7a supp revised
ITEM NO. _7a_Supp________ Revised: October 10, 2011 DATE OF MEETING: Oct 4, 2011 Aviation Division 2012 Preliminary Operating Budget Commission Briefing October 4, 2011 Industry Status/Trends Domestic airline industry was profitable in 2010, forecasting near breakeven for 2011 IATA forecasting global industry profit of $6.9 billion in 2011 Fuel costs are high (near 2008 levels), yet Industry has figured out how to survive: Focus on profit, not market share Unprofitable routes eliminated Seasonal capacity changes, very high load factors Consolidation Ancillary fees Industry expert predicts limited domestic growth, but there will be winners and losers among airports Large hubs with limited regional competition and international connections will likely see growth 2 Implications for Sea-Tac Sea-Tac will likely see growth in spite of economic uncertainty SEA is a large hub, has international connections, and has limited competition Very resilient market "Only" 3% drop in traffic during Great Recession Alaska Airlines is profitable and growing Record earnings for 2011 YTD Highest enplanement growth among U.S. airlines for January June 2011 (10.7%) Implications: Need to plan for growth 3 Sea-Tac Status Positive enplanement growth each month since June 2010 Strong YTD enplanement growth through August 2011: + 4.5% International +7.6% Forecasting growth of 3.8% for 2011 Exceeding last year's 2011 growth forecast of 1.0% Economic uncertainty and effect on future air travel remains a concern Airport is prepared to adjust budgets as needed if economic conditions deteriorate 4 Enplaned Passengers Traffic dropped 3% in recent recession, pointing out resiliency of market demand Faster recovery than after 2001 Assumptions: 2011: 3.8% 2012: 1.5% 2013: 2.2% 2014+: 2.2% 5 Financial Goals Aeronautical side of business revenues based on cost-recovery formulas 2011 Forecast CPE for 2012 $ 13.13 Plus increase inTerminal Realignment 0.31 Focus is on managing costs, so CPE Plus increase in RMM 0.04 CPE Target $ 13.48 is primary measure CPE for 2012 Budget $ 13.43 Exceeded target 0.05 Non-aeronautical side of business is focused on generating cash flow, so NOI is primary measure Total airport: Increase cash flow after debt service Maintain debt service coverage > 1.25x Maintain unrestricted cash balance > 10 months O&M expenses 6 Non-aeronautical Goal Goal is long-term growth in NOI. 2012 is a year of investment for future growth; NOI declining $5.3 million: Rental car revenue is down for 2012 due to: Space rent in garage replaced with lower land rent for rental car facility (permanent) Lease incentives to complete tenant improvements (one-time) Land development costs in anticipation of future revenues: brokerage fees, etc. Planning for new concessions space to come on-line in 2013 Marketing and promotion to increase parking revenue 2012 NOI reduction, positioned for future growth 7 Budget Drivers Expenses driven by: Payroll and contractual increases Opening rental car facility / busing service $9.6 million operating costs and 80.6 FTEs CFC revenues increase to cover almost all costs Terminal realignment Multiple capital projects, mostly approved by Commission $8.2 million in operating budget, drives increase in 2012 airline costs (CPE) New initiatives tied to Strategic Goals / Century Agenda Revenues driven by: Airline revenues increasing due to costs for terminal realignment, maintenance and capital costs Non-airline revenues: Increase in CFC to pay for operating costs of RCF / busing Reduction in rental car revenues due to relocation and incentives 8 Aviation Expense Summary Cost increases: $000s % Compensation +$5.0 million 2011 Budget 139,575 Contracts: +$1.3 million Cost increases (compensation, contractual) 6,348 4.5% Rental car facility / busing (see Rental Car Facility & Busing (CFC funded) 7,593 5.4% Appendix A) Increase in Terminal Realignment 5,200 3.7% Decrease of Grant funded operating costs (405) -0.3% Terminal realignment will total Increase in RMM 1,325 0.9% $8.2 million (increase of $5.2M). Subtotal 20,062 14.4% Budget Requests 8,811 Port project oversight of tenant Net savings/one-time items (5,539) projects Subtotal 3,272 2.3% Tenant reimbursement Total increase 23,334 16.7% Grant funded costs always 2012 Budget 162,908 excluded from baseline budget Environmental remediation expense driven by capital projects: Summary: Vertical conveyance While budget increase is large, only Common use expansion $3.3 million (2.3%) is driven by new South Sat. concessions requests. GSE Electrical charge stations 9 Payroll Costs Baseline Payroll 2011 2012 Change % Salary 18,195 19,364 1,169 6.4% Salary Benefits 6,639 6,835 196 3.0% Wage 37,931 40,655 2,723 7.2% Wage Benefits 16,726 17,645 919 5.5% Subtotal 79,490 84,498 5,007 6.3% Rental Car Facility 184 5,905 5,721 3116.3% Total 79,674 90,403 10,729 13.5% Table above shows payroll costs before 2012 requests. Variances included the following: 2012 salaries include $645K additional costs of FTEs added during 2011 Wages: 2011 FTEs added with full funding in 2012 $559K Retro contractual increase not 2011 budget $198K 2012 contractual increases $796K Firefighters added with SAFER grant $350K 10 Budget Requests Initial budget requests totaled $24 million $8.8 million proposed for approval, or 37% of requests Offset by $5.6 million of cuts and savings from one-time items in 2011 budget (details covered later) Next slides will focus on budget requests Requests organized by Strategic Goal 11 Budget Drivers: Strategic Goals 1. Operate a world-class international airport by: Ensuring safe and secure operations Meeting needs of our tenants, passengers and the region's economy Managing our assets to minimize the long-term total cost of ownership 2. Become one of the top ten customer service airports in the world by 2015 (measured by the ACI ASQ index) 3. Lead the airport industry in environmental innovation and minimize the airport's environmental impacts 4. Reduce airline costs (CPE) as far as possible without compromising operational and capital needs 12 Budget Drivers: Strategic Goals 5. Maximize non-aeronautical net operating income (NOI) consistent with current contracts, appropriate use of airport properties and market demand 6. Continually invest in a culture of employee development, organizational improvement, and business agility 7. Develop valued community partnerships based on mutual understanding and socially responsible practices 13 New Requests Summary New Requests: $000s Safe/Secure Airport 764 Customer needs/capacity 680 Asset Management: New Facilities/Assets 1,652 Maintenance Resource Alignment 1,717 Total 3,369 Customer service 1,567 Airline cost management 428 Non-Aero revenue development