Item 9a Report
ITEM NO. 9a Supp2 DATE OF MEETING May 19, 2009 OS QUARTERLY PERFORMANCE REPORT AS OF MARCH 31, 2009 TABLE OF CONTENTS Page I. Portwide Performance Report 3-4 II. Aviation Division Report 5-8 III. Seaport Division Report 9-12 IV. Real Estate Division Report 13-16 V. Capital Development Division Report 17-18 VI. Corporate Professional & Technical Services 19-20 2 I. PORTWIDE PERFORMANCE REPORT 3/31/09 INCOME STATEMENT CAPITAL SPENDING RESULTS ($ Millions) Annual Results: 2009 Plan of Finance $ 604.0 2009 Approved Budget $ 436.1 2009 Estimated/Actuals $ 397.9 Variance (Approved Budget vs Estimated/Actuals) 38.2 3 I. PORTWIDE PERFORMANCE REPORT 3/31/09 EXECUTIVE SUMMARY The first quarter Port of Seattle's overall operating revenues were $113.1 million, $3.7 million above the budget. Total operating expenses were $58.0 million, $15.7 million below budget. Operating income before depreciation was $55.1 million, $19.4 million above the budget. Operating income after depreciation is $18.6 million, $21.4 million above the budget. Port-wide Capital spending was $52.7 million for the first quarter and is forecasted to be $398.8 million for the year, $37.3 million below the budgeted $436.1 million. Within the Aviation Division, aeronautical revenues were $4.6 million over budget due to a budgeting error relating to seasonality. Non-airline revenues were $487K favorable due to advertising, retail and duty free, and concession services. Expenses were under budget due to expense project delays and implementation of the 2009 Expense Savings Plan. We forecast a shortfall of $9.3 million in non-airline revenues as Public Parking and Concessions will underperform against the budget due to decreased of enplanements. Operating expense is forecasted to be $10.2 million favorable due to implementation of the 2009 Expense Savings Plan. Total capital expenditures for 2009 are projected at $217.1 million. Total Seaport revenues were $1.0 million unfavorable in the first quarter due to Security Grant Revenue. Security Grant projects are commencing later than assumed in budget. Expenses were $6.3 million favorable through the first quarter primarily due to timing of spending and lower cost of the Terminal 18 maintenance dredging and Terminal 30 upland dredge disposal projects. For the full year, Seaport is forecasting a $2.9 million unfavorable revenue variance due to implementation of the Container Customer Support Package, default of tenant at Terminal 104, and 1 month later commencement of the Terminal 30 lease than budgeted. Expenses are forecasted to be $3.1 million below budget due to implementation of the 2009 Expense Savings Plan and the lower cost of the Terminal 18 maintenance dredging and Terminal 30 upland dredge disposal projects. Net Operating Income is estimated to be approximately equal to the budget. Total capital spending for 2009 is projected at $61.9 million or 62% of the Approved Annual Budget amount of $100.4 million. Total Real Estate revenues were $0.4 million unfavorable in the first quarter primarily due to lower than budgeted activity at Bell Harbor International Conference Center, World Trade Center Club and the Bell Street Garage. Expenses were $1.8 million favorable through the first quarter primarily due to timing of spending. For the full year, Real Estate is forecasting a $0.3 million unfavorable revenue variance due to lower occupancies at Shilshole Bay Marina and the termination of 3 tenants at other sites. Expenses are forecasted to be $2.0 million favorable expense variance due to implementation of the 2009 Expense Savings Plan. Net Operating Income is estimated to be approximately $1.7 million favorable to the budget. Total capital spending for 2009 is projected at $104.1 million or 99% of the Approved Annual Budget amount of $104.8 million. Total Capital Development expenses were $115K favorable in the first quarter mainly due to $293K of T-18 project capital cost being misapplied to CPO expense from Seaport. We forecast an $866K positive variance at the end of the year due to less expense work than budgeted. The division delivers projects and provides technical and contracting services in support of the business plans and infrastructure needs of the Port's operating divisions. As such, the CDD does not have its own capital improvement program. Corporate Professional and Technical Services expenses in the first quarter were $4.4 million or 23.6% favorable compared to the budget primarily due to timing of the spending and implementation of the 2009 Expense Savings Plan. Year-end spending is projected to be $68.2 million, which is $5.3 million below budget. Total capital spending for 2009 is projected at $15.7 million or 99% of the Approved Annual Budget amount of $15.9 million. 