6a Report
ITEM NO.: 6a_Report DATE OF MEETING: March 1, 2011 PORT OF SEATTLE 2010 FINANCIAL & PERFORMANCE REPORT AS OF DECEMBER 31, 2010 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 19-23 V. Capital Development Division Report 24-26 VI. Corporate Professional & Technical Services 27-29 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/10 EXECUTIVE SUMMARY Financial Summary The Port's 2010 total operating revenues were $470.5 million, $6.3 million below budget. Aeronautical revenues were $198.3 million, $12.0 million below budget mainly due to reduced debt service on variable rate bonds. Other operating revenues were $272.2 million, $5.7 million higher than budget primarily due to higher revenues from Concessions, Container, Cruise, Grain, and Dock & Industrial Properties, partially offset by lower revenues from Public Parking, Rental Cars, and Security & Environmental Grants. Total operating expenses were $253.2 million, $9.5 million below budget mainly due to savings from some vacant positions, lower benefits costs, outside services, and utilities costs. Operating income before depreciation was $217.3 million, $3.2 million above budget. Operating income after depreciation was $56.5 million, $1.0 million higher than the budget. Port-wide capital spending was $202.6 million for the year, $104.3 million below the budgeted $306.9 million. Operating Summary We had an outstanding year on the operating activities in 2010. Airline passengers at Sea-Tac were 31.6 million for 2010, 1.0% higher than 2009. Enplanements growth was also 1.0% higher than 2009 despite a decrease of 3% in landed weight. The Seaport division had a record-breaking year for both the Container and Cruise in 2010. With 2,140K TEU's, we surpassed the previous high set in 2005 at 2,088K TEU's. This represented a 35.0% increase compared to 2009 levels and it's the biggest increase among all the West coast ports. The 2010 cruise season broke the records with 223 sailing and 931,698 passengers. Cruise passenger volumes exceeded the prior record of 886,039 passengers, set in 2008, by 5.2%. For the Real Estate division, occupancy levels at Commercial Properties were at 88% at the end of the 2010, which is below the 90% target for the 2010 budget, but above comparable statistics for the local market at 84%. Moorage occupancies at Fishermen's Terminal exceeded budget targets. Recreational Marinas were on target at 94% occupied. The 2010 event activity for Bell Harbor International Conference Center, Maritime Event Center and Smith Cove Cruise Terminal, as measured by number of attendees/guests, was 26% over budget and 23% over 2009. Key Business Events We had a very challenging but exciting year in 2010. The Airport had new air service to Osaka in June and the Yellow Cab contract with the Port started on November 1. Seaport executed the new lease with PCC Logistics at Terminal 104 and Louis Dreyfus exercised option for 5 year lease extension at Terminal 86. This was also the first year of using the Smith Cove Cruise Terminal as an event site. Furthermore, we closed sale on portions of Eastside Rail Corridor to the City of Redmond and Puget Sound Energy. In addition, the SAO Performance audit of the Port's real estate management was completed and the Port received commendation from the SAO contract audit firm (TCBA) for the excellent cooperation and support received from the Port. On the environmental front, we not only saw a great success in the Clean Truck Program but also earned the AAPA award for Environmental Compliance Assessment Program and the ENERGY STAR label for the Pier 69 headquarters building. Moreover, we completed and unfolded Port's Centennial Website with map, timeline and stories of the Port. Finally, we completed a couple of bond refunding in 2010 for a total of $29.7 million present value savings and we received ratings upgrades from Moody's and S&P. Major Capital Projects We completed a number of capital projects in 2010. The Runway 16C panel replacement completed ahead of schedule and on budget. Other key projects completed in 2010 included the Emergency Generators, Burien Demolition, Town & Country Demolition, T-91 Cruise Terminal Modification, T115 Dock Reconstruction completed 2Q 2010, and T-5 Maintenance Dredging. We also successfully implemented enterprise asset and service management software, replaced the Permit Compliance Tracking System, enabled free wireless access at the airport, expanded the ticketing system at the airport, and deployed security technology and infrastructure for the Marine Domain Awareness project. Additionally, we continued to make progress on the Consolidated Rental Car Facility projects, Precondition Air project, Terminal Realignment project, North Harbor Island Mooring Dolphins construction project, and East Marginal Way Grade Separation project. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/10 INCOME STATEMENT Income Statement As of Date: 2010-12-31 2009 2010 2010 2010 Bud Var Change from 2009 $ in 000's Actual Actual Budget $ % $ % Revenues: Aviation 328,239 342,174 354,299 (12,125) -3.4% 13,935 4.2% Seaport 90,392 97,279 92,544 4,735 5.1% 6,887 7.6% Real Estate 30,430 30,391 29,923 468 1.6% (39) -0.1% Capital Development - 36 - 36 0.0% 36 n/a Corporate 374 610 18 592 3289.4% 237 63.3% Total Revenues 449,435 470,490 476,784 (6,293) -1.3% 21,056 4.7% Operating & Maintenance: Aviation 122,747 126,481 127,745 1,264 1.0% 3,735 3.0% Seaport 21,362 19,253 22,466 3,213 14.3% (2,110) -9.9% Real Estate 28,346 30,735 31,629 894 2.8% 2,388 8.4% Capital Development 7,831 9,335 8,898 (437) -4.9% 1,504 19.2% Corporate 65,481 67,391 71,958 4,567 6.3% 1,911 2.9% Total O&M Costs 245,767 253,195 262,696 9,501 3.6% 7,428 3.0% Operating Income Before Depreciation 203,668 217,295 214,088 3,208 1.5% 13,627 6.7% Depreciation 157,068 160,775 158,575 (2,199) -1.4% 3,707 2.4% Operating Income after Depreciation 46,600 56,520 55,512 1,008 1.8% 9,920 21.3% IMPORTANT NOTE: We reclassified $2.2 million operating grant revenues and $20.0 million environmental expenses from operating accounts to non-operating accounts after the 2010 budget was finalized. The numbers shown in the "Budget" columns hereinafter reflect all the changes after the account reclassifications. Seaport, Real Estate and Corporate revenues for 2009 were also reduced by $633 thousand, $5 thousand and $732 thousand, respectively due to reclassification from operating to non-operating revenues and expenses were also reduced $3.8 million in Seaport and $124 thousand in Real Estate in order provide meaningful comparison. 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 12/31/10 KEY PERFORMANCE INDICATORS 2009 2010 2010 Actual/Budget 2010 vs. 2009 Actual Actual Budget Var Var % Chg Chg % Enplanements (in 000's) 15,610 15,773 15,361 412 2.7% 163 1.0% Landed Weight (lbs in 000's) 20,388 19,786 20,364 (578) -2.8% (602) -3.0% Passenger CPE (in $) 10.92 11.63 12.69 (1.06) -8.4% 0.7 6.5% Container Volume (TEU's in 000's) 1,585 2,140 1,600 540 33.8% 555 35.0% Grain Volume (metric tons in 000's) 5,512 5,491 5,000 491 9.8% (21) -0.4% Cruise Passenger (in 000's) 875 932 849 83 9.8% 57 6.5% Commercial Property Occupancy 88.0% 88.0% 90.0% -2.0% -2.2% 0.0% 0.0% Shilshole Bay Marina Occupancy 95.5% 94.0% 94.6% -0.6% -0.6% -1.5% -1.6% Fishermen's Terminal Occupancy 80.6% 87.0% 78.5% 8.5% 10.8% 6.4% 7.9% CAPITAL SPENDING RESULTS 2010 2010 Budget Plan of Division Actual Budget Variance Finance ($ in millions) Aviation $ 183.6 $ 247.6 $ 64.0 $ 275.8 Seaport 11.2 30.9 19.7 30.6 Real Estate 4.0 11.8 7.8 12.1 Corporate 3.8 16.7 12.8 10.5 Total $ 202.6 $ 306.9 $ 104.3 $ 329.1 PORTWIDE INVESTMENT PORTFOLIO The investment portfolio for the fourth quarter of 2010 earned 1.55% against our benchmark (The Bank of America Merrill Lynch 3-year Treasury/Agency Index) of 0.64%.For the past twelve months the portfolio has earned 2.17% against the benchmark of 0.72%. Since the Port became its own Treasurer in 2002, the Port's portfolio life-to-date has earned 3.58% against our benchmark of 2.65%. 