Costs offset by new revenues 808 Future revenue development costs 802 Total 1,609 Other 394 Total 8,811 14 New Requests Safe/Secure Airport Capacity and Customer Needs Description $000s FTEs Description $000s FTEs Wildlife Specialist 75 1 Master Plan 230 Painters 135 2 Terminal development strategy planning 200 Safety Mgmt System Impl & Facilitation 108 Airfield project planning and analysis 100 Upgrade backup C4 facility 50 Air service development FTE 75 1 Other 396 Other 75 Total 764 3 Total 680 1 Wildlife Specialist allows for studies to be done in-house to reduce consulting costs and reduce pest presence to customers/aircraft Painters will update striping for safety concerns on the Airfield/Landside properties Safety Management System has been approved by Commission as a commitment to safety; 75% of which is grant funded 15 New Requests New Facilities Maintenance Resource Alignment Description $000s FTEs Description $000s FTEs Mechanical Systems Support 188 2 Common Use System support 314 3 STS Electronic Tech and materials 234 3 Airfield lighting photometrics 218 2 Auto mechanics for deferred maintenance 177 2 Airfield crew 3rd runway 258 4 Maintenance Planning Coordinator 70 1 Conveyor shop materials 160 Pre-conditioned air system 544 6 Cargo building mgmt ($500K new revenues) 585 Landscaping 156 Outside fence property cleanup 100 Other 162 Other 203 Total 1,652 15 Total 1,717 8 Pre-conditioned air was estimated at $800K annual O&M costs in 2010. Third runway became operational in late 2008, but staffing for airfield crew was not increased. Additional work load can't be accomplished. Electrical technicians support common use system. Airfield photo-metrics initiative supports compliance with FAA regulations. STS running more cars and longer hours. 16 New Requests Non-Airline Revenue Development Customer Service Description $000s Description $000s FTEs Offset by New 2012 Revenues: Enhanced elevator/escalator service 500 Tenant marketing expense increase 100 Pathfinders support for escalator project 251 4 Public parking marketing and promotion 430 Conference center video equip& advertising 64 Loading bridge and garage lobby flooring 133 Club International 214 Window interior and exterior cleaning 90 Subtotal 808 Remote cruise screening facility 84 Future Revenue Development Costs: Baggage Mgr & Electrical Support 194 2 Concession leasing and planning 300 Restroom facility support 139 1 Land Development: Brokerage Commission 234 Carpenter 79 1 Land Development Planning 250 Sign Writer 65 1 Other 18 Subtotal 802 Other 32 Total 1,567 9 Total 1,609 Escalator replacement project drives need for enhanced service and more Pathfinders for customer service. 17 New Requests Airline Cost Management Other New Initiatives Description $000s Description $000s FTEs FTEs Maintenance Budget Specialist 56 1 Energy Management 257 2 Wetland Re-delineation 125 Continuous Process Improvement 110 Part 150 97 Undergraduate and Graduate Internship 84 2.25 Other 61 RCF Opening Celebration 15 Total 428 2 Other 18 Total 394 3.25 Energy management team will perform ongoing dynamic air and water balancing for all HVAC system at SeaTac which will reduce future electrical consumption and save costs. Also key initiatives of Environmental Strategy. 2012 budget requests continuation of consultant support for Continuous Process Improvement initiative. Wetlands re-delineation is required. 18 Cuts / Trade-offs Initial requests of $24 million vs. proposed requests for approval of Amount Denied/ $8.8 million Budget Request ($ in 000s) Cut from budget: Enhanced Elevator/Escalator Service 1,061 Temporary back-up power Additional Janitorial Services 649 $2.3M (plus $570K from CDD Carpet Replacement in Garage Lobbies 354 Garbage/Recycling Cans 351 for total of $2.8M) Winter Chemical Cost Increases 350 Environmental remediation Maintenance Support (2 FTEs) 218 liability $1M Emergency Mgmt (2 FTEs) 207 Lora Lake Study 200 Budget requests that were reduced: Runway Studies/Pavement Classification 200 Elevator/escalator service Airfield planning and analysis 200 Demo of Gym at Learning Center 130 $1.1M Elevator Cab Re-Flooring 106 Concessions $200K South Satellite Fixed Stanchions 100 All Other Denied Budget Requests 11,073 Total budget requests denied Total Denied Budget Requests 15,200 $15.2M 19 Expense Summary by Department 2009 2010 2011 2012 '12-'11 Budget Change $ in 000's Actual Actual Budget Budget $ % Airport Operations Operations 29,039 31,726 32,204 33,489 1,285 4.0% Rental Car Facility - - 660 7,593 6,933 1050.5% Terminal Realignment - - 3,000 8,200 5,200 173.3% Subtotal 29,039 31,726 35,864 49,282 13,418 37.4% Business Development 4,024 3,431 4,272 5,464 1,192 27.9% SeaTac Utilities 14,971 13,668 15,322 13,050 (2,273) -14.8% Aviation Maintenance 45,791 46,636 48,678 56,357 7,679 15.8% Fire Department 11,848 11,143 11,799 11,749 (50) -0.4% Airport Security 6,215 5,636 6,044 6,137 92 1.5% AV Environmental Programs 2,940 3,244 3,705 3,847 142 3.8% Aviation Director's Office 101 1,150 1,431 1,804 373 26.1% AV Facilities & Infrastructure 1,612 1,524 1,654 1,923 270 16.3% Aviation Planning 1,263 991 2,373 1,898 (474) -20.0% Other (Excluding AV PMG) 2,952 4,061 6,663 8,302 1,639 24.6% Baseline O&M 120,755 123,210 137,804 159,812 22,009 16.0% Environmental Remediation Liability 1,991 3,271 1,771 3,096 1,325 74.8% Total Airport Expenses $ 122,747 $ 126,481 $ 139,575 $ 162,909 $ 23,334 16.7% SeaTac utilities 2012 budget decreased due to eliminating emergency generators Other budget line increased in 2012 due to budgeting worker's comp, unemployment, and OPEB in one new Org versus individual department. 20 Expense Summary by Accounts 2009 2010 2011 2012 '12-'11 Budget Change $ in 000's Actual Actual Budget Budget $ % Payroll $ 80,804 $ 76,036 $ 81,673 $ 95,732 $ 14,059 17.2% Outside Services 21,509 22,519 29,453 37,534 8,081 27.4% Utilities 13,209 11,381 12,576 12,584 8 0.1% Supplies & Stock 4,779 4,692 4,100 4,425 325 7.9% Other 455 11,853 11,773 12,634 861 7.3% Baseline O&M 120,755 123,210 137,804 159,812 22,009 16.0% Environmental Remediation Liability 1,991 3,271 1,771 3,096 1,325 74.8% Total Airport Expenses $ 122,747 $ 126,481 $ 139,575 $ 162,909 $ 23,334 16.7% Payroll variances include: Outside services variances include: 2012 baseline increase $5M Terminal realignment $5.2M Rental car facility $5.9M Enhanced escalator/elevator service 2012 budget requests $3M $500K Master long-term planning $200K Cargo property management $585K Non-airline revenue development $808K Future revenue development costs $802K 21 21 Maintenance Department Description $000s FTEs Baseline budget 2,694 - Rental Car Facility/Busing 1,073 9 New facilities 1,653 15 Safe/Secure airport 186 2 Maintenance resource alignment 941 8 Customer service 1,077 4 Other 56 1 7,679 39 2009 budget cuts reduced Maintenance FTEs by 7.6% Cuts were not sustainable: Workload to maintain existing assets has increased New assets have been added 22 Asset Growth vs. Maint. FTEs FTEs 2008 forward included Temporary FTEs counts (15 FTEs in 2008). 