4 II. AVIATION DIVISION PERFORMANCE REPORT 3/31/2009 FINANCIAL SUMMARY 2007 2008 2009 2009 Forecast/Budget Figures in $ 000's Actual Actual Forecast Budget Var $ Var % Operating Revenues Aeronautical 193,872 203,275 195,848 201,864 (6,016) -3.1% Non-Aeronautical 143,975 150,528 138,979 148,289 (9,310) -6.3% Other 9,640 4,526 9,853 9,853 - 0.0% Total Operating Revenues 347,487 358,329 344,680 360,006 (15,325) -4.3% Total Operating Expenses 171,624 195,183 179,280 189,521 10,241 5.8% Net Operating Income 175,864 163,146 165,400 170,485 (5,085) -2.9% Capital Expenditure 298,387 209,813 217,183 214,743 (2,440) -1.1% We forecast a shortfall of $9.3 million in non-air line revenues as Public Parking and Concessions will underperform against the budget due to decreased of enplanements. Operating expense is forecasted to be $10.2 m illion favorable due to implementation of the 2009 Expense Savings Plan. Total capital expenditures for 2009 are projected at $217.1 million. A. BUSINESS EVENTS Implemented Expense Savings Plan in order to achieve 6% savings in O&M costs. Mount Redoubt eruption forced diversion of both pass enger and cargo flights from Anchorage to Seattle. Runway 16L closed for reconstruction end of March. Project is progressing well. Icelandair service between Seattle and Reykjavik to begin in July. B. KEY INDICATORS 2008 2009 % 2008 2009 % in 000s Q1 Q1 Variance Actual Fcst Variance Enplanements 3,590 3,386 -5.7% 16,085 14,959 -7.0% Landed Weight 4,947 4,791 -3.2% 21,516 20,437 -5.0% Enplanements vs. Prior Year Landed Weight vs. Prior Year 0% 2% 0.42% Growth Rate -3.77% Growth Rate 0% -5.82% -5% -2% -3.95% -7.88% -4% -6.27% -10% -6% Jan Feb Mar -8% Jan Feb Mar March landed weight augmented by cargo divers ion from Anchorage due to volcanic activity. Enplanements are forecasted to dec rease 7% from the 2008 actual. 2007 2008 2009 2009 Forecast/Budget Actual Actual Forecast Budget Var $ Var % Non-Aero NOI ($ 000's) 87,714 86,367 81,366 86,393 (5,027) -5.6% Passenger Airline CPE 11.73 11.89 12.18 11.90 (0.28) -2.3% Total Operating Cost / Enpl 10.96 12.13 11.98 11.99 0.01 0.1% We forecast CPE to come in higher than both the revised budget and the 2008 actual, primarily due to increase costs allocated to aeronautical cost centers and lower enplaned passengers. 5 II. AVIATION DIVISION PERFORMANCE REPORT 3/31/2009 C. OPERATING RESULTS IN THOUSANDS $ 2007 YTD 2008 YTD 2009 YTD 2009 YTD Act/Budget Figures $ 000's Actual Actual Actual Budget Var $ Var % Revenues Aeronautical 49,069 47,098 48,155 43,494 4,661 10.7% Non-aeronautical 31,684 36,584 33,938 33,451 487 1.5% Other 2,423 2,178 2,128 2,176 (48) -2.2% Total Revenues 83,176 85,860 84,221 79,121 5,100 6.4% Expenses Airport Expenses 27,253 28,844 29,861 36,093 6,232 17.3% Corporate/CDD Expenses 5,716 6,818 7,633 8,000 367 4.6% Police Costs 3,392 3,637 3,048 3,936 888 22.6% Other Charges 318 260 315 433 117 27.1% Total Operating Expenses 36,679 39,559 40,858 48,461 7,604 15.7% Net Operating Income 46,497 46,301 43,363 30,659 12,704 41.4% Aeronautical revenues favorable $4.6 million due to a budgeting error relating to seasonality. Non-airline revenues were favorable due to advertising, retail and duty free, and concession services. Expenses were under budget due to expense project delays and implementation of Expense Savings Plan. DIVISION SUMMARY 2007 2008 2009 2009 Figures in $ 000's Actual Actual Forecast Budget Var $ Var % Operating Revenues 347,487 358,329 344,680 360,006 (15,325) -4.3% Expen ses Payroll 82,627 89,458 83,820 87,779 3,959 4.5% Outside Services 28,900 31,928 23,628 25,576 1,948 7.6% Ut ilit ies 12,603 12,636 13,571 13,571 - 0.0% Other 8,981 15,844 13,340 14,054 715 5.1% Total Airport Expenses 133,110 149,865 134,358 140,979 6,622 4.7% Corporate/C apital Developm ent 24,260 30,031 30,459 32,800 2,341 7.1% Police 14,253 15,287 14,464 15,743 1,279 8.1% Total Operating Expenses 171,624 195,183 179,280 189,522 10,242 5.4% Net Operating Income 175,864 163,146 165,400 170,484 (5,083) -3.0% Depreciation Expense 101,118 107,349 115,213 115,605 392 0.3% Non-Operating Rev/(Exp) Grants & Donations Revenues 89,692 49,461 63,276 63,276 - 0.0% Passenger Facility Charges 63,114 62,770 57,003 62,525 (5,522) -8.8% Customer Facility Charges 22,570 23,534 24,573 24,573 - 0.0% Other Non-operating Rev/(Exp) (80,848) (105,378) (116,013) (116,013) - 0.0% Total Non-Operating Rev/(Exp) 94,527 30,386 28,839 34,361 (5,522) -16.1% Total Revenue Over Expense 169,272 86,183 79,027 89,240 (10,213) -11.4% Operating revenues are forecasted to be $9.3 million unfavorable due to decline of parking transactions, rental car activity, and concession. Operating expenses are forecasted to be $10.2 million favorable due to implementation of the 2009 Expense Savings Plan, offset by a $1.6 million unfavorable variances from Maintenance and Utilities due to more snow and water storms than anticipated. 6 II. AVIATION DIVISION PERFORMANCE REPORT 3/31/2009 BUSINESS UNIT SUMMARY Aeronautical Business Unit 2008 2009 2009 Forecast/Budget Figures in $ 000's Actual Forecast Budget Var $ Var % Revenues requirement: Capital Costs 81,535 80,350 80,350 - 0.0% Operating Costs net Non-Aero 131,024 121,887 127,921 6,034 4.7% Total Costs 212,559 202,237 208,271 6,034 2.9% FIS Offset (5,250) (5,550) (5,550) - 0.0% Other Offsets (15,686) (14,033) (14,052) (19) 0.1% Net Revenue Requirement 191,623 182,654 188,670 (6,016) -3.2% Other Aero Revenues 11,651 13,194 13,194 - 0.0% Total Aero Revenues 203,275 195,848 201,864 (6,016) -3.0% Non-passenger Airline Costs 11,952 13,612 13,780 168 1.2% Net Pasenger Airline Costs 191,323 182,236 188,084 5,847 3.1% 2008 2009 2009 Forecast/Budget Actual Forecast Budget Var $ Var % CPE: Capital Costs / Enpl 5.07 5.37 5.09 (0.29) -5.6% Operating Costs / Enpl 8.15 8.15 8.10 (0.05) -0.6% Offsets (0.98) (0.94) (0.89) 0.05 -5.5% Non-passenger airline costs (0.74) (0.91) (0.87) (0.04) 4.3% Passenger airline CPE 11.89 12.18 11.90 (0.28) -2.3% Operating costs are forecasted to be lower than budgeted due to budget savings from payroll, travel and registration, and outside services. Forecasted passenger airline cost per enplanement (CPE) of $12.18 is higher than budget primarily due to lower enplanements. 