11c. Attachment 2020 Financial Performance Briefing
Item No. 11c_attach Meeting Date: March 9, 2021 PORT OF SEATTLE 2020 FINANCIAL PERFORMANCE REPORT AS OF DECEMBER 31, 2020 2020 FINANCIAL & PERFORMANCE REPORT 12/31/20 TABLE OF CONTENTS PAGE I. Portwide Performance Report 3-7 II. Aviation Division Report 8-13 III. Maritime Division Report 14-18 IV. Economic Development Division Report 19-22 V. Central Services Division Report 23-27 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/20 I. PORTWIDE EXECUTIVE SUMMARY The COVID-19 pandemic caused disruptions across the nation and the Port. At the airport, there was a decline of 61% in passenger activity compared to 2019. The 2020 Alaska cruise season was cancelled. Operating revenues were lower than 2020 budget across the board, except Employee Parking, Fishing and Operations, and Grain. The Port reacted proactively and responsibly by cutting $30M in operating expenses through hiring freeze and other cost saving measures, in addition to deferring about $40M in capital spending. In order to reduce operating expenses to preserve cash in the short term, the Port is taking a strategic long-term view of capital and other community investments. Capital projects have been reviewed and re-prioritized while some have been accelerated (i.e. North Satellite, Baggage Optimization, T117 Restoration). As a result, the 2020 capital spending exceeded the revised budget by $4.5M for the first time in many years. To support the community through these challenging times, the Port Commission approved the addition of $1.5M for Tourism Recovery Initiative and $1.5M to support Youth Opportunity Initiative that provided nearly 200 jobs to youth in underserved communities. The Port received $192M in CARES Act funding; $147M was used for Airport debt service and operating costs in 2020 and the remaining $45M would be retained for 2021. The Port also secured a $150M letter of credit to ensure adequate cash to meet business needs in early 2020. Additionally, the Port is applying for FEMA Reimbursement for all eligible costs related to COVID-19 response. Finally, the 2020 financial performance was enhanced by an expense offset of $17.2M state pension credit. PORTWIDE FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Approve d Budget Variance $ in 000's Actual Actual Actual Budge t Budge t $ % $ % Aeronautical Revenues 291,268 357,598 297,909 401,342 401,342 (103,433) -25.8% (59,689) -16.7% Airport Non-Aero Revenues 257,707 269,037 116,473 135,074 283,167 (18,601) -13.8% (152,564) -56.7% Non-Airport Revenues 140,415 137,538 96,446 103,302 127,106 (6,856) -6.6% (41,093) -29.9% Total Operating Revenues 689,390 764,174 510,828 639,717 811,616 (128,890) -20.1% (253,346) -33.2% Total Operating Expenses 397,638 443,089 411,954 438,081 469,769 26,127 6.0% (31,136) -7.0% NOI before Depreciation 291,752 321,085 98,874 201,637 341,847 (102,763) -51.0% (222,211) -69.2% Depreciation 164,362 174,971 179,807 179,056 179,056 (751) -0.4% 4,836 2.8% NOI after Depreciation 127,390 146,114 (80,933) 22,581 162,791 (103,514) -458.4% (227,047) -155.4% 2020 Actuals vs. 2020 Revised Budget: Total Operating Revenues were $128.9M lower than the revised budget due to reduced operations and lower airline passenger traffic. To mitigate the financial impacts of COVID-19, the Port instituted Portwide cost reduction measures which included cutting initiatives and discretionary spending and implementing a hiring freeze. The combination of delay in project/initiative spending, DRS Pension Plan True-ups, and cost savings resulted in a lower total operating expense of $26.1M compared to the revised budget. 2020 Actuals vs. 2019 Actuals: Compared to 2019, the Port's Total Operating Revenues for 2020 were down $253.3M primarily due to lower revenues in Public Parking, ADR & Terminal Leased Space, Ground Transportation, Rental Cars, Airport Clubs and Lounges, Cruise, Conference & Event Centers, and NWSA Distributable Revenues. Total operating expenses for 2020 was $31.1M lower due to cost reduction measures implemented in response to the COVID-19 pandemic. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/20 NON-AIRPORT FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Approve d Budget Variance $ in 000's Actual Actual Actual Budge t Budge t $ % $ % NWSA Distributable Revenue 55,992 47,979 38,782 41,935 41,935 (3,153) -7.5% (9,197) -19.2% Maritime Revenues 57,575 59,289 42,111 42,585 62,938 (474) -1.1% (17,178) -29.0% EDD Revenues 20,705 21,151 9,470 15,658 19,110 (6,188) -39.5% (11,681) -55.2% SWU & Other 6,143 9,119 6,083 3,123 3,123 2,960 94.8% (3,036) -33.3% Total Operating Revenues 140,415 137,538 96,446 103,302 127,106 (6,856) -6.6% (41,093) -29.9% Total Operating Expenses 78,789 86,455 82,274 89,254 92,463 6,981 7.8% (4,181) -4.8% NOI before Depreciation 61,626 51,084 14,172 14,047 34,643 125 0.9% (36,912) -72.3% Depreciation 40,159 38,737 37,674 37,062 37,095 (613) -1.7% (1,063) -2.7% NOI after Depreciation 21,467 12,347 (23,502) (23,014) (2,451) (488) 2.1% (35,849) -290.4% 2020 Actuals vs. 2020 Revised Budget: Non-Airport Operating Revenues were below the revised budget by $6.9M mainly due to lower revenues from Cruise, Conference & Event Centers, and NWSA Distributable Income; partially offset by unbudgeted Forfeitures Revenue from Police. Total operating expenses were $7.0M lower than the revised budget because of pension adjustment, program spending delays, and COVID-19 cost reduction measures. 2020 Actuals vs. 2019 Actuals: Non-Airport Operating Revenues were $41.1M less compared to 2019 due to cancellation of the cruise season, lower Conference and Event Center revenue, and NWSA Distributable revenue. The decline in NWSA Distributable Revenue was driven by lower container volumes as a result of tariff issues and COVID-19 disruptions. Total operating expenses were $4.2M lower than 2019 because of delays in implementing programs, and COVID-19 cost reduction initiatives. MAJOR OPERATING REVENUES SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Approve d Budget Variance $ in 000's Actual Actual Actual Budge t Budge t $ % $ % Aeronautical Revenues 291,268 357,598 297,909 401,342 401,342 (103,433) -25.8% (59,689) -16.7% - - - - Public Parking 80,212 82,125 34,502 40,813 89,485 (6,311) -15.5% (47,623) -58.0% Rental Cars - Operations 37,306 36,793 16,637 19,209 37,363 (2,572) -13.4% (20,157) -54.8% Rental Cars - Operating CFC 16,263 15,773 - - 13,786 - 0.0% (15,773) -100.0% ADR & Terminal Leased Space 64,323 68,013 31,234 32,905 71,845 (1,670) -5.1% (36,778) -54.1% Ground Transportation 18,772 20,765 6,557 11,092 22,299 (4,535) -40.9% (14,208) -68.4% Employee Parking 10,269 10,438 8,848 5,100 10,137 3,748 73.5% (1,590) -15.2% Airport Commercial Properties 15,434 15,773 10,766 11,854 16,660 (1,089) -9.2% (5,007) -31.7% Airport Utilities 7,206 7,431 5,672 8,831 8,831 (3,159) -35.8% (1,759) -23.7% Clubs and Lounges 6,802 10,274 2,043 4,441 10,536 (2,398) -54.0% (8,230) -80.1% Cruise 18,880 22,410 3,824 5,909 26,261 (2,085) -35.3% (18,586) -82.9% Recreational Boating 12,035 12,484 12,611 13,361 13,361 (750) -5.6% 127 1.0% Fishing & Operations 10,257 10,024 10,456 9,386 9,386 1,069 11.4% 432 4.3% Gra in 5,167 4,266 5,142 3,490 3,490 1,652 47.3% 876 20.5% Maritime Portfolio Management 11,305 10,108 10,074 10,428 10,428 (355) -3.4% (34) -0.3% Central Harbor Management 9,018 8,899 7,791 8,793 9,093 (1,001) -11.4% (1,108) -12.4% Conference & Event