2009 included cuts of 20 vacant positions and RIF of 7 FTEs. Asset Descripton 2005 2006 2007 2008 2009 2010 2011 2012 Bud # of Jet Bridges 46 46 48 48 49 51 51 51 Acres of Wetland Mitigation - - - - 158 171 181 181 Stormwater Retention Reservoirs 15 17 18 22 23 23 24 24 Baggage/Conveyor Linear Ft 15,668 15,828 27,018 28,628 49,327 49,327 49,237 49,237 Runway Sqft 3,198,750 3,198,750 3,198,750 6,839,500 6,839,500 6,839,500 6,839,500 6,839,500 23 FTEs FTE's % 2011 Budget Aviation 749.9 Rental Car Facility 12.0 761.9 2012 2012 % Change FTEs added in 2011 7.1 2011 Added in Budget Proposed 2012 Bud - Budget 2011 Requests Budget 2011 Bud 2011 Baseline 769.0 Airport Operations 2012 Budget Changes: Aeronautical 109.0 (5.0) 7.3 111.3 2.11% Rental Car Facility (RCF) & Busing: Landside 83.3 3.2 57.6 144.1 72.99% Bus Drivers 50.0 192.3 (1.8) 64.9 255.4 32.82% BMF Mechanics 5.0 Business Development 20.0 - 1.8 21.8 8.75% BMF Utility Workers 4.0 Aviation Services 177.3 6.9 - 184.1 3.87% Traffic Support Specialists 7.6 Facilities 43.4 - 2.3 45.7 5.18% RCF & BMF Subtotal 66.6 Maintenance 329.0 2.0 39.0 370.0 12.46% Total Aviation Division 761.9 7.1 107.9 876.9 15.1% Other Aviation Division Initiatives: New Facilities & Assets 15.0 Safe & Secure Airport 3.0 Customer Needs & Capacity 1.0 Asset Management 8.0 Customer Service 9.0 Airline cost Management 2.0 Employee Development 2.3 Other Initiatives Subtotal 41.3 2012 Budget Proposed FTEs 876.9 15.1% 24 Aviation FTEs: 2006 - 2012 FTEs 2006 2007 2008 2009 2010 2011 2012 Bud Total FTEs 762 775 782 792 746 762 877 25 Non-Airline Business 2009 2010 2011 2011 2012 '12-'11 Bud Change $ in 000's Actual Actual Budget Forecast Budget Var $ Var % Revenues: Public Parking $ 49,689 $ 49,416 $ 52,847 $ 51,542 $ 53,780 $ 933 1.8% Customer Facility Charge (RCF) - - 1,543 500 9,104 7,560 489.9% Rental Cars 33,320 30,309 32,290 31,678 26,367 (5,923) -18.3% Concessions 33,473 33,765 32,640 34,366 34,769 2,129 6.5% Other 20,865 21,929 25,644 26,818 26,228 584 2.3% Total Non-Airline Revenue 137,348 135,418 144,965 144,904 150,248 5,284 3.6% RCF Operating Expense - - 1,546 1,546 9,337 7,791 503.9% All Other Operating Expense 55,916 54,743 62,850 61,479 66,195 3,344 5.3% Share of terminal O&M 17,011 16,935 17,940 17,467 19,082 1,142 6.4% Less utility internal billing (16,738) (14,464) (18,370) (18,370) (20,010) (1,640) 8.9% Net Operating & Maint 56,189 57,215 63,967 62,122 74,604 10,637 16.6% Net Operating Income $ 81,159 $ 78,203 $ 80,997 $ 82,782 $ 75,644 $ (5,354) -6.6% Customer Facility Charge increase to cover operating costs associated with Rental Car Facility and related busing operations. Rental cars revenues decreased in 2012 due to $900K reduction of MAG and $2 million credit incentive. Operating expense increased due to maintenance costs of $1M, B&O taxes $215K, Club International $314K, and corporate and divisional allocations of $2M. 26 Non-Airline Key Indicators 2009 2010 2011 2011 2012 '12-'11 Bud Change Actual Actual Budget Forecast Budget Var $ Var % Revenues / Enplanement Parking 3.18 3.13 3.34 3.16 3.24 (0.10) -3.0% Rental Car (net of CFCs) 2.13 1.92 2.04 1.94 1.59 (0.45) -22.1% Concessions 2.14 2.14 2.06 2.11 2.09 0.03 1.6% Other 1.34 1.39 1.62 1.64 1.58 (0.04) -2.5% Total Revenue 8.80 8.59 9.15 8.88 9.04 (0.11) -1.2% Primary Concessions Sales / Enpl 9.66 9.99 10.12 10.24 10.42 0.30 3.0% Gross Profit Margin 59.1% 57.7% 55.9% 57.1% 50.3% (0.06) -9.9% Concessions 2012 budget lower than 2011 forecast due to one-time revenues in 2011, such as Google promotions. 27 Aeronautical Business 2009 2010 2011 2011 2012 '12-'11 Bud Change $ in 000's Actual Actual Budget Forecast Budget Var $ Var % Revenues requirement: Capital Costs $ 72,013 $ 82,083 $ 87,111 $ 85,554 $ 91,630 $ 4,519 5.2% Operating Costs net Non-Aero 118,456 122,985 137,195 135,793 152,845 15,651 11.4% Total Costs 190,469 205,067 224,305 221,348 244,475 20,170 9.0% FIS Offset (5,250) (7,000) (7,000) (7,000) (8,000) (1,000) 14.3% Other Offsets (16,441) (15,767) (14,821) (14,882) (13,523) 1,298 -8.8% Net Revenue Requirement 168,778 182,300 202,485 199,466 222,953 20,468 10.1% Other Aero Revenues 13,757 16,029 14,715 14,715 15,197 482 3.3% Total Aero Revenues 182,534 198,329 217,200 214,181 238,149 20,950 9.6% Non-passenger Airline Costs 12,074 14,885 15,066 15,566 15,051 (15) -0.1% Net Pasenger Airline Costs $ 170,460 $ 183,444 $ 202,133 $ 198,614 $ 223,098 $ 20,965 10.4% Major increases to aeronautical operating costs include Terminal Realignment project ($5.2 million), maintenance FTEs in support of aeronautical business ($2 million), Planning studies for terminal development/FIS ($150K), Environmental work ($145K). Increases to debt service is mainly driven by an increase in principal payment for 2005 bonds ($2.4 million aero), funding source for aero projects such as Runway 16L. Amortization of new aeronautical assets ($3.3 million) is driven by Runway 16C taxiway panel ($591K), HVAC air ducts ($222K), and allocation of IT/Roadways assets ($811K). 28 Aeronautical Key Indicators 2009 2010 2011 2011 2012 12-'11 Bud Change Actual Actual Budget Forecast Budget Var $ Var % CPE: Capital Costs / Enpl 4.61 5.20 5.50 5.24 5.51 0.02 0.3% Operating Costs / Enpl 7.59 7.80 8.66 8.32 9.20 0.54 6.2% Offsets (1.39) (1.44) (1.38) (1.34) (1.30) 0.08 -6.0% Other Aero Revenues 0.88 1.02 0.93 0.90 0.91 (0.01) -1.5% Non-passenger Airline Costs (0.77) (0.94) (0.95) (0.95) (0.91) 0.05 -4.7% Passenger Airline CPE 10.92 11.63 12.76 12.17 13.43 0.67 5.2% Increased operating costs are primary driver for increased CPE: Terminal realignment, incremental CPE impact of $0.31 Environmental remediation liability increase of $1.1M, or $0.04 CPE Maintenance additional FTEs or $0.15 CPE Security fund deposit $1.9M, or $0.04 CPE Offsets lower due to decreased levels of aeronautical related reimbursements, no TSA grant 29 Division Summary 2009 2010 2011 2011 2012 '12-'11 Bud Change $ in 000's Actual Actual Budget Forecast Budget $ % Revenues Total Airline Revenues $ 182,534 $ 198,329 $ 217,200 $ 214,181 $ 238,149 $ 20,950 9.6% Other Non-Airline Revenues 137,348 135,418 144,965 144,904 150,248 5,284 3.6% Fuel Hydrant 8,359 8,426 8,353 8,353 514 (7,839) -93.8% Fuel Hydrant reclass as Non-operating *** (7,845) (7,912) (7,839) (7,839) - 7,839 -100.0% Total Revenues 320,396 334,262 362,678 360,099 388,911 26,233 7.2% Airport Expenses 122,877 126,481 139,575 137,119 162,909 23,334 16.7% Corporate Expenses 32,492 33,975 35,529 34,802 37,602 2,073 5.8% Police Expenses 14,461 14,317 16,389 16,382 17,102 714 4.4% CDD/Other Expenses 4,823 6,368 9,458 9,611 9,838 380 4.0% Corporate and Other Expenses 51,777 54,660 61,376 60,795 64,542 3,166 5.2% Total Aviation Expenses 174,654 181,142 200,950 197,915 227,450 26,500 13.2% Net Operating Income $ 145,742 $ 153,120 $ 161,728 $ 162,184 $ 161,461 $ (267) -0.2% Key Measures Non-Aeronautical NOI 81,159 78,203 80,997 82,782 75,644 (5,354) -6.6% Net Cash Flow after Debt Service 48,433 44,585 45,382 49,366 42,662 (2,720) -6.0% Passenger Airline CPE 10.92 11.63 12.76 12.20 13.43 0.67 5.2% Debt Service Coverage 1.42 1.40 1.40 1.44 1.34 (0.06) -4.4% Traffic Enplanements 15,610 15,773 15,845 16,325 16,618 773 4.9% Landed Weight 20,388 19,786 20,089 20,089 20,290 201 1.0% *** Accounting change: non-cash transaction relating to fuel hydrant bonds. 