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Item No. 7b_Attach_1 Date of Meeting: August 7, 2012 PORT OF SEATTLE 2012 FINANCIAL & PERFORMANCE REPORT AS OF JUNE 30, 2012 TABLE OF CONTENTS Page I. Portwide Performance Report 3-5 II. Aviation Division Report 6-11 III. Seaport Division Report 12-16 IV. Real Estate Division Report 17-21 V. Capital Development Division Report 22-24 VI. Corporate Division Report 25-27 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/12 EXECUTIVE SUMMARY Financial Summary The Port's total operating revenues for the first half of 2012 were $259.2 million, $8.7 million above budget. Aeronautical revenues were $114.5 million, $1.3 million above budget. Other operating revenues were $144.6 million, $7.4 million higher than budget primarily due to higher revenues from Concessions, Container, Seaport Industrial Properties, Grain and Utilities, partially offset by lower revenues from Public Parking and Rental Cars businesses. Total operating expenses were $138.5 million, $12.9 million below budget mainly due to timing of spending and some vacant positions. Operating income before depreciation was $120.7 million, $21.6 million above budget. Operating income after depreciation was $39.9 million, $19.5 million higher than budget. The Port-wide capital spending is forecasted to be $160.3 million for the year, $9.6 million below the budgeted $169.9 million. Operating Summary At the Airport, enplanements through the second quarter were 2.2% higher and landed weight was 1.4% lower than the same period in 2011. International enplaned passengers through the second quarter attained greater growth (5.2% vs. 2011) than domestic enplanements (1.8% vs. 2011). For the Seaport division, TEU volume was down 0.1% from June year-to-date 2011. Full year forecasted volume is for 1.75 million TEU's compared to budget of 2.0 million. Grain volume was at 2.9 million metric tons, up by 5.8% from June year-to-date 2011 and 16.2% over budget. For the Real Estate division, occupancy levels at Commercial Properties were at 91%, above the target of 90% and Seattle market average of 86%. Fishermen's Terminal and Maritime Industrial Center were at 75% occupancy, below target of 86%. Recreational Marinas was at 92% occupancy, below target of 94%. Key Business Events We held a number of events in the community, including 21 Commission-led stakeholder presentations to business, industry, labor, community, and environmental groups in the region. We received seven communications awards for centennial book and documentary, centennial community bike ride, annual report, centennial video contest and website redesign. We also produced "Choose Washington" ad for presence in Commerce Department magazine. Rental Car Facility (RCF) and Bus Maintenance Facility (BMF) opened in May. The opening was very successful and startup and transition issues were minimal. The 2012 cruise season commenced on May 6th. Start -up operations for new ships in Seattle, Disney Cruise Line's Wonder and Norwegian Cruise Line's Jewell went very well. We also closed sale on 5.75 mile segment of the Eastside Rail Corridor with City of Kirkland in April. Major Capital Projects We began installation of the new revenue control system for and waterproofing of the 8th floor of the parking garage. Other key projects for the second quarter were Terminal realignment, T-18 pile cap pilot program, airport checkpoint security cameras, miscellaneous work on the rental car facility, Regulated Materials Management (RMM) oversight and compliance monitoring for the PC air and escalator, Electrified Ground Support Equipment (EGSE) charging stations, noise remedy, and passenger jet bridges. Loading bridge utilities design phase was extended due to addition to scope and construction will begin later than anticipated. Finally, we resolved issues with Alaska Air Group concerning the North Sea-Tac Airport Renovations (NorthSTAR) program resulting in a final letter outlining the terms of Alaska's involvement and issued requests for qualifications for design and program/project management consultants for this $250 million plus project. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/12 INCOME STATEMENT Report: Income Statement As of Date: 2012-06-30 2011 YTD 2012 YTD 2012 YTD Budget Variance Change from 2011 $ in 000's Actual Actual Budget $ % $ % Revenues: Aviation 180,537 186,903 187,521 (617) -0.3% 6,366 3.5% Seaport 47,017 56,631 46,681 9,949 21.3% 9,614 20.4% Real Estate 15,030 15,482 16,266 (784) -4.8% 452 3.0% Capital Development 76 12 - 12 0.0% (64) -83.9% Corporate 620 165 76 90 118.6% (454) -73.3% Total Revenues 243,280 259,194 250,543 8,651 3.5% 15,914 6.5% Operating & Maintenance: Aviation 63,614 71,051 78,237 7,186 9.2% 7,437 11.7% Seaport 7,780 9,524 9,698 174 1.8% 1,744 22.4% Real Estate 15,583 16,081 17,893 1,812 10.1% 498 3.2% Capital Development 4,334 7,097 8,004 907 11.3% 2,763 63.8% Corporate 34,195 34,760 37,602 2,842 7.6% 564 1.7% Total O&M Costs 125,507 138,514 151,434 12,921 8.5% 13,007 10.4% Operating Income Before Depreciation 117,773 120,680 99,109 21,571 21.8% 2,907 2.5% Depreciation 79,569 80,829 78,763 (2,066) -2.6% 1,261 1.6% Operating Income after Depreciation 38,204 39,851 20,345 19,505 95.9% 1,646 4.3% IMPORTANT NOTE: All the numbers in the table above are on an Org basis while the actual numbers for the operating divisions are on a Subclass basis. 4 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/12 KEY PERFORMANCE METRICS 2011 YTD 2012 YTD 2011 2012 2012 Forecast/Budget Actual Actual Actual Forecast Budget Var. Var. % Enplanements (in 000's) 7,678 7,844 16,396 16,650 16,650 - 0.0% Landed Weight (lbs in 000's) 9,648 9,509 20,123 20,444 20,444 - 0.0% Passenger CPE (in $) n/a n/a 11.75 13.25 13.26 (0.01) -0.1% Container Volume (TEU's in 000's) 1,008 1,006 2,034 1,750 2,000 (250) -12.5% Grain Volume (metric tons in 000's) 2,754 2,914 5,027 5,500 5,500 - 0.0% Cruise Passenger (in 000's) 324 343 886 864 881 (17) -1.9% Commercial Property Occupancy 89% 91% 90% 90% 87% 3% 3.4% Shilshole Bay Marina Occupancy 95.3% 93.3% 95.5% 93.9% 95.5% -1.6% -1.6% Fishermen's Terminal Occupancy 82.2% 75.2% 78.2% 74.3% 84.3% -10.0% -11.9% CAPITAL SPENDING RESULTS 2012 2012 Approved Budget Plan of Division Forecast Budget Variance Finance ($ in millions) Aviation 133.2 135.4 2.2 261.9 Seaport 13.3 15.5 2.2 25.7 Real Estate 4.2 7.3 3.1 10.9 Corporate & CDD 9.6 11.7 2.1 12.0 Total 160.3 169.9 9.7 310.5 PORTWIDE INVESTMENT PORTFOLIO The investment portfolio for second quarter of 2012 earned 1.02% against our benchmark (The Bank of America Merrill Lynch 3-year Treasury/Agency Index) of 0.35%. For the past twelve months the portfolio has earned 1.25% against the benchmark of 0.35%. Since the Port became its own Treasurer in 2002, the Port's portfolio life-to-date has earned 3.29% against our benchmark of 2.33%. 