7b report
ITEM NO. 7b_Attach_1 DATE OF MEETING March 6, 2012 PORT OF SEATTLE 2011 FINANCIAL & PERFORMANCE REPORT AS OF DECEBER 31, 2011 TABLE OF CONTENTS Page I. Portwide Performance Report 3-5 II. Aviation Division Report 6-12 III. Seaport Division Report 13-18 IV. Real Estate Division Report 19-24 V. Capital Development Division Report 25-29 VI. Corporate Division Report 30-32 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/11 EXECUTIVE SUMMARY Financial Summary The Port's 2011 operating revenues were $483.8 million, $9.0 million below budget. Excluding the $9.3 million unfavorable budget variance from aeronautical revenues, which are based on airline cost recovery formulas, and $3.0 million unfavorable budget variance from Seaport Security Grants, which would have a corresponding reduction in operating expense, operating revenues were $3.4 million higher than budget primarily due to higher revenues from Concessions, Container, and Cruise businesses. Total operating expenses were $268.7 million, $17.1 million below budget mainly due to savings from some vacant positions, outside services, and lower Passthrough Grants expenses. Operating income before depreciation was $215.1 million, $8.2 million above budget. Operating income after depreciation was $57.0 million, $10.6 million higher than budget. The Port-wide capital spending was $200.1 million for the year, $87.1 million below the budgeted $287.2 million. Operating Summary Operating performance was also strong in 2011. At the Airport, airline passengers reached a record high of 32.8 million in 2011, a 4.0% increase from 2010. Enplanements were 3.5% higher than budget and 3.9% higher than 2010. International enplaned passengers saw even a greater year-over-year growth of 5.2% in 2011. For the Seaport division, TEUs hit the 2 million mark for the second consecutive year. The Cruise business served 885,949 passengers in 2011, which was 11% above budget. While Grain volumes were down 8.5% from 2010 and 8.6% compared to the budget, they still came in above 5.0 million metric tons for the seventh consecutive year. For the Real Estate division, occupancy levels at Commercial Properties were at 90%, slightly higher than the 86% Seattle market average. Activity at Bell Harbor International Conference Center also exceeded budget, and the Shilshole Bay Marina occupancy rate was 95.5%, compared to 94.4% in 2010. Key Business Events To set the Port's strategic direction into the next century, we held a number of Century Agenda Roundtables with panelists composed of local industry experts and the Commission established a set of draft 25 year goals. We also held a number of events to celebrate the Port's 100 year anniversary in 2011 and successfully hosted the 100th annual AAPA conference in Seattle. We developed a funding plan for financing the Port's contribution to the Viaduct Replacement Project. Emirates Airlines announced daily non-stop service to Dubai beginning in the first quarter of 2012. We executed leases with the Washington State Department of Transportation at Terminal 106 and Terminal 46. Finally, the Port received 14 awards in various areas including environmental leadership, public relations, budgeting, and financial reporting in 2011. Major Capital Projects We completed a number of capital projects in 2011. These included all 2011 storm-water & habitat improvement projects, paving and offsite road improvements for the Consolidated Rental Car Facility, the first phase of a project replacing 44 airport escalators, the Terminal 10 Redevelopment Project, North Harbor Island Mooring Dolphins, Phase 1 Dredging at Terminal 5, Fishermen's Terminal NW Dock Fender System, Maritime Industrial Center Central Seawall Replacement, and Terminal 86 Tower Strengthening projects. Construction of the Consolidated Rental Car Facility and Bus Maintenance Facility continued and are planned for opening in the second quarter of 2012. The airline Terminal Realignment project was delayed but continues to move forward, the Pre-Conditioned Air Project was delayed due to delays in delivery of major equipment, and the Parking System replacement project was delayed due to a change in the bidding approach and longer than anticipated contract negotiations. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/11 INCOME STATEMENT Report: Income Statement As of Date: 2011-12-31 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Revenues: Aviation 334,263 351,390 362,678 (11,289) -3.1% 17,127 5.1% Seaport 97,279 98,619 98,153 466 0.5% 1,340 1.4% Real Estate 30,391 32,198 30,942 1,256 4.1% 1,807 5.9% Capital Development 36 79 - 79 0.0% 43 118.7% Corporate 610 1,559 1,025 534 52.1% 949 155.5% Total Revenues 462,579 483,844 492,798 (8,953) -1.8% 21,265 4.6% Operating & Maintenance: Aviation 126,481 136,164 139,575 3,410 2.4% 9,683 7.7% Seaport 19,522 16,124 23,247 7,123 30.6% (3,397) -17.4% Real Estate 30,735 33,376 33,736 360 1.1% 2,642 8.6% Capital Development 9,335 11,219 14,278 3,060 21.4% 1,883 20.2% Corporate 67,391 71,828 75,008 3,180 4.2% 4,436 6.6% Total O&M Costs 253,464 268,711 285,844 17,133 6.0% 15,247 6.0% Operating Income Before Depreciation 209,115 215,133 206,954 8,179 4.0% 6,018 2.9% Depreciation 160,775 158,107 160,491 2,384 1.5% (2,668) -1.7% Operating Income after Depreciation 48,340 57,026 46,463 10,564 22.7% 8,686 18.0% IMPORTANT NOTES: Total operating revenues are adjusted for the Fuel Hydrant Special Facility Rent reclassification. 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 12/31/11 KEY PERFORMANCE METRICS 2010 2011 2011 Budget Variance Change from 2010 Actual Actual Budget Var. % Chg % Enplanements (in 000's) 15,773 16,396 15,845 551 3.5% 623 3.9% Landed Weight (lbs in 000's) 19,786 20,123 20,089 34 0.2% 337 1.7% Passenger CPE (in $) 11.63 11.79 12.76 (0.97) -7.6% 0.2 1.4% Container Volume (TEU's in 000's) 2,140 2,034 1,800 234 13.0% (106) -5.0% Grain Volume (metric tons in 000's) 5,491 5,027 5,500 (473) -8.6% (464) -8.5% Cruise Passenger (in 000's) 932 886 796 90 11.3% (46) -4.9% Commercial Property Occupancy 88% 90% 90% - 0.0% 2.0% 2.3% Shilshole Bay Marina Occupancy 94.4% 95.5% 93.4% 2.1% 2.3% 1.2% 1.3% Fishermen's Terminal Occupancy 87.1% 78.2% 82.0% -3.8% -4.6% -8.9% -10.2% CAPITAL SPENDING RESULTS 2010 2011 2011 Budget Plan of Division Actual Actual Budget Variance Finance ($ in millions) Aviation 183.60 166.82 223.75 56.93 231.41 Seaport 11.17 18.84 33.95 15.12 29.49 Real Estate 3.97 10.09 16.34 6.25 15.36 Corporate & CDD 3.82 4.40 13.19 8.79 12.07 Total 202.56 200.14 287.23 87.09 288.33 PORTWIDE INVESTMENT PORTFOLIO The investment portfolio for fourth quarter of 2011 earned 1.20% against our benchmark (The Bank of America Merrill Lynch 3-year Treasury/Agency Index) of 0.31%. For the past twelve months the portfolio has earned 1.67% against the benchmark of 0.48%. Since the Port became its own Treasurer in 2002, the Port's portfolio life-to-date has earned 3.39% against our benchmark of 2.43%. 