30 Key Non-operating Revenues 2009 2010 2011 2011 2012 12-'11 Bud Change $ in 000's Actual Actual Budget Forecast Budget $ % Customer Facility Charges (Operating) - - 1,543 500 9,104 7,560 83.0% Customer Facility Charges (Non-Operating) 21,866 23,243 22,237 23,275 21,333 (904) -4.2% Total CFC Revenue 21,866 23,243 23,780 23,775 30,436 6,657 28.0% Passenger Facility Charges 59,689 59,744 61,320 61,933 63,142 1,822 2.9% Grants & Donations Revenues 74,323 30,040 28,990 28,990 28,982 (8) 0.0% CFCs split between non-operating revenues (pays for debt service) and operating revenues. Total increasing due to rate increase on opening day. 90% of PFCs used to pay debt service on PFC eligible projects. Grants tied to specific projects approved for grant funding by FAA. 31 Financial Forecast $ in 000's 2011 Bud 2012 2013 2014 2015 2016 Airline Revenue $217,200 $238,149 $265,368 $273,652 $286,355 $293,200 Non-Airline Revenue 144,965 150,248 161,533 167,729 174,512 182,997 Other Revenue (Excl Fuel Hyd) 514 514 514 514 514 514 Total Revenue 362,678 388,911 427,415 441,895 461,381 476,711 Operating Expense 200,950 227,450 243,305 230,976 234,915 243,726 Net Operating Income (NOI) 161,728 161,461 184,110 210,919 226,466 232,985 Non-Operating Income 4,167 3,771 2,160 6,002 6,047 5,998 CFC Excess* - - (1,866) (1,500) (2,129) (5,258) Available for Debt Service 165,895 165,232 184,404 215,421 230,384 233,725 Debt Service (171,474) (181,555) (192,510) (223,131) (233,515) (234,279) Debt Service paid by CFCs 20,048 21,698 22,381 24,717 26,199 25,335 Debt Service paid by PFCs 32,257 37,103 36,094 36,402 41,035 41,965 Net Cash Flow 46,726 42,478 50,369 53,409 64,103 66,746 Key Measures Total Airport Coverage 1.40 1.35 1.38 1.33 1.39 1.40 Rates and Charges Coverage 1.00 1.00 1.00 1.00 1.00 1.00 Passenger Airline CPE 12.76 13.43 14.70 14.82 15.19 15.22 CPE - Nov. 2005 (SLOA) 15.47 16.49 16.69 17.65 17.59 19.39 Reduction in CPE (2.71) (3.06) (1.99) (2.83) (2.40) (4.17) * CFC collections in excess of CFC debt service/O&M are restricted and cannot be used for other revenue bond debt service. 32 Risks & Opportunities Risks: Economic uncertainty, airline profitability and seat capacity in Seattle market Parking competition Environmental costs for Lora Lake Opening date for rental car facility affects the timing of costs and new revenues Pending labor settlements vs. baseline budget assumptions Weather forecast: wet and cold snow? Opportunities: Plan to launch parking promotions Terminal concessions have remained strong, growth may exceed forecast New international service 33 Seaport Division 2012 Preliminary Operating Budget Commission Briefing October 4, 2011 Terminal 91 Pier 86 Pier 66 Terminal 46 T-18 On-Dock Rail BNSF (SIG - North) Terminal 30 T-5 On-Dock Rail Terminal 18 BNSF (SIG - South) Terminal 25 S Terminal 5 UPRR (ARGO) 35 2012 SEAPORT KEY STRATEGIES In 2011, the Seaport's three Strategic Initiative Teams developed long term Seaport Strategies: 1. Commercial Business 2. Asset Stewardship 3. Green Gateway For 2012, Seaport will advance these strategies in alignment with the Commission's Century Agenda, the CEO's Goals and Key Corporate Initiatives. 36 Key Revenue Assumptions TEU volume at 2.0 million, an 11% increase from 2011 budget Cruise forecast 11% increase in passengers Grain volume level to 2011 budget CPI increase of 2.5% for applicable tariffs and lease rates 37 Expense Issues Comprehensive Asset Condition Assessments Maintenance Dredging Pile Cap Pilot Program and Repair Costs Stormwater NW Ports Clean Air Strategy Utility Increases Alaskan Way Viaduct monitoring related costs Environmental Remediation Liability 38 Org Revenues By Group Seaport Division Only 2010 2011 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenue Lease & Asset Management 80,248 81,474 82,145 81,000 (475) -0.6% Cruise & Maritime Ops 15,240 13,263 14,623 15,554 2,290 17.3% Operating Revenue 95,489 94,738 96,769 96,553 1,816 1.9% Security Grants 1,791 3,415 697 1,598 (1,817) -53.2% Total Revenues 97,279 98,153 97,466 98,151 (1) 0.0% 39 Org Revenues Lease & Asset Management 2010 2011 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenue Containers 61,036 61,916 62,788 60,435 (1,481) -2.4% Grain 6,035 6,087 6,087 6,088 1 0.0% Industrial Properties 13,177 13,471 13,270 14,476 1,006 7.5% Operating Revenue 80,248 81,474 82,145 81,000 (475) -0.6% 40 Org Revenues Cruise & Maritime Operations 2010 2011 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenue Cruise 11,666 10,150 11,450 11,718 1,568 15.4% Docks 3,574 3,113 3,173 3,836 723 23.2% Operating Revenue 15,240 13,263 14,623 15,554 2,290 17.3% Security Grants 1,791 3,415 697 1,598 (1,817) -53.2% Total Revenues 17,031 16,678 15,320 17,152 473 2.8% 41 Org Expenses By Group Seaport Division Only Incr (Decr) 2010 2011 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Org Expenses Lease & Asset Mgmt 5,780 8,326 7,118 8,061 (265) -3.2% Cruise & Maritime Ops 3,890 3,366 3,222 3,985 619 18.4% Commercial Strategy 1,215 1,874 1,626 1,841 (33) -1.7% Environmental Services 2,782 3,120 2,575 2,828 (292) -9.4% Planning 775 537 393 447 (90) -16.8% Seaport Finance 607 896 951 1,012 116 12.9% Seaport Admin 1,039 921 583 758 (163) -17.7% Contingency 0 250 0 0 (250) -100.0% Capital to Expense 8 0 0 0 0 NA Total Operating Expense 16,096 19,291 16,468 18,932 (358) -1.9% Security Grants 1,982 3,451 768 1,476 (1,975) -57.2% Envir Remediation Liability 1,439 500 250 0 (500) -100.0% Total Expenses 19,517 23,242 17,487 20,408 (2,834) -12.2% 42 Seaport Org Expense Budget Seaport Division Expenses Only 2011 2012 12-'11 Change $'s Thousands Budget Budget $ % Baseline Budget Salaries 5,014 5,053 39 0.8% Benefits 1,530 1,598 69 4.5% Wages & Benefits 0 0 0 NA OPEB 37 64 27 74.6% Salaries & Wages to Cap/Non-Op/ERL 1,133 1,113 (19) -1.7% Total Payroll Costs 7,713 