5 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 FINANCIAL SUMMARY 2011 2012 2012 Budget Variance Change from 2011 $ in 000's Actual Forecast Budget $ % $ % Operating Revenues: Aeronautical 207,763 236,123 236,221 -(98) n/a 0.0% 28,360 13.7% Non-Aeronautical 142,959 150,930 149,531 1,399 - n/a 0.9% 7,972 5.6% Total Operating Revenues 350,722 387,053 385,751 1,301 0.3% 36,331 10.4% Expenses: Operating Expenses 190,442 219,969 221,981 2,012 0.9% 29,528 15.5% Environmental Remediation Liability 1,428 4,913 3,096 (1,817) -58.7% 3,486 244.2% Total Operating Expenses 191,869 224,882 225,078 196 0.1% 33,013 17.2% Net Operating Income 158,853 162,171 160,674 1,497 0.9% 3,317 2.1% Capital Spending 166,820 133,196 135,419 2,223 1.6% (33,624) -20.2% Aeronautical revenues are forecasted lower than budget due to debt service savings from lower variable rate interest and refunding and a delay in terminal realignment expenses offset by unbudgeted litigated claims and increases in environmental reserve liabilities. Non-Aeronautical revenues are forecasted greater than budget due to forecasted strong performance in concessions, additional rental car space rents and higher energy/water revenue from increased usage. Operating expenses are forecasted less than budget due to delays in expenses in support of the terminal realignment project. $133.2 million are forecasted to be spent on capital projects in 2012, which are 1.6% less than budget. A. BUSINESS EVENTS Rental Car Facility (RCF) and Bus Maintenance Facility (BMF) opened in May. Terminal realignment in progress. All Nippon Airways of Japan (ANA) will begin service to Tokyo in Q3. B. KEY PERFORMANCE INDICATORS 2011 2012 % 2011 2012 % Figures in 000's YTD YTD Variance Actual Budget Variance Enplanements 7,678 7,844 2.2% 16,397 16,650 1.5% Landed Weight 9,648 9,509 -1.4% 20,123 20,444 1.6% YTD Enplanements vs. Prior Year YTD Landed Weight vs. Prior Year 10% 2% Growth Rate 6.72% 1% 0.99% Growth Rate 0% Jan Feb Mar Apr May Jun 5% 3.48% 1.66% -1% 2.22% -2% -0.50% -1.32% -0.35% -3% -1.83% 0.09% -4% 0% Jan Feb Mar Apr May Jun -5% -6% -5.71% -0.46% -7% -5% International enplaned passengers through Q2 2012 attained greater growth (5.2% vs. 2011) than domestic enplanements (1.8% vs. 2011). Total landed weight through Q2 2012 experienced negative growth (-1.4% vs. 2011). International air freight cargo metric tons through Q2 2012 experienced negative growth (-7.9% vs. 2011), whereas domestic air freight cargo metric tons through Q2 2012 experienced positive growth (1.0% vs. 2011). 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 Key Performance Measures 2011 2012 2012 Budget Variance Change from 2011 Actual Forecast Budget $ % $ % Key Measures: Non-Aero NOI ($ in 000s) 84,173 79,170 75,982 3,188 4.2% (5,003) -5.9% Passenger Airline CPE 11.75 13.25 13.26 0.01 0.1% 1.50 12.8% Debt / Enplaned Passenger 161.46 152.2 152.2 - 0.0% (9.28) -5.7% Debt Service Coverage 1.47 1.39 1.34 0.05 3.7% (0.08) -5.5% CPE is forecasted under budget due to significant savings in debt service and delays to terminal realignment expenses offset by unbudgeted litigated claims and increases in environmental reserve liabilities. C. OPERATING RESULTS Division Summary 2011 YTD 2012 Year-to-Date YTD Bud Var Year-end Projections $ in 000's Actual Actual Budget $ % Budget Forecast Variance Aeronatical Revenues 107,778 114,547 113,274 1,272 1.1% 236,221 236,123 (98) Non-Aeronautical Revenues 68,862 72,357 74,246 (1,890) -2.5% 149,531 150,930 1,399 Total Operating Revenues 176,640 186,903 187,521 (617) -0.3% 385,751 387,053 1,301 Operating Expenses: Salaries & Benefits 38,822 44,003 45,840 1,837 4.0% 93,871 93,077 795 Outside Services 11,185 11,177 17,053 5,876 34.5% 37,404 33,253 4,152 Utilities 7,294 7,065 6,469 (596) -9.2% 12,458 13,054 (596) Other Airport Expenses 6,524 7,973 6,961 (1,012) -14.5% 14,138 16,954 (2,815) Baseline Airport Expenses 63,824 70,219 76,323 6,104 8.0% 157,873 156,338 1,535 Environmental Remediation Liability (210) 833 1,914 1,082 56.5% 3,096 4,913 (1,817) Total Airport Expenses 63,614 71,051 78,237 7,186 9.2% 160,969 161,251 (282) Corporate 15,307 16,286 17,272 986 5.7% 35,566 35,161 405 Police Costs 7,885 7,733 8,530 797 9.3% 16,964 16,892 72 Capital Development/Other Expenses 3,155 5,374 5,927 553- 9.3%n/a 11,579 11,579 - - Total Operating Expenses 89,961 100,445 109,967 9,522 8.7% 225,078 224,882 196 NOI Before Depreciation 86,679 86,458 77,554 8,905 11.5% 160,674 162,170 1,497 Depreciation Expense 29,465 58,589 58,242 (347) -0.6% 117,072 117,072 - NOI After Depreciation 57,214 27,870 19,311 8,558 44.3% 43,602 45,099 1,497 Selected Non-Operating Rev/(Exp): Capital Grants & Donations 8,918 11,550 7,245 4,305 59.4% 28,982 28,982 - Non-Capital Grants & Donations 443 4 740 (736) -99.5% 1,479 1,479 - Passenger Facility Charges (PFC) 31,683 33,527 30,266 3,261 10.8% 63,448 63,448 - Customer Facility Charges (CFC) 10,074 10,109 9,224 886 9.6% 21,333 22,826 1,493 YTD Aeronautical revenues are greater than budget by $1.3 million due to a seasonality error in budgeting for terminal rents. YTD Non-aeronautical revenues are lower than budget by $1.9 million: o Concessions revenue is $874K greater than budget YTD due to higher sales per enplaned passenger than budgeted o Customer Facility Charge (CFC) operating revenues are lower than budget by $1.8 million due to lower operating costs from delayed opening of the Rental Car Facility (RCF) o Public Parking revenues under $927K mainly due to 1-4 day transactions down 2.4% vs. budget, and estimated $110K shortfall from data processing errors resulting in lost revenue o Rental car revenues are lower than budget by $670K due to monthly budget not spread based on seasonality, and gross industry revenues are lower than the revenues assumed in the budget by 1.2% even though transaction days are higher by 1.7% through May. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 YTD Operating expenses are less than budget by $9.5 million due to the net of the following: Positive Variance of $12.9 million: Negative Variance of $3.4 million: RCF opening delay $1.1M Litigated injury claims $1.5M Delay in expenditure of contracted services $2.7M Snow event materials and labor $1.3M Delays in terminal realignment expenses $2.5M Utility surface water discharge $608k Delayed hiring and vacant positions $1.5M Environmental remediation $1.1M Employee training and development expenses $545k Other Aviation Division savings $1.2M Corporate/CDD allocated expenses $2.3M Aeronautical Business Unit Summary 2011 2012 2012 Budget Variance Change from 2011 $ in 000's Actual Forecast Budget $ % $ % Revenues requirement: Capital Costs 81,507 89,720 91,876 2,157 2.3% 8,213 10.1% Operating Costs net Non-Aero 133,083 153,122 151,529 (1,593) -1.1% 20,039 15.1% Total Costs 214,590 242,842 243,405 564 0.2% 28,252 13.2% FIS Offset (7,000) (8,000) (8,000) - 0.0% (1,000) 14.3% Other Offsets (15,417) (14,461) (14,895) (435) 2.9% 956 -6.2% Net Revenue Requirement 192,173 220,381 220,510 129 0.1% 28,208 14.7% Other Aero Revenues 15,590 15,742 15,711 31 0.2% 152 1.0% Total Aero Revenues 207,763 236,123 236,221 98 0.0% 28,360 13.7% Less: Non-passenger Airline Costs 15,098 15,423 15,392 (31) -0.2% 325 2.2% Net Passenger Airline Costs 192,665 220,700 220,828 129 0.1% 28,035 14.6% 2011 2012 2012 Budget Variance Change from 2011 Actual Forecast Budget $ % $ % Cost Per Enplanement: Capital Costs / Enpl 4.97 5.39 5.52 0.13 2.3% 0.42 8.4% Operating Costs / Enpl 8.12 9.20 9.10 (0.10) -1.1% 1.08 13.3% Offsets (1.37) (1.35) (1.38) (0.03) 1.9% 0.02 -1.3% Other Aero Revenues 0.95 0.95 0.94 (0.00) -0.2% (0.01) -0.6% Non-passenger Airline Costs (0.92) (0.93) (0.92) 0.00 -0.2% (0.01) 0.6% Passenger Airline CPE 11.75 13.25 13.26 0.01 0.1% 1.51 12.8% Capital costs savings are forecasted to be $2.2 million due to savings from lower variable rate interest and debt refunding. Year-over-year capital cost increases can be attributed to the beginning of principal payments to bond issue 2005A in 2012. Operating costs are forecasted to be $1.6 million higher than budget due to: unbudgeted litigated claims, increases in environmental reserve liabilities, and unbudgeted 2011 retro contractual increase in airfield security, higher surface water discharge, higher electricity usage. Year -over-year operating expense increases are due to terminal realignment, additional maintenance FTEs and other aeronautical initiatives. 