversity activity and a January strategies, goals, and actions. Personal Development Plan Staff members will attend or participate in 100% of PREP plans one diversity activity per year. are completed on time Each employee will include a personal development plan in PREP; completion by year by year-end. 100% of Staff Employees and Managers complete PREPS on time. Objective: Strengthen a High Integrity, Continuous Improvement Culture Performance Measure Performance Target Actions Implement an industry Q4 Implement and complete the Work Plan generated, 3rd party marina including software installation, training of management system staff, working with ICT. Educate staff members To be scheduled by Require staff to attend a LEAN class by end about Lean Maritime Division of Q4 (may need to be phased) Managing Director Implement work process Q1 process review & SBM: Review operation processes and improvements utilizing the prioritization. prioritize by Q1. Lean process Implement one new Q4 Finalize agreed upon procedures and process improvement associated documents. by year-end Page A-17 MARITIME ENVIRONMENTAL & PLANNING 2016 BUSINESS PLAN MISSION: The mission of the Maritime Environmental and Planning department is to be the global leader among ports in demonstrating stewardship and reduction of the environmental impact of our operations, while enhancing our competitive advantage and preparing for the future of a growing maritime business. DESCRIPTION: Maritime Environmental and Planning is comprised of teams of professionals working in Remediation, Air Quality, Permitting and Compliance and Facility and Land Use planning. We support the Maritime and Economic Development Divisions as well as the Seaport Alliance and seek to demonstrate environmental stewardship and value to the business that we support and to the surrounding community. STRATEGY: Long Term Strategic Planning: To prepare for the future of a growing Maritime Business Asset and Portfolio Management: Pursue better ways to address and implement environmental regulations Operations: To improve income from operations while providing asset and environmental stewardship Finance and Information Systems: To use information systems and financial analysis to make prudent decisions consistent with our guiding principles. CHALLENGES AND OPPORTUNITIES: Challenge: Washington State has increasingly stringent regulations, particularly in the area of stormwater, construction and sediment clean up, and these can add substantial costs and impediments to business and operations. Opportunity: Increasingly stringent regulations are creating a market for mitigation Challenge: Funding is increasingly difficult to obtain for grant funded projects and funds available from business revenues are also increasingly constrained. However, proposed changes to MTCA grant rules may open up funding opportunities Challenge: Cleanup project and permitting schedules controlled by regulatory agencies and may move slowly Challenge: Department of Ecology direction increasing the number of sites under cleanup agreed orders is challenging Challenge: City policies for densification can make maintaining industrial uses challenging Opportunities to further apply CPI principles to permitting Increasing controls on Green House Gases could be both a challenge and an opportunity Opportunity: Creation of a stormwater utility creates revenue to maintain and repair stormwater infrastructure. Page A-18 2016 STRATEGIES AND OBJECTIVES STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES POSITION THE PUGET SOUND REGION AS A PREMIER INTERNATIONAL LOGISTICS HUB Objective: Grow Seaport annual container volume to more than 3.5M TEU's (Big Ship Ready) Performance Measures Performance Target Actions Co-manage Harbor-wide Work with ACE towards Contribute information and coordinate as (East and West 2017 Feasibility needed by USACE Waterways): USACE/ completion. 2020 obtain Draft Feasibility Study which will identify the Seattle Harbor project authorization and tentative deepening plan in 2016 Deepening Study initiate planning and design phase. Complete environmental Meet defined permit Manage permitting process to meet Feb 2016 review and prepare, schedule deadline for T-5 submit and acquire permits for Terminal 5 Objective: Double the economic value of the fishing and maritime cluster Performance Measures Performance Target Actions Develop Fishermen's Return to Commission by Obtain Consultant, perform outreach, and Terminal Strategic Plan end of Q4 with design develop concept alternatives and Obtain Commission concepts approval STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES ADVANCE THIS REGION AS A LEADING TOURISM DESTINATION AND BUSINESS GATEWAY Objective: Double the economic value of cruise traffic to Washington State Performance Measures Performance Target Actions Complete environmental Meet defined permit Manage permitting process to meet project goals review and prepare, schedule submit and acquire permits for Alaska Way Street widening. STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES BE THE GREENEST AND MOST ENERGY EFFICIENT PORT IN NORTH AMERICA Objective: Meet all increased energy needs through conservation and renewable sources Performance Measures Performance Target 2016 Actions Reduce electrical energy No increase in electrical Install outdoor lighting upgrades at needs through energy use from 2011 Fishermen's Terminal and Jack Block Park in conservation with baseline by 2020 2016 positive