7,829 116 1.5% Net Payroll Exp (net of to Cap/Non-Op/ERL) 6,580 6,716 135 2.1% Utilities 4,811 5,014 202 4.2% B&O Tax 308 386 77 25.0% Contract Watchmen 456 597 141 30.9% Projects Overhead 0 (408) (408) NA Other O&M 3,912 3,857 (55) -1.4% Total Baseline Budget 16,068 16,162 94 0.6% Initiatives Condition Assessments 1,000 0 (1,000) -100.0% Maintenance Dredging 1,050 500 (550) -52.4% Tribal Mitigation 331 340 9 2.7% Pile Cap (Pilot & Commence Full) 0 1,200 1,200 NA RFID Expenses 0 276 276 NA Relocation Costs 100 0 (100) -100.0% Planning & Transportation Services 258 263 5 1.9% ISO Certification (4 Terminals) 75 75 0 0.0% Artifact Storage 9 117 108 1200.0% Grain Terminal Appraisal/Assess 150 0 (150) -100.0% Contingency 250 0 (250) -100.0% Total Initiatives 3,223 2,771 (452) -14.0% Total Operating Expenses 19,291 18,932 (358) -1.9% Security Grant Expenses 3,451 1,476 (1,975) -57.2% Envir Remediation Liability 500 0 (500) -100.0% Total Expenses 23,242 20,408 (2,834) -12.2% 43 Initiatives $'s in Thousands Initiatives - Proposed for 2012 Budget Maintenance Dredging T-5 maintenance dredging (phase 2) 500 Pile Cap Repair Pilot Program costs in 2012 700 Commence pile cap repair 500 1,200 RFID Implementation Costs ($100 grant funded) 276 Tribal Mitigation Contractual Payment 340 Artifact Storage 117 Transportation & Planning Studies Transportation 100 Planning Studies 163 263 Terminal Efficiency Initiative ISO Certification (4 Terminals) 75 Total 2012 Seaport One-Time Expenses 2,771 2012 Projects/Work Budgeted in CDD Condition Assessments 1,000 Berth Soundings 50 AWV/Tunnel Monitoring 380 1,430 44 Northwest Ports Clean Air Initiatives and Envir Remediation Liability Classified as Non-Operating Expense $'s Thousands 2012 Non-Operating Expense Budget PSCAA ABC Fuels $700 Trucks 250 Cargo Handling Equip 100 Envir Remediation Liability -Sea 5,090 Envir Remediation Liability -RE 200 Total $6,340 45 Full-Time Equivalents (FTEs) FTE's 2011 Budget 60.4 2011 Changes Staff Addition: Sr. Financial Analyst from .6 to 1.0 0.4 Staff Reductions: Adj Asst Mgr Industrial Properties -0.1 Elim Deputy Director position -1.0 Ltd. Duration Real Estate Specialist -0.6 Adjusted 2011 59.1 2012 Budget Add: Ltd Duration Real Estate Specialist 0.8 Subtotal 0.8 Proposed FTE's for 2012 59.9 46 Full-Time Equivalents (FTEs) Summary Seaport FTE Summary 2008 Bud 2009 Bud 2010 Bud 2011 Bud 2012 Bud Total Seaport 64.9 61.8 60.4 60.4 59.9 Less: Interns (2.8) (2.2) (2.2) (2.2) (2.2) Adjusted Seaport 62.1 59.6 58.2 58.2 57.7 47 Seaport Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Incr (Decr) 2010 2011 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenues Operating Revenues 96,060 94,972 97,003 96,980 2,008 2.1% Security Grants 1,791 3,415 697 1,598 (1,817) -53.2% Total Revenues 97,850 98,387 97,700 98,578 191 0.2% Expenses Seaport Expenses (excl env srvs) 12,932 15,729 15,301 15,515 (214) -1.4% Environmental Services 1,982 2,208 1,935 2,009 (199) -9.0% Maintenance Expenses 4,981 4,761 5,051 6,079 1,318 27.7% P69 Facilities Expenses 527 532 532 531 (1) -0.2% Other RE Expenses 147 293 293 300 6 2.2% CDD Expenses 1,995 3,412 3,297 4,477 1,065 31.2% Police Expenses 3,201 3,713 3,713 4,167 454 12.2% Corporate Expenses 10,379 12,487 12,207 12,334 (154) -1.2% Security Grant Expenses 1,982 3,451 733 1,476 (1,975) -57.2% Envir Remed Liability 1,439 500 250 0 (500) -100.0% Operating Expenses 39,564 47,087 43,313 46,887 (200) -0.4% Net Operating Income 58,286 51,300 54,387 51,691 391 0.8% 48 Containers Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Containers Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Container Revenues 61,036 61,916 60,435 (1,481) -2.4% Maintenance Reimburseable 296 138 300 162 117.4% Total Revenues 61,332 62,054 60,735 (1,319) -2.1% Expenses Seaport Expenses (excl env srvs) 5,470 7,745 7,917 173 2.2% Environmental Services 1,307 1,335 1,029 (306) -23.0% Maintenance Expenses 1,470 1,128 1,697 568 50.4% P69 Facilities Expenses 326 329 336 7 2.0% Other RE Expenses 8 15 20 5 37.1% CDD Expenses 1,367 2,261 2,989 727 32.2% Police Expenses 843 989 1,093 103 10.4% Corporate Expenses 6,031 7,388 7,116 (272) -3.7% Operating Expenses 16,821 21,191 22,196 1,005 4.7% Net Operating Income 44,511 40,863 38,539 (2,324) -5.7% 49 Grain Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Grain Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Grain Revenues 6,035 6,087 6,088 1 0.0% Maintenance Reimburseable 0 0 1 1 NA Total Revenues 6,035 6,087 6,089 1 0.0% Expenses Seaport Expenses (excl env srvs) 306 449 261 (188) -41.8% Environmental Services 10 0 1 0 8.5% Maintenance Expenses 29 21 53 32 153.7% P69 Facilities Expenses 30 30 31 1 4.9% Other RE Expenses 1 0 0 (0) -100.0% CDD Expenses 41 155 179 24 15.4% Police Expenses 187 215 228 13 6.2% Corporate Expenses 478 586 615 29 5.0% Operating Expenses 1,081 1,456 1,369 (88) -6.0% Net Operating Income 4,955 4,631 4,720 89 1.9% 50 Industrial Properties Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Industrial Properties Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Industrial Properties Revenues 13,177 13,471 14,476 1,006 7.5% Maintenance Reimburseable 42 10 9 (1) -6.1% Total Revenues 13,219 13,481 14,486 1,005 7.5% Expenses Seaport Expenses (excl env srvs) 3,348 3,800 3,482 (318) -8.4% Environmental Services 506 702 569 (133) -19.0% Maintenance Expenses 942 1,213 1,386 173 14.2% P69 Facilities Expenses 87 88 83 (6) -6.3% Other RE Expenses 126 186 191 5 2.5% CDD Expenses 207 458 596 138 30.0% Police Expenses 823 944 1,000 56 5.9% Corporate Expenses 1,592 1,950 1,912 (39) -2.0% Operating Expenses 7,633 9,342 9,218 (124) -1.3% Net Operating Income 5,587 4,139 5,268 1,129 27.3% 51 Cruise Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Cruise Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Cruise Revenues 11,666 10,150 11,718 1,568 15.4% Maintenance Reimburseable 196 65 97 32 48.5% Total Revenues 11,862 10,215 11,815 1,599 15.7% Expenses Seaport Expenses (excl env srvs) 1,043 1,159 1,198 39 3.4% Environmental Services 98 138 227 89 64.4% Maintenance Expenses 1,390 1,236 1,682 446 36.1% P69 Facilities Expenses 59 59 55 (4) -6.5% Other RE Expenses 3 43 47 3 7.6% CDD Expenses 113 388 505 117 30.1% Police Expenses 936 1,094 1,345 252 23.0% Corporate Expenses 1,234 1,385 1,423 39 2.8% Operating Expenses 4,875 5,501 6,483 981 17.8% Net Operating Income 6,987 4,714 5,332 618 13.1% 52 Docks - Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Docks Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Docks Revenues 3,574 3,113 3,836 723 23.2% Maintenance Reimburseable 37 22 21 (2) -6.8% Total Revenues 3,611 3,135 3,856 721 23.0% Expenses Seaport Expenses (excl env srvs) 2,006 2,013 2,239 226 11.2% Environmental Services 61 32 184 152 470.1% Maintenance Expenses 1,144 1,154 1,253 99 8.6% P69 Facilities Expenses 25 26 26 0 0.1% Other RE Expenses 8 49 42 (7) -14.4% CDD Expenses 265 137 193 56 41.2% Police Expenses 412 472 501 29 6.2% Corporate Expenses 527 635 675 41 6.4% Operating Expenses 4,448 4,517 5,113 596 13.2% Net Operating Income (837) (1,382) (1,256) 125 -9.1% 53 Risks U.S. and Global economic uncertainties - Potential impact on Container and Cruise volumes Competitive Pressures Traffic congestion due to construction Unexpected Repairs Environmental Remediation Liabilities 54 Real Estate Division 2012 Preliminary Operating Budget Commission Briefing October 4, 2011 Key Assumptions Marina occupancy rate 94% compared to 93% in 2011 Budget Fishing & Commercial occupancy rates FT 84% and MIC 72% compared to FT 82% and MIC 70% in 2011 Budget Commercial Properties target 87% occupancy. 