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 Non-Aero Business Unit Summary 2011 2012 2012 Budget Variance Change from 2011 $ in 000's Actual Forecast Budget $ % $ % Revenues: Public Parking 49,996 51,512 52,480 (968) -1.8% 1,516 3.0% Rental Cars 29,969 28,359 26,580 1,779 6.7% (1,610) -5.4% CFC Operating Revenues (RCF) 778 7,560 9,053 (1,493) -16.5% 6,783 872.3% Ground Transportation 7,704 7,419 7,519 (100) -1.3% (285) -3.7% Concessions 35,404 37,107 35,659 1,448 4.1% 1,702 4.8% Other 19,109 18,974 18,240 734 4.0% (135) -0.7% Total Revenues 142,959 150,930 149,531 1,399 0.9% 7,972 5.6% Operating Expense 59,544 72,643 74,639 1,996 2.7% 13,099 22.0% Share of terminal O&M 17,610 18,906 18,698 (208) -1.1% 1,295 7.4% Less utility internal billing (18,369) (19,789) (19,789) - 0.0% (1,420) 7.7% Net Operating & Maint 58,786 71,760 73,549 1,789 2.4% 12,975 22.1% Net Operating Income 84,173 79,170 75,982 3,188 4.2% (5,003) -5.9% 2011 2012 2012 Budget Variance Change from 2011 Actual Forecast Budget $ % $ % Revenues Per Enplanement Parking 3.05 3.09 3.15 (0.06) -1.8% 0.04 1.5% Rental Cars (excludes CFCs) 1.83 1.70 1.60 0.11 6.7% (0.12) -6.8% Ground Transportation 0.47 0.45 0.45 (0.01) -1.3% (0.02) -5.2% Concessions 2.16 2.23 2.14 0.09 4.1% 0.07 3.2% Other 1.21 1.59 1.64 (0.05) -2.8% 0.38 31.4% Total Revenues 8.72 9.06 8.98 0.08 0.9% 0.35 4.0% Primary Concessions Sales / Enpl 10.30 10.60 10.42 0.18 1.7% 0.30 2.9% 2011 2012 2012 Budget Variance Change from 2011 $ in 000's Actual Forecast Budget $ % $ % Operating CFC Revenues 778 7,560 9,053 (1,493) -16.5% 6,783 872.3% Non-Operating CFC Revenues 23,669 22,826 21,333 1,493 7.0% (843) -3.6% Total CFC Revenues 24,447 30,386 30,386 0 0.0% 5,940 24.3% Non-Aeronautical revenues are forecasted greater than budget due to strong concessions revenue performance, additional rental car concession rents from delay in RCF opening, and higher energy/water sales from increased usage. Share of terminal operating and maintenance costs forecasted greater than budget due to higher volume of surface water discharge and higher electricity usage. Primary concessions sales per enplanement through May were $11.03. CFC revenues higher year-to-date than prior year due to rate increase from $5.0 to $6.0 effective February 1, 2012. CFC operating revenues (RCF) are higher year-over-year due to RCF opening in May 2012 resulting in more operating expenses. 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 Net Cash Flow: NOI after Debt Service and Interest Income 2011 2012 2012 Budget Variance Change from 2011 $ in 000's Actual Forecast Budget $ % $ % Aeronautical Net Operating Income (NOI) 74,679 83,001 84,692 (1,691) -2.0% 8,322 11.1% Debt Service 71,096 75,570 77,726 2,156 2.8% 4,474 6.3% Aero NOI After Debt Service 3,584 7,431 6,966 465 6.7% 3,848 107.4% Non-Aeronautical Net Operating Income (NOI) 84,173 79,170 75,982 3,188 4.2% (5,003) -5.9% Debt Service 40,845 44,847 45,390 543 1.2% 4,003 9.8% Non-Aero NOI After Debt Service 43,328 34,323 30,592 3,731 12.2% (9,006) -20.8% Total Aviation NOI 158,852 162,171 160,674 1,497 0.9% 3,318 2.1% Debt Service 111,940 120,417 123,116 2,699 2.2% 8,477 7.6% NOI After Debt Service 46,912 41,754 37,557 4,196 11.2% (5,158) -11.0% Add ADF Interest Income 4,771 3,704 3,771 (67) -1.8% (1,067) -22.4% Add Non-Operating TSA Grant 1,035 1,479 1,479 - 0.0% 445 43.0% Net Cash Flow after D/S & Interest Inc. 52,717 46,937 42,808 4,129 9.6% (5,781) -11.0% 2012 forecasted net cash flow is greater than budget by $4.1 million but down $5.8 million from 2011. D. CAPITAL SPENDING RESULTS Capital Variance $ in 000's 2012 YTD 2012 2012 Forecast/Budget Description Actual Forecast Budget Variance % Loading Bridges Utilities 109 459 5,750 5,291 92.0% Rental Car Facility Construction 14,408 25,061 29,778 4,717 15.8% All Other 31,663 107,676 99,891 (7,785) -7.8% Total 46,180 133,196 135,419 2,223 1.6% Loading bridge utilities design phase was extended due to addition to scope and construction will begin later than anticipated. RCF savings have been identified as the project nears completion. Change orders have been submitted by the construction contractor and it is anticipated that many of these will be resolved in the Port's favor. 2012 - 2016 Capital and Funding Plan Future 2012-2016 Revenue $ in 000's Total Bonds Budget 1,051,463 501,000 Forecast 1,173,577 623,114 Increase 122,114 122,114 Change due to North Satellite 150,000 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 2012 Annual Budget Changes $ in 000's 2012 Description Spending SSAT HVAC,Lights,Ceiling Repl 1,177 Port-Owned Loading Bridge R&R 979 North Satellite 650 New Window Wall Ticket Zone 1 610 Rubber and Paint Removal Equip 600 Emergency Lighting - Parking 591 Other 2,843 Total 7,450 Future 2012 Authorization Requests Future 2012 Authorization Requests: - NorthSTAR Additional Components - Zone 3 Ticketing - Cargo 2 West Hardstand - Cargo 6 Enhancement - Service Tunnel Repair and Replacement - Vertical Conveyance Modernization Aero Phase II - Facility Monitoring System - Zone 2 Ticketing 11 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 FINANCIAL SUMMARY 2011 2012 2012 Budget Variance Change from 2011 $ in 000's Actual Forecast Budget $ % $ % Revenues: Operating Revenue 98,910 110,361 96,980 13,381 14% 11,451 12% Security Grants 394 2,603 1,598 1,005 63% 2,209 560% Total Revenues 99,304 112,964 98,578 14,386 15% 13,660 14% Total Operating Expenses 38,463 48,006 46,536 (1,470) -3% 9,543 25% Net Operating Income 60,842 64,958 52,042 12,916 25% 4,117 7% Capital Expenditures 18,837 13,274 15,496 2,222 14% (5,563) -30% Total Seaport revenues were $10.1 million favorable through the second quarter primarily due to the Containers. Space/land rent is favorable due to the refunding of Terminal 18 Special Facility Bonds in December 2011 and the related implementation of the GAAP straight-line rent adjustment. Neither of these items was reflected in the 2012 Budget due to the timing of the transaction. For the full year Seaport is forecasting revenue to exceed budget by $14.4 million as a result of the described bond refunding $12.1 million and Security Grant activity $1.0 million. Total Operating Expenses were $1.2 million favorable through the second quarter due to favorable timing variances partially offset by above budget Security Grant expenses. Seaport is forecasting full year operating expenses to exceed budget by $1.5 million primarily due to Security Grant expenses. Forecasted Net Operating Income for 2012 is estimated to be $12.9 million favorable to budget and $4.1 million above 2011 Actual. As of the end of the 2nd Quarter, total capital spending for 2012 is projected to be $13.3 million or 86% of the Approved Annual Budget. A. BUSINESS EVENTS TEU volumes for Seattle Harbor are down (.1%) as of June 30, 2012 compared to the same period in 2011. Total