5 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 FINANCIAL SUMMARY 2008 2009 2010 2010 Actual/Budget $ in 000's Actual Actual Actual Budget Var $ Var % Operating Revenues Aeronautical 204,361 182,534 198,329 210,367 (12,038) -5.7% Non-Aeronautical 150,528 137,348 135,418 135,128 290 0.2% Other 3,440 8,359 8,426 8,803 (377) -4.3% Operating Revenues 358,329 328,241 342,173 354,299 (12,126) -3.4% Operating Expenses 192,641 175,482 177,871 182,075 4,203 2.3% Environmental Remediation Liability 2,542 1,991 3,271 2,971 (300) -10.1% VSP, HR10 & Unemployment - 1,196 - - - n/a OPEB Reversal - (4,016) - - - n/a Total Operating Expenses 195,183 174,654 181,142 185,045 3,903 2.1% Net Operating Income 163,146 153,587 161,031 169,254 (8,223) -4.9% Capital Expenditures 209,813 191,479 183,578 247,567 63,989 25.8% Aeronautical revenues were $12.0 million lower than budget due to lower interest rates of variable rate bonds, not utilizing commercial paper financing as budgeted, and lower operating costs. An overage of $290K in non-airline revenues was realized as strong Concessions sales more than offset underperforming Public Parking. Operating expense was favorable by $3.9 million mainly due to savings from payroll benefits and Corporate allocations, offset with deficits from unbudgeted back-up power generator costs, janitorial contract cost of living increase, unemployment benefits, and B&O taxes budgeted using incorrect rates.. $183.6 million was spent on capital projects in 2010, 74.2% of the 2010 budget of $247.6 million. A. BUSINESS EVENTS Terminal realignment in progress. Resolved zoning issue with City of Seatac related to airport property and possible new development by FAA. Yellow Cab contract began November 1. STRATEGIC INITIATIVES PERFORMANCE Customer Service O New service to Osaka started in June O Initiated terminal realignment with airline agreement Non-aeronautical Business o New concession agreements with taxis and limousine service Environmental Leadership o Completed design and initiated construction on PC Air Project o Secured grants for electric ground service equipment project Supportive Community o Executed voluntary runway use plan with FAA Employee Development o Completed internal internship program with eight interns Asset Management o South Satellite as prototype 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 B. KEY PERFORMANCE METRICS 2009 2010 % 2009 2010 % Figures in 000s Q4 Q4 Variance Actual Actual Variance Enplanements 3,686 3,842 4.2% 15,610 15,773 1.0% Landed Weight 4,792 4,874 1.7% 20,388 19,786 -3.0% Enplanements vs. Prior Year Landed Weight vs. Prior Year 1.29% 1.32% 2.54% 10% 4% 2% 0.89% Growth Rate 6.15% Growth Rate 0% -2% 5% 3.53% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 0.97% 3.19% 2.42% 2.52% -4% -6.73% 0.35% -3.28% -0.91% -0.67% -0.57% -0.79% 1.34% -6% -7.89% -8% -10.33% 0% -10% -11.65% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec -12% -14% -3.08% -1.29% -2.35% -5% Enplanements in the fourth quarter of 2010 were 4.2% greater than enplanements in the fourth quarter of 2009. There was an overall growth of 1% in enplaned passengers over last year despite a decrease of 3% in landed weight. 2008 2009 2010 2010 Actual/Budget Actual Actual Actual Budget Var $ Var % Non-Aero NOI ($ in 000s) 86,474 81,159 78,203 75,688 2,515 3.3% Passenger Airline CPE 11.89 10.92 11.63 12.69 1.06 8.3% Total Operating Cost / Enpl 12.13 11.19 11.48 12.05 0.56 4.7% Debt Service Coverage 1.40 1.41 1.39 1.35 0.04 2.6% CPE came in lower than the budget primarily due to significant savings to Terminal debt service, lower operating costs and increased enplanements. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 C. OPERATING RESULTS Division Summary 2008 2009 2010 2010 Actual/Budget $ in 000's Actual Actual Actual Budget Var $ Var % Total Operating Revenues 358,329 328,241 342,173 354,299 (12,126) -3.4% Operating Expenses Salaries & Benefits 89,458 80,804 76,036 78,103 2,067 2.6% Outside Services 31,928 21,509 22,519 24,848 2,329 9.4% Utilities 12,636 13,209 11,381 12,762 1,381 10.8% VSP, HR10 & Unemployment Savings - 1,196 - - - n/a OPEB Reversal - (4,016) - - - n/a Environmental Remediation Liability 2,542 1,991 3,271 2,971 (300) -10.1% Other Expenses 6,135 8,183 13,275 9,063 (4,212) -46.5% Baseline Airport Expenses 142,699 122,877 126,481 127,745 1,264 1.0% Corporate Expenses 34,940 31,181 32,558 34,776 2,217 6.4% Police Expenses 15,287 14,461 14,317 15,170 853 5.6% Capital Development/Other Expenses 2,257 6,135 7,785 7,354 (431) -5.9% Total Operating Expenses 195,183 174,654 181,142 185,045 3,903 2.1% Net Operating Income 163,146 153,587 161,031 169,254 (8,223) -4.9% Depreciation Expense 107,349 117,731 119,538 116,933 (2,605) -2.2% Non-Operating Rev/(Exp) Grants & Donations Revenues 49,461 74,323 30,040 37,208 (7,169) -19.3% Passenger Facility Charges 60,708 59,689 59,744 58,535 1,209 2.1% Customer Facility Charges 23,534 21,866 23,243 22,475 768 3.4% Other Non-operating Rev/(Exp) (103,316) (109,398) (122,549) (127,848) 5,298 -4.1% Total Non-Operating Rev/(Exp) 30,386 46,481 (9,522) (9,629) 107 -1.1% Total Revenue Over Expense 86,183 82,337 31,971 42,692 (10,721) -25.1% Operating revenues were $12.1 million unfavorable overall due to lower revenue requirements for Air Terminal operations from reduced debt service on variable rate bonds. Operating expense was $4 million favorable. o Savings are from payroll benefits $2M, utilities commodities $1.4M, International Lounge expenses $218K, deferral of South Access Study $450K, FTE vacancies $218K and Corporate and Police allocations $3.0M. o Budget deficits are from back-up power generators not budgeted $1.6M, litigated injury and damages claims $1.0M, janitorial contract cost of living increase $255K, unemployment benefits $400K, and B&O taxes budgeted using incorrect rates $550K. Grants and Donations lower than budget due to delayed projects spending of PC Air Vale grant $5.3M and Parkside Elementary HSD $1.9M. Customer Facility Charges over budget due to rental car transaction days staying 5% over budget assumptions. 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 Aeronautical Business Unit Summary 2008 2009 2010 2010 Actual/Budget $ in 000's Actual Actual Actual Budget Var $ Var % Revenues requirement: Capital Costs 81,535 72,013 82,083 92,610 10,527 11.4% Operating Costs net Non-Aero 131,024 118,456 122,985 125,605 2,620 2.1% Total Costs 212,559 190,469 205,067 218,215 13,147 6.0% FIS Offset (5,250) (5,250) (7,000) (7,000) - 0.0% Other Offsets (15,686) (16,441) (14,825) (15,062) (237) -1.6% Net Revenue Requirement 191,623 168,778 183,243 196,153 12,911 6.6% Other Aero Revenues 12,738 13,757 15,087 14,215 (871) -6.1% Total Aero Revenues 204,361 182,534 198,329 210,369 12,039 5.7% Less: Non-passenger Airline Costs 13,039 12,074 14,885 15,485 (599) -3.9% Net Passenger Airline Costs 191,323 170,460 183,444 194,884 12,639 6.5% 2008 2009 2010 2010 Actual/Budget Actual Actual Actual Budget Var $ Var % Cost Per Enplanement: Capital Costs / Enpl 5.22 4.61 5.20 6.03 0.83 13.7% Operating Costs / Enpl 8.39 7.59 7.80 8.18 0.38 4.6% Offsets (1.30) (1.39) (1.38) (1.44) (0.05) 3.7% Other Aero Revenues 0.79 0.88 0.96 0.93 (0.03) -3.4% Non-passenger Airline Costs (0.84) (0.77) (0.94) (1.01) (0.06) 6.4% Passenger Airline CPE 11.89 10.92 11.63 12.69 1.06 8.3% Capital costs lower than budget due to reduced debt service on variable rate bonds. Operating costs were $2.6 million lower due to cost savings from payroll benefits and Corporate and Police allocations. Other offsets are lower than budget due to reduced Terminal debt service. Other aeronautical revenues were greater than budget due to airfield land rental and gate parking revenues. Passenger airline cost per enplanement (CPE) was $11.63, a reduction of $1.02 from budget. With the budgeted enplanements, CPE would be $11.98, a reduction of $.71. 