financial metrics Perform energy audit at 1other Maritime facility per energy performance plan for Page A-19 inclusion in 2017 CIP budget Increase use of renewable Include cost effective Identify 1 cost-effective renewable energy energy renewable energy project is project by Q4 2017 CIP budget Objective: Meet or exceed agency requirements for storm water leaving facilities owned or operated by the port Performance Measures Performance Target Actions Meet conditions of Port No non-compliance 1. Prepare Annual report to Ecology to Phase I municipal conditions demonstrate 2015 compliance. Track 2016 NPDES permit. compliance for 2017 report. Implement and manage Assess and survey 1. Collect stormwater fees for Port utility Port Stormwater Utility condition of all stormwater accurately, correctly, and verifiably to deliver efficient and conveyance by 2018 and beginning on January 1, 2016 effective stormwater complete maintenance of 2. Extend utility billing/lease boundary services. 30% of stormwater system database system to all sites by end of 2016. by 2020 3. Assess 40% of stormwater infrastructure by Q4 4. Identify and Plan for rehabilitation of stormwater system for 200 acres for 2017 Objective: Reduce air pollutants and carbon emissions Performance Measures Performance Target Actions Meet Northwest Ports Admin-1: Port Admin-1: Implement and update e fuel Clean Air Strategy goals Administration Fuel efficiency (including anti-idling and other Efficiency plan (including operational measures) plan for Port fleet by Q4 anti-idling and other operational measures) for Port vehicle fleet maintained Reduce carbon emissions Conduct 2015 The Climate Complete TCR inventory and submit to TCR from port operations Registry (TCR) inventory by Q3 2015 Downward trend in total Analyze results and trends in GHG emissions Green House Gases (GHG) Update energy performance plan to ensure emissions reported to The continued downward trend in GHG emissions Climate Registry Objective: Anchor the Puget Sound urban-industrial land use to prevent sprawl in less developed areas Performance Measures Performance Target Actions Industrial-land use Replace 'IC' zoning with a Engage in in City public process associated with regulations in City's new industrial zone concept land use studies and processes by Comprehensive Plan that better incentivizes Page A-20 update and in City land industrial development and advocating with City staff, use code support a maritime-related writing comment letters as opportunities growing maritime development Target: arise, business 2016 providing public testimony at City Council City's Comprehensive Plan meetings and Update process retains and /or improves preservation collaborating with a wide range of of Industrial land use stakeholders aligned with industrial policies and protects freight preservation and coordinate mutual actions as corridors. Target: annually appropriate. City's arena triggered land use studies result in no residential or lodging uses in the stadium overlay district and that these studies result in enhanced industrial friendly land use regulations in the Duwamish MIC. Target: 2016 2018. Objective: Restore, create and enhance 40 additional acres of habitat in the Green/Duwamish watershed and Elliot Bay Performance Measures Performance Target Actions Restore, create or Create 13 acres of new (assumes Trustee negotiations completed 2015) enhance 40 additional habitat at T117 by 2017 Bid and award T117 project by Q1 acres of habitat in the Start construction T117 project by Q3 Gteen/Duwamish watershed and Elliott Bay by 2035 Generate revenue from Develop a wetland habitat Prospectus approved by Interagency review team habitat sites. Develop mitigation bank and Q1 plan to develop habitat evaluate other opportunities Instrument approved Q3 restoration into a line of for revenue generation Investigate potential of using habitat sites for business. city of Seattle ILF program mitigation Page A-21 Objective: Pursue Better ways to address and implement environmental regulations Performance Measures Performance Target Actions Implement CERCLA and Lower Duwamish 1. Activated Carbon study construction in MTCA projects as Waterway 2016. Monitor results in 2017-2019 efficiently and effectively 2. Complete Lower 2. Submit draft report by Q2 as possible Duwamish Agreed Order work by end of 2019 3. T115N Remedial Investigation and Feasibility Study. Submittal of draft Feasibility Study in 2016. East Waterway 1. Draft final report resubmitted to EPA by 1. East Waterway end of Q2. Feasibility Study finalized in 2016. EPA signs ROD 2. Design and implement the remedial action at and design phase initiated T30 cleanup site by Q4 2017 by 2020. 