year-to-date 2012 volume is 1,006K TEU's. Full year forecasted volume is for 1,750K TEU's compared to budget of 2,000K TEU's. Consolidated West Coast Port results through the 2nd Quarter of 2012 show an overall increase in TEU volume of 2.8% compared to volumes in 2011. TEU Volume (in 000's) 2012 2011 TEU Change % Change Long Beach 2,822 2,968 (146) -4.9% Los Angeles 4,010 3,767 243 6.4% Oakland 1,149 1,141 7 0.7% Portland 102 98 5 5.0% Prince Rupert 272 152 120 79.3% Seattle 1,006 1,008 (1) -0.1% Tacoma 730 720 10 1.3% Vancouver 1,298 1,225 73 6.0% West Coast - Totals: 11,390 11,078 311 2.8% Grain vessels shipped 2,914K metric tons of grain through Terminal 86 for year-to-date 2012. Amount is 5.8% above 2011 volumes and 16% favorable to 2012 Budget volume. The 2012 cruise season commenced on May 6th. Start-up operations for new ships in Seattle, Disney Cruise Line's Wonder and Norwegian Cruise Line's Jewell went very well. 12 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 B. KEY INDICATORS Container Volume TEU's in 000's 2,500 2,000 1,500 2011 Actuals 1,000 2012 Budget 2012 Actuals 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Grain Volume Metric Tons in 000's 6,000 5,000 4,000 2011 Actuals 3,000 2012 Budget 2,000 2012 Actuals 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cruise Passengers in 000's 1,000 800 600 2011 Actuals 400 2012 Budget 200 2012 Actuals 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net Operating Income Before Depreciation By Business $ in 000's 2011 YTD 2012 YTD 2012 YTD 2012 Bud Var Change from 2011 Actual Actual Budget $ % $ % Containers 23,302 28,932 19,795 9,137 46% 5,630 24% Grain 2,498 2,589 2,133 456 21% 91 4% Seaport Industrial Props 2,743 3,663 2,669 994 37% 920 34% Cruise 1,353 984 863 120 14% (369) -27% Docks (494) (269) (834) 565 68% 225 46% Security (373) (419) (466) 47 10% (45) -12% Env Grants/Remed Liab/Oth 18 (34) 0 (34) NA (51) -292% Total Seaport 29,045 35,447 24,161 11,286 47% 6,402 22% 13 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 C. OPERATING RESULTS 2011 YTD 2012 Year-to-Date YTD Bud Var Year-End Projections $ in 000's Actual Actual Budget $ % Budget Forecast Variance Operating Revenue 47,330 55,114 45,972 9,142 20% 96,980 110,361 13,381 Security Grants 51 1,848 920 927 101% 1,598 2,603 1,005 Total Revenues 47,380 56,962 46,892 10,069 21% 98,578 112,964 14,386 Seaport Expenses (excl env srvs) 6,604 6,238 7,222 984 14% 15,236 14,476 760 Environmental Services 693 874 961 87 9% 2,289 2,289 0 Maintenance Expenses 2,235 2,759 2,877 118 4% 5,817 5,817 0 P69 Facilities Expenses 228 272 262 (11) -4% 531 531 0 Other RE Expenses 92 145 160 15 9% 300 300 0 CDD Expenses 1,435 1,969 2,260 292 13% 4,388 5,588 (1,200) Police Expenses 1,785 1,900 2,095 196 9% 4,167 4,141 26 Corporate Expenses 5,221 5,494 6,018 524 9% 12,332 12,176 156 Security Grant Expense 61 1,833 877 (956) -109% 1,476 2,688 (1,212) Envir Remed Liability (18) 32 0 (32) NA 0 0 0 Total Expenses 18,335 21,514 22,731 1,217 5% 46,536 48,006 (1,470) NOI Before Depreciation 29,045 35,447 24,161 11,286 47% 52,042 64,958 12,916 Depreciation 15,687 17,292 15,740 (1,552) -10% 31,713 34,469 (2,756) NOI After Depreciation 13,359 18,155 8,421 9,735 116% 20,330 30,490 10,160 Seaport revenues were $10,069K favorable to budget. Key variances are as follows: Seaport Lease & Asset Management - favorable $8,718K Containers $7,712K favorable. Space Rental favorable $4,653K and GAAP Straight Line rental revenue recognition favorable $1,384K due to refunding of Terminal 18 Special Facility Revenue Bonds in December 2011. Crane Rent Revenue $1,538K favorable due to delays in certification of SSA owned cranes at Terminal 18 $891K and above budget tariff crane usage at Terminal 5 $638K. Grain $406K favorable due to volume coming in 16% favorable to budget. Seaport Industrial Properties $600K favorable primarily due to the higher than anticipated concession rent at T91, higher utility revenue and due to unbudgeted amortization of lease termination revenue from Terminal 106. Cruise and Maritime Operations - favorable $1,352K Cruise $80K favorable primarily due to higher passenger volumes and an additional cruise call. Maritime Operations Docks $345K favorable due higher moorage occupancy than budgeted, unbudgeted increase in preferential use rate and payment of minimum guaranteed moorage by Terminal 91 preferential use customers. Security Grants $927K favorable due to pass-thru grants primarily involving the Port of Everett. Total Seaport Division Expenses were $1,217K favorable to budget. Key variances: Seaport Expenses (excluding Environmental Services) were $984K favorable to budget. Major account variances were as follows: Salaries & Benefits were $115K favorable due to current or earlier in the year open positions in Division Administration, Commercial Strategies, and Seaport Finance. Equipment Expenses were ($244K) unfavorable due to unbudgeted furniture and equipment acquisitions related to the Cruise CTA lease allowance. Outside Services were $825K favorable due to the Terminal 18 Pile Cap project $600K which is being performed internally by CDD staff, RFID project $108K and transportation related work $46K due to timing differences, and contract watchmen services at Terminal 91 $64K due to less security requirements than budgeted for events and TWIC. 14 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 Travel & Other Employee Expenses (which includes Subscription expenses) were $225K favorable due to timing with the most significant factor being the payment of the Emodal subscription related to the RFID project $100K. Maintenance costs, direct and allocated, were favorable $118K due to timing with the budget. CDD costs were favorable $292K due to below budget allocations $337K from all CDD groups and below budget direct charged Outside Service costs $351K from Seaport Project Management. Favorable amounts are partially offset by unplanned direct charging from PCS for wages and overhead related to the Terminal 18 Pile Cap work ($363K). Police costs, direct and allocated were favorable $196K due to below budget spending by the Police for the year-to-date. Corporate costs, direct and allocated were favorable $524K due to lower than anticipated direct charges and allocations from virtually all Corporate groups including Public Affairs $126K, Accounting and Financial Reporting $78K, Commission Contingency $67K and Human Resources $65K. Security Grant Expenses were unfavorable ($956K) due to pass-thru grant activity, primarily involving the Port of Everett, being above budget. All other variances netted to favorable $59K or less than .3% of Total Expenses Budgeted. NOI Before Depreciation was $11,286K favorable to budget. Depreciation was ($1,552K) or 10% unfavorable to the year-to-date 2012 Budget primarily due to the booking of assets originally funded by Terminal 18 Special Facility Revenue Bonds. Due to refunding the special facility bonds with traditional bonds in December 2011, these formerly "off balance sheet" assets are now reflected on the Port's books together with the related depreciation. The timing of the refunding did not allow inclusion of the transaction in the 2012 Budget. NOI After Depreciation was $9,735K favorable to budget. Forecast As of the end of the 2nd Quarter 2012, Seaport anticipates ending the year $12.9 million favorable to budget for NOI