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 Non-Aero Business Unit Summary 2008 2009 2010 2010 Actual/Budget $ in 000's Actual Actual Actual Budget Var $ Var % Revenues: Public Parking 59,111 49,688 49,416 51,812 (2,396) -4.6% Rental Cars 35,592 33,321 30,309 31,014 (705) -2.3% Concessions 33,181 33,482 33,765 29,953 3,812 12.7% Other 22,644 20,858 21,929 22,350 (421) -1.9% Total Revenues 150,528 137,348 135,418 135,128 290 0.2% Operating Expense 61,279 55,916 54,743 56,732 1,988 3.5% Share of terminal O&M 16,396 17,011 16,935 17,174 238 1.4% Less utility internal billing (13,515) (16,738) (14,464) (14,466) 2 0.0% Net Operating & Maint 64,160 56,189 57,215 59,440 2,225 3.7% Net Operating Income 86,367 81,159 78,203 75,688 2,515 3.3% 2008 2009 2010 2010 Actual/Budget Actual Actual Actual Budget Var $ Var % Revenues Per Enplanement Parking 3.67 3.18 3.13 3.37 (0.24) -7.1% Rental Car 2.21 2.13 1.92 2.02 (0.10) -4.8% Concessions 2.06 2.14 2.14 1.95 0.19 9.8% Other 1.41 1.34 1.39 1.45 (0.06) -4.4% Total Revenues 9.36 8.80 8.59 8.80 (0.21) -2.4% Primary Concessions Sales / Enpl 10.29 9.66 9.99 9.78 0.21 2.1% Public Parking revenues shortfall due to decrease of short-term transactions and the Doug Fox contract. Positive transactions trend in the past four months. Rental Car revenues were budgeted using higher industry gross sales. Concession revenues were better than expected due to space rental income $1.1M, advertising $500K, food & beverages $1.1M, retail/duty free $1M, Google Wi-Fi deal. Concessions revenues were higher than budgeted due to steady gains in sales per enplanement (actual $9.99 vs. budget of $9.78). Operating expense under spent due to outside services not utilized for the Club International Lounge $512K. 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 Non-Aero Activity Summary 2008 2009 2010 2010 2010 Var 2010 vs 2009 Yr to Yr Actual Actual Actual Budget to Budget Actual % Var Garage Parking Transactions: 0-3 Hours 1,676,276 1,581,271 1,413,600 1,516,420 (102,820) (167,671) -10.6% Transactions: 3-24 Hours 195,224 164,924 168,604 171,501 (2,897) 3,680 2.2% Transactions: 1-4 Days 419,077 351,011 357,594 368,104 (10,510) 6,583 1.9% Transactions: +4 Days 130,758 105,862 105,670 113,468 (7,798) (192) -0.2% 2,421,335 2,203,068 2,045,468 2,169,493 (124,025) (157,600) -7.2% Revenue to Port ($000) $ 53,548 $ 44,797 $ 45,060 $ 46,911 $ (1,851) $ 263 0.6% Rental Cars Transactions Cars 1,210,954 1,019,534 1,075,568 1,064,000 11,568 56,034 5.5% Transactions Days 5,199,183 4,388,906 4,695,879 4,495,000 200,879 306,973 7.0% Revenue to Port ($000) $ 28,474 $ 26,140 $ 23,129 $ 23,834 $ (705) $ (3,011) -11.5% Ground Transportation Trips 2,145,898 1,919,508 1,790,374 1,949,389 (159,015) (129,134) -6.7% Revenue to Port ($000) $ 4,691 $ 4,629 $ 4,814 $ 4,432 $ 383 $ 185 4.0% Primary Concessions Sales 165,391,237 150,682,463 157,551,180 150,123,000 7,428,180.00 6,868,717.00 4.6% SPE 10.29 9.66 9.99 9.78 0.21 0.33 3.4% Revenue to Port ($000) $ 22,594 $ 20,593 $ 21,617 $ 19,516 $ 2,101 $ 1,024 5.0% Garage Parking Transactions: Number of vehicles paying to park in the General & Direct garage parking. Revenue to Port: Revenue from airport garage parking (net of all taxes). Rental Cars Revenue to Port: 10% of gross sales generated by rental cars (does not include space rent). Primary Concessions Sales: Total sales generated by the Primary Concessionaires. Revenue to Port: Revenue generated by Food/Beverage and Retail/Duty Free. 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 Net Cash Flow: NOI after Debt Service and Interest Income 2008 2009 2010 2010 Actual/Budget $ in 000's Actual Actual Actual Budget Var $ Var % Aeronautical Net Operating Income (NOI) 72,583 65,985 74,402 84,763 (10,360) -12.2% Debt Service 78,526 68,767 73,080 83,607 10,527 12.6% NOI After Debt Service (5,943) (2,781) 1,323 1,156 167 14.5% Non-Aeronautical Net Operating Income (NOI) 86,474 81,159 78,203 75,688 2,515 3.3% Debt Service 41,762 39,241 41,752 40,921 (830) -2.0% NOI After Debt Service 44,712 41,917 36,451 34,767 1,684 4.8% Fuel Hydrant Revenue 3,440 8,359 8,426 8,803 (377) -4.3% Total Aviation NOI 162,496 155,503 161,031 169,254 (8,223) -4.9% Debt Service 120,288 108,008 114,831 124,528 9,697 7.8% NOI After Debt Service 42,208 47,495 46,200 44,726 1,474 3.3% Add ADF Interest Income 11,462 8,853 6,297 7,065 (768) -10.9% Less Non-Cash Fuel Hydrant Revenue (2,926) (7,845) (7,912) (7,845) (67) 0.8% Net Cash Flow after D/S & Interest Inc. 50,745 48,503 44,585 43,946 639 1.5% D. CAPITAL SPENDING RESULTS 2010 2010 2010 Actual/Budget Plan of $ in 000's Actual Budget Var $ Var % Finance Rental Car Facility 143,076 174,699 31,623 18.1% 157,818 Third Runway 1,897 7,714 5,817 75.4% 5,549 North Expressway Relocation Phase 1 2,781 5,600 2,819 50.3% 13,000 Runway 16C-34C Panel Replacement 2,736 5,450 2,714 49.8% - Loading Bridges Utilities 235 2,900 2,665 91.9% 3,500 Alaska Air 2 Step Ticket Counter - 2,015 2,015 100.0% - Garage Escalator and "A" Elevator Upgrade 1,265 2,300 1,035 45.0% 3,811 Apron Pavement Rehabilitation - 3 1,359 2,382 1,023 42.9% 2,500 All Other 30,229 44,507 14,278 32.1% 89,654 Total Aviation 183,578 247,567 63,989 25.8% 275,832 Rental Car Facility savings from favorable bids, delays in expenditures. Turner's construction expenditures have lagged behind the cash flows they provided because ORI, BMF and Main Terminal Improvements projects have experienced schedule delays. Pond M of Third Runway project will be completed in 2011. Runway 16C/34C panel replacement bids came in significantly under engineer's estimate. 12 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 FINANCIAL SUMMARY 2009 2010 2010 Budget $ in 000's Actual Actual Budget Var $ Var % Operating Revenue 89,844 96,060 90,134 5,925 7% Security Grants 847 1,791 2,535 (744) -29% Total Revenues 90,691 97,850 92,669 5,181 6% Total Operating Expenses 40,545 39,321 43,324 4,004 9% Net Operating Income 50,145 58,530 49,345 9,185 19% Capital Expenditures 44,677 11,172 30,784 19,612 64% Total Seaport revenues were $5,181K favorable for the year partially due to a non-cash accounting adjustment resulting from a modification in GAAP straight line rent adjustment methodology required for container terminal leases. Revenues were also favorable due to higher crane rent, cruise revenue and grain volumes, partially offset by lower than anticipated Environmental Grant and Security Grant revenue. Total Operating Expenses were $4,004K favorable due to delays in starting some budgeted projects and other anticipated work that was not necessary, third party security grant project costs which were pushed back until 2011, open Seaport positions, lower than budgeted benefit costs, expense contingency amounts that were not needed, and lower corporate expenses. Full Year 2010 Net Operating Income of $58,530K is $9,185K favorable to the 2010 Budget and $8,384K higher than 2009 Actual NOI. Total capital spending for 2010 was $11.2 million or 36% of the Approved Annual Budget. A. BUSINESS EVENTS The Seattle Harbor