7 II. AVIATION DIVISION PERFORMANCE REPORT 3/31/2009 Non-Aero Business Unit 2008 2009 2009 Forecast/Budget Figures in $ 000's Actual Forecast Budget Var $ Var % Revenues: Public Parking 59,111 51,963 57,377 (5,413) -9.4% Rental Cars 35,592 35,177 35,867 (691) -1.9% Concessions 33,181 30,052 32,821 (2,769) -8.4% Other 22,644 21,787 22,224 (437) -2.0% Total 150,528 138,979 148,289 (9,310) -6.3% Operating Expense 61,279 57,174 60,639 3,465 5.7% Share of terminal O&M 16,396 17,287 18,105 818 4.5% Less utility internal billing (13,515) (16,848) (16,848) - 0.0% Net Operating & Maint 64,160 57,613 61,896 4,283 6.9% Net Operating Income 86,367 81,366 86,393 (5,027) -5.8% 2008 2009 2009 Forecast/Budget Actual Forecast Budget Var $ Var % Revenues / Enplanement Parking Revenue 3.67 3.47 3.63 (0.16) -4.3% Rental Car Revenue 2.21 2.35 2.27 0.08 3.6% Concessions 2.06 2.01 2.08 (0.07) -3.3% Other Revenue 1.41 1.46 1.41 0.05 3.5% Total Revenue 9.36 9.29 9.39 (0.09) -1.0% Primary Concessions Sales / Enpl 10.29 9.75 10.19 (0.44) -4.3% Public parking revenues are forecasted to underperform due to decline in daily transactions by 20% over prior year. Rental car revenues are forecasted to come in lower than budgeted due to weak rental car activity. Concessions revenues are forecasted lower than budgeted due to decline in enplanements. D. CAPITAL SPENDING RESULTS IN THOUSANDS $ Fcst/Budget 2009 2009 2009 Plan of Figures in $ 000's YTD Actual Forecast Budget Var $ Var % Finance R/W 16L/34R Reconstruction 499 70,499 71,000 501 0.7% 82,715 Rental Car Facility 13,060 33,260 37,519 4,259 11.4% 117,200 100% Baggage Screening 5,460 10,960 18,000 7,040 39.1% 21,727 Third Runway Projects 3,657 14,514 17,281 2,767 16.0% 47,027 Other 8,993 87,950 70,943 (17,007) -24.0% 79,533 Total 31,669 217,183 214,743 (2,440) -1.1% 348,202 Reduced budgeted spending by $133M vs. plan of finance budget (38%) for 2009. Suspended construction of Rental Car Facility in December. Forecasting to spend $9.5 million on newly approved project C8000254, Aircraft RON parking. 8 III. SEAPORT DIVISION PERFORMANCE REPORT 3/31/2009 FINANCIAL SUMMARY 2008 2009 2009 Forecast/Budget $'s in 000's Actual Forecast Budget Var $ Var % Operating Revenue 85,453 87,234 90,131 (2,897) -3% Environmental Grants 8,833 850 850 0 0% Security Grants 850 3,955 3,955 0 0% Total Operating Revenues 95,136 92,038 94,935 (2,897) -3% Total Operating Expenses 44,921 48,839 51,928 3,089 6% Net Operating Income 50,215 43,199 43,007 192 0% NOI Excl Envir Grants/Reserve 47,254 45,724 45,532 192 0% Capital Expenditures 88,523 61,899 100,425 38,526 38% NOTE:* NOI Excl Envir Grants/Reserve is Before Depreciation Total Seaport revenues were ($1.0) million unfavorable in the first quarter due to Security Grant Revenue. Security Grant projects are commencing later than assumed in budget. For the full year, Seaport is forecasting a $2.9 million unfavorable revenue variance due to implementation of the Container Customer Support Package, default of tenant at Terminal 104, and 1 month later commencement of the Terminal 30 lease than budgeted. Total Operating Expenses were $6.3 million favorable through the first quarter primarily due to timing and due to lower cost of the Terminal 18 maintenance dredging and Terminal 30 upland dredge disposal projects than budgeted. For the full year, Seaport is forecasting a $3.1 million favorable expense variance due to implementation of the 2009 Expense Savings Plan and the lower cost of the Terminal 18 maintenance dredging and Terminal 30 upland dredge disposal projects. Forecasted Net Operating Income for 2009 is estimated to be approximately equal to the 2009 Budget and ($7.0) million below 2008 Actual. 2008 Actual included $8.8 million in environmental cleanup grants and lower expenses due to fewer one-time expense projects. 2009 expenses include $2.7 million for the Terminal 30 upland dredge disposal project. Total capital spending for 2009 is projected at $61.9 million or 62% of the Approved Annual Budget amount of $100.4 million. The reduction in capital spending is the result of deferring projects. A. BUSINESS EVENTS TEU volumes for Seattle Harbor are down 23.1% in 2009 compared to the same period in 2008. Total 2009 YTD volume is 331K TEU's. 2009 full inbound TEU's are down 28.1%, full outbound TEU's are down 24.2%, empty inbound TEU's are down 22.9%, and empty outbound TEU's are up 8.0%. It was announced that Maersk and CMA-CGM will commence service at Terminal 18 in June. Grain vessels shipped 1,679K metric tons of grain through Terminal 86 YTD in 2009. Amount represents a 3% increase over 2008 YTD. Market expected to remain stable through 2009. Smith Cove cruise facility is on schedule to open for the 2009 cruise season with the first call at the new th terminal to take place on April 24 . Reactivation of Terminal 30 to a container facility is on schedule for completion in May 2009. Transportation Worker Identification Credential (TWIC) guidelines successfully implemented at Terminal 91 on February 28, 2009. In connection with the 2009 Expense Savings Plan, the Seaport Division reduced 2009 Budgeted Operating Expenses by $1.8 million. 