PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.      6d 
ACTION ITEM 
Date of Meeting    November 24, 2015 
DATE:    November 6, 2015 
TO:      Ted Fick, Chief Executive Officer 
FROM:   James Schone, Director, Aviation Business Development 
SUBJECT:  The Street Pricing Policy for Airport Dining and Retail Tenants 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to provide short-term Airport
concessions pricing flexibility in order to accommodate City of SeaTac Ordinance 13-1020
(commonly referred to as Proposition One) that increases employee minimum wages to $15.24. 
The Chief Executive Officer would be authorized to implement pricing flexibility by revising the
Port's policy regarding street pricing in order to allow tenants in the Airport Dining and Retail
(ADR) Program to set prices at not more than 10% above "street" prices for all products and
services sold from December 1, 2015, through December 31, 2019.  As of January 1, 2020, the
policy shall revert to its current state. Consistent with this change, staff also requests the
Commission to authorize the Chief Executive Officer to amend all existing leases in the Airport
Dining and Retail Program to reflect this change. 
SYNOPSIS 
"Street pricing", a commonly-used airport industry term, references the requirement that all
tenants in the ADR Program at Seattle-Tacoma International Airport (Airport) set prices for all
goods and services based on prices for similar quality and quantity of goods and services sold at
similar types of businesses in the Seattle-Tacoma area. This policy has been in effect at the
Airport since 2004. Continuation of this policy was stated in the Commission's motion of
November 25, 2014, regarding "Quality Jobs, Service and Employment Continuity Assurances
for the Airport Dining and Retail Program." Specific language about this policy is included in
all leases between the Port and its ADR tenants.
There are disparities in wage rates between employees of ADR tenants at the Airport and those 
of firms in the broader Seattle-Tacoma area as a result of the shift in minimum wage standards 
contained in the City of SeaTac's Ordinance 13-1020 (approved by City of SeaTac citizens as
Proposition 1 in November 2013). The increased wage rates at the Airport result in higher
operating costs for ADR tenants. As a result of these disparities, staff recommends changing the
pricing policy to allow ADR tenants to set prices at up to 10% above street prices at their
discretion from December 1, 2015, through December 31, 2019. After this period, street pricing 
would resume. This four-year period is deemed sufficient time for the disparities in minimum
wage rates paid by ADR tenants as compared to wage rates paid by firms elsewhere in the

Template revised May 30, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 6, 2015 
Page 2 of 8 
Seattle area to be greatly reduced such that a return to street pricing on January 1, 2020, is
warranted. 

BACKGROUND 
Local Minimum Wage Ordinances 
On November 5, 2013, City of SeaTac voters approved an ordinance, commonly referred to as
Proposition One, regarding minimum employment standards.  This ordinance established
minimum wage requirements and minimum standards for paid leave for safe and sick time for
workers in the hospitality and transportation industries located within that city. This ordinance
set minimum wages at $15 per hour starting on January 1, 2014, for workers in those industries.
This wage rate will be increased each year thereafter by the change in the Consumer Price Index. 
The wage rate for 2015 was set at $15.24 per hour starting on January 1, 2015. For 2016, the
wage rate will remain at $15.24.
On June 2, 2014, the Seattle City Council approved an ordinance establishing minimum wage
and minimum compensation rates for employees performing work in Seattle (see Tables 1 and 2 
below). As part of this law, two classifications were established for businesses based on their 
number of employees: large employers are those with 500 or more employees and small 
employers are those with less than 500 employees. The ordinance requires that large employers 
steadily increase minimum wage rates starting on April 1, 2015, until reaching $15 per hour by
January 1, 2017, if no health care benefits are paid, or by January 1, 2018, if the employer pays 
health care benefits.
Table 1. City of Seattle Minimum Wage Summary, Large Employers 