had a record-breaking year in 2010 at 2,140K TEU's surpassing the previous high set in 2005 at 2,088K TEU's. 2010 results represent a 35.0% increase compared to 2009 levels. Consolidated West Coast Port results for 2010 show an overall increase in TEU volume of 17.7% compared to volumes in 2009. TEU Volume (in 000's) 2010 2009 % change Long Beach 6,263 5,068 23.6% Los Angeles 7,832 6,749 16.0% Oakland 2,330 2,045 13.9% Portland 181 174 4.0% Prince Rupert 343 265 29.5% Seattle 2,140 1,585 35.0% Tacoma 1,455 1,546 -5.8% Vancouver 2,514 2,152 16.8% West Coast - Total: 23,059 19,584 17.7% Grain vessels shipped 5,491K metric tons of grain through Terminal 86 in 2010. Amount is consistent with 2009 grain volumes of 5,512 metric tons. 2010 actual volume is 10% higher than 2010 budgeted volume. The 2010 cruise season ended on October 1st, breaking Seattle cruise records with 223 sailing and 931,698 passengers. Passenger volumes exceeded the prior record of 886,039 passengers, set in 2008, by 5.2%. Inaugural year for use of Smith Cove Cruise Terminal as an event site. 13 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 Executed new lease with PCC Logistics at Terminal 104. Louis Dreyfus exercised option for 5 year lease extension at Terminal 86. Implementation of the Northwest Ports Clean Air Strategy continued: o At-Berth Clean Fuels Vessel Incentive Program (ABC Program) - 400 participating calls were made in 2010. Overall 72.4% of frequent caller vessels participated in the program which was just slightly below the goal of 80%. o Under the Scrappage and Retrofits for Air in Puget Sound program (ScRAPS Program) 270 pre-1994 drayage trucks have been taken off the road since the inception of the program. AAPA award for Environmental Compliance Assessment Program. Authorization of $3.4 million investment in the Spokane Street Widening project. 14 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 B. KEY PERFORMANCE METRICS Container Volume TEU's in 000's Grain Volume Metric Tons in 000's Cruise Passengers in 000's Net Operating Income Before Depreciation By Business 2009 2010 2010 2010 Bud Var Change from 2009 $ in 000's Actual Actual Budget $ % $ % Containers 37,250 44,513 37,694 6,819 18% 7,263 19% Container Support Props (894) 576 974 (398) -41% 1,470 -164% Cruise 5,340 6,987 5,091 1,896 37% 1,647 31% Grain 4,748 4,955 4,396 559 13% 206 4% Docks/Industrial Props 5,033 4,146 2,708 1,438 53% (886) -18% Security (1,307) (1,477) (1,618) 141 9% (169) -13% Envir Grants/Remed Liab (24) (1,170) 100 (1,270) -1270% (1,146) -4823% Total Seaport 50,145 58,530 49,345 9,185 19% 8,384 17% 15 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 C. OPERATING RESULTS 2009 2010 2010 Bud Var Change from 2009 $ in 000's Actual Actual Budget $ % $ % Operating Revenue 89,844 96,060 90,134 5,925 7% 6,216 7% Security Grants 847 1,791 2,535 (744) -29% 944 111% Total Revenue 90,691 97,850 92,669 5,181 6% 7,160 8% Direct Expenses 25,108 20,780 22,698 1,918 8% (4,328) -17% Security Grant Expense 860 1,983 2,689 706 26% 1,123 131% Envir Remediation Liability 24 1,170 1,500 330 22% 1,146 4823% Divisional Allocations 2,123 2,354 2,575 221 9% 231 11% Corporate Allocations 12,430 13,033 13,862 829 6% 603 5% Total Expense 40,545 39,321 43,324 4,004 9% (1,225) -3% NOI Before Depreciation 50,145 58,530 49,345 9,185 19% 8,384 17% Depreciation 29,385 31,212 31,974 763 2% 1,827 6% NOI After Depreciation 20,761 27,318 17,370 9,947 57% 6,557 32% Total Seaport revenues were $5,181K favorable to budget. Key variances are as follows: Containers and Support Properties - favorable $4,480K Containers $4,843K favorable. Space Rent favorable $1,858K due to modification in GAAP straight line rent adjustment methodology for Terminal 5 and the addition of Terminals 30 and 46 in the calculation. Crane Rent Revenue $2,710K favorable due to higher volumes and related crane usage at Terminal 5 and Terminal 18. Intermodal Revenue $228K favorable due to higher Terminal 5 intermodal volumes. Support Properties ($363K) unfavorable due to lower than budgeted rents from Terminal 104, continued warehouse vacancy at Terminal 106, and lower than anticipated liquid bulk volumes at the Terminal 18 facility. Cruise and Industrial Properties - favorable $3,045K Cruise $1,359K favorable due to higher than anticipated passenger volumes $589K, additional Savings Rent $348K from cost savings on CTA allowable expenses, higher than anticipated utility revenue $227K (correction to utility billing methodology), and maintenance reimburseable work not anticipated in the budget $196K. Bulk Terminals $502K favorable. Terminal 86 grain volume exceeded budget by 10%. Docks $675K favorable due to higher use of berths by fishing preferential use customers partially offset by lower usage by barges and other non-fishing vessels $219K. Additional favorable variances due to revenue from maintenance and other services performed for customers $231K, higher than anticipated storage fee revenue $128K and utility revenue $99K. Industrial Properties $509K favorable primarily due to higher than anticipated utility revenue $331K at Terminal 91. Space rent was also higher than budget $135K due to increased rents from leases which were amended after completion of the 2010 budget and higher than anticipated Carnitech percentage rent. Environmental Grants - unfavorable ($1,600K) Environmental Grant revenue ($1,600K) unfavorable due to overstatement of grant in budget. Amount represents a grant received by the Port which is passed through to the City. Amounts received should have been budgeted as offset by amounts paid to the City for a net amount of $0. Security Grants - unfavorable ($744K). Security Grants ($744K) unfavorable due to Rounds 6 and 7 grant activities commencing later than planned. Unfavorable revenue variance is largely offset by corresponding favorable expense variance. 16 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 Expenses were $4,004K favorable to budget. Key variances: Security Grant Expenses favorable $706K due to Rounds 6 and 7 grant activities commencing later than planned. Favorable expense variance is offset by corresponding unfavorable revenue variance. Environmental Liability Expense favorable $330K due to lower estimated future clean-up costs than assumed in Budget. Seaport Salaries and Benefits (excluding Security) direct charged to Seaport favorable $415K due to elimination of the SPT&S Director's position, later than expected hiring of eastern Washington Rep position in Asia Business Development, and lower than expected benefits expense (as a percentage of salaries). Advertising, Promotional Hosting, and Trade Business & Community expense favorable $172K primarily due to lower than anticipated spending by Commercial Strategy group ($148K). Outside Services (excluding Corporate, CDD, and Security Grants) were favorable $1,104K due to delays in starting budgeted projects and/or work that was anticipated, but then not needed in 2010. Projects and programs with later work commencement include Environmental Services $287K for storm water and air programs, a condition assessment and associated repairs at Terminal 103, asphalt and roof repairs at Terminal 46 and a rail survey at Terminal 115. Work that was anticipated, but then not needed were studies by Strategic Planning $55K, crane work at Terminal 46, and tenant improvements/brokerage fees at Terminal 115. In addition, an expense project to install bollards at Pier 90 has been re-scoped and is proceeding as a capital project $200K. Budgeted work for under dock inspection work and Terminal 5 maintenance dredging are on schedule, but a portion of the actual costs