9 III. SEAPORT DIVISION PERFORMANCE REPORT 3/31/2009 B. KEY INDICATORS Container Volume TEU's in 000's 1,800 1,600 1,400 TEU's in 000's 1,200 1,000 2009 Actual 800 2009 Budget 2008 Actual 600 400 200 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Grain Volume Metric Tons in 000's 7,000 6,000 5,000 Metric Tons in 000's 4,000 2009 Actual 3,000 2009 Budget 2,000 2008 Actual 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cruise Passengers in 000's 1,000 900 800 700 # of Passengers in 000's 600 2009 Actual 500 400 2009 Budget 300 2008 Actual 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Net Operating Income By Business In $ Thousands 2008 YTD 2009 YTD 2009 YTD 2009 Bud Var Change from 2008 Actual Actual Budget $ % $ % Containers 11,133 9,241 6,334 2,907 46% (1,892) -17% Container Support Props 322 389 387 2 0% 67 21% Cruise (731) (645) (1,623) 978 60% 86 12% Grain 1,284 1,541 1,116 425 38% 256 20% Docks/Industrial Props 1,390 1,502 681 820 120% 111 8% Security (243) (270) (474) 204 43% (27) -11% Envir Grants/Reserve 7,809 12 0 12 NA (7,797) -100% Total Seaport 20,964 11,768 6,421 5,347 83% (9,196) -44% 10 III. SEAPORT DIVISION PERFORMANCE REPORT 3/31/2009 C. OPERATING RESULTS IN THOUSANDS $ In $ Thousands 2008 YTD 2009 Year-to-Date 2009 Bud Var Year-End Projections Actual Actual Budget $ % Budget Forecast Variance Operating Revenue 19,940 21,560 21,436 123 1% 90,131 87,234 (2,897) Environmental Grants 7,809 12 0 12 NA 850 850 0 Security Grants (0) 152 1,267 (1,115) -88% 3,955 3,955 0 Total Revenue 27,750 21,724 22,704 (980) -4% 94,935 92,038 (2,897) Direct Expenses 3,412 6,360 10,625 4,265 40% 27,234 24,797 2,438 Security Expense 185 300 1,616 1,316 81% 5,431 5,365 66 Environmental Reserve 0 0 0 0 NA 3,375 3,375 0 Divisional Allocations 554 548 596 48 8% 2,378 2,275 103 Corporate Allocations 2,634 2,747 3,446 699 20% 13,510 13,027 482 Total Expense 6,785 9,956 16,283 6,327 39% 51,928 48,839 3,089 NOI Before Depreciation 20,964 11,768 6,421 5,347 83% 43,007 43,199 192 Depreciation 6,670 6,749 6,924 175 3% 30,903 31,057 (154) NOI After Depreciation 14,295 5,020 (503) 5,523 -1098% 12,105 12,143 (38) NOI Excl Envir Grants/Reserve* 13,155 11,757 6,421 5,335 83% 45,532 45,724 192 NOTE:* NOI Excl Envir Grants/Reserve is Before Depreciation Total Seaport revenues were ($980K) unfavorable to budget. Key variances Containers and Support Properties unfavorable ($493K). Containers ($478K) unfavorable. Crane Rent Revenue ($61K) unfavorable due to lower crane hours at Terminal 5 than assumed in the budget. Operating Grant Revenue ($398K) unfavorable due to lower reimbursement from King County for Terminal 30 upland disposal of dredge materials because the project cost less than anticipated in the budget. Support Properties ($16K) unfavorable due to lower volumes than budgeted at Terminal 18 liquid bulk facility. Cruise and Industrial Properties favorable $617K. Cruise $101K favorable primarily due to prior year Savings Rent in excess of 2008 year-end accrual. Bulk Terminals $175K favorable. Terminal 86 grain volume exceeded budget by 12%. Docks $225K favorable primarily due to favorable barge activity from preferential use customers and fishing activity from both preferential and non-preferential use customers. Implementation of TWIC related tariff charges and increased License to Use Revenue also contributed to the favorable variance. Industrial Properties $115K favorable largely due to higher than expected Carnitech percentage rent. Security Grants unfavorable ($1,115K) due to Rounds 6 and 7 grant activities commencing later than planned. Amount more than offset by corresponding favorable expense variance. Expenses were $6,327K favorable to budget. Key variances: Security favorable $1,316K primarily due to Round 6 and 7 grant activities commencing later than planned. Amount is partially offset by corresponding unfavorable revenue variance above. Outside Services favorable $3,506K largely due timing except for the lower than budgeted cost of the Terminal 18 maintenance dredge project ($873K) and the Terminal 30 upland dredge disposal project ($948K), and certain project items that were eliminated or reduced in the 2009 Expense Savings Plan. Miscellaneous Expense favorable $600K due to timing of recognition of expense components of T30/T91 project $525K. Balance of variance reflects Seaport Expense Contingency which is $75K favorable also due to timing. Maintenance favorable $100K due to lower cost of or deferral of project work as well as lower overhead allocations. Corporate and Capital Development costs, direct and allocated, favorable $422K due to timing. All other variances netted to a favorable $458K or about 1% of total expenses budgeted. NOI Before Depreciation was $5,347K favorable to budget. Depreciation was $175K favorable or 3% of the budget. NOI After Depreciation was $5,523K favorable to budget. 