Centers 11,703 12,239 1,662 6,833 9,985 (5,171) -75.7% (10,577) -86.4% NWSA Distributable Revenue 55,992 47,979 38,782 41,935 41,935 (3,153) -7.5% (9,197) -19.2% Other 7,177 10,783 6,318 3,995 5,390 2,323 58.2% (4,466) -41.4% Total Operating Revenues (w/o Aero) 398,122 406,576 212,919 238,375 410,274 (25,457) -10.7% (193,657) -47.6% TOTAL 689,390 764,174 510,828 639,717 811,616 (128,890) -20.1% (253,346) -33.2% 4 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/20 MAJOR OPERATING EXPENSES SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Approve d Budget Variance $ in 000's Actual Actual Actual Budge t Budge t $ % $ % Salaries & Benefits 127,056 137,052 147,623 148,368 152,358 744 0.5% 10,572 7.7% Wages & Benefits 108,379 119,942 119,831 134,877 134,819 15,047 11.2% (112) -0.1% Payroll to Capital Projects 28,329 27,844 29,759 34,529 37,330 4,770 13.8% 1,915 6.9% Outside Services 99,673 107,188 103,637 114,501 126,169 10,864 9.5% (3,551) -3.3% Utilitie s 25,552 25,838 22,017 28,491 29,036 6,473 22.7% (3,821) -14.8% Equipment Expense 10,621 11,869 10,331 7,944 9,970 (2,387) -30.1% (1,537) -13.0% Supplies & Stock 10,780 11,200 9,894 9,990 9,082 95 1.0% (1,306) -11.7% Travel & Other Employee Expenses 4,837 5,461 2,764 3,752 7,029 988 26.3% (2,697) -49.4% Third Party Mgmt Op Exp 11,660 13,329 5,201 8,494 12,699 3,293 38.8% (8,128) -61.0% B&O Taxes 4,488 4,859 3,332 3,949 5,007 616 15.6% (1,527) -31.4% Other Expenses 19,391 33,154 15,078 11,959 17,105 (3,119) -26.1% (18,076) -54.5% Charges to Capital Projects/Overhead Alloc (53,130) (54,647) (57,515) (68,772) (70,835) (11,257) 16.4% (2,867) 5.2% TOTAL 397,638 443,089 411,954 438,081 469,769 26,127 6.0% (31,136) -7.0% TOTAL OPERATING AND NON-OPERATING REVENUES AND EXPENSES Fav (UnFav) 2018 2019 2020 2020 2020 Act/Rvsd Bud Var ($ in 000's) Actual Actual Actual Rvsd Bud Appr. Bud $ % Revenues 1. Operating Revenues 689,390 764,174 510,828 639,717 811,616 (128,890) -20.1% 2. Tax Levy 71,771 73,801 76,196 76,385 76,385 (189) -0.2% 3. PFCs 94,070 100,004 34,637 99,505 99,505 (64,868) -65.2% 4. CFCs 21,802 22,355 15,429 17,630 23,914 (2,201) -12.5% 5. Fuel Hydrant 6,942 6,742 6,886 7,022 7,022 (136) -1.9% 6. Non-Capital Grants & Donations 1,573 2,880 150,143 2,551 2,551 147,592 5785.7% 7. Capital Contributions 43,650 17,736 20,909 48,010 48,010 (27,101) -56.4% 8. Interest Income 26,287 54,078 41,406 27,669 27,669 13,737 49.6% Total 955,484 1,041,771 856,433 918,490 1,096,672 (62,057) -6.8% Expenses 1. O&M Expense 397,638 443,089 411,954 438,081 469,769 26,127 6.0% 2. Depreciation 164,362 174,971 179,807 179,056 179,056 (751) -0.4% 3. Revenue Bond Interest Expense 100,432 105,601 133,149 157,231 157,231 24,082 15.3% 4. GO Bond Interest Expense 13,414 12,493 11,850 12,003 12,003 153 1.3% 5. PFC Bond Interest Expense 4,368 3,547 2,670 2,740 2,740 70 2.6% 6. Public Expense 5,269 12,986 6,658 19,233 19,233 12,575 65.4% 7. Non-Op Environmental Expense 10,600 118 5,971 5,000 5,000 (971) -19.4% 8. Other Non-Op Rev/Expense 3,217 21,959 22,033 2,905 2,905 (19,128) -658.4% Total 699,299 774,765 774,091 816,249 847,937 42,158 5.2% Special Item 34,923 - - - - - 0.0% Retro Adjustment to Net Position 2,721 - - - - - 0.0% Change In Net Assets 218,541 267,007 82,342 102,241 248,735 (19,899) -19.5% Major Non-Op Budget Variance Explanations: Passenger Facility Charges (PFCs): $64.9M lower due to less enplanement than budgeted. Non-Capital Grants & Donations: Due to $147M unbudgeted CARES grant for 2020. Capital Contributions: $27.1M lower due to less TSA OTA and FAA grants. Interest Income: Primarily due to unrealized gain on investments. Revenue Bond Interest Expense: $24.1M favorable mainly due to lower interest rates than budgeted. Public Expense: $12.6M lower due to less spending on Safe & Swift and Heavy Haul. Other Non-Op Expense: Mainly due to assets retirements. Special Item Expense: $34.9M higher than budget due to T25 NRD restoration project. 5 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/20 KEY BUSINESS EVENTS The Port received the 2020 Environmental Stewardship Award from the Washington Public Ports Association for its effort on reducing the adverse effects of underwater noise to Southern Resident Orcas and other whale species. Through this Quiet Sound program, small and large vessel operators can receive information of whale sightings so they can take necessary steps to reduce vessel noise or chart a different course. The Port became the first airport in the country to purchase thermal renewable natural gas (RNG) produced from a landfill to heat the airport terminal. The transition to RNG allows the Port to reduce carbon emissions by 50 percent in 2021, a goal that was initially targeted for 2030. In addition, the Port, in collaboration with Washington State University, released a key finding that there is enough available forest residuals and municipal solid waste to produce up to 220-290 million gallons of sustainable aviation fuel (SAF) annually in the Pacific Northwest. This will allow the Port to exceed the goal to offer a 10 percent SAF jet fuel blend at Seattle-Tacoma International Airport (SEA) by 2028. The Port completed the Northwest Ports Clean Air Strategy to address greenhouse gas (GHG) and air quality and broke ground on construction at Terminal 117 to create a 13-acre habitat restoration and public access site. The Port also implemented the new Sustainable Evaluation Framework to assess environmental features as part of capital project delivery. The Port also became the first port in the US to join the International Ocean Acidification Alliance. The Port provided relief to both the Non-Aero tenants at the Airport and waterfront tenants impacted by pandemic. To promote safety and protect the health of the public, the Port partnered with Discovery Health MD to launch the COVID-19 Testing Pilot program for travelers at SEA. In addition, SEA celebrated the one-year anniversary of the Sunflower Lanyard program. This program helps the airport meet its goal of improving overall airport experience for travelers with hidden disabilities. To help jumpstart an equitable economic recovery, the Port expanded the focus of the South King County fund adding economic development to mitigate the impacts of COVID-19 for the communities disproportionately impacted by the pandemic. The Commission recently authorized the disbursement of economic recovery grants to ten nonprofit organizations in South King County. This marks the first funding cycle through this fund and will support projects centered on education and job search assistance, skills-based learning, pre-apprenticeship programs as well as habitat restoration and green jobs programs at Port habitat sites. The Port advanced design work on T91 Uplands and Fishermen's Terminal buildings and formalized funding partnership with WA Department of Commerce to support Maritime Innovation Center development. The Port once again partnered with Washington Maritime Blue to launch the second cohort of the Maritime Blue Innovation Accelerator. This is a four-month long program that provides access to a global network of mentors, advisors from the maritime industry and ocean economy leaders as well as provide opportunities to secure funding. The first cohort comprised of eleven startups that completed the program earlier this year. They pitched their innovative ideas and solutions to maritime stakeholders and investors during a virtual demo day. The Commission