were reflected in CDD actual expenses. Miscellaneous Expense was favorable $399K due to relocation expenses budgeted for 2010, but largely deferred until 2011 ($139K) and due to unused Seaport Division Contingency budget ($500K), partially offset by higher than budgeted tribal mitigation costs ($147K). Corporate costs, direct and allocated were favorable $1,225K due to lower than anticipated direct charges and allocations from virtually all orgs/departments including Contingencies $196K, Police $190K, Accounting and Financial Reporting $159K, Human Resources $126K, Risk $117K, and Legal $100K. CDD costs, direct and allocated were unfavorable ($280K) primarily due to higher than anticipated direct charges and allocations from Port Construction Services, for various locations including the Pier 28 barge layberth project which had been deferred from 2009. All other variances netted to an unfavorable ($67K) or less than 1% of Total Expenses Budgeted. NOI Before Depreciation was $9,185K favorable to budget. Depreciation was $763K, or approximately 2%, favorable to the 2010 Budget. NOI After Depreciation was $9,947K favorable to budget. Change from 2009 Actual NOI Before Depreciation for 2010 increased by $8,384K from 2009. Revenue is up $7,160K from the prior year due to higher lease rents related to the newly redeveloped Terminal 30 ($2,900K), modification in GAAP straight line rent adjustment methodology for Terminal 5 and the addition of Terminals 30 and 46 in the calculation ($1,808K), full year effect of the blended eagle rate increase effective mid-2009 ($1,059K), higher cruise revenue $1,359K and higher security grant revenue $944K. Amounts were partially offset by 2009 revenue from King County for the T30 Upland Dredge Disposal project ($1,382K). Overall expenses in 2010 are $1,225K lower due a significant reduction in direct expenses from 2009 related to the Terminal 30 Upland Dredge Disposal project $2,644K, expensing of design costs associated with the Terminal 25 South Container Yard project and the expensing of costs for the Pier 24 habitat project $1,322K, and bad debt expense for T104 lease. Amount is largely offset by higher security grant expenses, environmental remediation liability expense and corporate and divisional allocations. 17 III. SEAPORT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 D. CAPITAL SPENDING RESULTS 2010 Variance 2010 Actual Approved EstActs to EstActs as a % 2010 Plan of $ in 000's Budget Budget of Budget Finance Terminal 18 884 4,771 3,887 19% 3,319 Terminal 5 818 4,744 3,926 17% 6,468 Terminal 10 309 4,607 4,298 7% 4,412 Security 949 3,258 2,309 29% 826 Terminal 115 3,226 3,793 567 85% 1,841 All Other 4,986 9,611 4,625 52% 13,752 Total Seaport 11,172 30,784 19,612 36% 30,618 Comments on Key Projects: Full year spending for Seaport was 36% of the Approved Capital Budget. Projects with significant changes in spending were: Terminal 18 Street Vacations Due to changes in the timing of the project, some spending was moved out to 2011. Terminal 18 Pile Cap Improvements Funds moved to 2011. Project under evaluation. Terminal 10 Interim Development Construction pushed to 2011. Terminal 5 Crane Cable Reels Equipment delivery expected in 1st quarter 2011. Security Security Grant Round 6 projects are currently expected to come in $1M lower than authorized. Received final approval from FEMA to utilize the $1M on other projects in 2011. Spending on Security Grant Round 7 projects delayed into 2011. All Other Primary difference is due to delays in small capital projects and in finding appropriate capital projects to be funded under the Green Port Initiative. Changes between the 2010 Plan of Finance and the 2010 Approved Budget represent modifications in 2010 spending estimates made after determination of 2009 actual spending. 18 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 FINANCIAL SUMMARY 2009 2010 2010 Budget $ in 000's Actual Actual Budget Var $ Var % Operating Revenue 30,132 29,820 29,798 22 0% Total Revenues 30,132 29,820 29,798 22 0% Total Operating Expenses 29,569 31,499 32,956 1,457 4% Net Operating Income 563 (1,678) (3,158) 1,479 47% Capital Expenditures 74,039 3,965 11,793 7,828 66% Total Real Estate Division revenues are $22K, or 0.1%, favorable to budget due to higher activity at Bell Harbor International Conference Center and higher occupancy at Fishermen's Terminal. Amounts were largely offset by unfavorable revenue variances resulting from closure of the Portside Caf (more than offset by expense savings), lower activity at World Trade Center Club and higher vacancies at commercial and industrial properties. Total Operating Expenses are $1,457, or 4%, favorable due to closure of the Portside Caf, salary benefits rates below what was assumed in the budget, cost savings related to activities at World Trade Center Club and Bell Harbor International Conference Center, lower maintenance expenses due to delays in project start dates, and lower direct charges and allocations from Corporate. Favorable variances were partially offset by higher utility costs and unexpected litigation reserves. Net Operating Income for 2010 is $1,479K above budget for the year and $2,241K below 2009 Actual. Capital spending for 2010 was $4.0 million or 34% of the Approved Annual Budget amount of $11.8 million. A. BUSINESS EVENTS Occupancy levels at Commercial Properties were at 88% at the end of the 2010, which is below the 90% target for the 2010 Budget, but above comparable statistics for the local market at 84%. For 2010 full year average, moorage occupancies at Fishermen's Terminal exceeded 2010 Budget targets and at the Maritime Industrial Center were below target. Recreational Marinas were on target at 94% occupied. Vessel Liability Insurance requirement effective at Fishermen's Terminal on January 1, 2010. A monitoring and tracking process was implemented at all Harbor Services' facilities, for almost 2,000 customers, to ensure continued compliance at 100%. 2010 event activity for Bell Harbor International Conference Center, Maritime Event Center and Smith Cove Cruise Terminal, as measured by number of attendees/guests, was 26% over budget and 23% over 2009. Under the management of Columbia Hospitality, 5 events were held at the Smith Cove Cruise Terminal. This was the first year of using the new facility as an event site. Former Portside Caf management agreement was terminated in May. Through an RFP process the spaced was leased and operations at the Caf commenced in early October. Net savings to the Port in 2010 was approximately $50K. Closed sale on portions of Eastside Rail Corridor to the City of Redmond and Puget Sound Energy. In the 1st quarter, a new lease was executed with water-dependent tenant, Arctic Storm Management Group, for Office and Warehouse/Storage space at Pier 69. Electrical consumption at Pier 69 headquarters was the lowest recorded in the history of the building. There has been a 50% reduction in consumption since 2000. Pier 69 headquarters earned the ENERGY STAR label for buildings Reached settlement with the City of Des Moines regarding South Correctional Entity (SCORE) jail facility 19 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 B. KEY PERFORMANCE METRICS Shilshole Bay Marina Occupancy 120.0% Percent Linear Footage Occupied 100.0% 2009 Actual 80.0% 2010 Budget 60.0% 2010 Actual 40.0% 20.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fishermen's Terminal Moorage Occupancy 120.0% Percent Linear Footage Occupied 100.0% 2009 Actual 80.0% 2010 Budget 60.0% 2010 Actual 40.0% 20.