5 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 FINANCIAL SUMMARY 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Notes Actual Actual Budget $ % $ % Operating Revenues: Aeronautical 198,843 208,363 217,714 (9,351) -4.3% 9,520 4.8% Non-Aeronautical 135,418 143,089 144,965 (1,876) -1.3% 7,670 5.7% Total Operating Revenues 1 334,262 351,452 362,678 (11,227) -3.1% 17,190 5.1% Expenses: Operating Expenses 177,871 191,403 199,180 7,776 3.9% 13,532 7.6% Environmental Remediation Liability 3,271 1,428 1,771 343 19.4% (1,843) -56.4% Total Operating Expenses 181,142 192,831 200,951 8,120 4.0% 11,689 6.5% Net Operating Income 1 153,120 158,621 161,728 (3,107) -1.9% 5,502 3.6% Capital Expenditures 183,578 166,820 223,746 56,926 25.4% (16,758) -9.1% Notes: 1) 2010 and 2011 Budget revenues and NOI restated to reflect the reclassification of fuel system revenues to non-operating. Aeronautical revenues were up $9.5 million vs. 2010, but $9.4 million less than budget due to lower variable rate debt service, additional debt service offsets paid for by PFC collections and operating expense savings from delayed start of the terminal realignment project and delayed hiring in new positions. Non-aeronautical revenues were up $7.7 million vs. 2010, but $1.9 million less than budget due to underperformance in Public Parking and Rental Cars outweighing strong performance in Concessions and Ground Transportation revenues. Operating expenses were up $11.7 million vs. 2010, but $8.1 million less than budget due to delayed start of terminal realignment, lower than budgeted Corporate and Capital Development Division allocations, FTE vacancies and delays in hiring, delays and lower than budgeted estimates of outside services, and the cessation of generator rentals for emergency back-up power. $166.8 million was spent on capital projects in 2011, 74.5% of the 2011 budget of $223.8 million. A. BUSINESS EVENTS Terminal realignment in progress but delayed start. Construction of Rental Car Facility and Bus Maintenance Facility continues for opening in Q2 of 2012. Emirates announced daily non-stop service to Dubai which will begin in Q1 of 2012. B. KEY INDICATORS 2010 2011 % 2010 2011 % Figures in 000's Q4 Q4 Variance Actual Actual Variance Enplanements 3,842 3,930 2.3% 15,773 16,396 3.9% Landed Weight 4,874 4,847 -0.5% 19,786 20,123 1.7% 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 International enplaned passengers in 2011 saw greater growth (5.2% vs. 2010) than domestic enplanements (3.8% vs. 2010). 2011 cargo landed weight made up 6.8% of total landed weight compared to 7.1% of 2010 total landed weight. 2011 actuals resulted in a 3.9% increase in enplaned passengers and a 1.7% increase of landed weight over 2010 actuals. Key Performance Measures 2010 2011 2011 Budget Variance Change from 2010 Actual Actual Budget $ % $ % Non-Aero NOI ($ in 000s) 78,203 83,895 81,209 2,686 3.3% 5,692 7.3% Passenger Airline CPE 11.63 11.79 12.76 0.98 7.6% 0.16 1.4% Debt / Enplaned Passenger 172.96 161.46 166.79 5.34 3.2% (11.50) -6.6% Debt Service Coverage 1.39 1.47 1.40 0.06 4.6% 0.08 5.8% CPE came in lower than the budget primarily due to significant savings in debt service, lower operating costs and increased enplanements. C. OPERATING RESULTS Division Summary 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Notes Actual Actual Budget $ % $ % Total Operating Revenues 1 334,262 351,452 362,678 (11,227) -3.1% 17,190 5.1% Operating Expenses: Salaries & Benefits 76,036 80,577 81,673 1,096 1.3% 4,541 6.0% Outside Services 22,519 25,228 29,453 4,225 14.3% 2,709 12.0% Utilities 11,381 13,202 12,576 (626) -5.0% 1,821 16.0% Other Airport Expenses 13,275 15,730 14,102 (1,628) -11.5% 2,455 18.5% Baseline Airport Expenses 123,211 134,737 137,804 3,067 2.2% 11,526 9.4% Environmental Remediation Liability 3,271 1,428 1,771 343 19.4% (1,843) -56.4% Total Airport Expenses 126,481 136,164 139,575 3,410 2.4% 9,683 7.7% Corporate 32,558 32,583 34,043 1,461 4.3% 24 0.1% Police Costs 14,317 15,913 16,389 475 2.9% 1,596 11.2% Capital Development/Other Expenses 7,785 8,171 10,944 2,773 25.3% 385 5.0% Total Operating Expenses 181,142 192,831 200,951 8,120 4.0% 11,689 6.5% Net Operating Income 1 153,120 158,621 161,728 (3,107) -1.9% 5,501 3.6% Depreciation Expense 119,538 116,762 118,418 1,656 1.4% (2,777) -2.3% Non-Operating Rev/(Exp): Grants & Donations Revenues 30,040 19,565 28,990 (9,425) -32.5% (10,475) -34.9% Passenger Facility Charges 59,744 62,358 60,379 1,979 3.3% 2,614 4.4% Customer Facility Charges 23,243 23,669 22,237 1,433 6.4% 426 1.8% Other Non-operating Rev/(Exp) (110,471) (104,383) (121,952) 17,569 14.4% 6,088 5.5% Total Non-Operating Rev/(Exp) 2,556 1,210 (10,346) 11,556 111.7% (1,347) -52.7% Total Revenue Over Expense 1 36,138 43,069 32,964 10,105 30.7% 6,931 19.2% Notes: 1) 2010 and 2011 Budget revenues and NOI restated to reflect the reclassification of fuel system revenues to non-operating. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Operating CFC Revenues - 798 1,543 (745) -48.3% 798 n/a Non-Operating CFC Revenues 23,243 23,669 22,237 1,433 6.4% 426 1.8% Total CFC Revenues 23,243 24,467 23,780 687 2.9% 1,224 5.3% Operating revenues were $11.3 million less than budget due to savings of $2.3 million from variable rate debt service, $3.3 million additional debt service offsets paid for by PFC collections, $3.7 million operating expense savings from delayed start of the terminal realignment project and delayed hiring in new positions, and underperformance in Public Parking of $2.8 million and Rental Cars $2.3 million outweighing strong performance in Concessions $2.7 million and Ground Transportation $768K. Operating expenses were less than budget by $8.1 million due to the net of the following: Savings of $12.9 million: Overspending of $4.8 million: Payroll vacancies and delayed hiring $493K Equipment fuel costs, repair and maintenance $865K Terminal realignment delayed $2.9M Utility surface water and sewer $626K Noise Program Part 150 delayed $357K Snow/Ice deicer and control and other maintenance materials $869K Emergency backup generators installation cancelled $897K Contracted janitorial services $246K Other contracted and outside services $711K B&O taxes due to increased revenues and budget error $732K Aviation Division contingency not utilized $636K Kone elevator/escalator increased coverage $317K Training and development funds not utilized $531K Litigated injuries and damages $356K Environmental remediation liability $343K SLOA security fund not budgeted $796K Emergency preparedness and other supplies $141K Other savings $1.2M Corporate and Capital Development Division Allocations $4.7M Operating expenses were up $11.7 million vs. 2010: o Salaries, wages and benefits were up $4.4 million, or 6% vs. 2010 due to compensation and benefit increases. o Outside services were up $2.7 million, or 12.0% vs. 2010 due to contractual increases and increased services for elevator and escalator maintenance. o Utilities were up $1.8 million, or 16% vs. 2010 due to higher surface water discharge volumes. o Other expenses were up $2.5 million, or 18.5% vs. 2010. o Environmental remediation liability for asbestos was down $1.8 million, or 56.4% vs. 2010. o Allocations from Corporate and Capital Development Division were up $2.0 million, or 4% vs. 2010. o Customer Facility Charge increased 1.8% in 2011 vs. 2010, whereas, transaction days increased 5.2%. A reclass of $787K from non-operating to operating revenues to offset operating expense for the Rental Car Facility. 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 Aeronautical Business Unit Summary 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Revenues requirement: Capital Costs 82,083 81,506 87,111 5,604 6.4% (576) -0.7% Operating Costs net Non-Aero 122,985 133,638 137,195 3,557 2.6% 10,653 8.7% Total Costs 205,067 215,144 224,305 9,161 4.1% 10,077 4.9% FIS Offset (7,000) (7,000) (7,000) - 0.0% - 0.0% Other Offsets (14,825) (15,371) (14,821) 550 -3.7% (546) 3.7% Net Revenue Requirement 183,243 192,773 202,485 9,711 4.8% 9,531 5.2% Other Aero Revenues 15,601 15,590 15,229 (361) -2.4% (11) -0.1% Total Aero Revenues 198,843 208,363 217,714 9,351 4.3% 9,520 4.8% Less: Non-passenger Airline Costs 15,400 15,098 15,645 547 3.5% 302 2.0% Net Passenger Airline Costs 183,444 193,265 202,069 8,804 4.4% 9,822 5.4% 2010 2011 2011 Budget Variance Change from 2010 Actual Actual Budget $ % $ % Cost Per Enplanement: Capital Costs / Enpl 5.20 4.97 5.51 0.54 9.7% (0.23) -4.5% Operating Costs / Enpl 7.80 8.15 8.66 0.51 5.9% 0.35 4.5% Offsets (1.38) (1.36) (1.38) (0.01) 0.9% 0.02 -1.4% Other Aero Revenues 0.99 0.95 0.96 0.01 1.1% (0.04) -3.9% Non-passenger Airline Costs (0.98) (0.92) (0.99) (0.07) 6.7% 0.06 -5.7% Passenger Airline CPE 11.63 11.79 12.76 0.98 7.6% 0.16 1.4% Capital Costs savings compare to budget were due to $2.3M lower variable rate debt service and $3.3M more in PFC used to offset debt service. Operating costs net non-aero were $3.6 million lower than budget due to cost savings primarily from the delayed start of the Terminal Realignment project and FTE vacancies and delays in hiring. Year