approved to rename six Port-owned parks and shoreline habitat areas along the Duwamish River after a series of outreach. The Port received over 4,000 public comments recommending the inclusion of indigenous place names and Lushootseed words for local wildlife and natural features. The Commission also approved the Equity Motion to Combat Racial Bias in the workplace and operations. This motion directs the organization to examine practices and policies for sources of racial bias and discrimination as well as advance directives that eradicate inequity in all levels of the organization. Moreover, the Port implemented the Gender Identity Policy to ensure equitable and respectful treatment of transgender or gender non-conforming employees and customers who use Port and SEA facilities. The Port also adopted Juneteenth as a paid holiday for non-represented employees. This is another way the Port is celebrating diversity and promoting equity in the workplace. Additionally, the Port began the process of Police Assessment in the following categories: Use of Force, Oversight, Accountability, Racial Equity, Civil Rights, and Mutual Aid. 6 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 12/31/20 KEY PERFORMANCE METRICS CAPITAL SPENDING SUMMARY 2020 2020 Budget Variance YTD Revised $ % $ in 000's Actual Budge t Aviation 504,073 489,182 (14,891) -3.0% Maritime 19,698 19,712 14 0.1% Economic Development 9,314 10,699 1,385 12.9% Central Services & Other (note 1) 6,984 15,991 9,007 56.3% TOTAL 540,069 535,584 (4,485) -0.8% Note: (1) "Other" includes 100% Port legacy projects in the North Harbor and Storm Water Utility Small Capital projects Total capital spending for 2020 is $540.1M, $4.5M above the revised budget mainly due to the acceleration of North Satellite projects and Baggage Optimization projects and the T117 Restoration project. PORTWIDE INVESTMENT PORTFOLIO During the fourth quarter of 2020, the investment portfolio earned 1.44% versus the benchmark's (the Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index) of 0.13%. Over the last twelve months, the portfolio and the benchmark have earned 1.9% and 0.17%, respectively. Since the Port became its own Treasurer in 2002, the life-to-date earnings of the Port's portfolio and the benchmark are 2.41% and 1.74%, respectively. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 II. AVIATION DIVISION FINANCIAL SUMMARY Fav(UnFav) Actual vs. Revised Incr/(Decr) Financial Summary 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved ($ in 000's) Actual Actual Actual Budget Budget $ % $ % Operating Revenue Aeronautical Revenues 291,268 357,598 297,909 401,342 401,342 (103,433) -25.8% (59,689) -16.7% Non-Aeronautical Revenues 257,707 269,037 116,473 135,074 283,167 (18,601) -13.8% (152,564) -56.7% Total Operating Revenues 548,975 626,636 414,382 536,416 684,510 (122,034) -22.7% (212,254) -33.9% Total Operating Expenses 318,849 356,635 329,680 348,826 377,306 19,146 5.5% (26,955) -7.6% Net Operating Income 230,126 270,001 84,702 187,589 307,203 (102,887) -54.8% (185,299) -68.6% CPE 10.79 12.85 26.50 13.92 13.92 (12.58) (0.90) 13.65 106.2% Non-Aero NOI ($ in 000s) 149,959 150,752 6,671 21,443 154,660 (14,772) -68.9% (144,081) -95.6% Enplaned passengers (in 000s) 24,894 25,874 10,044 26,667 26,667 (16,623) -62.3% (15,830) -61.2% - Capital Expenditures (in 000s) 579,135 573,598 504,073 489,182 513,131 (14,891) -3.0% (69,525) -12.1% 2020 Actuals vs. 2020 Revised Budget Net Operating Income (NOI) for 2020 was (-$103M or -54.8%) unfavorable to the revised budget, driven by: o Aeronautical revenue (-$103M or -25.8%) unfavorable. Due to timing issues, there was not an official revised budget for Aeronautical revenue to compare against. Therefore, the variance is against the original Approved Budget which did not account for revisions to the budget to account for cost recovery with COVID-19 impact based on -61% decline in passengers. Nevertheless, Aeronautical revenues are down due to cost reductions across all the Aeronautical business units in response to the COVID-19 impact. See the Aeronautical tables for more details. o Non-Aeronautical revenue (-$18.6M or -13.8%) unfavorable due to the COVID-19 impact affecting all Non-Aeronautical business lines. Revenues from concession fees or transaction volume (Parking, Rental Car, Ground Transportation, Airport Dining & Retail, Clubs & Lounges, In-flight Kitchens) are closely aligned with the 61% decline in passenger volume. Commercial Properties and other Non-Aeronautical line of business with revenue from space rent for real estate leases were relatively unaffected by the COVID-19 decline in enplanements. See the Non-Aeronautical tables for more details. o Total Operating Expenses ($19.1M or 5.5%) favorable to revised budget driven primarily by the pension credit of $14M and underspending of $3.2M in Environmental Remediation Liability (ERL), and net savings in other expenses of $1.9M. 2020 Actuals vs. 2019 Actuals Net Operating Income for 2020 was (-$185M or -68.6%) lower than prior year primarily driven by: o Lower Operating Revenue (-$212M or -33.9%) compared to prior year due to: Lower Aeronautical revenue (-$59.6M lower) due to decreased rate-based costs associated with COVID-19 and the elimination of revenue sharing for the remainder of SLOA IV. Drastically lower projection of Non-Aeronautical revenue performance ($152.5M lower) for all non- airline business such as Port Clubs and Lounges, Ground Transportation, Non-Arline Terminal Lease Spaces, Public Parking, Commercial Properties, and Airport Dining & Retail. o Lower Operating Expenses ($-27M or -7.6%) compared to prior year were primarily driven by $18.3M in lower Environmental Remediation Liability costs in 2020, $16M lower Airport Direct Charges associated with less spending due to COVID-19. 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 A. BUSINESS EVENTS Covid-19 pandemic has dramatically reduced operations and passenger traffic, impacting all businesses at the airport. 61% reduction in passengers in 2020 compared to 2019. Receipt of $192 million in CARES grant (non-operating). CPE and Non-aeronautical NOI goals for 2020 have not been met. B. KEY PERFORMANCE METRICS % Change 2018 YE 2019 YE 2020 YE from 2019 Total Passengers (000's) Domestic 44,422 46,101 18,690 -59.5% International 5,428 5,728 1,371 -76.1% Total 49,850 51,829 20,062 -61.3% Operations 438,391 450,487 296,048 -34.3% Landed Weight (In Millions of lbs.) Cargo 2,471 2,485 2,713 9.2% All other 27,879 29,078 17,549 -39.6% Total 30,350 31,562 20,262 -35.8% Cargo - Metric Tons Domestic freight 241,397 252,671 351,352 39.1% International & Mail freight 190,918 200,878 103,232 -48.6% Total 432,315 453,549 454,584 0.2% *Mail weight for 2020 forward is incorporated in freight Key Performance Measures Fav(UnFav) 2018 2019 2020 2020 2020 Actual vs. Revised Incr/(Decr) Budget Variance Change from 2019 Revised Approved Actual Actual Actual Budget Budget $ % $ % Key Performance Metrics Cost per Enplanement (CPE) 10.79 12.86 26.50 13.92 13.92 (12.58) -90.4% 13.64 106.1% Non-Aeronautical NOI (in 000's) 149,959 150,752 6,671 21,443 154,660 (14,772) -68.9% (144,081)-95.6% Other Performance Metrics O&M Cost per Enplanement 12.81 13.78 16.41 13.08 14.15 (3.33) -25.5% 2.63 19.1% Non-Aero Revenue per Enplanement 10.35 10.40 5.80 5.07 10.62 0.73 14.5% (4.60) -44.2% Debt per Enplanement (in $) 133 133 163 123 123 (40) -32.8% 30 22.7% Debt Service Coverage 1.66 1.68 1.40 1.80 1.80 (0.40) -22.1% (0.28) -16.6% Days cash on hand (10 months = 304 days) 235 314 327 332 332 -5 -1.6% 12 3.9% Aeronautical Revenue Sharing ($ in 000's) (36,863) (17,146) 1 - - 1 0.0% 17,147 100.0% Activity (in 000's) Enplanements 24,894 25,874 10,044 26,667 26,667 (16,623) -62.3% (15,830) -61.2% Total Passengers 49,789 51,748 20,087 53,334 53,334 (33,246) -62.3% (31,660) -61.2% 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 Key Performance Metrics 2020 Actuals vs. 2020 Budget: Cost per Enplanement (CPE): o CPE is ($-12.58, or -90.4%) unfavorable driven primarily by lower airline activity that started in March impacted by COVID-19, and -61% lower passenger activity for the year. o Non-Aero NOI was unfavorable ($-148M or -96%) to original approved budget due to lower revenues across all Non-Aeronautical business lines based on enplanement of -61% decline in passenger volumes compared to prior year. See the Non-Aeronautical tables for more details. 