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Commercial Building 100% 90% 95% 95% 94% Percent Occupied 93% 90% 88% 90% 90% 90% 89% 87% 88% 2009 Actual 80% 2010 Target 70% 2010 Actual 60% Qtr 1 Qtr 2 Qtr 3 Qtr 4 Net Operating Income Before Depreciation By Business 2009 2010 2010 2010 Bud Var Change from 2009 $ in 000's Actual Actual Budget $ % $ % Recreational Boating 2,052 1,878 1,236 642 52% (173) -8% Fishing & Commercial (1,753) (2,543) (3,113) 571 18% (789) -45% Commercial & Third Party 661 212 (436) 648 149% (449) -68% Eastside Rail (79) (637) (358) (279) -78% (558) -709% RE Development & Plan (318) (591) (486) (105) -22% (273) -86% Environmental Reserve (0) 2 0 2 NA 2 NA Total Real Estate 563 (1,678) (3,158) 1,479 47% (2,241) -398% 20 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 C. OPERATING RESULTS 2009 2010 2010 Bud Var Change from 2009 $ in 000's Actual Actual Budget $ % $ % Operating Revenue 30,132 29,820 29,798 22 0% (312) -1% Total Revenue 30,132 29,820 29,798 22 0% (312) -1% Direct Expenses 27,525 29,503 30,949 1,445 5% 1,979 7% Envir Remediation Liability 0 (2) 0 2 NA (2) -1376% Divisional Allocations (3,200) (3,485) (3,802) (317) -8% (284) -9% Corporate Allocations 5,244 5,481 5,808 327 6% 237 5% Total Expense 29,569 31,499 32,956 1,457 4% 1,930 7% NOI Before Depreciation 563 (1,678) (3,158) 1,479 47% (2,241) -398% Depreciation 9,949 10,025 9,659 (366) -4% 76 1% NOI After Depreciation (9,386) (11,703) (12,817) 1,114 9% (2,317) -25% Total Real Estate revenues were $22K favorable to budget. Key variances are as follows: Harbor Services: Favorable $288K Recreational Boating favorable $28K. The variance amounted to less than 1% of budget. Fishing and Commercial favorable $260K due to a shift in the mix of boat sizes to larger vessels. In addition, a delay in the net shed loft removal project has allowed for continued revenue. Portfolio Management: Unfavorable ($47K) Commercial Properties unfavorable ($405K) primarily due to the reconciliation payment to Clipper at P69 ($252K). The payment is to reimburse the tenant for previously incurred street permit costs that per the lease are to be paid by the Port. Future costs will be considered rental credits and are included in the 2011 Budget. Higher than anticipated vacancies at T102 and Fishermen's Terminal Office & Retail also contributed to the negative revenue variance ($227K). The variances are partially offset by Fugro revenue not anticipated in the 2010 Budget $68K. Third Party Managed Properties favorable $358K due to higher than anticipated activity at the Bell Harbor International Conference Center $562K partially offset by lower activity at Bell Street Garage ($60K) and World Trade Center Seattle ($140K). Eastside Rail Corridor: Unfavorable ($41K) Eastside Rail Corridor unfavorable ($41K) due to considerable unknowns at time of Budget. Budgeted revenue for the corridor was a rough estimate. RE Development and Planning: Favorable $6K Terminal 91 General Industrial favorable $6K due to unanticipated revenue from Pacific Maritime Association and United States Seafoods. The positive variance is partially offset by M.T. Housing vacating Terminal 91 in 2009. The 2010 Budget assumed occupancy throughout the year. Facilities Management: Unfavorable ($204K) Pier 69 Facilities Management ($204K) due to lower revenues from the Pier 69 Caf. The management agreement associated with the Pier 69 Caf was terminated April 30, 2010. A new lease has been signed for the space, but revenue will be reported under Portfolio Management. Maintenance: Favorable $20K Maintenance $20K due to unbudgeted license to use fees from parks and recycling fees. 21 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 Total Real Estate expenses were $1,457K favorable to budget. Key variances: Salaries and Benefits for Real Estate employees (excluding Maintenance) favorable $541K primarily due to budgeted higher than actual benefit percentages $464K. Third Party Management Expense and Management Fees related to the Pier 69 Caf were favorable $295K due to the termination of the management agreement on April 30, 2010. Third Party Management Expense and Management Fees related to the World Trade Center Club, World Trade Center West and Bell Harbor International Conference Center were favorable $340K due to expense controls by third party managers. Outside Services (excluding Maintenance, Corporate, Capital Development, and Capital to Expense) were favorable $457K primarily due to unused and delayed Eastside Rail Corridor consulting and reimbursement expenses $423K. Maintenance expenses were favorable $419K primarily due to longer than expected lead times in getting scheduled work underway in 2010. Corporate costs, direct and allocated, were favorable $437K primarily due to positive variances in Human Resources $124K, Accounting & Financial Reporting $88K, Police $71K, Public Affairs $42K, Contingencies $66K, and Internal Audit $39K. Utilities unfavorable ($255K) due to higher surface water and garbage costs partially offset by lower steam costs. Litigated Injuries and Damages unfavorable ($470K) primarily due to reserve set up related to Eastside Rail Corridor. Capital to Expense unfavorable ($121K) due to the expensing of capital costs associated with projects to upgrade the Bell Street Garage and to install cathodic protection on pilings at Pier 69. All other variances netted to an unfavorable ($186K) or less than 1% of Total Expenses budgeted. NOI Before Depreciation was $1,479K favorable to budget. Depreciation was ($366K) unfavorable to budget primarily due to higher than anticipated depreciation at SBM ($174K). The variance amounted to 3.8% of budget. NOI After Depreciation was $1,114K favorable to budget. Change from 2009 Actual Net Operating Income Before Depreciation decreased by ($2,241K) between 2009 and 2010 as a result of lower revenue and higher operating expenses. Operating Revenue decreased by ($312K) due to higher vacancies at World Trade Center West, Terminal 102, Fishermen's Terminal Office & Retail, and the Tsubota Steel site as well as reimbursement payment to tenant at P69 and closure of the Portside Caf. Expenses increased by $1,930K in 2010 due to higher expenses for the Eastside Rail Corridor $672K, higher expenses associated with tenant improvements, higher expenses associated with Bell Harbor International Conference Center (more than offset by higher revenue), higher charges from Environmental Services, and higher Corporate direct charges and allocations. In addition, 2009 included an expense credit for reversal of prior year OPEB accruals amounting to $267K. Increase in expense amounts were partially offset by reduction in expenses due to closure of Portside Caf and lower bad debt expenses. 22 IV. REAL ESTATE DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 D. CAPITAL SPENDING RESULTS 2010 Variance Approved EstActs to EstActs as a % 2010 Plan of $ in 000's 2010 Actual Budget Budget of Budget Finance Small Projects 836 2,321 1,485 36% 1,810 FT NW Dock Fender System 267 2,000 1,733 13% 2,000 RE Maintenance Shop Solution 379 1,800 1,421 21% 2,100 RE Division Green Initiative 0 1,300 1,300 0% 1,300 Fleet Replacement 743 950 207 78% 950 All Other 1,740 3,422 1,682 51% 3,966 Total Real Estate 3,965 11,793 7,828 34% 12,126 Comments on Key Projects: The Real Estate Division spent 34% of the 2010 Approved Budget. Projects with significant changes in spending were: FT NW Dock Fender System Construction moved back to 2011. RE Division Green Initiative Determination of projects to move forward was deferred until 2011. RE Maintenance Shop Solution Projects delayed until 2011. Expect to complete in 2011. Small Projects Projects delayed until 2011. Changes between the 2010 Plan of Finance and the 2010 Approved Budget represent modifications in 2010 spending estimates made after determination of 2009 actual spending. 