over year operating expense increased due to: o Allocated Utility billings $3.9 million o Wages and benefits $2.0 million o Allocated Firefighter wages and OPEB expenses $1.3 million o Elevator/Escalator work $729K o Ramp Tower, Baggage Messaging, Lost & Found $507K o Natural gas $485K o Deicing fluid $353K o Janitorial contract increases $347K 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 Non-Aero Business Unit Summary 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Revenues: Public Parking 49,416 49,996 52,847 (2,851) -5.4% 580 1.2% Customer Facility Charge (RCF) - 798 1,543 (745) -48.3% 798 n/a Rental Cars 30,309 30,005 32,290 (2,285) -7.1% (304) -1.0% Ground Transportation 4,912 7,704 6,936 768 11.1% 2,792 56.8% Concessions 33,765 35,404 32,640 2,764 8.5% 1,639 4.9% Other 17,017 19,182 18,707 475 2.5% 2,165 12.7% Total Revenues 135,418 143,089 144,965 (1,876) -1.3% 7,670 5.7% Operating Expense 54,743 59,878 64,397 4,519 7.0% 5,134 9.4% Share of terminal O&M 16,935 17,685 17,729 44 0.2% 749 4.4% Less utility internal billing (14,464) (18,369) (18,370) (1) 0.0% (3,905) -27.0% Net Operating & Maint 57,215 59,194 63,756 4,562 7.2% 1,979 3.5% Net Operating Income 78,203 83,895 81,209 2,686 3.3% 5,692 7.3% 2010 2011 2011 Budget Variance Change from 2010 Actual Actual Budget $ % $ % Revenues Per Enplanement Parking 3.13 3.05 3.34 (0.29) -8.6% (0.08) -2.7% Rental Cars (net of CFCs) 1.92 1.83 2.04 (0.21) -10.2% (0.09) -4.8% Ground Transportation 0.31 0.47 0.44 0.03 7.3% 0.16 50.9% Concessions 2.14 2.16 2.06 0.10 4.8% 0.02 0.9% Other 1.08 1.22 1.28 (0.06) -4.6% 0.14 13.0% Total Revenues 8.59 8.73 9.15 (0.42) -4.6% 0.14 1.7% Primary Concessions Sales / Enpl 9.99 10.30 10.12 0.18 1.8% 0.31 3.1% 2011 enplanement growth of 3.9% shows non-aero revenues increased 5.9% over 2010, but less than budget by 1.4%. Comparisons of non-aero revenues to 2010 and budget: o Public Parking Revenues: Year over year revenues were slightly up with 4.3% increase in 3-24 hour transactions; however, overall total transactions down 2.5%. 2011 total transactions down 2.2%. Budget assumed 5.0% increase for 4+ day transactions. o Rental Car Revenues: Year over year revenues slightly down even though transaction days were 5.0% higher. Industries revenues were down due to competitive pricing with rental car companies. Revenues less than budget which assumed average ticket price of $226 whereas the actual average ticket was $210. o Ground Transportation Revenues: Trips in 2011 were up 13.1% and the new STILA concession-based contract became effective in 2011. Revenues were higher than budget as trips were up by 9.5%. Also, the incremental revenues from the new STILA concession-based contract effective in 2011 are not included in the budget. o There were strong primary concessions sales performance, an increase in janitorial monthly rates and advertising revenue from Google partnership. o Other revenues were higher due to strong demand for in-flight kitchen services, higher tenant marketing revenue, and Sound Transit grant revenue reimbursements. 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 o The Primary Concessions Sales per Enplaned passenger (SPE) was $10.30, which is greater than the budget of $10.12. Non-aero operating expenses were up $5.1 million vs. 2010 and $4.5 million less than budget. o Security Fund Expense $796K o Increase in internal utility billing $3.9 million Net Cash Flow: NOI after Debt Service and Interest Income 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Aeronautical Net Operating Income (NOI) 74,917 74,727 80,519 (5,793) -7.2% (190) -0.3% Debt Service 73,080 71,096 76,700 5,604 7.3% (1,984) -2.7% Aero NOI After Debt Service 1,837 3,631 3,819 (188) -4.9% 1,794 97.7% Non-Aeronautical Net Operating Income (NOI) 78,203 83,895 81,209 2,686 3.3% 5,692 7.3% Debt Service 41,752 40,845 42,469 1,625 3.8% (907) -2.2% Non-Aero NOI After Debt Service 36,451 43,050 38,739 4,311 11.1% 6,599 18.1% Total Aviation Total Revenue 334,262 351,452 362,678 (11,227) -3.1% 17,190 5.1% Total O&M 181,142 192,831 200,951 8,120 4.0% 11,689 6.5% NOI 153,120 158,621 161,728 (3,107) -1.9% 5,502 3.6% Debt Service 114,831 111,940 119,169 7,229 6.1% (2,891) -2.5% NOI After Debt Service 38,288 46,681 42,559 4,122 9.7% 8,393 21.9% Add ADF Interest Income 6,297 4,771 4,167 603 14.5% (1,526) -24.2% Add Non-Operating TSA Grant 752 1,035 1,470 (435) -29.6% 283 37.7% Net Cash Flow after D/S & Interest Inc. 45,337 52,487 48,196 4,291 8.9% 7,150 15.8% 2011 net cash flow was up $7.2 million over 2010. 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 D. CAPITAL SPENDING RESULTS 2011 2011 2011 Actual/Budget Plan of $ in 000's Actual Budget Var $ Var % Finance Rental Car Facility Construction 84,363 97,488 13,125 13.5% 98,616 Central Plant Preconditioned Air 18,815 20,000 1,185 5.9% 8,000 Airfield Pavement Replacement 5,333 10,500 5,167 49.2% 10,500 Parking System Replacement 1,769 9,137 7,368 80.6% 8,994 EGSE Rolling Stock - 5,110 5,110 100.0% - South Satellite Delta Sky Club Expansion 7,207 5,250 (1,957) -37.3% 5,038 Aircraft RON Parking USPS Site 300 5,050 4,750 94.1% 5,661 Third Runway Construction 3,418 5,025 1,607 32.0% 5,078 All Other 45,615 66,186 20,571 31.1% 89,521 Total Aviation 166,820 223,746 56,926 25.4% 231,408 Rental Car Facility and Bus Maintenance Facility construction costs for the entire program were below budget due to allowances for claims and change orders that will not occur. Soft costs are also below budget. Unused contingency funds have been pushed out and program savings are likely to be realized. Site work delays for PC Air due to delays in delivery of major equipment. Amount originally budgeted for Airfield Pavement Replacement project was not needed for the scope of the 2011 pavement replacement. Parking System replacement delays resulted from a change in the bidding approach and longer than anticipated contract negotiations. Favorable bids resulted in project savings of approximately $3M. EGSE Rolling Stock spending will not be realized due to airlines' decision to acquire equipment directly. South Satellite Delta Sky Club Expansion budget increase authorized by Commission to reimburse Delta for expanded scope. Aircraft RON Parking USPS Site hazardous materials evaluation has pushed the project start date later in the year with completion in 2012. Bids for environmental work related to the Third Runway came in lower than anticipated. 12 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 FINANCIAL SUMMARY 2010 2011 2011 Budget $ in 000's Actual Actual Budget Var $ Var % Operating Revenue 96,060 98,868 94,972 3,895 4% Security Grants 1,791 394 3,415 (3,020) -88% Total Revenues 97,850 99,262 98,387 875 1% Total Operating Expenses 39,590 38,549 47,108 8,558 18% Net Operating Income 58,261 60,713 51,280 9,433 18% Capital Expenditures 11,172 18,837 33,953 15,116 45% Total Seaport revenues were $875K favorable for the year due to a favorable Operating Revenue variance of $3,895K being largely offset by an unfavorable Security Grant Revenue variance. Operating Revenue was 4% higher than budget due to; higher crane rent as a result of higher container volume than budgeted, higher container land rent as a result of refunding of T18 Special Facility Bonds (effective in December debt payments are no longer netted against lease revenue), and higher cruise revenue as a result of correction of prior year percentage rent calculations. Favorable variances were partially offset by an unfavorable grain revenue variance due to below budget volume. Total Operating Expenses were $8,558K favorable due to postponed or cancelled Security Grant projects $2,970K being administered for outside parties, lower Environmental Remediation Liability expense, lower corporate expenses, and lower costs for certain key projects including the Terminal 5 dredge project. Full Year 2011 Net Operating Income for 2011 of $60,713K was $9,433K favorable to 2011 Budget and is $2,452K higher than 2010 Actual NOI. Capital spending for 2011 was $18.8M or 55% of the Approved Annual Budget. A. BUSINESS EVENTS TEU volumes for Seattle Harbor are down 5.0% in 2011 compared to 2010 record levels. 