2020 Actuals vs. 2019 Actuals: CPE was $13.64 higher compared to prior year due to impact of COVID-19 on airline activity. Non-Aero NOI was $144M lower than prior year due to drastically lower non-airline revenues as a result of the COVID-19 impact. C. OPERATING RESULTS Division Summary YE Actuals Fav(UnFav) Actual vs. Revised Incr/(Decr) Total Airport Expense Summary 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved ($ in 000's) Actual Actual Actual Budget Budget $ % $ % Operating Expenses Payroll 133,999 147,076 152,895 156,826 160,340 3,930 2.5% 5,820 4.0% Outside Services 65,475 68,801 63,922 70,401 79,889 6,479 9.2% (4,878) -7.1% Utilities 18,306 18,180 15,695 20,642 21,180 4,947 24.0% (2,485) -13.7% Other Expenses 3,966 12,272 3,341 (1,682) 5,224 (5,023) 298.7% (8,931) -72.8% Total Airport Direct Charges 221,746 246,329 235,854 246,187 266,634 10,333 4.2% (10,475) -4.3% Environmental Remediation Liability 6,233 15,900 (2,361) 878 2,648 3,239 368.9% (18,261) -114.8% Capital to Expense 6,891 2,089 2,588 - - (2,588) 498 23.8% Total Exceptions 13,124 17,989 227 878 2,648 651 74.2% (17,763) -98.7% Total Airport Expenses 234,870 264,318 236,081 247,065 269,282 10,984 4.4% (28,237) -10.7% Corporate 60,659 65,671 68,316 71,646 77,460 3,330 4.6% 2,644 4.0% Police 19,231 22,290 22,150 26,122 26,233 3,972 15.2% (140) -0.6% Maritime/Economic Development/Other 4,088 4,355 3,134 3,994 4,332 860 21.5% (1,221) -28.0% Total Charges from Other Divisions 83,979 92,316 93,599 101,761 108,025 8,162 8.0% 1,283 1.4% - Total Operating Expenses 318,849 356,635 329,680 348,826 377,306 19,146 5.5% (26,955) -7.6% Operating Expenses 2020 Actuals vs. 2020 Revised Budget: Operating Expenses were ($19.1M or 5.5%) favorable driven primarily by the pension credit of $14M, underspending of $3.2M in Environmental Remediation Liability (ERL), and net savings in other expenses of $1.9M. 10 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 Aeronautical Business Unit Summary YE Actuals Fav(UnFav) Actual vs. Revised Incr/(Decr) Aeronautical NOI 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved ($ in 000's) Actual Actual Actual Budget Budget $ % $ % Rate Base Revenues Airfield Movement Area 116,703 123,436 84,906 132,128 132,128 (47,223) -35.7% (38,530) -31.2% Airfield Apron Area 15,627 22,016 15,146 22,011 22,011 (6,865) -31.2% (6,870) -31.2% Terminal Rents 169,318 205,283 171,607 212,943 212,943 (41,336) -19.4% (33,676) -16.4% Federal Inspection Services (FIS) 16,226 12,321 8,616 18,162 18,162 (9,546) -52.6% (3,706) -30.1% Total Rate Base Revenues 317,874 363,057 280,275 385,245 385,245 (104,970) -27.2% (82,782) -22.8% Airfield Commercial Area 10,257 11,687 17,633 16,097 16,097 1,536 9.5% 5,945 50.9% Subtotal before Revenue Sharing 328,131 374,744 297,908 401,342 401,342 (103,434) -25.8% (76,836) -20.5% Revenue Sharing (36,863) (17,146) 1 - - 1 17,147 -100.0% Total Aeronautical Revenues 291,268 357,598 297,909 401,342 401,342 (103,433) -25.8% (59,689) -16.7% Total Aeronautical Expenses 236,630 238,349 219,878 235,196 248,799 15,318 6.5% (18,471) -7.7% Aeronautical NOI 54,638 119,249 78,031 166,147 152,544 (88,115) -53.0% (41,218) -34.6% Debt Service (91,673) (110,945) (62,607) (121,410) (121,410) 58,802 -48.4% 48,337 -43.6% Net Cash Flow (37,035) 8,305 15,424 44,737 31,134 (29,313) -65.5% 7,119 85.7% Aeronautical 2020 Actuals vs. 2020 Budget Net Operating Income was (-$88.1M or -53%) unfavorable to budget due to $105M in lower aeronautical revenues driven by a large drop in airline activity starting in March due to the COVID-19 impact. Aeronautical expenses incurred savings of $15M driven by the pension credit, environmental remediation liability reductions, and contract services. However, the impact of the large decline in revenues far outweighed savings in expenses. Aeronautical 2020 Actuals vs. 2019 Actuals Net Operating Income was ($41.2M or 34.6%) lower than 2019 due to lower aeronautical costs to recover driven by cost reductions in response to the COVID-19 impact. Airline Rate Base Cost Drivers Impact on Aero *O&M Lower due to $14M COVID Revenues Budget Cost Reductions, Pension credit, 2020 2020 Budget vs Actuals and additional savings from vacancies, $ in 000's Budget Actual $ % contract savings, and ERL. O&M (1) 242,981 213,775 (29,205) -13.7% *2020 actual debt service lower due to CARES Grant O&M - (22,507) (22,507) 100.0% Net O&M 242,981 191,268 (51,712) -27.0% deferring 2008 variable rate bond principal Debt Service Gross 174,455 166,848 (7,607) -4.6% payment, lower variable rate interest, and Debt Service PFC Offset (62,998) (36,390) 26,608 -73.1% more capitalized interest applied. CARES Grant Debt Service - (71,763) (71,763) 100.0% *PFC Offset lower due to lower collections Net Debt Service 111,457 58,694 (52,762) -89.9% *CARES Grant Aero Portion: Amortization 32,326 32,359 33 0.1% - Payroll - $22.5M Space Vacancy (490) (1,083) (593) 54.8% TSA Operating Grant and Other (1,028) (960) 68 -7.1% - DS - $71.7M Rate Base Revenues 385,246 280,279 (104,967) -37.5% Commercial area 16,097 17,633 1,536 8.7% Note - $4K Difference in 2020 Actuals in Aero Total Aero Revenues 401,343 297,912 (103,431) -34.7% Summary above is known difference due to prior (1) O&M, Debt Service Gross, and Amortization do not include commercial area costs or the year reconciliation adjustment international incentive expenses Non-Aero Business Unit Summary YE Actuals 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 Fav(UnFav) Actual vs. Revised Incr/(Decr) Non-Aeronautical NOI 2018 2019 2020 2020 2020 Budget Variance Change from 2019 Revised Approved ($ in 000's) Actual Actual Actual Budget Budget $ % $ % Non-Aeronautical Revenues Public Parking 80,212 82,125 34,502 40,813 89,485 (5,085) -12.5% (46,397) -56.5% Rental Cars 53,569 52,567 16,637 19,209 51,149 (3,846) -20.0% (37,204) -70.8% Ground Transportation 18,772 20,765 6,557 11,092 22,299 (3,391) -30.6% (13,064) -62.9% Airport Dining & Retail 59,021 61,615 25,418 27,753 66,145 (2,208) -8.0% (36,070) -58.5% Other 46,132 51,966 33,359 36,207 54,089 (2,485) -6.9% (18,244) -35.1% Total Non-Aeronautical Revenues 257,707 269,037 116,473 135,074 283,167 (17,014) -12.6% (150,978) -56.1% Total Non-Aeronautical Expenses 82,219 118,286 109,802 113,631 128,508 4,229 3.7% (8,884) -7.5% Non-Aeronautical NOI 175,488 150,752 6,671 21,443 154,660 (12,785) -59.6% (142,093) -94.3% Less: CFC Surplus (7,724) (6,834) - - - - 6,834 -100.0% Adjusted Non-Aeronautical NOI 