11 III. SEAPORT DIVISION PERFORMANCE REPORT 3/31/2009 FORECAST st As of 1 quarter, Seaport anticipates ending the year $192K above budget for NOI Before Depreciation assuming that the year-end environmental reserve is consistent with the 2009 budgeted level. Revenue is expected to fall below budget due to implementation of Container Customer Support Package, default of tenant at Terminal 104, and 1 month later commencement of the Terminal 30 container facility lease than budgeted. Operating expenses are estimated to be favorable by $3,089K due to implementation of the 2009 Expense Savings Plan $2,591K and lower than expected cost of the Terminal 18 maintenance dredging and Terminal 30 upland dredge disposal projects. CHANGE FROM 2008 ACTUAL NOI Before Depreciation decreased by ($9,196K) from 2008 with the lion's share of the decrease being the $7,809K in retroactive Environmental Grant revenue received in 2008. The balance of the decrease in NOI reflects higher expenses in 2009 stemming from the Terminal 18 maintenance dredging and Terminal 30 upland dredge disposal projects. D. CAPITAL SPENDING RESULTS---IN THOUSANDS $ 2009 2009 Variance Estimated Approved EstActs to EstActs as a 2009 Plan SEAPORT DIVISION Actual Budget Budget % of Budget of Finance Container Support Yard 0 28,900 28,900 0% 28,900 Terminal 10 702 4,091 3,389 17% 4,000 Terminal 30/91 Program 32,811 35,774 2,963 92% 46,445 Green Port Initiative 250 2,800 2,550 9% 2,800 Security 7,126 7,871 745 91% 4,563 All Other 21,010 20,989 (21) 100% 39,977 Total Seaport 61,899 100,425 38,526 62% 126,685 Comments on Key Projects: Through first quarter, Seaport spent 19% of the approved budget. Full year spending is estimated to be 62% of the Approved Budget. Projects with significant changes in spending were: Terminal 30/91 Program Project is on schedule and on budget. Certain of the costs for the project do not qualify for capitalization and are included in Operating Expenses or Environmental Reserve rather than in Capital Spending. Container Support Yard Acquisition of land for a container support yard has been delayed due to economic conditions. Green Port Initiative After performing a financial evaluation, plans to develop Port owned decant stations have been put on an indefinite hold. Terminal 10 Modification of project scope has pushed out the timing of the project. Changes between the 2009 Plan of Finance and the 2009 Approved Budget represent modifications in 2009 spending estimates made after determination of 2008 actual spending. 12 IV. REAL ESTATE DIVISION PERFORMANCE REPORT 3/31/2009 FINANCIAL SUMMARY 2008 2009 2009 Forecast/Budget In $ Thousands Actual Forecast Budget Var $ Var % Operating Revenue 34,875 30,705 30,961 (256) -1% Environmental Grants 1 150 150 0 0% Total Operating Revenue 34,877 30,855 31,111 (256) -1% Total Operating Expense 38,819 33,396 35,391 1,994 6% NOI Before Depreciation (3,943) (2,541) (4,279) 1,738 41% NOI Excl Envir Grants/Reserve (3,340) (1,566) (3,304) 1,738 53% Capital Expenditures 21,196 104,088 105,165 1,077 1% Total Real Estate Division revenues were ($0.4) million unfavorable in the first quarter primarily due to lower than budgeted activity at Bell Harbor International Conference Center, World Trade Center Club and the Bell Street Garage. For the full year, Real Estate is forecasting a ($0.3) million unfavorable revenue variance due to lower occupancies at Shilshole Bay Marina and the termination of 3 tenants at other sites. Total Operating Expenses were $1.8 million favorable through the first quarter primarily due to timing. For the full year, Real Estate is forecasting a $2.0 million favorable expense variance due to implementation of the 2009 Expense Savings Plan. Forecasted Net Operating Income for 2009 is estimated to be approximately $1.7 million favorable to the 2009 Budget and $1.4 million above 2008 Actual. 2008 Actuals included the write-off of costs associated with the North Bay project which were partially offset by higher activity at Bell Harbor International Conference Center and higher occupancies for leased properties. Total capital spending for 2009 is projected at $104.1 million or 99% of the Approved Annual Budget amount of $104.8 million. The most significant project in 2009 is the Eastside Rail Corridor. A. BUSINESS EVENTS The Port entered into a lease agreement with Columbia Hospitality, Inc. (CHI) for the former Odyssey space, now called the Maritime Event Center. A subsequent sublease agreement was executed th between the Port and CHI allowing for a 4 amendment to the Management Agreement at the Bell Harbor International Conference Center to be executed. The result is the addition of the Maritime Event Center to the Bell Harbor International Conference Center as an event center to be managed by CHI. Occupancy levels at Commercial Properties were at 95% at quarter-end, which is at target for the 2009 Budget and above comparable statistics for the local market. st Through the 1 quarter, moorage occupancies at Fishermen's Terminal and the Maritime Industrial Center exceeded 2009 Budget Targets. Shilshole Bay Marina, Harbor Island Marina and Bell Harbor Marina all came in slightly below 2009 Budget Targets. Joint session convened with the City of Burien and Port senior staff to review draft redevelopment strategy for the Northwest Redevelopment Area. In connection with the 2009 Expense Savings Plan, the Real Estate Division reduced 2009 Budgeted Operating Expenses by $1.4 million, including $0.6 million in Real Estate specific expense projects budgeted in Capital Development. 