2. Design and implement the remedial action at T30 cleanup site by Q4 2017 Facilitate compliance by Complete 30 inspections Conduct inspections in compliance with Phase 1 tenants through ECAP municipal permits program STRATEGY: MANAGE OUR FINANCES RESPONSIBLY OPTIMIZE MARITIME FINANCIAL PERFORMANCE Objective: Reduce environmental liability through cost recovery Performance Measures Performance Target Actions Provide cost recovery Maximize cost recovery for Research, track costs, develop cost estimates support as needed to environmental cleanups by and provide backup documents for cost sharing other groups working with the legal and activities with other PRPs and to maximize financial teams in all recovery from insurance environmental related actions as needed in 2015 Provide support to legal for Provide technical and strategy support as needed the lower Duwamish to support justification of Port smallest cleanup allocation allocation possible Continue to apply for Provide 10 year forecasts, cost tracking, remedial action grants reporting and grant proposals. Page A-22 STRATEGY: HIGH PERFORMANCE ORGANIZATION Objective: Strengthen a high integrity, continuous improvement culture Performance Measures Performance Target Actions Continue CPI progress Complete additional CPI Pursue shoreline stabilization programatic process permit or other process. Page A-23 MARINE MAINTENANCE 2016 BUSINESS PLAN MISSION: The mission of the Marine Maintenance Department is to maintain, preserve, upgrade, improve and enhance, as directed, the assets owned by the Maritime and Economic Development Divisions. We conduct our activities in a manner that fosters competitive business practices, customer service and benefit to the public and local businesses, as well as environmental responsibility and conservation. We serve in support of the Century Agenda and tie our departmental goals to that plan and to the mission and goals of the Maritime and Economic Development Divisions. STRATEGY: Our business strategy is to fulfill the maintenance and property stewardship needs of our partners and customers while acting as stewards of the assets in the public trust. We conduct Preventive Maintenance and Corrective Maintenance to properly safeguard Port assets We engage in expense and capital improvements to support partner departments' business strategies We fully support the Port's business, community and environmental strategies with programs focused on Economics, Equity - Social Responsibility, Environment, Workforce Development and Employee Engagement. DESCRIPTION: Maintenance disciplines include automotive, carpentry, marine carpentry, electrical, general labor, painting, plumbing, sprinkler-fitting (fire protection), sheetmetal, welding, truck driving, sign writing, HVAC maintenance and elevator/escalator maintenance. Maintenance also provides services such as storm water pollution prevention, custodial labor, landscape labor, regulatory compliance and regulated materials management which fall into the property stewardship area. Most maintenance activities required by Port assets are available through the Marine Maintenance Shop, as are public works including small capital construction services and environmental and safety compliance support activities. INDUSTRY ASSESSMENT: Maintenance services are provided in many different ways to local industries. Contract, ad hoc, emergency response and fixed crew maintenance are all evident locally. There is no directly comparable market for the breadth of services Marine Maintenance provides. BUSINESS ASSESSMENT: Marine Maintenance has an assignment that is different from other local government entities. It is also different from that of Aviation Maintenance. The ages and types of properties are unique. In a recent study by TokuSaku Consulting, data was collected and comparisons made against established benchmarks in clearly identifiable areas of maintenance. Marine Maintenance compared favorably with a broad range of private and public maintenance organizations in cost of maintenance per rentable square foot. Locally, in a cost per catch basin comparison to the University of Washington, Marine Maintenance performed at only two thirds the cost at UW. Similar results were noted in the comparison of fleet maintenance costs between Marine Maintenance and UW. (Full study submitted to Commission and available upon request.) Page A-24 CHALLENGES AND OPPORTUNITIES: Challenge - Changes in maintenance demands from Maritime and Economic Development have required reconfiguration of Marine Maintenance service delivery Challenge - Increasing regulatory compliance requirements increase maintenance costs for business units Opportunity Work with Storm Water Utility to structure appropriate relationship between department and utility Opportunity Examine relocation of permanent MarineMaintenance Shop, which could offer opportunities to review service delivery model and cultivate new efficiencies, while creating interesting options for Economic Development - Real Estate related to the current Shop properties. 2016 STRATEGIES AND OBJECTIVES STRATEGY: MANAGE OUR FINANCES RESPONSIBLY OPTIMIZE MARITIME FINANCIAL PERFORMANCE Objective: Meet 2016 Financial Targets - Conduct Marine Maintenance Activities Efficiently and Cost-Effectively Performance Measure Performance Target Actions Meet Authorized Budget +/- 2% Monthly review and adjustment in spending to meet target Reduce trip costs Fifty (50) users processing Acquire units work remotely Measure remote usage and trips saved Evaluate MM Shop Full analysis, with Analyze needs, location, cost and benefits of location recommendations new location v. current STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES PROMOTE SMALL BUSINESS GROWTH AND WORKFORCE DEVELOPMENT Objective: Foster New Business Opportunities for Local Businesses Performance Measure Performance Target Actions Utilize small businesses 15% of operating and Track purchasing and contracting activities in capital expenditures conjunction with OSR goals Objective: Increase Work Force Training for Local Communities in Trade, Travel, and Logistics Increase work force Five Apprentices and Continue outreach to schools and support training, job and business Twelve Interns per year organizations - Utilize