2011 volume is 2,034K TEUs which ranks as 3rd highest volume in Port history and the second consecutive year with TEU's in excess of 2 million. 2011 full inbound TEUs are down 13.1%, full outbound TEUs are up 8.5%, empty inbound TEUs are up 30.4%, and empty outbound TEUs are down 37.6%. Consolidated West Coast Port results for 2011 show an overall decrease in TEU volume of (0.3%) compared to volumes in 2010. TEU Volume (in 000's) 2011 2010 % change Long Beach 6,061 6,263 -3.2% Los Angeles 7,941 7,832 1.4% Oakland 2,343 2,330 0.5% Portland 197 181 9.0% Prince Rupert 410 343 19.5% Seattle 2,034 2,140 -5.0% Tacoma 1,489 1,455 2.3% Vancouver 2,507 2,514 -0.3% West Coast - Totals: 22,981 23,060 -0.3% 13 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 Grain vessels shipped 5,027K metric tons of grain through Terminal 86 in 2011. Amount is (8.5%) below 2010 grain volumes of 5,491K metric tons. 2011 actual volume is (8.6%) lower than 2011 budget volume. The cruise season ended on September 27th. For the full season, the Port served 196 cruise vessel calls and processed 885,949 revenue passengers through the Port's two cruise terminals. This was a very good year cruise ships sailed on average at 109% capacity an indication that cruising to Alaska remains a popular cruise experience. Completed major work: Condition assessments on dock systems at Terminals 18, 5 and 46 substantially completed Terminal 10 Redevelopment Project North Harbor Island Mooring Dolphins Phase 1 Dredging at Terminal 5 Executed leases with Washington State Department of Transportation at Terminal 106 and Terminal 46. Lower Duwamish Feasibility Study comment period closed and comments received from EPA. Environmental awards received: American Association of Port Authorities 2011 Environmental Improvement Awards: (1) Stakeholder Awareness, Education and Involvement Award for Terminal 117 and (2) Comprehensive Environmental Management Award for the Northwest Ports Clean Air Strategy Implementation Puget Sound Regional Council 2011 VISION 2040 Award Finalist for the 2011 Sustainable Shipping Award in the clean air category 14 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 B. KEY INDICATORS Container Volume TEU's in 000's 2,500 2,000 1,500 2010 Actuals 2011 Budget 1,000 2011 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 2010 Actuals 3,000 2011 Budget 2,000 2011 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 2010 Actuals 400 2011 Budget 200 2011 Actuals 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net Operating Income Before Depreciation By Business $ in 000's 2010 2011 2011 2011 Bud Var Change from 2010 Actual Actual Budget $ % $ % Containers 44,511 44,746 40,863 3,883 10% 235 1% Grain 4,955 4,432 4,631 (199) -4% (523) -11% Seaport Industrial Props 5,561 5,319 4,119 1,200 29% (243) -4% Cruise 6,987 7,576 4,714 2,863 61% 589 8% Docks (837) (1,144) (1,382) 237 17% (307) -37% Security (1,477) (848) (1,165) 316 27% 628 43% Env Grants/Remed Liab/Oth (1,439) 633 (500) 1,133 227% 2,072 144% Total Seaport 58,261 60,713 51,280 9,433 18% 2,452 4% 15 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 C. OPERATING RESULTS 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Operating Revenue 96,060 98,868 94,972 3,895 4% 2,808 3% Security Grants 1,791 394 3,415 (3,020) -88% (1,396) -78% Total Revenues 97,850 99,262 98,387 875 1% 1,412 1% Seaport Expenses (excl env srvs) 12,937 13,166 15,749 2,582 16% 230 2% Environmental Services 1,999 1,772 2,208 436 20% (227) -11% Maintenance Expenses 4,981 4,637 4,761 124 3% (344) -7% P69 Facilities Expenses 527 508 532 25 5% (19) -4% Other RE Expenses 147 181 293 112 38% 34 23% CDD Expenses 1,998 3,595 3,412 (183) -5% 1,597 80% Police Expenses 3,201 3,603 3,713 110 3% 402 13% Corporate Expenses 10,378 11,239 12,487 1,249 10% 861 8% Security Grant Expense 1,983 481 3,451 2,970 86% (1,502) -76% Envir Remed Liability 1,439 (633) 500 1,133 227% (2,072) -144% Total Expense 39,590 38,549 47,108 8,558 18% (1,040) -3% NOI Before Depreciation 58,261 60,713 51,280 9,433 18% 2,452 4% Depreciation 31,212 31,172 31,898 726 2% (40) 0% NOI After Depreciation 27,049 29,541 19,381 10,159 52% 2,492 9% Seaport revenues were $875K favorable to budget. Key variances are as follows: Seaport Leasing & Asset Management - favorable $1,487K Containers $2,060K favorable. Crane Rent Revenue $1,199K favorable due to higher volumes and related crane usage at Terminal 5 and Terminal 18. Intermodal Revenue ($136K) unfavorable due to waiver of intermodal fees at Terminal 18. Space and Land Rental $602K favorable due to refunding of Terminal 18 Special Facility Bonds. Miscellaneous Revenue $292K favorable due to more maintenance reimbursable work performed than budgeted. Grain ($474K) unfavorable due to volume coming in 8.5% below budget. Seaport Industrial Properties ($99K) unfavorable due to lower utility sales revenue and related expense at T91. Amount partially offset by higher revenue from T18 Bulk Terminal and unanticipated revenue from the City of Seattle and Seattle Tunnel Partners for leases related to replacement of the Alaskan Way Viaduct. Cruise and Maritime Operations - unfavorable ($613K) Cruise $2,072K favorable primarily due to higher than anticipated passenger volumes and retroactive correction of percentage rent calculation. Docks $336K favorable primarily due to unanticipated revenue from wharfage which was high due to high fish quotas and due to security fee revenue from Terminal 91 customers. Security Grants ($3,020K) unfavorable due to Round 7 pass-through grant activity being less than budgeted. Examples of 3rd party projects planned but not performed were for the Port of Everett and the Seattle Fire Department. See offsetting expense variance below. Seaport expenses were $8,558K favorable to budget. Key variances: Security Grant Expenses favorable $2,970K due to Round 7 pass-through grant activity being delayed. Outside Services (excluding Corporate, CDD, Maintenance and Security Grants) were favorable $1,738K due to asset condition assessment work that was performed by internal Port staff $1,000K, Terminal 5 Dredge where outside costs were lower than budgeted $501K, Grain facility appraisal costs were lower than budgeted $101K, Seaport Division Admin CTQI certification work that has been pushed into 2012 $75K, and less spending than budgeted on T91 uplands and other studies $182K. Amounts were partially offset by higher than anticipated costs for Contract Watchmen at Terminal 91 $102K. 16 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 Corporate costs, direct and allocated were favorable $1,359K due to lower than anticipated direct charges and allocations from virtually all orgs/departments including AAPA Conference $366K, Contingency $161K, Accounting and Financial Reporting $158K, Office of Social Responsibility $141K, Police $110K, Human Resources $88K, and Legal $67K. Overhead Allocations and related charges to capital project favorable $826K due to less direct charging of time to Business Groups and projects by Environmental Services than assumed in developing the overhead rate. In addition, budget did not anticipate charging of an outside consultant's costs to overhead and the budget, as recorded, was inconsistent with actual overhead methodology. CDD costs were unfavorable ($183K) due to overall more spending by CDD groups due to work performed internally on asset condition assessments largely offset by amounts budgeted to be spent on other, nonspecified , work for Seaport. Environmental Remediation Liability Expense favorable $1,133K due to lower estimated future clean-up costs than assumed in Budget. Maintenance costs, direct and allocated, were favorable $124K due to less work performed on behalf of cruise than anticipated in the budget and work at other sites being performed by PCS rather than by Maintenance. Travel & Other Employee Expenses, Promotional Hosting, and Trade Business and Community