167,764 143,917 6,671 21,443 154,660 (12,785) -59.6% (135,259) -94.0% Debt Service (44,545) (49,299) (33,065) (50,064) (50,064) 16,999 -34.0% 16,234 -32.9% Net Cash Flow 123,219 94,619 (26,394) (28,621) 104,596 4,214 -14.7% (119,026) -125.8% Non-Aeronautical 2020 Actuals vs. 2020 Revised Budget Net Operating Income was ($12.7M or 59.6%) unfavorable to revised budget driven by: o COVID-19 impact to Non-Aero Revenue which affected all non-aeronautical businesses. Revenues from concession fees or transaction volume (Parking, Rental Car, Ground Transportation, Airport Dining & Retail, Clubs & Lounges, In-flight Kitchens) are closely aligned with the 61% decline in passenger volume. Commercial Properties and other Non-Aeronautical line of business with revenue from space rent for real estate leases were relatively unaffected by the COVID-19 decline in enplanements. o Non-Aeronautical operating expenses were ($4.2M or 3.7%) favorable due primarily to the pension credit and overall underspending in Outside Services on consultants and other contracted services, utilities, and charges from other divisions. Non-Aeronautical 2020 Actuals vs. 2019 Actuals Net Operating Income was (-$142M or -94.3%) lower than 2019 driven by: o A dramatic impact to Non-Aero Revenue from COVID-19 evident starting in March and continuing through September with a 61% decline in enplanements for the remainder of the year compared to the same time in the prior year. Many Non-Aero tenants have closed operations until passenger volume begins to recover. Although ADR and Parking businesses have started to open back up in May and June on a limited basis, tenants continue to report drastic decline in activity compared to last year. 12 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 D. CAPITAL RESULTS Capital Variance 2020 2020 Budget Variance YTD Revised $ % $ in 000's Actual Budget International Arrivals Facility (1) 171,414 215,000 43,586 20.3% NS NSAT Renov NSTS Lobbies (2) 160,268 134,528 (25,740) -19.1% Checked Bag Recap/Optimization (3) 38,437 14,500 (23,937) -165.1% Remote Aircraft Deicing (4) 6,517 15,058 8,541 56.7% Terminal Security Enhancements Ph 2 (5) (611) 6,916 7,527 108.8% AFLD Pvmnt Program 2016-2020 (6) 18,390 13,133 (5,257) -40.0% Restroom Upgrades Conc B, C, D (7) 8,977 5,400 (3,577) -66.2% PLB Renew & Replace Phase 2 (8) 2,356 5,654 3,298 58.3% ARC Flash Hazard Mitgation (9) 172 3,405 3,233 94.9% RCF Pavement Remediation (10) 3,538 6,198 2,660 42.9% Main Terminal Low Voltage Upgrade (11) 1,278 3,961 2,683 67.7% Central Terminal Infrastructure & HVAC (12) 4,565 7,250 2,685 37.0% Service Tunnel Renewal/Replace (13) 3,329 5,529 2,200 39.8% Sound Insulation Projects (14) 1,287 16,764 15,477 92.3% All Other 84,156 107,888 23,732 22.0% Subtotal 504,073 561,182 57,109 10.2% CIP Cashflow Mgmt Reserve - (72,000) (72,000) 100.0% Total Spending 504,073 489,182 (14,891) -3.0% 1. The construction of the IAF has been delayed by a year from what had been planned at the beginning of 2020. Substantial completion was June 2020. Now the pedestrian walkway is scheduled for completion in May 2021. 2. $25.7M Increase due to added construction costs associated with work pulled forward (Operation Silver Cloud) that would have been performed in 2021. 3. MII Rejection at the beginning of the year led to uncertainty whether the project would be rebid, so the spending was pushed out of the baseline. The contract has been executed and spending was accelerated. 4. New estimate has significant reduction as a result of value engineering and bid came in lower than engineering estimate. 5. Cancellation of bollard purchase and major works contract have deferred work. And, $1M of project costs have been moved from capital to expenses given changes in procurement approach. 6. Construction was expedited to take advantage of downturn in air traffic operation, and transfer of scope from 2025 Pavement Improvement program. 7. Bid overage for Phase 3 construction, increased construction costs for phase 2 with impacts from COVID-19 as a factor contributed to higher than anticipated costs for 2020. 8. Delayed work. 2 bridge installations have been moved to 2021. 9. Constructability reviews caused design delays, which pushed construction into 2022. 10. Construction suspended and delayed one year due to Covid-19. 11. 1 year behind schedule due to delays in getting designer and general contractor onboard. 12. Project came under budget. 13. Project is in close-out and savings on soft costs due to efficient construction, and contingency budget was not spent. 14. Commission directed acceleration of the sound insulation projects in Q1 2020. However, they are projected to start in 2021. Highline insulation is funded by 67% AIP grants, 16% tax levy, and 17% airport funds. 13 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 III. MARITIME DIVISION FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual B udg e t B udg e t $ % $ % Total Revenues 57,575 59,289 42,111 42,581 62,938 (470) -1% (17,178) -29% Total Operating Expenses 43,252 48,644 53,500 52,191 54,396 (1,309) -3% 4,856 10% Net Operating Income 14,323 10,644 (11,389) (9,610) 8,541 (1,779) -19% (22,034) -207% Capital Expenditures 20,489 7,887 19,698 19,712 14 0% 11,811 150% 2020 Actuals vs. 2020 Revised Budget Operating Revenues $.5M lower than revised budget driven by Cruise moving from delay to cancellation for the 2020 season. Operating Expenses were $1.3M higher than budget with pension adjustment and savings initiatives offset by litigation reserve and capital to expense. Net Operating Income $1.8M under budget. Capital Spending finished at 100% of $19.7M revised budget driven by expedited schedule of T117 habitat restoration project. 2020 Actuals vs. 2019 Actuals Operating Revenues $17.2M lower than 2019 due to COVID-19 impacts in Cruise. Operating Expenses $4.8M higher than 2019 actual driven primarily by $1.9M ILA payment to NWSA, $4M in 2020 Capital to Expense projects, $3.5M in lease payment reserve, offset by port wide COVID-19 related cost cutting initiatives. Net Operating Income $22M below 2019 actual. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Appr ove d Budget Variance $ in 000's Actual Actual B udg e t B udg e t $ % $ % Ship Canal Fishing & Operations (2,512) (1,886) (2,340) (2,616) 454 19% 626 25% Elliott Bay Fishing & Commercial Operations 629 (47) (1,653) (1,931) 1,606 97% (676) NA Recreational Boating 1,325 1,458 2,240 1,690 (782) 35% 133 10% Cruis e 10,514 (13,847) (7,688) 11,575 (6,160) -80% (24,361) -232% Gra in 2,566 3,700 1,684 1,614 2,016 -120% 1,134 44% Maritime Portfolio (1,338) (1,294) (1,289) (1,746) (6) 0% 44 -3% All Other (540) 526 (566) (44) 1,092 193% 1,066 197% Total Maritime 10,644 (11,389) (9,610) 8,541 (1,779) -19% (22,034) -207% 14 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 A. BUSINESS EVENTS Recreational Boating Completed customer service facilities at SBM. Established Customer Moorage Deferral program for financially distressed customers. Updated COVID processes with Q4 occupancy exceeding pre-pandemic levels. Elliott Bay Fishing and Commercial Operations - Design work underway for P91 NW Fender. Ship Canal Fishing & Operations Summer Recreational Boating exceeded expectations. Due to COVID- 19 many key events at Fishermen's Terminal were cancelled including ant 92nd annual Blessing of the Fleet and the Fishermen's Fall Festival. Cruise The Cruise team is working with cruise