13 IV. REAL ESTATE DIVISION PERFORMANCE REPORT 3/31/2009 B. KEY INDICATORS Shilshole Bay Marina Occupancy 120.0% 100.0% Percent Linear Footage Occupied 80.0% 2009 Actual 60.0% 2009 Budget 40.0% 2008 Actual 20.0% 0.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fishermen's Terminal Moorage Occupancy 120.0% 100.0% Percent Linear Footage Occupied 80.0% 2009 Actual 60.0% 2009 Budget 40.0% 2008 Actual 20.0% 0.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Commercial Building 110% 100% 98% 98% 97% 97% Percent Occupied 95% 95% 95% 95% 95% 90% 2009 Actual 80% 2009 Target 2008 Actual 70% 60% Qtr 1 Qtr 2 Qtr 3 Qtr 4 Net Operating Income By Business In $ Thousands 2008 YTD 2009 YTD 2009 YTD 2009 Bud Var Change from 2008 Actual Actual Budget $ % $ % Recreational Boating 410 497 270 227 84% 87 21% Fishing & Commercial (204) (346) (609) 263 43% (143) -70% Commercial & Third Party 817 (2) (591) 588 100% (820) -100% Eastside Rail 0 (27) (154) 126 82% (27) NA RE Development & Plan 17 59 (67) 126 188% 42 242% Total Real Estate 1,041 180 (1,150) 1,330 116% (861) -83% 14 IV. REAL ESTATE DIVISION PERFORMANCE REPORT 3/31/2009 C. OPERATING RESULTS IN THOUSANDS $ 2008 YTD 2009 Year-to-Date 2009 Bud Var Year-End Projections In $ Thousands Actual Actual Budget $ % Budget Forecast Variance Operating Revenue 8,270 6,980 7,425 (444) -6% 30,961 30,705 (256) Environmental Grants 0 0 0 0 NA 150 150 0 Total Revenue 8,270 6,980 7,425 (444) -6% 31,111 30,855 (256) Direct Expenses 6,978 6,433 7,946 1,513 19% 31,821 30,539 1,282 Environmental Reserve 0 0 0 0 NA 1,125 1,125 0 Divisional Allocations (778) (791) (880) (89) -10% (3,515) (3,399) (116) Corporate Allocations 1,029 1,158 1,509 351 23% 5,960 5,131 829 Total Expense 7,230 6,800 8,575 1,775 21% 35,391 33,396 1,994 NOI Before Depreciation 1,041 180 (1,150) 1,330 116% (4,279) (2,541) 1,738 Depreciation 2,529 2,469 2,632 163 6% 10,528 10,501 (27) NOI After Depreciation (1,488) (2,289) (3,782) 1,494 39% (14,807) (13,042) 1,765 NOI Excl Envir Grants/Reserve* 1,041 180 (1,150) 1,330 116% (3,304) (1,566) 1,738 NOTE:* NOI Excl Envir Grants/Reserve is Before Depreciation REVENUES: UNFAVORABLE ($444K) Harbor Services: Unfavorable ($33K) Recreational Boating Unfavorable ($27K) primarily due to slightly higher than budgeted vacancy at SBM. Fishing and Commercial was unfavorable ($6K) due to higher demand for inner harbor slips by working boats which limited the space available for recreational vessels. Portfolio Management Unfavorable ($503K) Commercial Properties Favorable $9K primarily due to higher occupancy at T-102 than budgeted. Amount was partially offset by incorrect posting of lease payments for Tsubota site to RE Development and Planning. Third Party Managed Properties Unfavorable ($512K) due to lower than anticipated activity at Bell Harbor International Conference Center, World Trade Center Club, and the Bell Street Garage. RE Development and Planning: Favorable $95K Terminal 91 General Industrial Favorable $95K due to tenants budgeted in Portfolio Management but lease payments posted to Development and Planning. In addition, a month to month tenant that was assumed to vacate has continued to lease. EXPENSES: FAVORABLE $1,775K. KEY VARIANCES: Third Party Management Expense favorable $377K primarily due to lower activity than budgeted at Bell Harbor International Conference Center and the World Trade Center Club. Outside Services (excluding Maintenance, Corporate and Capital Development) favorable $527K primarily due to timing including charges from Environmental Services, broker fees and tenant improvement expenses budgeted for the World Trade Center West Building and Personal & Professional Services related to the Eastside Rail Corridor. Maintenance expenses favorable $205K primarily due to timing and the deferral of some work in connection with the 2009 Expense Saving Plan. Corporate and Capital Development costs direct and allocated favorable $677K primarily due to timing and the cancellation/deferral of projects in connection with the 2009 Expense Savings Plan. All other variances netted to a favorable $11K or less than 1% of Total Expenses Budgeted. NOI BEFORE DEPRECIATION was $1,330K favorable to Budget. Depreciation was $163K favorable due to overstatement of Harbor Service's Depreciation in the Budget. NOI AFTER DEPRECIATION was $1,494K favorable to Budget. 15 IV. REAL ESTATE DIVISION PERFORMANCE REPORT 3/31/2009 FORECAST st As of 1 Quarter, Real Estate anticipates ending the year $1,738K above Budget for NOI Before Depreciation assuming that the year-end environmental reserve adjustments are consistent with budget. Revenue is expected to come in below Budget by ($256K) primarily due to lower occupancies at Shilshole Bay Marina and the termination of 3 tenants at other sites. Operating expenses are estimated to be favorable by $1,994K due to implementation of the 2009 Expense Savings Plan. NOI After Depreciation is currently estimated to end the year $1,765K favorable to budget. Excluding Environmental Grants and Reserve, NOI Before Depreciation is expected to come in at $1,738K favorable to Budget. CHANGE FROM 2008 ACTUAL st st Net Operating Income decreased by $861K between 1 Quarter 2008 