favorable $294K partially due to elimination of Deputy Director Position and in general less spent on registrations and travel than budgeted. General Expense was favorable $63K primarily due to offsetting variances including Seaport Division Contingency and favorable variances to budget for Advertising Expense and relocations expenses largely offset by unbudgeted street vacations fees. All other variances netted to favorable $234K or less than .5% of Total Expenses Budgeted. NOI Before Depreciation was $9,433K favorable to budget. Depreciation was $726K, or approximately 2%, favorable to the 2011 Budget due to correction of prior year asset booking. NOI After Depreciation was $10,159K favorable to budget. Change from 2010 Actual NOI Before Depreciation for 2011 increased by $2,452 from 2010. Revenue is up $1,412K from the prior year due to an increase in Container revenue of $2,782K resulting from higher crane rent, increase in container lease rate effective July 2010 and refunding of Terminal 18 Special Facility Bonds effective December (debt payments are no longer netted against lease revenue). Cruise revenue increased by $425K due to retroactive correction of percentage rent calculation. Amounts are partially offset by lower grain terminal revenue ($422K) resulting from lower volume, and lower Security Grant related revenue ($1,396K). Expenses decreased $1,040K due to lower security grant project driven expenses and lower Environmental Remediation Liability Expense. These amounts were largely offset by higher direct charges from CDD for asset condition assessment work and SR99 Tunnel property related work and higher allocations from Corporate, primarily from IT, Police, and Human Resources. 17 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 D. CAPITAL SPENDING RESULTS 2011 Variance 2011 Plan 2011 Approved Actual to Actual as a % of $ in 000's Actual Budget Budget of Budget Finance Terminal 10 5,017 5,326 309 94% 5,585 Terminal 18 3,075 4,616 1,541 67% 5,040 Cruise 968 4,617 3,649 21% 2,737 Security 595 3,583 2,988 17% 1,799 Terminal 91 - Industrial Properties 3,932 3,568 (364) 110% 4,073 Cranes 68 3,465 3,397 2% 2,800 All Other 5,182 8,778 3,596 59% 7,456 Total Seaport 18,837 33,953 15,116 55% 29,490 Comments on Key Projects: Seaport spent 55% of the 2011 Approved Capital Budget. Projects with significant changes in spending were: Terminal 5 Crane Cable Reels Spending moved to 2012 and current estimate $2M below approved budget. Terminal 18: o Street Vacation Delays o T18 South End Fendering project savings (project complete) o T18 Fender Replacement project savings and spending moved to 2012. Security Projects Spending moved to 2012. Cruise P91 Fender System Upgrade Contract authorization later than expected. Spending moved to 2012. All Other Primary difference is due to savings on projects as the result of lower costs or change in scope and due to postponing projects. Changes between the 2011 Plan of Finance and the 2011 Approved Budget represent modifications in 2011 spending estimates made after determination of 2010 actual spending. 18 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 FINANCIAL SUMMARY 2010 2011 2011 Budget $ in 000's Actual Actual Budget Var $ Var % Operating Revenue 29,820 31,553 30,707 846 3% Total Revenues 29,820 31,553 30,707 846 3% Total Operating Expenses 31,499 35,004 36,079 1,075 3% Net Operating Income (1,678) (3,451) (5,372) 1,921 36% Capital Expenditures 3,965 10,085 16,339 6,254 38% Total Real Estate Division Revenues were $846K favorable to budget for the year due to higher activity at Bell Harbor International Conference Center and due to favorable revenue variances from Recreational Boating, Commercial Properties and Real Estate Planning & Development. Total Operating Expenses were $1,075K, or 3%, favorable to budget primarily due to deferral into 2012 of some Maintenance projects as well as more Maintenance work being charged to capital than anticipated in the budget. This favorable variance was largely offset by unbudgeted litigation reserves associated with the Eastside Rail Corridor by above budget spending on tenant improvements associated with lease renewals. Net Operating Income for 2011 was $1,921K favorable to Budget and ($1,773K) below 2010 Actual. Higher maintenance expenses, expensed tenant improvements, and litigation reserve expenses drove the year over year change. Capital spending for 2011 was $10.1 million or 62% of the Approved Annual Budget amount of $16.3 million. A. BUSINESS EVENTS Occupancy levels at Commercial Properties were at 90% at the end of the year, which is at the 90% target for the 2011 Budget, and above comparable statistics for the local market of 86%. Revenue at Bell Harbor International Conference Center exceeded full year revenue budget by approximately $600K or 7.5%. Recreational marinas averaged 94% occupancy for the year which was above the target of 93%. Fishermen's Terminal and Maritime Industrial Center averaged 78% which was below the target of 81%. Lower occupancy was due to a longer fishing season driven by higher quotas and due to the construction on the NW Dock at Fishermen's Terminal. Significant renewal and replacement capital projects were completed in 2011: Fishermen's Terminal NW Docks Fender Replacement Maritime Industrial Center Seawall Replacement Fishermen's Terminal South Wall Replacement Fishermen's Terminal net shed pilot program continues with 20 lofts and shelving installed in 21 lockers. Facility and site long-term planning: Commission briefed on Fishermen's Terminal 25-Year Plan/Net Shed Buildings Code Compliance Improvements in December Commission briefed on preliminary Terminal 91 site development options in August Marine Maintenance Twenty-two deferred maintenance projects were completed. North-end facility established. 19 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 Real Estate Development & Planning: Signed letter of intent with potential tenant for 18-acre City of SeaTac site Executed letter of intent for long-term ground lease of Des Moines Business Park site Issued RFI for hotel development at SeaTac Airport Completed assemblage of Lora Lake and Des Moines Business Park sites 48% of Pier 69 employees using alternative modes of transportation for commuting to and from work. 20 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 B. KEY INDICATORS Shilshole Bay Marina Occupancy 120.0% 100.0% 2010 Actual Footage 80.0% 2011 Budget 60.0% Percent Linear 2011 Actual 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% 2010 Actual 80.0% 2011 Budget Footage Occupied 60.0% 2011 Actual Percent Linear 40.0% 20.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Commercial Building 100% 90% 90% 88% 90% 89% 90% 90% 90% 90% 90% 89% 87% 88% 2010 Actual 80% Percent 2011 Target 70% 2011 Actual 60% Qtr 1 Qtr 2 Qtr 3 Qtr 4 Net Operating Income Before Depreciation By Business 2010 2011 2011 2011 Bud Var Change from 2010 $ in 000's Actual Actual Budget $ % $ % Recreational Boating 1,878 1,720 845 875 104% (158) -8% Fishing & Commercial (2,543) (2,597) (2,760) 163 6% (55) -2% Commercial & Third Party 212 (56) (1,745) 1,689 97% (268) -126% Eastside Rail (637) (1,953) (649) (1,304) -201% (1,317) -207% RE Development & Plan (591) (558) (1,063) 504 47% 33 6% Envir Grants/Remed Liab/Oth 2 (7) 0 (7) NA (8) NA Total Real Estate (1,678) (3,451) (5,372) 1,921 36% (1,773) 106% 21 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 C. OPERATING RESULTS 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Revenue 21,500 22,055 21,780 275 1% 555 3% BHICC & WTC Revenue 8,320 9,498 8,927 571 6% 1,178 14% Total Revenue 29,820 31,553 30,707 846 3% 1,732 6% Real Estate Exp (excl Maint,P69,Hosp) 9,305 9,781 9,473 (308) -3% 476 5% Real Estate BHICC & WTC 6,964 7,600 7,613 13 0% 637 9% Eastside Rail Corridor 504 1,585 484 (1,101) -228% 1,082 215% Maintenance Expenses 6,652 7,245 8,934 1,689 19% 592 9% P69 Facilities Expenses 226 151 159 9 5% (75) -33% Seaport Expenses 1,178 1,346 1,328 (19) -1% 169 14% CDD Expenses 803 934 1,266 332 26% 131 