Source: City of Seattle's Minimum Wage Ordinance FAQ located:
http://www.seattle.gov/Documents/Departments/CivilRights/mwo-faq-expanded.pdf 
Small employers are required to steadily increase minimum wage rates starting on April 1, 2015, 
until reaching $15 per hour minimum wage on January 1, 2021. Small employers are required to
pay a temporary guaranteed minimum compensation of $15 per hour by January 1, 2019.  This
minimum compensation level can be achieved by combining employer-paid health care
contributions, consumerpaid tips and employer-paid wages.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 6, 2015 
Page 3 of 8 
Table 2. City of Seattle Minimum Wage Summary, Small Employers 







Source: City of Seattle's Minimum Wage Ordinance FAQ located:
http://www.seattle.gov/Documents/Departments/CivilRights/mwo-faq-expanded.pdf 
The initial minimum wage rates of $11 per hour for large employers and $10 per hour for small
employers took effect on April 1, 2015. Once the wage rates reach $15 per hour, they are to
increase on the first day of each year thereafter by the percentage increase in the Consumer Price
Index. 
On November 25, 2014, the Port of Seattle Commission approved a motion regarding "Quality
Jobs, Service and Employment Continuity Assurances for the Airport Dining and Retail
Program." This motion directed staff to incorporate the Commission's general expectations of
employers regarding quality jobs into the Request for Proposal (RFP) and Competitive
Evaluation Process (CEP) for award of contracts to restaurant, retail, duty-free and personal
service providers as part of the ADR Program redevelopment.  These expectations pertained to
the level of wages and compensation, the amount of paid time off and compliance with the
Affordable Care Act. 
On August 20, 2015, the Washington State Supreme Court announced its decision in the case of
Filo Foods, LLC et al vs. The City of SeaTac, et al. In that decision, the court ruled that the City
of SeaTac's ordinance, Proposition One, does apply at Seattle-Tacoma International Airport.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 6, 2015 
Page 4 of 8 
Based on the Supreme Court's decision, Port of Seattle staff interprets that the employment
standards specified in the City of SeaTac's ordinance should now be used to implement the
expectations provided by the Commission in their motion regarding quality jobs within the ADR
Program. This interpretation is explained in a memo from CEO Fick to the Commission copresidents
dated November 11, 2015 (Attachment A). 
Disparity between Local Minimum Wage Ordinances 
As noted above, a significant disparity exists between the minimum wage rates specified in the
City of SeaTac's and the City of Seattle's ordinances. For 2015, the disparity in minimum wage
rates between what is required by the City of SeaTac ordinance and the City of Seattle's
ordinance is 39% for both large and small businesses (see chart below). Due to the different step
increases specified in the City of Seattle's minimum wage ordinance for large and small
employers, this disparity will decrease at different rates for the two classifications of businesses.
For large employees, this disparity is projected to decrease to 4% by 2017, the year that large
employers are required to pay $15 per hour.  For small employers, this disparity is projected to
decrease to 9% by 2019 when they are required to pay $15 in total minimum compensation. The
exact amount of this disparity between now and the date at which wage rates for employees of
large and small employers in the City of Seattle reach $15 per hour cannot be determined. It will
vary depending on the specific increase in the consumer price index that is the basis for the
increase in the minimum wages paid to employees in the hospitality and transportation industries
in the City of SeaTac as specified in that city's ordinance. 
Minimum Wage Comparison - City of SeaTac vs. City of Seattle
$19.00
$18.42
$18.00                                                                                $17.99
$17.71
$17.57
(-4%)
$17.29
$17.16
$17.00                                                                                 (-4%)
$16.89              $16.89
$16.76
(-4%)               (-9%)
$16.49              $16.49
$16.36
(-4%)                (-9%)
$16.00                                                        $16.11             $16.11
$15.98
(-4%)                (-9%)
$15.73              $15.73
SeaTac           $15.61       (-4%)       (-9%)
$15.36              $15.36
(-4%)                (-9%)
$15.00       $15.00    $15.24    $15.24    $15.00             $15.00
(-4%)                (-9%)

$14.00                                        $14.00
Seattle (large)           (-14%)
Notes:
- Percentages in parentheses are
$13.00                        $13.00    $13.00
(-17%)      (-20%)                              difference of Seattle to SeaTac wages
- For 2017 and onward, assumes 2.4%
Seattle (small)           CPI-W growth
$12.00                        $12.00
(-27%)