Before Depreciation. The variance reflects above budget revenue of $14.4 million partially offset by above budget expenses of ($1.5 million). The favorable revenue variance is primarily the result of refunding the T18 Special Facility Bonds in December 2011. Of the total impact of $12.1 million, $9.3 million reflects debt payments that are no longer netted against revenue and $2.8 million reflects the GAAP straight line rent adjustment which now applies to the Terminal 18 lease payments. Security Grant Revenue is also forecasted to exceed budget by $1.0 million due to more activity than anticipated related to third party pass-through grants. Expenses are forecasted to exceed budget primarily due to the expenses associated with pass-thru security grants as well as due to unbudgeted additional work on the Terminal 18 Pile Cap Pilot project. Change from 2011 Actual NOI Before Depreciation for YTD 2012 increased by $6,402K from 2011 due to higher revenue partially offset by higher expenses: Revenue is up $9,581K from the prior year due to increased Container revenue $5,709K resulting from the refunding of the Terminal 18 Special Facility Bonds in December 2011 slightly offset by lower crane rent, increased Security grant activity of $1,797K, and increased Industrial Property $1,220K revenue due to higher occupancy, increased rental rates and more concession rent. Expenses, both direct and allocated, increased by $3,180K due to more Security grant activity $1,771K, increased Maintenance costs $524K, increased CDD costs $534K due to the Terminal 18 Pile Cap Pilot project, and higher Corporate and Police expenses $388K. Seaport expenses decreased ($366K) primarily due to the Terminal 5 Maintenance Dredge work that was done in 2011. 15 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 D. CAPITAL SPENDING RESULTS 2012 2012 Budget Variance 2012 Plan Estimated Approved of $ % $ in 000's Actual Budget Finance Cruise 3,221 4,456 1,235 28% 2,501 Security 4,010 3,500 (510) -15% 1,354 Terminal 18 1,608 2,390 782 33% 2,478 Small Projects 766 1,374 608 44% 775 Cranes 922 1,220 298 24% 13 Terminal 91 - Industrial Properties 1,016 762 (254) -33% 2,570 Terminal 5 314 400 86 22% 813 Terminal 10 343 295 (48) -16% 475 N Argo Express - Private Road 192 0 (192) NA 0 Green Port Initiative 20 170 150 88% 470 All Other 862 929 67 7% 14,257 Total Seaport 13,274 15,496 2,222 14% 25,706 Comments on Key Projects: Seaport spent 45% of the 2012 Approved Capital Budget through the end of the 2nd quarter. Projects with significant changes in spending were: Cruise P91 Fender System Upgrade spending moved to 2013 CTA allowance spending did not qualify as capital Security Projects Security Grant Rounds 9 & 10 were approved by Commission 11/8/11. These projects were included in 2012 Plan of Finance as Business Plan Prospective. Terminal 18: Delays in Street Vacation process. N Argo Express Private Road Project was approved by Commission 12/13/11. The 2012 Plan of Finance assumed that 100% of the project costs would be Public Expense. Changes between the 2012 Plan of Finance and the 2012 Approved Budget represent modifications in 2012 spending estimates made after determination of 2011 actual spending. 16 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 Financial Summary 2011 2012 2012 Budget Variance Change from 2011 $ in 000's Actual Forecast Budget $ % $ % Revenues: Operating Revenue 31,569 31,105 32,401 (1,296) -4% (464) -1% Total Revenues 31,569 31,105 32,401 (1,296) -4% (464) -1% Total Operating Expenses 34,758 36,374 37,224 850 2% 1,616 5% Net Operating Income (3,189) (5,269) (4,823) (446) -9% (2,080) -65% Capital Expenditures 10,085 4,178 7,294 3,116 43% (5,907) -59% Total Real Estate Division Revenues were ($892K) or about 6% unfavorable to budget for the year-to-date due to unfavorable revenue variances from Fishing and Commercial, Recreational Boating, and Third Party Managed Properties. For the full year, Real Estate is forecasting Revenue to be ($1,296K) unfavorable to budget. Total Operating Expenses were $2,231K, or 12%, favorable to budget due to below budget activity at Bell Harbor International Conference and due to timing. For the full year, Real Estate is forecasting Operating Expenses to come in $850K favorable to budget. Net Operating Income for 2012 was $1,339K favorable to budget and $726K above 2011 Actual. Higher revenues and lower expenses were driving the year over year change. For the full year, Real Estate is forecasting Net Operating Income to come in ($446K) unfavorable to budget. At the end of the second quarter, capital spending for 2012 is currently estimated to be $4.2 million or 57% of the Approved Annual Budget amount of $7.3 million. A. BUSINESS EVENTS Occupancy levels at Commercial Properties were at 91% at the end of the first quarter, which is above the 90% target for the 2012 Budget, and above comparable statistics for the local market of 86%. New Conference and Event Center Management Agreement was executed on April 4th and became effective on June 1st. Recreational marinas averaged 92% occupancy through the second quarter which was below the target of 94%. Fishermen's Terminal and Maritime Industrial Center averaged 75% occupancy which was below the target of 86%. 5-year agreement between the Port of Seattle and the Shilshole Liveaboard Association was finalized and signed in June. Closed sale on 5.75 mile segment of the Eastside Rail Corridor with City of Kirkland in April. 17 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 B. KEY INDICATORS Shilshole Bay Marina Occupancy 120.0% 100.0% 2011 Actual Footage 80.0% 2012 Budget 2012 Actual 60.0% Percent Linear 40.0% 20.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fishermen's Terminal Moorage Occupancy 120.0% 100.0% 2011 Actual 80.0% 2012 Budget Footage Occupied 60.0% 2012 Actual Percent Linear 40.0% 20.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Commercial Building 100% 90% 89% 90% 90% 90% 90% 91% 90% 90% 90% 90% 2011 Actual 80% Percent 2012 Target 70% 2012 Actual 60% Qtr 1 Qtr 2 Qtr 3 Qtr 4 Net Operating Income Before Depreciation By Business 2011 YTD 2012 YTD 2012 YTD 2012 Bud Var Change from 2011 $ in 000's Actual Actual Budget $ % $ % Recreational Boating 914 925 511 414 81% 12 1% Fishing & Commercial (1,037) (1,215) (1,455) 240 16% (178) -17% Commercial & Third Party (147) 60 (495) 555 112% 207 141% Eastside Rail (944) (287) (275) (13) -5% 657 70% RE Development & Plan (330) (214) (452) 239 53% 116 35% Envir Grants/Remed Liab/Oth (9) (97) 0 (97) NA (87) NA Total Real Estate (1,553) (828) (2,166) 1,339 62% 726 47% 18 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 C. OPERATING RESULTS 2011 YTD 2012 Year-to-Date YTD Bud Var Year-End Projections $ in 000's Actual Actual Budget $ % Budget Forecast Variance Revenue 10,799 10,956 11,120 -164 -1% 22,389 22,068 (321) BHICC & WTC Revenue 3,867 4,207 4,935 -728 -15% 10,012 9,037 (975) Total Revenue 14,667 15,163 16,055 -892 -6% 32,401 31,105 (1,296) Real Estate Exp(excl Maint,P69,Conf) 4,904 4,967 4,960 -7 0% 9,920 9,920 0 Real Estate BHICC & WTC 3,230 3,318 3,864 546 14% 7,870 7,109 761 Eastside Rail Corridor 721 189 101 -88 -86% 203 203 0 Maintenance Expenses 3,256 3,356 4,667 1,311 28% 9,687 9,562 125 P69 Facilities Expenses 68 101 98 -4 -4% 198 198 0 Seaport Expenses 462 557 639 82 13% 1,408 1,408 0 CDD Expenses 467 501 636 135 21% 1,266 1,266 0 