and 1 Quarter 2009. Revenue decreased by $1,290K due to lower activity at Bell Harbor International Conference Center and the Bell Street Garage, partially offset by higher revenues at Shilshole Bay Marina due to construction completion. Expenses decreased by $430K in 2009 primarily due to less activity at Bell Harbor International Conference Center, partially offset by higher expenses at Shilshole Bay Marina related to higher occupancy. D. CAPITAL SPENDING RESULTS---IN THOUSANDS $ 2009 2009 Variance Estimated Approved EstActs to EstActs as a 2009 Plan of REAL ESTATE DIVISION Actual Budget Budget % of Budget Finance Eastside Rail Corridor 96,297 96,302 5 100% 0 Small Projects 2,153 1,753 (400) 123% 1,665 RE Division Green Initiative 500 1,000 500 50% 1,000 Pier 69 North Apron Piling Cathodic 300 1,000 700 30% 1,060 MIC Seawall Replacement 234 649 415 36% 800 All Other 4,604 4,461 (143) 103% 4,809 Total Real Estate 104,088 105,165 1,077 99% 9,334 Comments on Key Projects: Through first quarter, the Real Estate Division spent less than 1% of the approved budget. Full year spending is estimated to be 99% of the Approved Budget. Projects with significant changes in spending were: Eastside Rail Corridor Sale is expected to close in 2009. Small Projects Workload issues due to insufficient staffing have pushed the start of some projects into later in the year and completion into 2010. Green Port Initiative Part of the construction of a stormwater improvement project will take place in 2010. Pier 69 North Apron Piling Cathodic System Later start of project than expected. Work will take place over 2009 and 2010. MIC Seawall Replacement In-water construction start is delayed to 2010. Changes between the 2009 Plan of Finance and the 2009 Approved Budget represent modifications in 2009 spending estimates made after determination of 2008 actual spending. 16 V. CAPITAL DEVELOPMENT DIVISION PERFORMANCE REPORT A. BUSINESS EVENTS The 2008 PCS Annual Report was published and the information was provided to the Commissioners and the Senior Executive Team. Hiring freeze has resulted in the use of more consultant time in lieu of more cost effective FTEs. This also has negatively impacted the overhead ratio. Unemployment due to termination in 2008 that were not anticipated/not budgeted. This variance is expected to continue through year-end. Port issued new procedure for personal and professional services, CPO-1. As part of implementation, CPO conducted 9 all-day training sessions for CPO-1. At the end of May, 2009, 13 training sessions will be completed with over 350 attendees. Project Labor Agreement Administration was turned over to the Port's Labor Relations group from the consultant team. Rental Car Facility Project continued with site-button up and continued analysis of work shutdown, funding options and cash flows. B. KEY INDICATORS Construction Soft Costs: 18.9% of total project costs for period 2005-2008 inclusive. Goal: no more than 25% of total project costs. Cost Growth during Construction: 10 projects closed in 2008 had average of 6.3% total cost growth. Goal: no more than 4% discretionary and no more than 4% non-discretionary. Schedule: Projects on or ahead of schedule 31, Projects delayed 41. Goal: no more than 10% average time growth. Small Business Participation: Not available Goal: 30% of PCS, 8% of major construction Customer Score Card: Not available Goal: average 30 out of possible 35 points. Environmental: Not available Goal: Incorporate EX-15 or LEED in every project initiated in 2009. Safety: Not available Goal: Score 90 out of 100 on organizational Safety Evaluations; limit annual contractor workplace injury rate to 6 accidents and 2 time-lost accidents. Performance Review Timeliness: 79.3% Goal: 98% of PREPs within 4 weeks of review date. 17 V. CAPITAL DEVELOPMENT DIVISION PERFORMANCE REPORT C. OPERATING RESULTS IN THOUSANDS $ 2008 YTD 2009 YTD 2009 Bud Var. Year-End Projections In $ Thousands Actual Actual Budget $ % Budget Forecast Var. Capital Development Admin - 82 140 58 41.1% 554 339 215 Engineering 284 229 274 45 16.5% 1,351 1,295 56 Port Construction Services 363 252 335 82 24.6% 1,449 1,431 18 Central Procurement Office 22 671 376 (295) -78.4% 1,494 1,591 (97) Aviation PMG 177 135 191 56 29.3% 761 707 54 Seaport PMG 316 175 344 169 49.1% 1,400 780 620 Total Expenses 1,161 1,544 1,659 115 6.9% 7,010 6,144 866 CDD 2009 budgeted total cost before capital charges and transfers is some $35 million, while these figures represent the net expense left over after allocations to capital. The combination of delayed programmed hires, furloughs and cuts to travel and other employee expenses puts the forecast CDD execution well within the revised budget target, notwithstanding some errors noted below. The CPO's $295K negative budget variance in the first quarter: o $293K of T-18 project capital cost misapplied to CPO expense from Seaport. Will be reversed in Q2. o $45K CPO personnel cost budgeted in the wrong organization. o $8K of supplies cost misapplied to CPO. Will be reversed in Q2. The CPO's $97K budget variance in year-end projection is due to same personnel cost budgeting change as above. Variance will continue to show. The two PMGs forecast year-end results below their budgets. Seaport PMG continues to have one unfilled but budgeted staff position. Aviation PMG has seen less expense work than anticipated and is therefore billing more to capital. D. CAPITAL SPENDING RESULTS IN THOUSANDS $ Not applicable. The Capital Development Division (CDD) delivers projects and provides technical and contracting services in support of the business plans and infrastructure needs of the Port's operating divisions. As such, the CDD does not have its own capital improvement program. 