16% Police Expenses 1,198 1,310 1,350 40 3% 112 9% Corporate Expenses 4,671 5,045 5,472 427 8% 373 8% Envir Remed Liability (2) 7 0 (7) NA 8 495% Total Expense 31,499 35,004 36,079 1,075 3% 3,505 11% NOI Before Depreciation (1,678) (3,451) (5,372) 1,921 36% (1,773) -106% Depreciation 10,025 10,172 10,166 (5) 0% 147 1% NOI After Depreciation (11,703) (13,623) (15,538) 1,916 12% (1,920) -16% Total Real Estate revenues were $846K favorable to budget. Key variances are as follows: Harbor Services: Favorable $53K Recreational Boating favorable $157K due to 2.1% higher monthly occupancy which provided a $197K favorable variance partially offset by lower guest moorage ($52K). Fishing and Commercial unfavorable ($104K) primarily due to fewer medium and large fishing boats due to work on the Northwest Dock fender pile replacement project and higher catch quotas than expected which kept vessels out fishing longer and thus out of the harbor. Portfolio Management: Favorable $510K Commercial Properties favorable $180K primarily due to higher utility revenue at Maritime Industrial Center, higher occupancy and favorable concession rent at Bell Street Office & Retail, higher occupancy and utility revenue at Fishermen's Terminal Office & Retail, and higher utility reimbursements and higher revenue from the Portside Caf at P69 than assumed in budget. Third Party Managed Properties favorable $330K due to activity greater than anticipated at the Bell Harbor International Conference Center partially offset by lower sponsorship revenue and activity at World Trade Center Club, and lower occupancy at WTC West than assumed in Budget. Eastside Rail Corridor: Favorable $40K Eastside Rail Corridor favorable $40K due to considerable unknowns at time of Budget. Budgeted revenue was based on continuing review of over 844 agreements assigned to the Port from BNSF. As research and billing progressed it was found that only 240 agreements require payment and they are spread among annual, 5-year, and 10-year periodic payments. RE Development and Planning: Favorable $194K Terminal 91 General Industrial favorable $194K due to higher revenue from Pacific Maritime Association as a result of the tenant taking more yard space. Facilities Management: Favorable $5K Pier 69 Facilities Management favorable $5K due to print services revenue from Office of Port Jobs. Maintenance: Favorable $44K Maintenance favorable $37K due to recycling revenue. 22 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 Total Real Estate expenses were $1,075K favorable to budget. Key variances: Outside Services (excluding Maintenance, CDD and Corporate) were favorable $203K primarily due to lower than expected spending on Eastside Rail Corridor $361K, lower spending on Terminal 91 Planning effort $110K, and decision not to hire an asset condition consultant for Harbor Island Marina $60K. These favorable variances were partially offset by above budget spending on tenant improvements associated with lease renewals, other planning and appraisal work, and higher direct charging from Environmental Services. Maintenance expenses were favorable $1,689K primarily due to lower cost of the Bell Street Garage sprinkler project, deferral of P69 concrete beam project into 2012, fewer tenant improvement projects, slower work on the net shed pilot program and higher than anticipated charges to capital projects. Corporate costs, direct and allocated, were favorable $467K primarily due to Internal Audit $94K, Accounting & Financial Reporting $90K, Human Resources $81K, Contingency $54K, Police $40K, and Public Affairs $25K. CDD costs, direct and allocated were favorable $332K primarily due to lower direct charges and allocations from Central Procurement. Room/Space/Land Rental favorable $89K due to correction of prior accruals related to DNR submerged land rent for Pier 69 and Pier 66. Litigated Injuries & Damages unfavorable ($1,528K) due to reserve for legal expense set up for lawsuits filed. All other variances netted to an unfavorable ($177K) or about 0.5% of Total Expenses budgeted NOI Before Depreciation was $1,921K favorable to budget. Depreciation was ($5K) or less than 1% unfavorable to budget. NOI After Depreciation was $1,916K favorable to budget. Change from 2010 Actual Net Operating Income Before Depreciation decreased by ($1,773K) between 2011 and 2010 as a result of higher revenue more than offset by higher expenses. Operating Revenue increased by $1,732K due to higher revenue at Bell Harbor International Conference Center and from Commercial Properties. Expenses increased by $3,505K primarily due to litigated damages associated with a lawsuit filing, higher third party management expenses due to more activity (more than offset by related revenue), increased maintenance expenses, expensing of tenant improvements and higher corporate costs. 23 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 D. CAPITAL SPENDING RESULTS 2011 Variance 2011 Approved Actual to Actual as a % 2011 Plan $ in 000's Actual Budget Budget of Budget of Finance FT NW Dock Fender System 2,361 3,440 1,079 69% 3,350 FT East Portion South Wall 2,842 3,232 390 88% 4,668 Small Projects 1,040 2,026 986 51% 992 RE Maintenance Shop Solution 1,635 1,925 290 85% 186 MIC Seawall Replacement 1,542 1,707 165 90% 2,123 All Other 665 4,009 3,344 17% 4,038 Total Real Estate 10,085 16,339 6,254 62% 15,357 Comments on Key Projects: The Real Estate Division spent 62% of the 2011 Approved Capital Budget. Projects with significant changes in spending were: FT NW Dock Fender System Actual contractor bids lower than estimate. Work completed. All Other Primary difference due to less spending than anticipated on Tenant Improvements qualifying for capitalization and due to changes in scope and timing of spending 2012 for the following projects: o Bell Harbor Lighting Control Upgrade o Fishermen's Terminal C15 Building HVAC Improvements o Technology projects Changes between the 2011 Plan of Finance and the 2011 Approved Budget represent modifications in 2011 spending estimates made after determination of 2010 actual spending. 24 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 A. BUSINESS EVENTS AVPMG Began detailed discussions with Alaska Airlines concerning its interest in and business proposal for renovation of the north end terminals. Developed & implemented approach for accelerating common use lounge reconstruction at the South Satellite to complete project prior to March 1 service start for Emirates Airlines. Completed all 2011 stormwater & habitat improvement projects. Signed contracts for USPS building demolition, old maintenance warehouse demolition, parking revenue control system replacement, and parking garage 8th floor waterproofing projects. Completed paving for offsite road improvements for Rental Car Facility. Completed first phase of project replacing 44 escalators. Completed first gate installations of preconditioned air system connections for aircraft. CPO Completed the Continuous Process Improvement / Accelerated Improvement Workshop. Adopted decision to move forward with Consensus Based Evaluation process. ENG Participated in the Emergency Recovery Seminar on lessons learned from the FEMA exercise. Engineering Contract Specialist hired. Organizational Flexibility work with HR continues. Expanded Document Control Specialist role duties completed and new job description being evaluated by HR. Clean-up of surplus supplies underway at the Watertower facility. Implemented the first Leica 360' photo system hardware and software in the Survey & Mapping Section. Administrative Supervisor hired. Administrative support services review underway. Transfer of 1.0 FTE position from 1650 to 1660 will open a vacancy in future quarter. Construction Safety Administrator hired. Completed two under dock inspection studies for the Seaport Division. PCS Several key projects were started or completed during the fourth quarter: seaport and real estate tenant notification program was completed, continued work on the noise home remedy, approximately 80% complete on the T-91 waterline replacement/ repair program, completed renovation of the emergency command center expansion, installed security cameras at checkpoints 2, 3, 4, & 5, completed renovations at gates B5 and S10. Several small works contracts were awarded during the fourth quarter. Phase 1 upgrades to PMIS were deployed. SPM T-91 Tank Farm Remediation Submitted Final Data Gaps Investigation Work Plan to the Department of Ecology and finalized public documents for use in January 2012 public comment period for the tank farm clean up agreed order. CEO Yoshitani signed Remedial Action Grant Agreement with the Department of Ecology for the tank farm clean up. Maximum amount of the grant is $6,000,000 with Port's $3,000,000 match. T-10 Development Despite encountering many differing site conditions, the T-10 Construction progressed well and Port issued Substantial Completion Certification on December 6th. T-117 Cleanup Completed 60% design internal review of drawings and specs. The Joint Management Plan and Community Involvement Plan were submitted to the Environmental Protection Agency. Bank repair work is complete. 