Police Expenses 649 658 725 68 9% 1,442 1,433 9 Corporate Expenses 2,454 2,246 2,531 284 11% 5,229 5,177 52 Envir Remed Liability 7 97 0 -97 NA 0 97 (97) Total Expense 16,220 15,991 18,221 2,231 12% 37,224 36,374 850 NOI Before Depreciation -1,553 -828 -2,166 1,339 62% (4,823) (5,269) (446) Depreciation 5,037 4,948 4,781 -167 -3% 9,694 9,694 0 NOI After Depreciation -6,590 -5,776 -6,948 1,172 17% (14,517) (14,963) (446) Total Real Estate revenues were ($892K) unfavorable to budget. Key variances are as follows: Harbor Services: Unfavorable ($168K) Recreational Boating unfavorable ($89K) due to an occupancy shortfall of 2.2% at Shilshole Bay Marina or an average of 31 boats per month less than planned. Fishing and Commercial unfavorable ($79K) primarily due to fewer medium and small fishing boats. Portfolio Management: Unfavorable ($815K) Commercial Properties unfavorable ($68K) primarily due to lower occupancy at Terminal 102 Marina Corporate Center and Pier 2 partially offset by higher occupancy at Fishermen's Terminal Office & Retail than assumed in the Budget. Third Party Managed Properties unfavorable ($747K): Bell Street International Conference Center and World Trade Center Club unfavorable ($728K) due to lower activity ($706K) and below budget Membership Revenue ($22K). Bell Street Garage unfavorable ($29K) due to less activity than budgeted. World Trade Center West on Budget. Eastside Rail Corridor: Unfavorable ($6K) Eastside Rail Corridor unfavorable ($6K) due to land rental. RE Development and Planning: Favorable $81K Terminal 91 General Industrial favorable $81K due primarily to higher revenue from Pacific Maritime Association as a result of the tenant taking more yard space. Facilities Management: Unfavorable ($2K) Pier 69 Facilities Management unfavorable ($2K). Maintenance: Favorable $17K Maintenance favorable $17K. 19 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 Total Real Estate expenses were $2,231K favorable to budget. Key variances: Real Estate Expenses (excluding Maintenance, P69 Facilities, and Conference & Event Activity Expense) were unfavorable ($7K). Major account variances were as follows: Outside Services favorable $67K due to timing. Litigated Injuries and Damages unfavorable ($120K) due to unexpected legal claims. Real Estate BHICC & WTC favorable $546K due to lower activity and cost controls at Bell Harbor International Conference Center and World Trade Center Seattle. Eastside Rail Corridor expenses were ($88K) unfavorable due to unanticipated Litigated Injuries and Damages and Surface Water Utility expenses, partially offset by underutilized consulting service costs. Maintenance expenses were favorable $1,311K primarily due to timing differences with the budget. Seaport originated expenses were favorable $82K due to below budget direct charges from Planning, Dock Operations and Seaport Finance. CDD costs, direct and allocated were favorable $135K primarily due to lower direct charges and allocations from Central Procurement and Port Construction Services. Police costs, direct and allocated were favorable $68K due to below budget spending by the Police for the year-to-date. Corporate costs, direct and allocated, were favorable $284K primarily due to Legal $73K, Executive and Internal Audit $37K, Human Resources $54K, Accounting $26K, Public Affairs $22K, and IT $22K. Environmental Remediation Liability Expense unfavorable ($97K) due to environmental work at Fishermen's Terminal. All other variances netted to an unfavorable ($3K). NOI Before Depreciation was $1,339K favorable to budget. Depreciation was ($167K) or (3%) unfavorable to budget due to allocated depreciation from ICT that was inadvertently not budgeted. NOI After Depreciation was $1,172K favorable to budget. Full Year Forecast Real Estate anticipates ending the year unfavorable ($446K) to Budget for NOI Before Depreciation. Revenue is forecast to be ($1,296K) unfavorable to Budget due to below budget activity at Bell Harbor International Conference Center and below budget occupancy at Fishermen's Terminal and Shilshole Bay Marina. Expenses are forecasted to be $850K favorable to Budget due to below budget activity at Bell Harbor International Conference Center and a project that was budgeted as an expense, but instead qualified for capitalization. Change from 2011 Actual Net Operating Income Before Depreciation increased by $726K between Q2 year-to-date 2012 and 2011 as a result of higher revenue and lower expenses. Revenues increased by $496K due to more activity at Bell Harbor International Conference Center and overall higher occupancies and lease rates at Commercial Properties. Amounts were partially offset by lower occupancies at the Shilshole Bay and Fishermen's Terminal marinas. Expenses decreased by ($229K) due to decrease in Eastside Rail Corridor litigation related expenses ($574K) and Corporate Outside Legal Expense ($159K). These decreases were partially offset by higher Real Estate Salaries & Benefits and Utilities, higher Marine Maintenance costs, higher charges for storm water related work from Seaport Environmental Services and higher Environmental Remediation Liability Expense. 20 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/12 D. CAPITAL SPENDING RESULTS 2012 2012 Budget Variance 2012 Plan Estimated Approved $ % of Finance $ in 000's Actual Budget Small Projects 1,242 1,908 666 35% 815 Tenant Improvements -Capital 766 1,148 382 33% 1,148 FT East Portion South Wall 49 760 711 94% 0 Bell Harbor Lighting Ctrl Upgrade 47 633 586 93% 160 RE Maintenance Shop Solution 626 624 (2) 0% 0 All Other 1,448 2,221 773 35% 8,801 Total Real Estate 4,178 7,294 3,116 43% 10,924 Comments on Key Projects: Through second quarter, the Real Estate Division spent 14% of the Approved Capital Budget. Full year spending is estimated to be 57% of the Approved Capital Budget. Projects with significant changes in spending were: Small Projects Delay in start of some projects and movement of others to future years. Tenant Improvements Capital New leases and lease renewals have not required capital tenant improvements. FT East Portion South Wall Budget overestimated. Bell Harbor Lighting Upgrade Project cancelled. Changes between the 2012 Plan of Finance and the 2012 Approved Budget represent modifications in 2012 spending estimates made after determination of 2011 actual spending. 