23 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 A. BUSINESS EVENTS Implemented new management structure in AVPMG eliminating one layer, completed reorganization and restructuring of administrative functions and of the airfield program team, improved workload projection and increased project management staffing for increased workload. Completed Preconditioned Air project design and construction contract awarded. Consolidated Rental Car Facility projects - continued to make progress toward the March 2012 opening date. Completed Runway 16C panel replacement, ahead of schedule and on budget. State's Capital Projects Advisory Review Board approved the Port's first design-build project, the escalator renewal/replacement project. Procurement process nearly complete by the end of 2010. Demobilized temporary backup power in the spring and reinstalled in the fall for the winter rainy season. Conducted training in Contract Pricing, Source Selection and Prevailing Wage Administration. Developing Purchase-Card procedures; anticipated start date Q1 2011. CPO initiated a quarterly public owner's forum with representatives from Sound Transit, King County, University of Washington, and City of Seattle. Held Port-wide auction at the former warehouse and distribution center, November 20, 2010. Operating Divisions requested direct charge and expense project work in excess of those identified in the operating budget. Execution resulted in variance. Budgeted significant overtime for the construction management group did not occur, resulting in lower project charges to capital projects. Upgraded Water Tower, included painting, cubicle build out and signage to increase efficiency and utilization of the space. Engineering worked closely with CDD staff and accounting to finalize development and implementation of new overhead rate methodology and revised Port policies for capitalization and department expense for 2011. Completed HRD position re-evaluation of the entire Engineering Department. Completed Several key projects in 2010 included the Emergency Generators, Burien Demolition, Town & Country Demolition, T-91 Cruise Terminal Modification. PCS moved from the Kilroy office building to the Airport Office Building (AOB) resulting in $300K annual savings. Completed T115 Dock Reconstruction. Started North Harbor Island Mooring Dolphins construction project at year-end. Started East Marginal Way Grade Separation project and scheduled for completion in September 2011. Completed Phase 1 of T86 Grain Facility Modernization project and Phase 2 work in design. Executed FT NW Dock Fender System Replacement, FT South Wall Reconstruction Phase IV and MIC Central Seawall Replacement construction contracts in 4Q. Completed T-5 Maintenance Dredging. Awarded T-18 South Fender Replacement and Damaged Fender Piles Repair and underway. 24 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 B. KEY PERFORMANCE METRICS Key Indicators 2010 2009/Notes Construction Soft ($ in 000's) Limit construction soft costs (design, Costs Total Costs $ 1,041,985 (100%) construction management, project 36 month rolling management, environmental Total Construction: $ 831,713 (80%) average from documentation) to no more than 25% Total Soft: $ 210,271 (20%) of total capital improvement costs. Q1 2008 thru Q4 2010 Cost Growth During Total Completed Projects YTD: 11 Limit average mandatory change cost Construction Discretionary Change: 4.7% growth to 4% of construction contract award. Mandatory Change: 5.75% Limit average discretionary change cost growth to 4% of construction contract award. Project Schedule ($ in 000's) Limit time growth from initial Growth Total Completed Projects YTD: 11 Commission project authorization to Average Growth Completed Projects: 69.4% substantially complete to no more than Cumulative Value YTD: $65,228 10% of originally allotted duration. Small Business ($ in 000's) Goal: Participation Goods & Services $7,553 13.6% Goods & Services = 10% Major Publics Works $10,869 14.4% Major Public Works = 8% Small Works $3,768 83.0% Small Works = 60% Customer Score Card Survey all projects; average 85% of Total Projects 16 total possible points on scorecards Scorecards Received 15 returned. Total Points 370 Total Score 321.16 Average Score (%) 86.8% Environmental Total Applicable Projects: 19 Incorporate Executive Policy and Total Environmental incorporated or pending: Procedure 15 and/or LEED process in 16 every project. Average: 84.2% Safety 2010 2009 Average 90% of possible points. Total Points 2,595.0 1910.0 Limit annual contractor workplace Total 2,395.8 1724.5 injury rates to 6 recordable accidents Average Score (%) 92.5% 90.2% and 2 time lost accidents per 200,000 TRIR 5.4 1.8 hours worked. LTIR 0 0.4 Performance Q4 2010 98% PREPs completed within 30 days Evaluation Total PREPs due: 48 182 of anniversary date. Timeliness Total PREPs on time: 0-30 days (CDD) 41 156 (85.4%) (85.7%) 0-60 days (HRD) 46 24 (95.8%) (99%) 2010 Procurement Good & Services 81 days Average number of days. Schedule: Major Public Works 62 days Total Time FRS - Small Works 56 days Execution Service Agreements 256 days 25 V. CAPITAL DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/10 C. OPERATING RESULTS 2009 2010 2010 Bud Var. $ in 000's Notes Actual Actual Budget $ % Total Revenues - 36 - 36 0.0% EXPENSES BEFORE CHARGES TO CAPITAL PROJECTS Capital Development Administration 340 380 387 7 1.8% Engineering 9,984 9,963 13,574 3,611 26.6% Port Construction Services 7,354 7,886 8,552 666 7.8% Central Procurement Office 3,224 3,287 4,171 884 21.2% Aviation Project Management 5,554 5,134 6,150 1,016 16.5% Seaport Project Management 2,735 2,693 2,672 (21) -0.8% Total Before Charges to Capital Projects 29,192 29,343 35,505 6,163 17.4% CHARGES TO CAPITAL PROJECTS Capital Development Administration - - - - 0.0% Engineering (9,051) (8,572) (12,418) (3,847) 31.0% Port Construction Services (4,300) (3,998) (5,228) (1,230) 23.5% Central Procurement Office (1,552) (1,507) (1,983) (476) 24.0% Aviation Project Management (4,554) (3,991) (5,006) (1,015) 20.3% Seaport Project Management (1,904) (1,939) (1,971) (32) 1.6% Total Charges to Capital Projects (21,361) (20,007) (26,607) (6,600) 24.8% OPERATING & MAINTENANCE EXPENSE Capital Development Administration 340 380 387 7 1.8% Engineering 934 1,391 1,156 (236) -20.4% Port Construction Services 3,054 3,888 3,324 (564) -17.0% Central Procurement Office 1,672 1,780 2,188 408 18.7% Aviation Project Management 1,001 1,143 1,144 0.0% Seaport Project Management 831 754 701 (53) -7.6% Total Expenses 7,831 9,335 8,898 (437) -4.9% Notes: Summary of Variances FTEs: 46.5 vacancies Workers Compensation: ($77K) All CDD PCS: ($564K) primarily due to all but $465K of $2.2M Expense Work (wages/benefits, Small Works construction services, expense project overhead) transferred to PCS budget from operating divisions. STIA backup power project Town & Country and Burien Demolition Bird Deterrent Project Vacca Site work Miscellaneous Small Construction ENG: ($236K) due in part to expense project overhead and to intra-departmental allocation methodology. This methodology is being changed for 2011. SPM: ($53K) due primarily to outside consultants for expense projects not budgeted in SPM. 26 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/10 A. BUSINESS EVENTS Completed and unfolded Port's Centennial Website with map, timeline and stories of the Port. Collaborated with partner agencies to communicate effectively about the importance of the SR-99 replacement to the