25 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 T-18 Damage Fender Piles New SSA crane offload is underway. General Construction mobilized to site. TWIC Rounds 7, 7B and 9 ARRA Grants were reviewed by the FEMA Financial Monitor. Questions related to one construction contract are being responded to by CPO and ICT. Contract has been awarded Alaskan Way Viaduct Port submitted comments on design for H2K3, initial Traffic Control Plans for Tunnel, and the T46 Mitigation Measures Tunnel. TCP Phase 1A.2 is scheduled to begin in January. CDD Admin Completed first year of revised overhead budgeting, learning lessons and giving greater visibility to costs. B. KEY PERFORMANCE METRICS Key Performance 2011 Notes Metrics Construction Soft ($ in 000's) Limit construction soft costs (design, Costs Total Costs $ 750,651 (100%) construction management, project 36 month rolling management, environmental Total Construction: $ 601,384 ( 80%) average from documentation) to no more than 25% Total Soft: $ 149,177 ( 20%) of total capital improvement costs. Q1 2009 thru Q4 2011 Cost Growth During Total Completed Projects YTD: 9 Limit average mandatory change cost Construction Discretionary Change: -2.0% growth to 5% of construction contract award. Mandatory Change: 2.5% 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: 9 Commission project authorization to Avg Design Growth Completed Projects: construction advertisement to no more 161.7% than 10% of originally allotted Cumulative Value YTD: $104,726 duration. Construction Schedule ($ in 000's) Limit construction growth from Growth Total Completed Projects YTD: 9 contract award to substantially Avg Construction Growth Completed complete to no more than 10% of Projects: 19.3% originally allotted duration Cumulative Value YTD: $104,726 Performance Q4 2011 98% PREPs completed within 30 days Evaluation Timeliness Total PREPs due: 36 181 of anniversary date. Total PREPs on time: 28 132 0-30 days (CDD) (77.8%) (72.9%) 7 29 0-60 days (HRD) (97.2%) (89%) 26 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 2011 Procurement Good & Services 84 days Average number of days, improving Schedule: Major Public Works 75 days from period to period. Total Time Specs - Small Works 58 days Execution Service Agreements *214 days *Pulled out 1 non-urgent procurement that resulted in 2 contracts (averaged 450 days for each contract to be executed). Customer Score Card #Projects surveyed: 24 100% of projects surveyed. Average AVPMG avg score: 94.9% 85% of total possible points on project SPMG avg score: 82.5% customer feedback scorecards CDD average score: 91.6% returned. Environmental AVP SPM CDD Incorporate Executive Policy and Applicable Projects: 8 2 10 Procedure 15 (Sustainable Asset Incorp/Pending: 8 2 10 Management) and/or LEED process in Average: 100% 100% 100% every project. Safety CDD Safety Eval: 87% Score an average of 90 out of a possible 100 points on CDD TRIR: 4.4 organizational Safety Program Evaluations. Limit annual contractor LTIR 0.73 workplace injury rates to 6 recordable accidents and 2 time lost accidents per 200,000 hours worked. Small Business Small Works: 63.2% 60% of small works contracts; 8% of Participation Major Construction: 29.2% major construction contracts; 5% of Svc Agreements: not available service agreements and 10% of Goods & Services: 44.3% purchases. 27 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 C. OPERATING RESULTS 2010 2011 2011 Budget Variance Change from 2010 $ in 000's Actual Actual Budget $ % $ % Revenues Engineering - 63 - 63 0.0% 63 n/a Port Construction Services 23 16 - 16 0.0% (7) -31.0% Aviation Project Management 13 - - - 0.0% (13) -100.0% Total Revenues 36 79 - 79 0.0% 43 118.7% Expenses before Charges to Cap/Govt Envrs Projects Capital Development Administration 380 354 359 4 1.3% (26) -6.7% Engineering 9,963 12,712 15,225 2,513 16.5% 2,750 27.6% Port Construction Services 7,886 7,304 7,554 250 3.3% (582) -7.4% Central Procurement Office 3,287 3,878 4,394 516 11.7% 591 18.0% Aviation Project Management 5,134 6,616 8,637 2,022 23.4% 1,482 28.9% Seaport Project Management 2,693 2,419 2,493 74 3.0% (274) -10.2% Total Before Charges to Capital Projects 29,343 33,283 38,662 5,379 13.9% 3,941 13.4% Charges to Cap/Govt/Envrs Projects Engineering (8,572) (9,351) (10,892) (1,541) 14.1% (780) 9.1% Port Construction Services (3,998) (4,846) (4,338) 508 -11.7% (848) 21.2% Central Procurement Office (1,507) (1,511) (1,214) 297 -24.5% (3) 0.2% Aviation Project Management (3,991) (5,160) (6,338) (1,179) 18.6% (1,169) 29.3% Seaport Project Management (1,939) (1,197) (1,602) (404) 25.3% 742 -38.3% Total Charges to Capital/Govt/Envrs Projects (20,007) (22,065) (24,384) (2,319) 9.5% (2,057) 10.3% Operating & Maintenance Expense Capital Development Administration 380 354 359 4 1.3% (26) -6.7% Engineering 1,391 3,361 4,333 972 22.4% 1,970 141.6% Port Construction Services 3,888 2,458 3,216 758 23.6% (1,430) -36.8% Central Procurement Office 1,780 2,367 3,180 813 25.6% 588 33.0% Aviation Project Management 1,143 1,456 2,299 843 36.7% 313 27.3% Seaport Project Management 754 1,222 891 (331) -37.1% 468 62.1% Total Expenses 9,335 11,219 14,278 3,060 21.4% 1,883 20.2% Variance Summary Vacancies: 30.25 Salaries & Benefits: $2.3M favorable primarily from unfilled positions, although PCS was ($345K) unfavorable due to unbudgeted hiring to accommodate unbudgeted projects (expense and capital). Overhead Allocation: $852K favorable because original budget did not include OH offset accounts that zero out OH charges to expense. Charges to Capital: $2.3M unfavorable due to less overall capital work than budgeted. CDD Admin: $4K favorable due to Equipment and Supplies savings. ENG: $972K favorable due to vacancies, plus $139K reduced ICT expense; $318K reduced consultant use; and $86K reduced travel/other. 