Apprenticeships and opportunities for local Internships communities in trade, Work with OSR and Aviation to share travel and logistics programs such as Career Workplace Exploration ind Skilled Trades (CWEST) Page A-25 STRATEGY: HIGH PERFORMANCE ORGANIZATION Objective: Strengthen a High Performance, High Integrity, Continuous Improvement Culture Performance Measure Performance Target Action Identify work process Identify one new tool to Identify new work or technology tools to improvements. improve efficiency. improve effectiveness (eg workflow,Akwire, etc) Participate in LEAN programs % Personal development 100% of staff Each non-represented employee will plan in PREP includes a personal development plan in PREP Staff and craft personnel Six (6) people actively Opportunities documented and reported involved in development engaged in development opportunities. Page A-26 MARITIME FINANCE 2016 BUSINESS PLAN MISSION: To be a leading edge provider of quality financial management services and strategic support to the Port Commission, Executive, and Maritime and Economic Development Divisions and to play a fiduciary role in ensuring the most efficient and effective use of Port resources. To be viewed by our customers as strategic business partners who provide exceptional, value-added services that enable them to achieve their mission and goals. We assume personal responsibility for understanding our customers' needs and delivering services that consistently exceed their expectations. DESCRIPTION: The Maritime Finance group provides financial consulting services and expertise to the Maritime and Economic Development Divisions of the Port of Seattle and to the Northwest Seaport Alliance. STRATEGY: Provide the Commission, Executive, Maritime and Economic Development and Seaport Alliance leaders with the tools to make informed business and strategic decisions related to current and future financial performance of the two divisions, the Port of Seattle overall and to the Seaport Alliance. Ensure that the Maritime and Economic Development Divisions and Seaport Alliance are in compliance with accounting policies and procedures, Generally Accepted Accounting Principles (GAAP) and Governmental Accounting Standards to support a clean opinion on the Port of Seattle's audited financial statements. Reduce the Port of Seattle's environmental liability through cost recovery from clean-up partners, grants and insurers. Attract, retain and develop a staff of financial experts with strong business sense and a customer service focus. Continuously seek out ways to improve processes to make them more effective and efficient. INDUSTRY ASSESSMENT: Not applicable BUSINESS ASSESSMENT: The Maritime Finance team is made up of a group of dedicated, resourceful, and professional team members. We support a diverse group of businesses and an equally diverse group of customers who have varying knowledge of financial concepts, goals for financial improvement and wants/needs for financial support. Unlike the private sector, the Port of Seattle's primary goal is not just about improving the bottom line, but about creating jobs and economic vitality for the region while being a responsible steward of the environment. This creates a challenge for Maritime Finance where the focus is on improving the bottom line. We reconcile this situation by ensuring that the decision makers are well informed about the financial aspects and implications of decisions so that the appropriate tradeoffs are taken into consideration. CHALLENGES AND OPPORTUNITIES: Maritime and Economic Development Divisions are made up of a relatively diverse group of businesses that require lead time for new staff members to fully understand. Page A-27 Maritime Finance supports a diverse group of customers who have varying knowledge of financial concepts, goals for financial improvement and wants/needs for financial support. The budgeting cycle has extended from an approximately 4 month cycle (July October) to effectively 6 month cycle (May October). Recent staff turnover has reduced the average years of Port experience staff members. Time sensitive nature of business decisions typically require near immediate turn-around of financial analyses and other work projects. Due to volume of unanticipated requests we often find ourselves in a reactive mode rather than position to make improvements and otherwise be proactive. 2016 STRATEGIES AND OBJECTIVES STRATEGY: IMPLEMENT CENTURY AGENDA STRATEGIES POSITION THE PUGET SOUND REGION AS A PREMIER INTERNATIONAL LOGISTICS HUB Objective: Structure our relationships with Washington ports to optimize infrastructure investments and financial returns Performance Measures Performance Target Actions Advance the financial Financial analyses and Partnering with Port of Tacoma personnel, aspects of the Seaport actions to advance the support the Performance Reporting for the Alliance. Seaport Alliance are Seaport Alliance insightful, thorough and Determine appropriate Seaport Alliance timely financial support structure Develop service cost share model STRATEGY: MANAGE OUR FINANCES RESPONSIBLY OPTIMIZE MARITIME FINANCIAL PERFORMANCE Objective: Meet 2016 financial targets Performance Measures Performance Target Actions Maritime Finance & Operating Expenses within Develop realistic Budget Budget 2016 Operating 5% of 2016 Budget Monitor expenses on an ongoing basis and make Expenses adjustments in spending as needed Objective: Reduce the Port's environmental liability through cost