lines, CLIA, AAPA, CDC, and other stakeholders to plan for and implement new health protocols at T91 and P66, as well as developing a strategy and community communication plan in preparation of recommencing cruise operations for the 2021 cruise season.. B. KEY PERFORMANCE METRICS Grain Volume Metric Tons in 000's Cruise Passengers in 000's 15 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 C. OPERATING RESULTS Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Appr ove d Budget Variance $ in 000's Actual Actual Actual B udg e t B udg e t $ % $ % Ship Canal Fishing & Operations 3,502 3,929 4,704 4,264 4,264 440 10% 775 20% Elliott Bay Fishing & Commercial Operations 6,755 6,095 5,752 5,119 5,123 633 12% (344) -6% Recreational Boating 12,035 12,484 12,611 13,361 13,361 (750) -6% 127 1% Cruis e 18,880 22,410 3,824 5,909 26,261 (2,085) -35% (18,586) -83% Gra in 5,167 4,266 5,142 3,490 3,490 1,652 47% 876 21% Maritime Portfolio Management 11,305 10,108 10,074 10,428 10,428 (355) -3% (34) 0% Other (69) (3) 4 11 11 (6) -59% 7 -247% Total Revenue 57,575 59,289 42,111 42,581 62,938 (470) -1% (17,178) -29% Expenses Maritime (Excl. Maint) 11,326 13,789 19,529 16,408 16,881 (3,120) -19% 5,740 42% Economic Development 4,347 4,987 4,511 5,626 5,756 1,115 20% (476) -10% Total Direct 15,673 18,776 24,039 22,035 22,637 (2,005) -9% 5,264 28% Maintenance Expenses 11,416 12,186 12,029 12,426 13,073 397 3% (157) -1% Envir Services & Planning 1,553 2,250 2,739 2,295 2,681 (444) -19% 489 22% Seaport Project Management 295 175 1,061 330 356 (731) -221% 886 507% Total Support Services 13,265 14,611 15,828 15,051 16,110 (777) -5% 1,217 8% IT 2,558 2,685 2,719 2,895 2,906 176 6% 33 1% Police Expenses 4,041 4,086 2,865 3,368 3,382 503 15% (1,220) -30% External Relations 1,379 1,564 1,200 1,501 1,635 300 20% (363) -23% Other Central Services 6,117 6,645 6,534 6,974 7,481 441 6% (111) -2% Aviation Division / Other 220 278 315 368 245 53 14% 37 13% Total Central Services / Other 14,315 15,258 13,633 15,106 15,650 1,473 10% (1,625) -11% Total Expense 43,252 48,644 53,500 52,191 54,396 (1,309) -3% 4,856 10% NOI Before Depreciation 14,323 10,644 (11,389) (9,610) 8,541 (1,779) -19% (22,034) -207% Depreciation 18,022 17,627 17,624 17,249 17,244 (376) -2% (3) 0% NOI After Depreciation (3,699) (6,982) (29,013) (26,859) (8,703) (2,154) -8% (22,031) -316% 2020 Actuals vs. 2020 Revised Budget Operating Revenues were $470K lower than budget: 1) Ship Canal Fishing & Operations were $440K favorable due to higher summer recreational moorage at Fishermen's terminal. 2) Elliott Bay Fishing & Commercial Operations $633K above budget benefits of the closure to the Ballard Locks and increased utilization of mooring dolphins by Olympic Tug and Barge. 3) Recreational Boating lower $750K due to COVID-19 guest moorage transition delays and event cancellations. 4) Cruise $2,085K unfavorable due to full cancellation of cruise season instead of late July start. 5) Grain $1,652K higher driven by increased volumes in the second half of the year. 6) Maritime Portfolio Management $355K lower due to vacancy at Maritime Industrial Center. Operating Expenses were $1,309K higher than budget: 1) Direct Expenses were $1,542K higher than budget Recreational Marinas and Commercial Operations $1,031K under from pension adjustment, lower utilities, and outside security services. Maritime Marketing $652K below budget from event cancellations. Cruise Operations $2,166K above from reserve tied to lease payments. Portfolio Management $1,177K favorable from salaries, open headcount, tenant improvements. Capital to expense unbudgeted $2,478K related to Fishermen's Terminal and Cruise T46 development charges in prior years. Received $250K benefit in Environmental Remediation liability All other Direct Expenses net to $8K over budget. 16 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 2) Total Support Services were $777K unfavorable to budget. Maintenance $397K favorable due to project spend. Environmental Services and Planning were $444K higher than budget due to unplanned derelict vessel cleanup and capital to expense costs occurring in 2020. Seaport Project management $731K unfavorable to budget due to capital to expense in 2020. 3) Total Central Services / Other were $1,473K favorable to budget. Net Operating Income was $1,779K unfavorable to budget. 2020 Actuals vs. 2019 Actuals Operating Revenues were $17.2M lower than 2019 due to cancellation of the Cruise season. Operating Expenses were up $4,9M to 2019: 1) First year of ILA Payments to NWSA at T46, $1.9M higher. 2) Capital to Expense up $4M. 3) Lease Payment Reserve up $3.5M. 4) Pension adjustment and cost cutting initiatives from COVID-19 created a $4.5M reduction. Net Operating Income was $22M below 2019 actual. 17 II. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 D. CAPITAL RESULTS 2020 Budget Variance 2020 Revised Actual $ % $ in 000's Budge t SBM Restrms/Service Bldgs Rep 8,867 9,400 533 6% T117 Restoration 5,885 5,000 (885) -18% MD Small Projects 964 3,099 2,135 69% SBM Paving 1,636 1,810 174 10% MD Fleet 949 1,957 1,008 52% New Cruise Terminal (1,107) 1,259 2,366 188% T91 Northwest Fender 98 785 687 88% FT Gateway Building 17 700 683 98% FT Maritime Innovation Center 663 700 37 5% FT Docs 3,4,5 Fixed Pier 528 510 (18) -4% All Other Projects 1,198 (5,508) (6,706) 122% Total Maritime 19,698 19,712 14 0% Comments on Key Projects: T117 Restoration costs moved forward with expedited schedule from contactor. SBM Restrooms/Buildings Foundation work completed, reducing amount of project contingency. T91 Northwest Fender construction spending delayed to Q3 2021 based on operational concerns. T91 Berth 6&8 Design contract execution in Q4 2020 resulted in design start later than planned last year. New Cruise Terminal project placed on hold. Will be evaluating post-COVID-19 effects on cruise. 18 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Fcst vs. Revised Change from 2019 Revised Approved Budget Variance $ in 000's Actual Actual Actual B udg e t B udg e t $ % $ % Total Revenues 20,705 21,151 9,470 15,658 19,110 (6,188) -40% (11,681) -55% Total Operating Expenses 27,028 27,155 20,611 27,222 29,368 6,611 24% (6,544) -24% Net Operating Income (6,323) (6,004) (11,141) (11,564) (10,258) 423 4% (5,138) -86% Capital Expenditures 2,066 3,121 9,314 10,699 1,385 13% 6,193 198% 2020 Actuals vs. 2020 Revised Budget Operating Revenues $6.2M unfavorable to revised budget due to deeper cuts in volumes at the Conference & Event Center related to COVID-19 cancellations and variable revenue at restaurants and parking facilities. Operating Expenses $6.6M favorable to budget due to cost impact of conference cancellations and port-wide cost cutting initiatives. Net Operating Income $423K above budget. Capital spending finished at 87% of $10.7M revised budget. 