Port's ability to generate jobs. Worked with FAA officials to plan and manage a press conference at Sea-Tac at which Secretary of Transportation identified Sea-Tac Airport and Alaska Airlines as the leading edge agencies in developing and implementing environmental programs in the aviation industry. The story was covered nationally. Managed media interest in the new TSA pat-down policies; managed media questions about multiple taser events near the airport; managed multiple requests for information about Class B Air Space issues; managed media regarding the Part 150 Public Workshop; managed media during the snow event in November. Worked with partner agencies to communicate safety messaging around munitions found at Smith Cove Cruise Terminal, insuring accurate coverage of technical aspects, and protecting Port's cruise business' public license to operate. Produced two employee forums at P69 and airport, received positive comments; people appreciated the change in format. Great employee attendance at both forums. Implemented Workplace Responsibility Program. Code of Conduct was delivered to all Port employees and process for feedback provided. Intake system implemented. Training program is being developed. Finalized the medical and dental third party administration contracts for the Port's self funded benefit program and received approval from the State Risk Manager on the Port's application for self funding. Wellness Reward participation rate was 98%. The Wellness Fair was attended by over 300 employees. 530 employees participated in 19 onsite Spirit and Wellness classes. Classes this year were provided by Wellspring, our EAP provider. Successfully completed annual health benefits and Flexible Spending Account Open enrollment. Transitioned membership of Development and Diversity Council, bringing on 19 new members chosen after an application process. Awarded the "Certificate of Achievement for Excellence in Financial Reporting" from the Government Finance Officers Association (GFOA) of the United States and Canada for its 2009 Comprehensive Annual Financial Report (CAFR) for the 5th consecutive year. Completed the SAO Performance audit of the Port's real estate management. The Port received commendation from the SAO contract audit firm (TCBA) for the excellent cooperation and support received from the Port. Selected a vendor and finalized the Statement of Work for redesigning the Port of Seattle's internet. This will improve external communications and business operations while also increasing transparency and public understanding. Successfully implemented enterprise asset and service management software, upgraded the ID Badge Printers, replaced the Permit Compliance Tracking System, enabled free wireless access at the airport, implemented the IronPort Email Filter, expanded the ticketing system at the airport, and deployed security technology and infrastructure for the Marine Domain Awareness project. Received the Distinguished Budget Presentation Award from Government Finance Officers Association for the third consecutive year. Filed the 2011 statutory budget with King County Council and King County Assessor on December 2nd within prescribed deadline as required by law. Issued Revenue and Refunding Bonds for $15 million present value savings. Completed PFC Refunding for $14.7 million present value savings. Received ratings upgrades from Moody's and S&P. The Police department submitted grant applications to augment Seaport Security, and has been successfully receiving grant funding for vehicles and equipment. Acquisition of the proceeds of these grants is projected to be mid 2011. 27 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/10 B. KEY PERFORMANCE METRICS Key Indicators 2010 2009/Notes A. High Performance Workplace: 1. Occupational Injury Rate 5.24 (injuries for every 100 5.94; lowest recordable injury workers) rate 2. Lost Work Day Case Rate 2.17 2.10, increased 3% 3. Injury Cost per Worked Hour $.52 $1.19, decreased 56% 4. Total Lost Work Days 778 1085, decreased by 28% 5. Contract Administration Issues 28 29, decreased by 1 6. Employee Training a) New Employee Orientation 58 69, decreased by 11 b) REALeadership Program 27 29, decreased by 2 c) Budget Training 8 classes and 68 users 8 classes and 78 users d) MIS Training 7 classes and 75 users No classes in 2009 e) Annual Safety Program 96% 93%, increased by 3% 7. Job Openings 181 170, increased by 11 8. Applications Received 7,334 5,268, increased by 2,066 B. Transparency: 1. Rate of Public Meetings 18 16, increased by 2 2. Port 101s - # of Attendees 88 for Airport 101 71 for Airport 101 106 for Cargo 101 86 for Cargo 101 125 for Ship Canal 101 73 for Cruise 101 150 for Duwamish River 101 158 for Duwamish River 101 3. Public Disclosure Requests 281 199, increased by 82 4. Website Visits a) Port Website Visits 9,797,236 page views 8,644,671 page views b) Environmental Report 1,033 readers Not Available c) Annual Report Readership 4,553 visits for 2010 2,565 total visits for 2009 d) E-newsletters & Bulletins Community News 1,867 Constant Contact 18,022 at year- Cargo News 679 end, a decrease of 10% Shilshole News 2,400 OSR News 364 Constant Contact 16,142 C. Accountability: 1. Internal Audits Completed 16 23, decreased by 7 2. % of Audit Plan Completed 84% 91%, decreased by 8% 3. Preventable Vehicle Incidents 112, 75 preventable 107, 53 preventable D. Other Services and Support: 1. No. of ICT Work Orders 20,808 22,845, decreased by 9% 2. No. of ICT Projects Completed 19 29, decreased by 10 3. Deployed Laptops 1,405 1,063, increased by 32% 4. No. of ICT Projects Completed 95% 90%, increased by 6% on Budget 5. Police Service Calls 58,741 calls received 61,809, decreased by 5% 6. Police Arrests 614 with no warrant 778, decreased by 164; 399 with warrant 684 with warrant, decreased by 285 7. Attorney Services 28 litigation and claims 32 litigations and claims, decreased by 4 8. Labor Contracts Negotiated 4 12, decreased by 8 28 VI. CORPORATE FINANCIAL & PERFORMANCE REPORT 12/31/10 C. OPERATING RESULTS 2009 2010 2010 Bud Var. $ in 000's Notes Actual Actual Budget $ % Total Revenues 374 610 18 592 3289.4% Executive 1,551 1,356 1,536 181 11.8% Commission 750 831 868 37 4.3% Legal 2,702 3,475 3,613 137 3.8% Risk Services 2,526 2,618 2,859 241 8.4% Health & Safety Services 913 1,001 1,095 94 8.6% External Affairs 4,918 5,553 6,002 449 7.5% Economic & Trade Development 1 1,441 - - - 0.0% Human Resources & Development 3,913 4,107 4,988 881 17.7% Labor Relations 542 675 784 109 14.0% Information & Communications Technology 17,505 18,765 19,033 268 1.4% Finance & Budget 1,635 1,455 1,529 74 4.8% Accounting & Financial Reporting Services 5,836 5,939 6,716 777 11.6% Internal Audit 978 990 1,109 119 10.8% Office of Social Responsibility 1,431 1,280 1,458 178 12.2% Police 18,409 19,273 20,314 1,040 5.1% Contingency 420 21 55 33 60.8% Total Expenses 65,481 67,391 71,958 4,567 6.3% Notes: 1) Economic & Trade Development was dissolved for 2010. Corporate revenues were $592 thousand favorable compared to budget due to the higher operating grants. Corporate expense performance for the year-ended 2010 was $67.4 million, $4.6 million or 6.3% favorable compared to budget and $1.9 million or 2.9% higher than 2009. This favorable variance was primarily due to cost savings in the reduction of the benefits rate and several vacant positions. All Corporate departments have a favorable variance. D. CAPITAL SPENDING RESULTS ($ Millions) Annual Results: 2010 Plan of Finance $ 10.51 2010 Approved Budget $ 16.66 2010 Actuals $ 3.82 Variance (Budget vs Actuals) $ 12.84 29
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