$11.00               $11.00
(-39%)

$10.00
2014     2015     2016     2017     2018     2019     2020     2021     2022     2023     2024
SeaTac     Seattle (Large)     Seattle (Small)

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 6, 2015 
Page 5 of 8 
Street Pricing 
"Street pricing" is a commonly used airport industry term referencing the pricing policy
mandating that tenants in an airport must set prices for goods and services that they make
available for purchase based on prices for similar quality and quantity of goods and services sold
at similar types of businesses located off-airport in the local area. This pricing policy started in
response to the widespread notion by much of the travelling public in the United States that
merchants at airports were taking advantage of the captive nature of the market and setting prices
substantially higher than those found outside of the airport where there is more competition. In
accord with multiple U.S. airports, the Port of Seattle adopted a policy in 2004 that mandated 
adherence to street pricing by its ADR tenants.  Language requiring adherence to this policy is 
included in all ADR leases along with specific guidance as to how this policy is to be
implemented. 
The Port's street pricing policy requires all ADR tenants to submit specific comparisons to Port
staff between prices for the products and services available for purchase at their stores in the
Airport, and goods and services of similar quality and quantity from businesses of similar quality
located in the greater Seattle-Tacoma area. Port staff evaluates each of the comparisons to
ensure that firms are setting prices for goods and services available for purchase in the Airport
comparable to those available outside of the Airport. 
Disparity in Cost of Operations 
Due to the wage disparities mentioned above, tenants in the ADR Program at the Airport will
likely be paying substantially higher wages than comparable businesses in the City of Seattle
during the next several years. This wage disparity creates a challenge regarding use of the
Airport's street pricing policy as prices for goods and services in the City of Seattle that ADR
merchants have historically used in their street pricing comparisons will likely not rise at the
same rate or rise to the same level as needed to cover the higher wage rates required by the City
of SeaTac ordinance. For ADR tenants, wages as a percentage of total operating costs can reach
40%. Thus, the higher wage rates required by the City of SeaTac minimum wage ordinance as
compared to those required in the City of Seattle have the potential to significantly alter the
profitability of businesses operating at the Airport.  This change could result in certain ADR
tenants reducing or even discontinuing their Airport operations, resulting in the loss of jobs,
business income and non-aeronautical revenue for the Airport. 
In recognition of these impacts, staff recommends that the Commission allow a temporary
change to the street pricing policy. The proposed change would allow ADR tenants, at their
discretion, to set prices at up to 10% above those charged for similar quality and quantity of
product or service by similar types of businesses in the Seattle-Tacoma area.  This change is
recommended only for the period of December 1, 2015 through December 31, 2019. At that
point in time, the disparity in wage rates will have significantly decreased such that a return to
street pricing will be warranted. This policy change will be of significant help to ADR tenants in
coping with the disparity in wage rates that exist between the minimum wage ordinances in the
City of SeaTac and the City of Seattle.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 6, 2015 
Page 6 of 8 
Impact of Change in Street Pricing Policy 
The impacts of a change in the street pricing policy are difficult to determine with any degree of
certainty as changes in passenger purchasing behavior due to the higher prices for goods and
services available in the Airport are difficult to predict. AirProjects, the consulting firm hired to
assist the Port with development of its ADR master plan, analyzed the impacts of street pricing
plus 10% as compared to keeping the current street pricing policy. Their analysis, when looking
at the impacts on the entire ADR program, showed that a change to street pricing plus 10% is
expected to result in a slight increase in the total dollar value of all goods and services sold by 
ADR tenants, approximately the same revenue to the Port and significantly better net operating
income for the tenants.  Their analysis of a 10% increase in prices also showed a greater
reduction in demand for retail goods and services as compared to demand for food and beverage
items due to the fact that retail purchases are more spontaneous with relatively more elastic
demand, i.e., for any given % increase in price, demand will decrease closer to the % increase in
price. Passengers who choose to purchase goods and service at the Airport will pay slightly
higher prices than they do now. This analysis looked at the period of 2015-2020 and assumed