21 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PEFORMANCE REPORT 06/30/12 A. BUSINESS EVENTS Rental Car Facility opened on May 19. The opening was very successful and startup and transition issues were minimal. Resolved issues with Alaska Air Group concerning the North Sea-Tac Airport Renovations program resulting in a final letter outlining the terms of Alaska's involvement. Issued requests for qualifications for design and program/project management consultants for this $250 million plus effort. Began installation of the new revenue control system for and waterproofing of the 8th floor of the parking garage. Participated in P-Card audit anticipate positive results. Participated in joint meetings with Associated General Contractors Participation with reauthorization committee for RCW 39.10 legislation Prepared open order bid documents for small works contracts in electrical, mechanical, and general construction. Key projects for the second quarter were T-18 pile cap pilot program, airport checkpoint security cameras, miscellaneous work on the rental car facility, Regulated Materials Management (RMM) oversight and compliance monitoring for the PC air and escalator, Electrified Ground Support Equipment (EGSE) charging stations, noise remedy, and passenger jet bridges. Cleanup Agreed Order for the T-91 Tank Farm Clean-Up Project was signed by Ecology and the Port. The City Council passed the final ordinance to vacate streets at T-105. Stage 2 of Washington State Department of Transportation's (WSDOT) Holgate to King St Project is nearing completion, to replace the southern half of the Viaduct. The contract for Stage 3 of the Holgate to King Project was awarded to construct a new overpass at South Atlantic Street. Bored Tunnel crews began digging the launch pit, where the tunnel boring machine will begin mining next summer. T-46 improvements began that will allow WSDOT's tunnel contractor to utilize a portion of the site. Significant traffic and ferry access changes were made along downtown Seattle waterfront. A preliminary agreement was reached with Seattle Department of Transportation (SDOT) regarding the configuration of East Marginal Way traffic improvements required for the Argo Yard Access Road and East Marginal Way Grade Separation Phase II projects. 22 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PEFORMANCE REPORT 06/30/12 B. KEY PERFORMANCE METRICS Key Performance 2012 YTD Notes Metrics Construction Soft ($ in 000's) Limit construction soft costs (design, Costs construction management, project Total Costs $ 654,934 (100%) management, environmental 36 month rolling documentation, allocated overhead) to average from Total Construction: $ 526,667 ( 80%) no more than 25% of total capital improvement costs. Q3 2009 thru Q2 2012 Total Soft: $ 128,268 ( 20%) Cost Growth During Total Completed Projects YTD: 12 Limit average mandatory change cost Construction growth to 5% of construction contract Discretionary Change: 5.6% award. Mandatory Change: 0.6% Limit average discretionary change cost growth to 5% of construction contract award. Design Schedule ($ in 000's) Limit design growth from initial Growth Total Completed Projects YTD: 12 Commission project authorization to Avg Design Growth Completed Proj's: 23.6% construction contract award to no more Cumulative Value YTD: $15,449 than 10% of originally allotted duration. Construction Schedule ($ in 000's) Limit construction growth from Growth Total Completed Projects YTD: 12 contract award to substantially Avg Construction Growth Completed complete to no more than 10% of Projects: 19.6% originally scheduled. Cumulative Value YTD: $15,449 Performance Q2 2012 98% PREPs completed within 30 days Evaluation Timeliness Total PREPs due: 64 101 of anniversary date. Total PREPs on time: 0-30 days (CDD) 49 77 (76.6%) (76.2%) 0-60 days (HRD) 57 91 (89.1%) (90.1%) 2012 Procurement Goods & Services 138 days Average number of days, improving Schedule: Major Public Works 65 days from period to period. Total Time Specs - Small Works 58 days Execution Service Agreements 221 days 23 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PEFORMANCE REPORT 06/30/12 C. OPERATING RESULTS 2011 YTD 2012 YTD 2012 Bud Var. Year-End Projections $ in 000's Notes Actual Actual Budget $ % Budget Forecast Variance Total Revenues 76 12 - 12 0.0% - 12 12 Expenses Before Charges To Cap/Govt/Envrs Propects Capital Development Administration 171 181 188 7 3.5% 374 374 - Engineering 5,479 6,119 7,203 1,083 15.0% 14,217 13,700 516 Port Construction Services 2,947 3,216 3,397 181 5.3% 6,791 6,609 182 Central Procurement Office 1,598 2,292 2,223 (68) -3.1% 4,481 4,866 (385) Aviation Project Management 2,561 4,456 4,129 (327) -7.9% 7,731 7,731 - Seaport Project Management 983 1,073 1,576 503 31.9% 2,987 2,984 4 Total Before Charges to Capital Projects 13,739 17,338 18,717 1,379 7.4% 36,581 36,264 317 Charges To Capital/Govt/Envrs Projects Capital Development Administration - - - - 0.0% - - - Engineering (3,935) (4,101) (4,953) (852) 17.2% (9,757) (9,332) (425) Port Construction Services (2,200) (2,113) (1,656) 457 -27.6% (3,313) (3,313) - Central Procurement Office (523) (804) (665) 140 -21.0% (1,330) (1,360) 30 Aviation Project Management (2,157) (2,637) (2,721) (84) 3.1% (5,229) (5,229) - Seaport Project Management (589) (586) (719) (133) 18.5% (1,437) (1,437) - Total Charges to Capital/Govt/Envrs Projects (9,405) (10,241) (10,713) (472) 4.4% (21,066) (20,671) (395) Operating & Maintenance Expense Capital Development Administration 171 181 188 7 3.5% 374 374 - Engineering 1,544 2,018 2,250 232 10.3% 4,460 4,368 91 Port Construction Services 746 1,103 1,741 638 36.6% 3,479 3,297 182 Central Procurement Office 1,075 1,487 1,559 71 4.6% 3,151 3,506 (355) Aviation Project Management 404 1,819 1,408 (411) -29.2% 2,502 2,502 - Seaport Project Management 393 487 858 370 43.2% 1,550 1,547 4 Total Expenses 4,334 7,097 8,004 907 11.3% 15,516 15,593 (78) Variance Summary and other notes: Accounting triple coding error for GOVT projects resulted in under-stated Salaries & Benefits YTD with corresponding positive variance impacts. This is expected to be corrected in Q3. CPO $17,227 ENG $70,143 PCS 6,792 SPM $68,145 Total $162,307 Vacancies: 21.8 = $960K Salaries & Budget savings from unfilled positions; some hiring projected in Q3. Over Absorption OH Clearing ($237K) represents costs allocated as overhead above the total actual overhead costs. Actual capital, expensed and net operating costs will decrease to account for the over absorption value. YTD budget variance will increase by the Absorption value. AVPMG ($411K) Favorable variances in Salaries & Benefits and Total Charges to Capital Projects are more than offset from $677K unbudgeted OAC Services Inc. airline realignment which will be transferred to Org 3110 in Q3. CPO ($71K) for more capital work than budgeted/anticipated offset by $200K unplanned legal costs (Q1) and unbudgeted $102K Escalator Warranty Maintenance (Q2) hopefully to be recoded. ENG $232K partially due to under absorption in OH clearing of $103K, unfilled positions and delay in outside services billings. PCS $638K due to more capital work than budgeted/anticipated and reduced scope of SW construction from Rental Agency Companies (RAC) deactivation. SPM $370K due to timing of outside services; offset by more expense work than budgeted/anticipated. CDD Admin $7K primarily due to timing of expenses. 