18 VI. CORPORATE PROF. & TECHNICAL SERVICES PERFORMANCE REPORT 3/31/09 A. BUSINESS EVENTS Completed the budget reductions adjustment for a total of $16.5 million in the budget system: two week furloughs, reduced spending in travel, and other accounts all of which contributed towards the $16.5 million in budget reductions. Completed Commission review of four citizen panel recommendations and adoption of guiding principles and initiate broader strategic planning process. POS Women's Initiative "Women to Women Wisdom Summit:" held on March 31, 2009 with more than 90 attendees. Completed several important ICT projects, including Intranet Redesign, Aviation Dashboard, and Geographic Information Systems (GIS) Data Collection. Viaduct/Seawall Replacement Project: announcement of decision to pursue Bored Tunnel Hybrid and potential Port participation as funding partner. Joint Port Commission strategies: Commissioner Presidents' meeting to recommend transportation infrastructure priorities for road & rail projects/policies. The Police Department has applied for stimulus funded grants to help address the funding challenges being faced by the department. B. KEY INDICATORS Using McKay report recommendations, developing a code of conduct and ethics compliance program and improving policies, procedures and training related to ethics and personnel conduct. Occupational injury rate decreased from 6.65 in the first quarter of 2008 to 5.20 in the first quarter of 2009. Our lost work day case rate decreased from 2.22 in the first quarter of 2008 to 1.53 in the first quarter of 2009. 1,599 employees have completed the Workplace Responsibility policy review curriculum. Our recycling efforts were touted in a number of local, national, and international publications and aired on a number TV and radio programs. Stimulus transportation funding distribution supports projects with freight and passenger benefits for Port; will pursue additional opportunities. Government Relations supported the Seaport and Airport divisions representing their interests before city, county and regional governments. Among the accomplishments: With the Port's support, the Seattle City Council approved legislation aimed at limiting non-industrial development in areas near Port cargo facilities, Port needs are addressed in work plan for Seattle transportation planning; the Port and King County are involved in study of cruise-ship waste disposal with the opening of the new cruise terminal. Police Department Indicators: January March Calls for Service 15,459 January March Arrests No Warrant 233 January March Arrests Warrant 153 Completed and presented the following audits to the Audit Committee: o Central Procurement o Host & Seattle Restaurant o Bell Harbor Conference Center o Cruise Terminals of America 19 VI. CORPORATE PROF. & TECHNICAL SERVICES PERFORMANCE REPORT 3/31/09 C. OPERATING RESULTS IN THOUSANDS $ 2008 YTD 2009 YTD 2009 Bud Var. Year-End Projections In $ Thousands Actual Actual Budget $ % Budget Forecast Var. Total Revenues 18 125 341 (216) -63.2% 1,470 1,470 - Executive 445 361 436 75 17.1% 1,540 1,449 92 Commission 236 209 280 71 25.3% 867 844 22 Legal 339 330 706 376 53.3% 2,703 2,638 66 Risk Services 706 627 718 91 12.6% 2,861 2,838 24 Health & Safety Services 264 219 254 35 13.7% 985 947 38 Public Affairs 747 850 1,118 267 23.9% 4,270 3,565 705 External Affairs 267 320 342 22 6.3% 1,347 1,249 98 Economic & Trade Development 234 283 509 226 44.4% 2,099 1,638 461 HR&D 935 864 1,065 201 18.9% 4,165 3,926 238 Labor Relations 141 160 181 21 11.5% 731 689 43 ICT 2,253 3,854 4,800 946 19.7% 19,658 18,404 1,253 Finance & Budget 395 376 415 39 9.5% 1,719 1,645 74 Accounting & Reporting Services 1,560 1,388 1,787 398 22.3% 6,541 6,253 288 Internal Audit 160 225 301 76 25.1% 1,211 1,136 75 Office of Social Responsibility 153 278 375 97 25.8% 1,647 1,401 246 Regional Transportation 84 98 126 28 22.3% 498 461 37 Police 4,505 3,927 5,219 1,292 24.8% 19,979 18,379 1,599 Contingency 258 13 188 174 93.0% 750 750 - Total Expenses 13,683 14,384 18,818 4,434 23.6% 73,572 68,212 5,359 Corporate Professional and Technical Services performance for the first three months of 2009 was $4.4 million or 23.6% favorable compared to the approved budget and $701 thousand or 5.1% higher than the same period a year ago. The $4.4 million favorable variance is due primarily to timing of the spending and implementation of the 2009 Expense Savings Plan. There aren't any major variances to report on since all departments are favorable. Year-end spending is projected to be $68.2 million. D. CAPITAL SPENDING RESULTS IN THOUSANDS $ ($ Milllions) Annual Results: 2009 Plan of Finance $ 12.8 2009 Approved Budget $ 15.9 2009 Estimeated/Actuals $ 15.7 Variance (Approved Budget vs Estimated/Actuals 0.1 20
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