2020 Actuals vs. 2019 Actuals Operating Revenues $11.7M below 2019 due to lower volumes at the Conference & Event Center related to both Bell Harbor Modernization construction and COVID-19 cancellations. Operating Expenses $6.5M lower than 2019 from lower variable conference and event center costs and the port-wide cost cutting initiatives offset. Net Operating Income $5.1M below 2019 actual. Net Operating Income before Depreciation by Business Fav (UnFav) Incr (Decr) 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Appr ove d Budget Variance $ in 000's Actual Actual B udg e t B udg e t $ % $ % Portfolio Management (2,530) (3,212) (3,384) (3,802) 172 5% (681) -27% Conference & Event Centers (612) (5,497) (3,021) (2,422) (2,475) -82% (4,884) -797% Tourism (1,183) (873) (1,164) (1,359) 291 25% 309 26% EDD Grants (785) (788) (1,130) (1,160) 342 30% (3) NA Env Grants/Remed Liab/ERC (894) (772) (2,865) (1,515) 2,093 73% 122 -14% Total Econ Dev (6,004) (11,141) (11,564) (10,258) 423 4% (5,137) -86% 19 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 A. BUSINESS EVENTS Provided relief to 40+ waterfront tenants impacted by pandemic related operating restrictions. Maintained 94% occupancy across real estate portfolio despite COVID pandemic challenges. Advanced design work on T91 Uplands and Fishermen's Terminal buildings and formalized funding partnership with WA Department of Commerce to support Maritime Innovation Center development. Surpassing 2020 Port WMBE utilization (non-construction) goal through Q3 (16.92% actual v 14% goal). Worked with Maritime Blue to launch successful inaugural Maritime innovation accelerator program that included cohort of 11 emerging maritime companies. B. KEY PERFORMANCE METRICS Building Occupancy by Location: 20 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 C. OPERATING RESULTS Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Appr ove d Budget Variance $ in 000's Actual Actual Actual B udg e t B udg e t $ % $ % Revenue 9,002 8,912 7,808 8,824 9,124 (1,017) -12% (1,105) -12% Conf & Event Centers 11,703 12,239 1,662 6,833 9,985 (5,171) -76% (10,577) -86% Total Revenue 20,705 21,151 9,470 15,658 19,110 (6,188) -40% (11,681) -55% Expenses Portfolio Management 3,571 3,732 3,073 3,988 4,008 915 23% (659) -18% Conf & Event Centers 9,889 10,218 4,440 6,703 8,902 2,264 34% (5,779) -57% P69 Facilities Expenses 235 215 232 226 230 (6) -3% 17 8% RE Dev & Planning 149 136 209 145 208 (64) -44% 73 53% EconDev Expenses Other 785 930 938 632 932 (306) -48% 8 1% Maintenance Expenses 3,914 3,145 3,042 3,476 3,819 434 12% (104) -3% Maritime Expenses (Excl Maint) 281 253 442 512 524 70 14% 189 75% Total EDD & Maritime Expenses 18,824 18,630 12,376 15,682 18,624 3,306 21% (6,254) -34% Diversity in Contracting 132 152 103 151 197 48 32% (49) -32% Tourism 1,408 1,337 954 2,842 1,536 1,888 66% (384) -29% EDD Grants 838 785 778 1,110 1,110 332 30% (7) -1% Total EDD Initiatives 2,378 2,274 1,834 4,103 2,843 2,269 55% (440) -19% Environmental & Sustainability 281 344 211 260 323 49 19% (133) -39% Police Expenses (76) 61 64 232 233 168 73% 3 5% Other Central Services 5,466 5,731 5,965 6,752 7,223 787 12% 234 4% Aviation Division 155 114 161 193 123 32 16% 47 41% Total Central Services & Aviation 5,825 6,251 6,401 7,437 7,901 1,036 14% 150 2% Envir Remed Liability 0 0 0 0 0 0 NA 0 NA Total Expense 27,028 27,155 20,611 27,222 29,368 6,611 24% (6,544) -24% NOI Before Depreciation (6,323) (6,004) (11,141) (11,564) (10,258) 423 4% (5,138) -86% Depreciation 3,948 3,647 3,611 3,392 3,389 (220) -6% (35) -1% NOI After Depreciation (10,271) (9,651) (14,753) (14,956) (13,647) 203 1% (5,102) -53% 2020 Actuals vs. 2020 Revised Budget Operating revenue were $6,188K unfavorable to budget due primarily to additional event cancellations at the Conference and Event Centers as a result of government mandates caused by COVID-19 pandemic. Operating Expenses were $6,611K favorable to budget: 1) Portfolio Management $915K favorable from open FTE, timing of TI spending, and deferral of fire, electrical, and signage upgrades and enhancements. 2) Conference and Event Center $2,264K favorable from lower activity related to cancelled events. 3) Maintenance Expenses $434K favorable due to either cancelled or delayed expense projects. 4) EDD Initiatives $2,269K favorable due to timing of spending related to COVID-19. 5) Central Services $1,036K below budget. 6) All other expenses net to $307K above budget. Net Operating Income was $423K above budget. 2020 Actuals vs. 2019 Actuals Operating Revenues were $11,681K lower than 2019 actual due to reduced volumes at the Conference and Event Centers as well as Bell Street Garage Operating Expenses were $6,544K lower than 2019 actual: 1) Portfolio Management $659K lower due to hiring freeze on open headcounts and lower TI spending. 2) Conference and Event Centers $5,779K lower than 2019 due to variable costs associated with lower Conference and Event Center volumes as a result of government mandates caused by COVID-19 pandemic. 3) Maintenance Expenses $104K lower than 2019. 4) All other Expenses net to $2K lower than 2019. Net Operating Income was $5,138K below 2019 actual. 21 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 D. CAPITAL RESULTS 2020 Budget Variance 2020 Revised Actual $ in 000's $ % Budge t BHICC Interior Modernization 7,483 8,358 875 10% Tenant Improvements -Capital 0 1,150 1,150 100% EDD Small Projects 467 541 74 14% T91 Uplands Dev Phase 1 325 1,000 675 68% EDD Reserve 0 54 54 100% P66 HVAC Systems Upgrade 380 912 532 58% CW Bridge Elev Modernization 185 350 165 47% WTC HVAC Replacement 277 260 (17) -7% EDD Technology Projects 0 0 0 NA P69 Underdock Utility Rpl 109 0 (109) NA All Other Projects 88 (1,926) (2,014) 105% Total Economic Development 9,314 10,699 1,385 13% Comments on Key Projects: T-91 Upland Industrial Unanticipated delays in the finalization of the design contract. BHICC Modernization Completed initial scope. Project has encountered unforeseen site conditions, additional effort required to execute change orders. P66 HVAC Cost in 2020 delayed due to building engineering system method of procurement which requires an RFP to be developed. 22 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 V. CENTRAL SERVICES DIVISION FINANCIAL SUMMARY Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Approve d Budget Variance $ in 000's Actual Actual Actual Budge t Budge t $ % $ % Total Operating Revenues (500) 1,282 2,927 40 40 2,887 7218.3% 1,645 128.3% Core Central Support Services 74,419 79,276 84,705 91,594 93,604 6,889 7.5% 5,429 6.8% P olic e 23,908 27,793 27,538 31,312 31,444 3,774 12.1% (255) -0.9% Capital Development 8,999 10,038 9,096 8,611 12,513 (485) -5.6% (942) -9.4% Environment & Sustainability 8,770 10,748 10,433 10,399 12,866 (33) -0.3% (315) -2.9% Total Operating Expenses 116,097 127,855 131,772 141,916 150,427 10,144 7.1% 3,917 3.1% 2020 Actuals vs. 2020 Revised Budget Operating Revenues favorable by $2.9M due primarily to Police forfeiture seizures of $2.4M and Derelict Vessel Reimbursements of $416K for Maritime Environmental & Planning. Operating Expenses $10.1M favorable to budget mainly due to $9.4M from DRS Pension Plan True-up, implementing hiring freeze for all new and backfill vacant positions as part of the COVID-19 cost reduction measures saving $$4.6M which were offset by lower Charges to Capital Projects of ($2.9M), higher than anticipated General Expense of ($667K), and increases to Worker's Compensation of ($486K). 