28 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/11 PCS: $758K favorable due to $538K favorable variance from cancelled generator project and increased charges to capital, which offset unfavorable variances in non-capital equipment costs ($72K); utilities ($46K); supplies/stock ($131K); plus penalty and claims ($65K). CPO: $813K favorable from salary savings and increased charges to capital, plus $78K favorable variances from reduced registrations and travel; and $146K favorable from budget error related to OH allocation. AVPMG: $843K favorable due to vacancies; $1.4M favorable from reduced consulting expenses, and $45K general expense from RST Enterprises claim refund; but offset by ($1.2M) unfavorable in reduced charges to capital. SPM ($331K) unfavorable due to reduced charges to capital and ($310K) unfavorable consultant services. Commitment Control transfers covered the expense in SPM that was budgeted in SP and RE. Commitment Control transfers are not reflected in the bottom line. These unfavorable balances negated the salary and other savings. Unbudgeted PCS Projects 2011 Total $1,688K South Satellite Ramp Office Abatement $ 103K RMM Renew/Replace Escalators $ 113K T-5 Erosion Control $ 117K T-117 Sediments $ 134K Learning Center Gym/Bldg E $ 155K CM Trailer Relocation $ 198K RMM Abatement Delta VIP Sky Lounge $ 868K 29 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/11 A. BUSINESS EVENTS Centennial Celebration events included: o Get to know your port by boatWorking Waterfront Tour o Birthday cake distributed to all employees in September o Port of Seattle Day in the State of Washington (September 5) declared by Governor, Chris Gregoire o Chief Executive Officer presented at ALWU Pensioners conference o Port of Seattle flag flown at U.S. Capital in honor of our Centennial, presented by Congressman Reichert o Port Centennial commemorative book debut at Fishermen's Fall Festival. Successfully completed 100th annual AAPA conference from September 11 to 15 held here in Seattle. Hosted 9 Century Agenda Roundtables with panelists composed of members of the public who have particular expertise in their areas. Managed Employee Forum with centennial year-in-review video and branded food, chocolate bars and coffee thermos; distributed centennial books and videos to all attendees and employees who requested them. Promoted sales of centennial book, "Rising Tides and Tailwinds" via book signing, website and electronic bulletins. The arrival of three new cranes for Terminal 18 received neighborhood, mainstream, and trade press coverage. Completed criteria to be used for hiring bus drivers for the Rental Car Facility. Finalized 2012 premium rates for the Port's self funded medical and dental programs. Created a revised commercial driver's license application for use at the Port to include the bus drivers for the Rental Car Facility. The application is in compliance with the Federal Motor Carrier Safety Administration (FMCSA) and Code of Federal Regulations (CFR) requirements. Completed the 2011 Wellness Rewards 935 employees completed the health assessment and wellness reward goal. Designed and launched of the 2012 Wellness Reward Program. Completed 97% of annual safety training requirements. HR&D identified as lead on Request for Proposal (RFP) selected Scontrino-Powell, a consultant for design of Port-wide process improvement effort. A Process Improvement Program Manager was hired in October. Identified 16 internal internship opportunities in Aviation and all internal internships were hired for. Finished building the Port's new website including interactive maps and videos. It improves external communications and business operations while also increasing transparency and public understanding. The new site recently broke a record for the amount of load handled in a single hour and in a single day. Completed the deployment of the new Ground Transportation Management System and the PeopleSoft interface is currently being implemented. Completed Port-wide deployment of Windows seven operating system and Office 2010. Received the "Certificate of Achievement for Excellence in Financial Reporting" from the Government Finance Officers Association (GFOA) of the United States and Canada for its 2010 Comprehensive Annual Financial Report (CAFR) for the sixth consecutive year. Held two public hearings on the 2012 preliminary budget in November. Filed the 2012 statutory budget with King County Council and King County Assessor on November 30th within prescribed deadline as required by law. Published the final 2012 Budget Document and Business Plan in December. Received the Distinguished Budget Presentation Award from Government Finance Officers Association for the fourth consecutive year. Issued revenue refunding bonds for the purpose of refunding certain outstanding Port bonds and generating $29 million of present value savings. 30 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/11 B. KEY PERFORMANCE METRICS Key Performance Metrics 2011 2010 Notes A. High Performance Workplace: 1. Occupational Injury Rate 6.21 5.24, increased by .97 2. Total Lost Work Days 1,164 778, increased by 386 3. Contract Administration Issues 111 50, increased by 61 4. Employee Training a) New Employee Orientation 124 69, increased by 55 b) REALeadership Program 30 27, increased by 3 c) MIS Training 8 MIS class/meetings,16 users 7 MIS classes, 75 users; 7 Clarity classes, 64 users 8 Clarity classes, 68 users d) Required Safety Training 97% 96%, increased by 1% 5. Job Openings Created 243 170, increased by 73 6. Job Applications Received 12,607 7,334, increased by 5,273 7. Tuition Reimbursement 37 employees participated n/a B. Transparency: 1. Rate of Public Meetings 27 18, increased by 9 2. Public Disclosure Requests 298 281, increased by 17 3. Web site usage 209,823 visits, and 688,217 7,105,266 page views in 2010 page views (two months only for new site) 4. Track Constant Contact 20,352, electronic newsletter 16,142, increased by 4,210 5. Increase internal Average 826 visitors per day Average 867visitors per day, communications via Compass decreased by 41 C. Accountability: 1. Internal Audits Completed 23 18, increased by 5 2. % of Audit Plan Completed 92% 69%, increased by 23% 3. Preventable Vehicle Incidents 45 65, decreased by 20. Note 2010 include equipment incidents 4. Incurred Auto Liability Costs $33K $0K, increased by $33K D. Other Services and Support: 1. Commission Authorized Projects 100%/58% 100%/33% increased by 25% On Budget/Schedule 2. Police Service Calls 56,406 58,741 decreased by 4% 3. Police Arrests 510 with no warrant 619 decreased by 109; 391 with warrant 399 with warrant, decreased by 8 4. Attorney Services 37 litigation and claims 28, increased by 9 5. Labor Contracts Negotiated 5 4, increased by 1 6. Account Receivables Collection 93.3% 90.8%, increased by 2.5% (0 30 days) 7. Small Business Roster 576 registered on new PRMS n/a; 1,122, on old Small Business system Roster 31 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/11 C. OPERATING RESULTS 2010 2011 2011 2011 Bud Var. Change from 2010 $ in 000's Notes Actual Actual Budget $ % $ % Total Revenues 610 1,559 1,025 534 52.1% 949 155.5% Executive 1,356 1,494 1,500 6 0.4% 139 10.2% Commission 831 743 931 189 20.3% (88) -10.6% Legal 3,475 2,990 2,906 (84) -2.9% (485) -13.9% Risk Services 2,618 2,618 2,789 171 6.1% Health & Safety Services 1,001 1,059 1,129 69 6.2% 58 5.8% Public Affairs 5,553 6,519 7,012 493 7.0% 966 17.4% Human Resources & Development 4,107 4,950 5,285 335 6.3% 843 20.5% Labor Relations 675 948 922 (27) -2.9% 273 40.5% Information & Communications Technology 18,765 19,237 19,511 274 1.4% 472 2.5% Finance & Budget 1,455 1,445 1,493 48 3.2% (10) -0.7% Accounting & Financial Reporting Services 5,939 5,817 6,596 780 11.8% (122) -2.1% Internal Audit 990 1,087 1,215 128 10.5% 97 9.8% Office of Social Responsibility 1,280 1,353 1,567 214 13.6% 73 5.7% Police 19,273 21,297 21,452 155 0.7% 2,024 10.5% Contingency 21 105 700 595 85.0% 84 391.4% Total Expenses 67,391 71,828 75,008 3,180 4.2% 4,436 6.6% Corporate revenues were $534 thousand favorable compared to budget due to higher operating grants. Corporate expenses for the year-ended 2011 were $71.8 million, $3.2 million or 4.2% favorable compared to the approved budget and $4.4 million or 6.6% higher than the same period a year ago. The $3.2 million favorable variance was primarily due to several position vacancies during the year and other cost savings realized in several departments. All corporate departments had a favorable variance except for Legal and Labor Relations. The unfavorable variance in Legal of $84 thousand was due to litigation costs and unanticipated charges for the Workplace Responsibility investigations. The unfavorable variance of $27 thousand in Labor Relations was due to the Project Labor Agreement charging less to capital projects than originally anticipated. D. CAPITAL SPENDING RESULTS ($ Millions) Annual Results: 2011 Plan of Finance $12.07 2011 Approved Budget 13.19 2011 Actuals 4.40 Variance (Budget vs Actuals) $8.79 32
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