2011 Budget target was 90% 56 Key Assumptions (continued) Bell Harbor International Conference Center Number of guests consistent with 2011 Budget Revenue per guest budgeted to increase Ownership of Eastside Rail Corridor transferred to King County by July 1, 2012 Execution of Deferred Maintenance Plan continues with $3.5 million of projects budgeted for 2012 57 Org Revenues By Group Real Estate Division Only Incr (Decr) 2010 2011 2011 2012 12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenue Harbor Services 11,533 11,448 11,360 11,633 185 1.6% Portfolio Management 17,150 18,373 18,612 19,820 1,447 7.9% Commercial 6,133 6,513 6,513 6,906 393 6.0% Third Party 11,017 11,860 12,099 12,914 1,054 8.9% Development & Planning 756 724 858 812 88 12.1% Eastside Rail 114 45 76 22 (23) -50.8% Facilities & Maintenance 839 352 352 542 189 53.8% Total Revenue 30,391 30,942 31,258 32,828 1,886 6.1% 58 Org Expenses By Group Real Estate Division Expenses Only Incr (Decr) 2010 2011 2011 2012 12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Operating Expenses Harbor Services 4,436 4,454 4,310 4,614 160 3.6% Portfolio Management 10,990 11,954 12,157 12,441 487 4.1% Commercial 3,390 3,610 3,810 3,913 303 8.4% Third Party 7,600 8,344 8,347 8,528 184 2.2% Development & Planning 692 759 753 799 40 5.3% Eastside Rail Corridor 504 484 835 203 (281) -58.1% Maintenance 12,142 14,279 13,629 17,209 2,930 20.5% Facilities 1,510 1,453 1,384 1,521 68 4.7% Division Admin 346 358 403 378 20 5.6% Other 120 0 0 0 0 NA Contingency 0 0 0 0 0 NA Total Operating Expenses 30,739 33,741 33,471 37,166 3,425 10.2% 59 Real Estate Org Expense Budget Real Estate Division Expenses Only 2011 2012 Incr (Decr) $'s Thousands Budget Budget Change % Baseline Budget Salaries 5,816 6,089 273 4.7% Benefits 2,120 2,228 108 5.1% Wages & Benefits 7,113 7,621 508 7.1% Salaries & Wages to Cap, Non-op,ERL 1,000 1,400 400 40.0% Total Payroll Costs 16,049 17,338 1,289 8.0% Net Payroll Exp (net of to capital,Non-op,ERL) 15,049 15,938 889 5.9% Utilities 3,243 3,627 384 11.8% Third Party Mgmt (Hospitality Only) 7,613 7,870 257 3.4% Increase Baseline Maint 0 1,250 1,250 NA Other O&M 5,311 5,221 (90) -1.7% Allocated to Capital (400) (644) (244) 61.0% Total Baseline Budget 30,816 33,262 2,446 7.9% Initiatives Tenant Improve & Broker Fees 155 207 52 33.3% Deferred Maint Projects in Budget 1,690 3,046 1,356 80.2% Deferred Maint Salaried Staff 198 198 (0) -0.1% Net Shed related work 260 250 (10) -3.8% T91 Development Study (50%) 138 0 (138) -100.0% Eastside Rail Corridor 484 203 (281) -58.1% Contingency 0 0 0 NA Total 2,925 3,904 979 33.5% Total Operating Expenses 33,741 37,166 3,425 10.2% 60 Baseline Maintenance Work $'s Thousands Increase in Baseline Maintenance 2012 Budget Maint work for Engineering, PCS 347 Northend Office Overhead (Mgr,Admin, Utilities, Maint) 277 Increase in reimburseable work 190 Purchasing and Safety Training 117 Phased Maintenance of Bell St Cruise Pier & Gangway 86 SBM ongoing repairs (e.g. potholes, concrete) 60 Project Mgmt & Craft Technical Training 32 New Areas Requiring Maintenance Tsubota 62 Eastside Rail Corridor 50 Terminal 10 29 Total Increase in Baseline Maintenance 1,250 61 2012 Deferred Maintenance Projects $'s Thousands Deferred Maintenance Projects 2012 Budget Bell Street Bridge painting 400 P69 concrete beams rehab 350 P69 carpet replacement 400 Centennial Park rip rap repair 250 T102 electrical coordination study 150 Pier 66 replace wood fender panels 120 Replace 800 MHz radio system 270 Maximo mobility and integration 250 Marine Maint lighting upgrade 100 Contingency 300 Other 654 Subtotal per schedule 3,244 Maint Net Shed related work 250 Total Deferred Maintenance Projects 3,494 62 Full-Time Equivalents (FTEs) 2011 Budget 164.8 2011 Changes Maintenance - Purchaser 1.0 Maintenance - Skilled Crafts (1.0) Facilities - upgrade non-exempt position 0.0 Adjusted 2011 164.8 2012 Budget Staff Additions: RE Dev & Planning Project Assistant 1.0 Net Change 1.0 Proposed 2012 Budget 165.8 63 Real Estate Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Incr (Decr) 2010 2011 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Forecast Budget $ % Revenues Operating Revenues 29,820 30,707 31,023 32,401 1,694 5.5% Total Revenues 29,820 30,707 31,023 32,401 1,694 5.5% Expenses Real Estate Exp (excl Maint,P69,Hosp) 9,814 9,963 10,568 10,123 160 1.6% Real Estate BHICC & WTC 6,964 7,613 7,623 7,870 257 3.4% Maintenance Expenses 6,652 8,934 8,485 9,837 902 10.1% P69 Facilities 226 159 152 198 39 24.5% Environmental Services 800 912 775 819 (93) -10.2% Seaport Expenses (excl env srvs) 395 430 430 589 159 37.0% CDD Expenses 806 1,266 1,366 1,214 (52) -4.1% Police Expenses 1,198 1,350 1,350 1,442 93 6.9% Corporate Expenses 4,671 5,472 5,337 5,230 (241) -4.4% Envir Remediation Liability (2) 0 0 0 0 NA Operating Expenses 31,524 36,099 36,086 37,323 1,224 3.4% Net Operating Income (1,704) (5,392) (5,063) (4,922) 471 8.7% 64 Fishing & Commercial Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Fishing & Commercial Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 2,753 2,653 2,667 14 0.5% Total Revenues 2,753 2,653 2,667 14 0.5% Expenses Real Estate Exp (excl Maint & P69) 1,850 1,744 1,847 103 5.9% Real Estate BHICC & WTC 0 0 0 0 NA Maintenance Expenses 1,430 1,530 1,855 325 21.3% P69 Facilities 23 24 33 9 35.4% Environmental Services 324 353 266 (87) -24.6% Seaport Expenses (excl env srvs) 45 60 113 53 89.0% CDD Expenses 335 292 215 (77) -26.5% Police Expenses 430 482 519 37 7.6% Corporate Expenses 857 928 964 36 3.9% Envir Remediation Liability 0 0 0 0 NA Operating Expenses 5,296 5,413 5,813 399 7.4% Net Operating Income (2,543) (2,760) (3,146) (385) -14.0% 65 Recreational Boating Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Recreational Boating Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 8,794 