that current ADR tenants were in place throughout the projection period. 
STRATEGIES AND OBJECTIVES 
This change in policy supports the Port's Century Agenda goal to "advance the region as a
leading tourism destination and business gateway" by making it possible for the ADR tenants to
continue their operations at the Airport in a profitable manner. This change also supports the
Aviation Division's goals to grow non-aeronautical revenues. 
TRIPLE BOTTOM LINE 
The ADR Program places a high value on the concurrent pursuit of positive economic,
community, customer service and environmental stewardship outcomes. This policy change
supports all of these objectives. 
Economic Development 
This policy change will support ADR tenants in meeting the significantly higher minimum wage
requirements specified in the City of SeaTac's minimum wage ordinance while maintaining
profitable operations.  This will also make leasing opportunities available through the ADR
Program redevelopment more attractive to potential tenants. 
Environmental Responsibility 
This policy change will support ADR tenants, through profitable operations, in their efforts to
continue meeting all of the environmental goals set forth in their leases.
Community Benefits 
The policy change supports all current and future employees of ADR tenants as those tenants, be
they large or small businesses, will have sufficient profitability to pay the higher minimum
wages called for in the City of SeaTac's minimum wage ordinance.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 6, 2015 
Page 7 of 8 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1)  Do not change the street pricing policy in ADR leases. 
Pros: This would keep prices for goods and services available for purchase in the Airport
more affordable for the travelling public. 
Cons: This could lead to certain ADR tenants determining that it is no longer profitable
to operate at the Airport. It would also likely serve as a deterrent to local small
businesses who are interested in opportunities with the ADR Program redevelopment.
This is not the recommended alternative. 
Alternative 2)  Change the street pricing policy in ADR leases to allow an increase of 5% 
over street prices for the period of December 1, 2015 through December 31, 2019. 
Pros: This would keep prices for goods and services available for purchase in the Airport more
affordable for the travelling public than alternatives 3 or 4.
Cons: This level of increase in prices above street pricing is not deemed sufficient to cover the
higher costs associated with the wage rates specified in Proposition One. It could still lead to
certain ADR tenants determining that it is no longer profitable to operate at the Airport and thus
reduce or close their operations. This alternative would also likely serve as a deterrent to local,
small businesses who are interested in opportunities with the ADR Program redevelopment. 
This is not the recommended alternative. 
Alternative 3)  Change the street pricing policy in ADR leases to allow an increase of 10%
over street prices through the end of 2019 and then a 5% increase over street prices until
the end of 2021. 
Pros: This alternative has the benefit of providing a longer period for ADR tenants to
adjust to the higher wages associated with Proposition One. However, staff believes that
prices for goods and services in the surrounding area will have risen to sufficiently high
levels by the end of 2019, due to higher wage rates as mandated in the City of Seattle
minimum wage ordinance, that an increase over street pricing will no longer be needed to
offset the wage disparities that exist today. 
Cons: This longer time period for ADR tenants to set prices for their goods and services
above street pricing would negatively impact the travelling public who purchase items in
the Airport. This is not the recommended alternative. 
Alternative 4)  Change the street pricing policy to allow ADR tenants, at their discretion, 
to set prices at up to 10% above street prices for the time period of December 1, 2015
through December 31, 2019 at which time the street pricing will be re-instituted. 
Pros: Staff believes that this is the best alternative to cope with the current disparity in
wages that must be paid by ADR tenants and comparable businesses in the City of
Seattle.  The commitment to return to strict street pricing in 2020 emphasizes to the

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 6, 2015 
Page 8 of 8 
travelling public that this is temporary measure intended to ensure that ADR tenants are
able to stay in business and pay the wage rates deemed by the Commission to be an
important component of Quality Jobs here at the Airport. 
Cons: This alternative will lead to higher prices for the travelling public during the
proposed 4 year period. 
This is the recommended alternative. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None. 
ATTACHMENTS TO THIS REQUEST 
Attachment A: November 11, 2015 memo from CEO Fick to the Commission copresidents
regarding staff interpretation of the Commission's Quality Jobs expectations 
Attachment B: Powerpoint