recovery Performance Measures Performance Target Actions Partner reimbursements Port partners are invoiced Timely preparation of partner billings invoiced and partners pay within 30 days after month- Monitor timeliness of partner payment with in a timely manner end follow-up on any deliquencies Department of Ecology Submissions are completed Proper set up of processes to to efficiently and Grants are processed and reviewed within 30 effectively comply with grant requirements quarterly days after quarter-end Timely preparation and review of grant submissions Page A-28 Insurance submittals are Submissions are completed Proper set up of processes to efficiently and completed monthly and reviewed within 45 effectively meet insurance requirements days after month-end. Timely preparation and review of insurance submissions Objective: Provide timely, accurate, and insightful financial information and analyses for the Commission, Executive and other leadership teams for decision-making Performance Measures Performance Target Actions Financial analyses Financial analyses are Provide analyses to evaluate existing and insightful, thorough, changing business opportunities including: accurate, and timely. Investments in major capital and expense projects Lease negotiations Customer financial operational issues Market rate analyses for marinas Real estate valuations Other business opportunities Financial reporting Reporting deadlines as Complete quarterly performance reports published by Corporate Monitor and update current year forecasts Finance & Budget are met 2017 Maritime, Economic Budget deadlines as Facilitate the Maritime, Economic Development Development, Seaport established by Corporate and Seaport Alliance 2017 Business Planning Alliance Budgets and Finance & Budget and process. financial capacity Commission Office are met Manage the Maritime, Economic Development analysis. and Seaport Alliance 2017 Capital Budget process Manage the Maritime, Economic Development and Seaport Alliance 2017 Operating Budget process Manage the 10-Year Environmental Remediation forecast process Manage the process and develop the 10-Year Net Operating Income forecast Page A-29 Objective: Ensure Divisions are in compliance with Accounting policies and procedures, Generally Accepted Accounting Principles and Government Accounting Standards Performance Measures Performance Target Actions Bi-annual measurement Completed on time and with Establish calendars for bi-annual update of Environmental no audit findings Set up files and schedules in advance of start of Remediation Liabilities update Ensure proper training of project managers making update Perform thorough review of schedules with analyses of unexpected results Booking of new assets, Completed on time and with Team member are responsible for monitoring removal of demolished no audit findings asset changes within assigned business and assets and adjustment for service groups. impaired assets. Reports monitoring the status of capital projects are run on a quarterly basis with follow-up with project managers Detailed impairment review performed each January with interim reviews performed as circumstances arise. 2016 1/3 inventory of 100% complete by Initiate process including calendar of due dates fixed assets 11/30/2016 with Marine Maintenance by March 15, 2016 Meet interim deadlines Annual Environmental Key deadlines are met and Establish calendar and process for meeting Remediation Liability reports are accurate. deadlines spending authorization Perform process and quarterly spending Perform detailed as well "big picture" review of reports. authorization memo/quarterly spending reports. STRATEGY: HIGH PERFORMANCE ORGANIZATION Objective: Align leadership, people and systems with strategic priorities and plans Performance Measures Performance Target Actions % Participation in 100% of staff Each staff member will attend or participate in diversity activities one diversity activity per year. % Participation as a 100% of staff Each staff member will volunteer in at least one volunteer in at least one Port sponsored event. Port sponsored event. % Personal Development 100% of staff Each staff member will include a personal Plan in PREP development plan in PREP. Page A-30 Completion of annual Complete PREP review Team members submit PREP self-reporting 2 PREP review on a timely within 1 week of review weeks prior to PREP review date. basis date. Manager completes input and holds review meeting within 1 week of review date. Objective: Strengthen a high integrity, continuous improvement culture Performance Measures Performance Target Actions Work process Continue to restructure and Continue to optimize structures. improvements repopulate libraries within Move files from other libraries and from the Maritime Finance M:Drive into new libraries. Especially key SharePoint site to make it historic information. easier (e.g. more intuitive) Inform other relevant groups about new for all to find past financial structure. analyses, supporting workpapers, etc. Objective: Attract, retain, inspire, and develop a diverse workforce that will achieve the Port's vision Performance Measure Performance Target Actions Staffing utilization Department is appropriately Continuous monitoring of workload and staffed in that all members resources with adjustments as warranted are fully utilized, but have enough time to be able be proactive rather than reactive. Page A-31
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