8,803 8,974 171 1.9% Total Revenues 8,794 8,803 8,974 171 1.9% Expenses Real Estate Exp (excl Maint & P69) 2,633 2,741 2,803 61 2.2% Real Estate BHICC & WTC 0 0 0 0 NA Maintenance Expenses 1,647 1,934 2,191 257 13.3% P69 Facilities 61 64 81 17 26.4% Environmental Services 309 356 274 (82) -23.0% Seaport Expenses (excl env srvs) 45 60 70 10 16.9% CDD Expenses 169 385 467 82 21.4% Police Expenses 337 387 415 29 7.5% Corporate Expenses 1,715 2,032 1,881 (150) -7.4% Envir Remediation Liability 0 0 0 0 NA Operating Expenses 6,916 7,958 8,182 224 2.8% Net Operating Income 1,878 845 792 (54) -6.3% 66 Portfolio Management Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Portfolio Management Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 17,300 18,479 19,923 1,444 7.8% Total Revenues 17,300 18,479 19,923 1,444 7.8% Expenses Real Estate Exp (excl Maint & P69) 4,041 4,142 4,348 206 5.0% Real Estate BHICC & WTC 6,964 7,613 7,870 257 3.4% Maintenance Expenses 3,339 5,115 5,289 175 3.4% P69 Facilities 58 61 72 12 19.4% Environmental Services 62 31 212 182 587.4% Seaport Expenses (excl env srvs) 218 224 224 0 0.1% CDD Expenses 253 528 461 (67) -12.6% Police Expenses 431 481 508 27 5.6% Corporate Expenses 1,747 2,049 1,978 (71) -3.5% Envir Remediation Liability 0 0 0 0 NA Operating Expenses 17,113 20,244 20,965 721 3.6% Net Operating Income 187 (1,765) (1,042) 723 41.0% 67 Eastside Rail Corridor Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions Eastside Rail Corridor Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 114 45 22 (23) -50.8% Total Revenues 114 45 22 (23) -50.8% Expenses Real Estate Exp (excl Maint & P69) 660 634 389 (245) -38.7% Real Estate BHICC & WTC 0 0 0 0 NA Maintenance Expenses 6 0 64 64 NA P69 Facilities 0 0 0 0 NA Environmental Services 0 30 60 30 100.8% Seaport Expenses (excl env srvs) 0 0 0 0 NA CDD Expenses 11 0 8 8 NA Police Expenses 0 0 0 0 NA Corporate Expenses 74 31 101 70 230.3% Envir Remediation Liability 0 0 0 0 NA Operating Expenses 751 694 621 (73) -10.5% Net Operating Income (637) (649) (599) 50 7.7% 68 Re Dev & Plan Budget Summary Inclusive of Direct Charges & Allocations from Corporate, CDD, & Other Divisions RE Development & Planning Incr (Decr) 2010 2011 2012 '12-'11 Bud Chg $'s Thousands Actual Budget Budget $ % Revenues Operating Revenues 756 724 812 88 12.1% Total Revenues 756 724 812 88 12.1% Expenses Real Estate Exp (excl Maint & P69) 628 701 737 36 5.1% Real Estate BHICC & WTC 0 0 0 0 NA Maintenance Expenses 204 356 434 78 22.0% P69 Facilities 7 7 11 4 58.4% Environmental Services 105 143 7 (136) -95.1% Seaport Expenses (excl env srvs) 87 86 181 95 111.3% CDD Expenses 37 62 63 2 2.5% Police Expenses 0 0 0 0 NA Corporate Expenses 279 432 306 (126) -29.3% Envir Remediation Liability 0 0 0 0 NA Operating Expenses 1,347 1,786 1,739 (48) -2.7% Net Operating Income (591) (1,063) (927) 136 12.8% 69 Risks Potential higher vacancies in commercial properties and recreational marinas Eastside Rail Corridor Deferred maintenance costs Outside legal costs Tenant improvement allowances 70 Capital Development Division 2012 Operating Budget Commission Briefing October 4, 2011 CDD 2011 & 2012 Budgets 2011 Budget 2012 Budget FTE 262.5 255.75 Total Salaries & Benefits $ 28,451,234 $ 29,510,754 On-site consultants $ 5,529,009 $ 2,575,595 Small Works Constr Contracts $ 1,122,664 $ 992,000 Total Before Capital Ch & Trans $ 38,637,105 $ 36,556,692 Sal/Wag to Capital $ 13,663,576 $ 14,062,613 Capital Projects Overhead $ 6,295,482 $ 5,195,829 On-site consultants to Capital $ 4,424,462 $ 1,794,896 Total Charges to Capital $ 24,383,520 $ 21,053,338 Total Operating Expense $ 14,278,467 $ 15,528,081 72 CDD 2012 by Department O9000: Capital CDD All CDD Development ENG PCS AVPMG SPMG CPO Admin Total FTE 108.75 47 44 17 37 2 255.75 Payroll to Capital Projects 6,652,371 2,769,447 2,666,168 870,225 1,104,402 14,062,613 Total Salaries & Benefits 12,065,162 5,224,463 5,532,915 2,300,298 4,030,085 357,832 29,510,754 On-site Consultants 1,282,500 1,293,095 2,575,595 Total Costs Before Capital 14,209,092 6,790,865 7,730,978 2,986,588 4,465,202 373,966 36,556,692 Charges & Transfers Total Charges to Capital -9,744,225 -3,312,529 -5,229,354 -1,437,192 -1,330,038 -21,053,338 Projects TOTAL OPERATING 4,472,367 3,478,836 2,501,904 1,550,201 3,150,507 374,266 15,528,081 EXPENSE 73 Priority CDD Initiatives Establish Skire Unifier as our Project Delivery System. Support the business divisions in implementing sustainable asset management. Streamline the formation and administration of service agreement contracts. Update Port standard specifications for construction projects. Optimize SharePoint in CDD. Improve Emergency Response readiness. 74 Corporate 2012 Preliminary Operating Budget Commission Briefing October 4, 2011 Budget Overview Key Drivers: Baseline payroll increases and contractual increases New Rental Car Facility Century Agenda Audit Committee/Internal Audit Initiatives Other initiatives including Enterprise Risk Management, Medical Plan Review/Design, Business Process Improvement Overall increase of 2.2% vs. 2011 budget Decline in Corporate Cost as a percent of total operating revenues and expenses 76 Corporate Expense Summary (in $ 000's) Amount Notes 2011 Budget 75,008 Less: 2011 One time Items (1,829) AAPA Conference & other misc. 2011 Baseline Budget 73,179 Cost Increases Salaries & Benefits (Baseline) 991 Per budget guidelines Wages & Benefits (Baseline) 862 Per bargaining agreements Contractual/Unavoidable 364 ICT Software maintenance and new systems Subtotal 2,216 New Budget Requests New Rental Car Facility Costs 185 Details in the next slide 2012 One Time Items 711 Details in the next slide Other Requests 373 Details in the next slide Subtotal 1,269 2012 Proposed Budget 76,655 Increase Over 2011 Baseline 3,485 Increase Over 2011 Budget 1,647 77 Approved Budget Requests (in $ 000's) Amount Notes New Rental Car Facility Costs Police FTE for Traffic Mitigation 110 CFC reimbursable Insurance premiums 75 RCF reimbursable Subtotal RCF 185 2012 One Time Items Century Agenda 135 Complete strategic planning process IT Risk Assessment and Performance Audit 250 Endoresed by Audit Committee Internal Audit Independent Peer Review 50 Endorsed by Audit Committee Medical Benefits Consulting 95 Evaluate alternative plan designs Tourism Business Consultant 50 Develop business & revenue model Port Leadership Conference 51 $19K in baseline for $70K total Accounts Payable Invoice Automation 80 Set up paperless AP system & workflow Subtotal One Time Items 711 Other Requests Apprenticeship Program 100 Previously funded through $0.20/hour contractor fees Police Communications Support FTE 102 Support to Police, Fire, Emergency Prep Risk Management