24 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 06/30/12 A. BUSINESS EVENTS The Century Agenda Committee has been developing initiatives intended to create partnerships with stakeholders in the region to carry out the Century Agenda goal of creating 100,000 jobs in the next 25 years. For Century Agenda outreach, Commissioners spoke at 44 forums during an intensive outreach program developed and implemented with Public Affairs. Port of Seattle has been named one of only 15 employers across the country to receive the 2012 Secretary of Defense Employer Support Freedom Award. Port of Seattle Internship Program awarded Internship Employer of the Year by Seattle University. This award acknowledged the Port of Seattle's commitment to fostering the next generation of community leaders and provides an avenue for students to apply their academic learning to jobs that may lead to a Port-related career in the maritime or aviation sectors. Published Corporate Annual Report and Environmental Annual Report. Received seven communications awards for centennial book and documentary, centennial community bike ride, annual report, centennial video contest and website redesign. Launched Shilshole Bay Marina 50th Anniversary communications plan. Launched Social Media pilot strategy project, initiated team recruitment project. Produced "Choose Washington" ad for presence in Commerce Department magazine. Risk Management worked diligently with Landside in the hiring, review, training, and safety aspects of the Rental Car Facility busing. A new project was approved for the replacement of Risk Master, the risk management claims system. Designed and launched of the 2012 Wellness Reward Program and work is underway for developing a health care cost containment strategy. Ninety-seven percent (97%) participation rate in the health assessment, which is a requirement of the 2012 Wellness Reward Program. Deferred Compensation Record Keeping was successfully transitioned from Great-West to ICMA-RC at the middle of March. Provided strategic recruiting assistance and HR Business Planning to the Rental Car and Bus Maintenance Facilities. Successfully recruited over 75 positions necessary to the opening and ongoing success of the Rental Car Facility. Issued a revised RFP for PeopleSoft Financials System Upgrade consultant services. The project is anticipated to span approximately twelve months, with an anticipated start date of August 2012. Configuration of Flight Information Management System (FIMS) software is in progress and construction for the display replacement has begun. This project will replace the aging monitors and the current FIMS with a flexible system that can provide flight and other information such as visual paging and emergency notification. Began the 2013 business and budget planning process. Amended Investment Policy. Completed and filed Annual bond disclosure. Continued to reach out to the community to educate small businesses on contracting opportunities and the Small Contractors and Suppliers Program (SCS). Provided staffing to the Occupy Seattle Protests at Port properties and assisted City of Seattle. Provided security and crowd control at several Washington Works events on the Port property. 25 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 06/30/12 B. KEY PERFORMANCE METRICS Key Performance Metrics YTD 2012 YTD 2011/Notes A. Be a High Performance Workplace 1. Employee Training a) New Employee Orientation 122 attendees 46 attendees, increased by 76 due to opening of RCF b) Employee Develop. Classes 169 84, increase by 85 c) REALeadership Program Presently being reassessed 30, decreased by 30 d) MIS Training 6 MIS classes, 35 users 6 MIS classes, 67 users e) Required Safety Training 91% 91% 2. Tuition Reimbursement 25 employees participated 30, decreased by 5 3. Occupational Injury Rate 6.39 5.68, increased by .71 4. Total Lost Work Days 234 313, decreased by 79 days B. Foster a Strong Partnership with Surrounding Communities 1. Sustainability Communications 79,494 individuals reached N/A 2. Targeted Outreach Contacts 684 new contacts N/A 3. Implement Century Agenda Conducted 21 Commission-led N/A Outreach Campaign stakeholder presentations 4. Small Business Outreach 9 39, decreased by 30 C. Continue to be a Strong Advocate of Social Responsibility 1. Small Businesses on PRMS 253 registered on new PRMS N/A 2. Contracts Reviewed for SCS 23 27, decreased by 4 3. Airport Job Placements 722 N/A 4. Apprenticeship Opportunity 61 N/A Project Placements 5. Numbers of Interns Hired 26 26 6. Community Giving Campaign 153 employees donated 74 employees, increased by 79 D. Maintain a Strong Culture of Transparency and Accountability 1. Internal Audits Completed 10 10 2. % of Audit Plan Completed 38 32, increased by 6% 3. Public Disclosure Requests 192 144, increased by 48 4. Vehicle Incidents 33 total/30 preventable 58 total/27 preventable 5. Incurred Auto Liability Costs $25K $50K, decreased by $25K E. Maintain the Port's Strong Financial Position 1. Corp. Cost as a % of Total Rev. 13.4% 14.1% (14.0% excluding the AAPA) 2. Corp. Cost as a % of Total Exp. 25.1% 27.2% (27.1% excluding the AAPA) 3. Commission Authorized Projects 100%/53% 100%/38%, increased by 15% On Budget/Schedule 4. Account Receivables Collection $3,121,303 $4,488,296 (0 30 days) 5. Invoice Due Date vs. Date Paid 4 days Compared to 3 days (benchmark) F. Provide Outstanding Support to Divisions 1. Contract Administration Issues 39 59, decreased by 20 2. Attorney Services 37 litigation and claims 30, increased by 7 3. Labor Contracts Negotiated 22 2, increased by 20 4. Job Openings Created 122 132, decreased by 10 5. Job Applications Received 4,931 6,210, decreased by 1,279 6. Police Customer Service Survey 93.5% 90% (% Above Average or Excellent) 26 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 06/30/12 C. OPERATING RESULTS 2011 YTD 2012 YTD 2012 Bud Var. Year-End Projections $ in 000's Actual Actual Budget $ % Budget Forecast Variance Total Revenues 620 165 76 90 118.6% 151 177 26 Executive 694 718 813 95 11.7% 1,539 1,539 - Commission 336 425 473 47 10.0% 980 962 18 Legal 1,529 1,381 1,390 9 0.7% 2,901 2,928 (27) Risk Services 1,249 1,225 1,433 208 14.5% 2,959 2,809 150 Health & Safety Services 542 486 549 63 11.5% 1,060 1,040 20 Public Affairs 2,990 2,709 3,046 337 11.1% 5,815 5,660 154 Human Resources & Development 2,271 2,402 2,710 308 11.4% 5,484 5,388 96 Labor Relations 515 492 482 (10) -2.1% 961 1,111 (150) Information & Communications Technology 8,951 9,359 9,478 119 1.3% 20,194 20,194 - Finance & Budget 707 737 780 43 5.5% 1,543 1,533 10 Accounting & Financial Reporting Services 2,789 3,111 3,347 236 7.1% 6,853 6,797 56 Internal Audit 507 564 697 133 19.1% 1,496 1,491 6 Office of Social Responsibility 531 679 753 74 9.9% 1,476 1,431 45 Police 10,535 10,418 11,351 933 8.2% 22,574 22,478 96 Contingency 48 53 300 247 82.2% 700 500 200 Total Expenses 34,195 34,760 37,602 2,842 7.6% 76,535 75,862 673 Corporate revenues were $90K favorable compared to budget due to higher operating grants. Corporate expenses for the first six months of 2012 were $34.8 million, $2.8 million or 7.6% favorable compared to the approved budget and $565K or 1.7% higher than the same period a year ago. The $2.8 million favorable variance is due primarily to a combination of cost savings and timing differences between when the items are paid and when budgeted. All corporate departments have a favorable variance except for: Labor Relations - unfavorable variance of $10K is due to Project Labor Agreement charging less to capital projects than originally anticipated. Year-end spending is projected to be $673K under budget due primarily to: Risk Management vacant positions and lower insurance costs. Public Affairs vacant positions. Human Resources and Development vacant positions and credit from state for participating in the Commute Trip Reduction Program. Accounting and Financial Reporting Services vacant position and unbudgeted charges to capital for work performed on the Enterprise Cost Management Project (SKIRE.) Not anticipating to use all funds in Contingency. D. CAPITAL SPENDING RESULTS ($ Millions) Annual Results: 2012 Plan of Finance $12.0 2012 Approved Budget $11.7 2012 Estimated/Actuals $9.6 Variance (App.Budget vs Est./Acts) $2.1 27
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