FTE 79 RCF driver program, strategic initiatives Other 91 Subtotal Other Requests 373 Total 1,269 78 2012 Corporate Budget 2010 2011 2011 2012 '12-'11 Bud Change (in $ 000's) Actual Budget Forecast Budget $ % TOTAL REVENUES 610 1,025 1,202 151 -874 -85.2% EXPENSES Executive 1,356 1,500 1,460 1,539 39 2.6% Commission 831 931 862 980 49 5.3% Legal 3,475 2,906 3,055 2,901 -5 -0.2% Risk Management 2,618 2,789 2,722 2,959 170 6.1% Health & Safety 1,001 1,129 1,124 1,060 -69 -6.1% Public Affairs 5,553 7,012 6,795 5,815 -1,197 -17.1% Human Resources & Development 4,107 5,285 5,063 5,494 209 4.0% Labor Relations 675 922 922 961 39 4.3% Information & Communications Tech. 18,765 19,511 19,511 20,194 683 3.5% Finance & Budget 1,455 1,493 1,483 1,543 50 3.3% Accounting & Financial Reporting 5,939 6,596 6,415 6,853 257 3.9% Internal Audit 990 1,215 1,204 1,496 281 23.2% Office of Social Responsibility 1,280 1,567 1,560 1,476 -90 -5.8% Contingency 21 700 350 700 0 0.0% Police 19,273 21,452 21,443 22,684 1,232 5.7% Total Corporate Costs 67,391 75,008 73,969 76,655 1,647 2.2% 79 2012 Budget Major Changes 80 2012 Corporate FTE Summary FTE's 2011 Approved Budget 447.6 Changes in 2011: Intern for Century Agenda 0.5 Public Affairs Program Manager (Full Time) 0.2 Added CAD System Administrator in ICT 1.0 Added Two Limited Duration Positions in AFR 2.0 Eliminated Two Positions -2.0 Intern Position in HR&D 0.5 2011 Baseline 449.8 2012 Proposed New FTEs: Risk Specialist 1 1.0 Police Sergeant for new RCF 1.0 Communication Support Position 1.0 WR Intake/Investigation Specialist Becomes Full Time 0.4 Proposed new FTEs for 2012 3.4 2012 Budget Proposed FTEs 453.2 81 Corporate Cost Analysis ($ in 000's) 2010 2011 2011 2012 Actual Budget Forecast Budget Corporate Cost 67,391 75,008 73,969 76,655 Total Revenue 462,651 492,798 487,719 520,042 Total Expense 253,464 285,844 278,547 312,666 Corporate Cost as % of Revenues 14.6% 15.2% 15.2% 14.7% Corporate Cost as % of Expense 26.6% 26.2% 26.6% 24.5% 82 Risks Pending labor settlements vs. budget assumptions Insurance premiums on renewal Unexpected litigations or claims Unanticipated events 83 Port of Seattle 2012 Preliminary Operating Budget Port-wide Summary 84 Key Payroll Assumptions 3% average merit increase for non-represented staff in line with projected 3.1% average in regional salary planning surveys only 3.5% of employers projecting zero increases for 2012, vs. 17.3% in 2010 and 8.1% in 2011 2.2% increase in Port-sponsored medical plan due to lower utilization and minor design changes 85 Key Payroll Assumptions 2012 PERS employer rate not yet available 2011 actual blended rate of 6.25% is below budgeted rate of 7% Preliminary budget assumes 2012 rate increases to 8.5% in July from current actual rate of 7.25%, for a full year blended rate of 7.875% Represented staff payroll based on bargaining agreements, includes COLA & STEP increases for specified groups 86 Key Payroll Assumptions In August, Commission asked for a comparison of recent average pay increases for represented and non-represented staff The following table provides base pay increases for 2010 and YTD June 2011 2010 2011 YTD June Represented Staff Average Increase* 4.0% 2.4% Range 0-7% 0-6% Non-Represented Staff Average Merit Increase 3.78% 2.45% Range 0-5% 0-3% * COLA/across the board increases only; excludes STEP increases 87 2012 Preliminary Budget 2010 2011 2012 $ % ($ in '000s) Actual Budget Budget Chang Change Notes Operating Revenues Aeronautical 198,329 217,200 238,149 20,950 9.6% Cost recovery Non-Aeronautical 135,052 144,601 149,828 5,227 3.6% Including $9.1M RAC operating revenue. Other (adjusted) 880 877 934 57 6.4% $7.8M Fuel Hydrant rev is reclassified as non-op. Aviation 334,262 362,678 388,911 26,233 7.2% Seaport 97,279 98,153 98,151 -1 0.0% $2.1M reduction in pass-through grant. Real Estate 30,391 30,942 32,828 1,886 6.1% CDD 36 n/a Corporate 610 1,025 151 -874 -85.2% $990K for AAPA Conference in 2011 budget. Other Operating Revenues 128,316 130,119 131,131 1,012 0.8% Total 462,578 492,798 520,042 27,245 5.5% Operating Expenses Aviation 126,481 139,575 162,909 23,334 16.7% Seaport 19,517 23,242 20,408 -2,834 -12.2% $2.1M pass-thro grant and $500K for env. reserve exp. Real Estate 30,739 33,741 37,166 3,425 10.2% CDD 9,335 14,278 15,528 1,250 8.8% Corp 67,391 75,008 76,655 1,647 2.2% Total 253,464 285,844 312,666 26,822 9.4% Net Operating Income 209,114 206,954 207,376 422 0.2% 88 Comprehensive Summary Total Revenues were $13.8M higher than 2011 budget and $42.1M higher than 2010. Total Expenses were $1.2M less than 2011 budget and $13.0M higher than 2010. Change in Net Assets were $15.0M above 2011 budget and $29.1M higher than 2010. 89 Potential Contingency Cuts 2012 Estimated Description Budget Cuts Notes Vacant Positions 4,253 2,127 Hiring delay for 6 months Travel/Training Expenses 5,523 1,657 Cut 30% of the budget New Budget Requests & Outside Services 10,360 Furloughs 7,239 Two-week furloughs Total 21,382 2012 Preliminary Budget 312,666 Estimated Cuts as % of Total Budget 6.8% 90 Port-wide FTEs Summary Aviation Seaport Real Estate Capital Dev Corporate Totals 2011 Approved FTE's 761.9 60.4 164.8 262.5 447.6 1697.2 Mid Year Approval 7.1 0.4 1.0 2.0 3.7 14.2 Eliminated 0.0 -1.7 -1.0 0.0 -1.5 -4.2 Transfers 0.0 0.0 0.0 0.0 0.0 0.0 Adjusted 2011 FTE's 769.0 59.1 164.8 264.5 449.8 1707.2 2012 Budget Eliminated 0.0 0.0 0.0 -9.8 0.0 -9.8 Transfer 0.0 0.0 0.0 0.0 0.0 0.0 New FTE's 107.9 0.8 1.0 1.0 3.4 114.1 Total 2012 Changes 107.9 0.8 1.0 -8.8 3.4 104.4 Proposed 2012 FTE's 876.9 59.9 165.8 255.8 453.2 1811.6 91 Port of Seattle 2012 Preliminary Operating Budget Commission Briefing October 4, 2011 Appendix A: Summary of RCF/Bussing $ in 000's 2011 Budget New Costs 2012 Budget Expenses: CFC $000s Payroll 184 5,905 6,088 Revenues 8,627 Other 476 1,689 2,165 Costs 8,656 Total Aviation 660 7,593 8,253 Surplus/(Deficits) (30) Corporate 96 31 127 Reimbursable Capital Development 790 56 847 Revenues 477 Police (a) 110 110 Costs 477 Subtotal Other 886 198 1,084 Surplus/(Deficits) - Total RCF Expenses 1,546 7,791 9,337 Employee Parking (ADF) Expenses not CFC covered: Revenues - 30% Allocable to Employee Parking (145) (145) Expenses 204 Ops Mgr 25% to Employee Parking (59) (59) (204) Total ADF funded - (204) (204) RCF Reimbursable - (477) (477) Total Deficit (234) Total CFC funded 1,546 7,110 8,656 New revenues: RCF Reimbursable - 477 477 All CFC-eligible costs paid by CFC Op Rev (b) 1,543 7,083 8,627 CFC operating revenues Total new revenues 1,543 7,560 9,104 Total Surplus/(Deficit) (3) (231) (234) (a) Includes one Sergeant in the Police's Budget. (b) Assumes $6.17 opening day CFC in April 2012. 93
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