2020 Actuals vs. 2019 Actuals Operating Revenues $1.6M above 2019 mainly due to higher Police forfeiture seizures in 2020 of $813K and Derelict Vessel Reimbursements of $416K. Operating Expenses $3.9M higher than 2019 mainly due to higher payroll and increases to Outside Services. A. BUSINESS EVENTS Placed a total of 30 interns with private maritime employers and nonprofits in 2020 under the Youth Maritime Collaborative. Partnered with four non-profits to provide paid internships and professional training opportunities in Port- related industries to nearly 200 low-income youth and youth of color under the Opportunity Youth Initiative. Hosted three Career Awareness events with Highline School District: Boeing Academy for STEM Learning, POS Fire Department, and ICT. Began the process of Police Assessment in the following categories: Use of Force, Oversight, Accountability, Racial Equity, Civil Rights, and Mutual Aid. Announced the first round of the South King County Fund economic recovery grants. Continued to work with City of Seattle in support of West Seattle Bridge, traffic detours, and low bridge access. Held 6-part Caucusing for Change series in Oct and Nov, included guest speakers from King County, JustLead WA, and Port employees sharing their personal experiences with race and racism. Held virtual events for 2020 Community Giving Campaign with 11 speakers from 11 different non- profits/communities. Added new features and functionality to the flySEA (formerly SeaTac) Mobile App. Implemented HR-33 Gender Identity Policy in November 2020. Completed migration and dynamic sign installation to support tracking buses between the airport terminal and the rental car facility (RCF). Completed migration of all legacy SharePoint collab sites, workflows and related content across the Port to a supportable modern platform. 23 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 B. KEY PERFORMANCE METRICS Century Agenda Strategic Objectives 2018 2019 2020 Responsibly Invest in the Economic Growth of the Region and all its Communities A. Job seekers placed in jobs at SEA Airport through the Employment Center 2049 2239 857 B. Number of SEA Airport tenants supported in finding employees 100 102 79 C. Employment Center training completions 418 441 211 D. K-12 Career Connected Learning: WFD engagement with teachers/faculty N/A 450 9,070 E. Community members entering employment in construction, maritime and N/A 190 72 environmental sustainability F. Number of Job Openings created 535 578 360 G. Number of new employees hired 470 498 202 H. Job applications received 10,899 12,959 7,024 I. Number of job interviews conducted 1,571 1,718 813 J. Number of interns 142 155 84 K. Number of Veteran Fellows 6 6 0 L. Number of employees participating in Tuition Reimbursement 29 34 27 M. Prepare and negotiate agreements for the Port's 22 bargaining units 293 411 266 N. Oversee Implementation/Administration of CBAs agreements 122 122 264 Become a Model for Equity, Diversity and Inclusion A. Employee participation in Caucusing (Black Lives Matter and Caucusing N/A N/A 495 for Change) B. Employee participation in EDI Port Reads book club N/A N/A 141 C. Employee participation in Podcast club N/A N/A 48 D. EDI Change Team core members N/A N/A 74 E. EDI Change Team departments represented N/A N/A 44 Be a Highly Effective Public Agency A. Corporate costs as a % of Total Operating Expenses 28.6% 28.3% 31.2% B. Timely process disbursement payment requests 4 days 3 days 3 days C. Keep receivables collections current (within 30 days) 87% 78% 27% D. Litigation and Claim Reserves $1.4M $2.9M $1.3M E. Claims/Injury Damages Reserves $707K $494K $304K F. Percent of annual audit work plan completed each year 100% 100% 100% G. Employee Development Class Attendees/Structured Learning 1,765 2,201 7,457 H. Total Recordable Incident Rate (previous Occupational Injury Rate) 4.87 5.01 4.04 I. Lost Work Day Rate (previously Days Away Severity Rate) 61.44 28.81 66.81 J. Respond to Public Disclosure Requests 657 608 503 K. Customer Survey for Police Service Excellent or Above Average 90% 83% 92% 24 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 C. OPERATING RESULTS Financial Summary (YE Actuals) Fav (UnFav) Incr (Decr) 2018 2019 2020 2020 2020 Actual vs. Revised Change from 2019 Revised Approve d Budget Variance $ in 000's Notes Actual Actual Actual Budge t Budge t $ % $ % Total Revenues (500) 1,282 2,927 40 40 2,887 7218.3% 1,645 128.4% Executive 2,136 2,018 2,259 2,253 2,355 (6) -0.3% 241 11.9% Commission 1,848 2,022 1,748 2,014 2,292 266 13.2% (274) -13.5% Legal 3,948 4,987 6,282 3,948 4,001 (2,333) -59.1% 1,295 26.0% External Relations 7,362 7,760 7,465 10,274 11,070 2,809 27.3% (295) -3.8% Equity Diversity and Inclusion 1,561 2,337 4,674 5,328 4,465 655 12.3% 2,337 100.0% Human Resources 8,430 9,187 8,356 10,191 11,690 1,834 18.0% (831) -9.0% Labor Relations 1,079 1,230 1,283 1,336 1,386 53 4.0% 53 4.3% Internal Audit 1,521 1,450 1,534 1,589 1,749 55 3.5% 84 5.8% Accounting & Financial Reporting Services 6,842 7,341 8,138 8,810 9,024 672 7.6% 797 10.9% Information & Communication Technology 21,961 23,014 24,668 25,695 26,013 1,027 4.0% 1,654 7.2% Information Security 934 1,203 1,652 1,915 1,968 262 13.7% 449 37.3% Finance & Budget 5,593 6,230 6,719 6,959 7,039 239 3.4% 490 7.9% Maritime Finance 1,445 1,605 1,664 1,870 1,942 206 11.0% 59 3.7% Finance & Budget 1,843 2,037 2,171 2,211 2,219 40 1.8% 134 6.6% Aviation Finance & Budget 2,305 2,587 2,885 2,878 2,878 (7) -0.2% 298 11.5% Business Intelligence 1,323 1,302 1,177 1,516 2,209 338 22.3% (125) -9.6% Risk Services 3,095 3,137 3,347 3,380 3,438 33 1.0% 210 6.7% Office of Strategic Initiatives 1,596 1,448 931 1,197 1,619 266 22.2% (517) -35.7% Central Procurement Office 4,630 4,453 4,258 5,289 5,988 1,031 19.5% (195) -4.4% Contingency 185 39 (190) (100) (2,702) 90 -90.0% (229) -583.9% Core Central Support Services 74,419 79,159 84,302 91,594 93,604 7,292 8.0% 5,144 6.5% P olic e 23,908 27,793 27,535 31,312 31,444 3,777 12.1% (258) -0.9% Total Before Cap Dev & Environment 98,327 106,952 111,838 122,906 125,048 11,069 9.0% 4,886 4.6% Capital Development Engineering 5,478 5,696 4,897 5,143 8,765 245 4.8% (799) -14.0% Port Construction Services 3,522 4,341 4,126 3,468 3,748 (658) -19.0% (215) -4.9% Sub-Total 8,999 10,038 9,024 8,611 12,513 (413) -4.8% (1,014) -10.1% Environment & Sustainability Aviation Environmental 5,006 5,680 5,603 5,465 6,895 (138) -2.5% (76) -1.3% Maritime Environmental & Planning 2,418 3,275 3,394 2,908 3,420 (486) -16.7% 119 3.6% Noise Programs 722 817 660 813 1,012 153 18.8% (157) -19.2% Environment & Sustainability 624 976 691 1,214 1,538 522 43.0% (285) -29.2% Sub-Total 8,770 10,748 10,348 10,399 12,866 51 0.5% (400) -3.7% Industrial Development Corporation - 1 - - - - 0.0% (1) -100.0% Capital to Expense - 117 193 - - (193) 0.0% 76 65.2% Total Expenses 116,097 127,855 131,403 141,916 150,427 10,514 7.4% 3,548 2.8% 25 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 2020 Actuals vs. 2020 Revised Budget by Department Operating Expenses were $10.5M below the revised budget due primarily to: Executive unfavorable variance of ($6K) mainly due to extension of Outside Services contracts of ($159K) and higher Payroll of ($34K) offset by Pension Credit of $141K and lower Travel of $28K. Commission favorable variance of $266K mainly due to $133K from Payroll savings from vacant positions, Pension Credit of $96K, lower Travel of $36K, and Promotional Expenses of $16K. Legal unfavorable variance of ($2.3M) primarily due to higher than planned Legal Expenses of $2.6M offset by $232K in Pension Credit. External Relations favorable variance of $2.8M due to reduced Outside Services of $2M, lower Payroll from vacant positions of $331K, Pension Credit of $400K, Promotional Expenses of $43K, Travel of $67K, and General Expenses of $138K offset by unplanned Property Rentals of ($16K), Equipment of ($34K), and lower charges to Capital Projects of ($104K). Equity, Diversity and Inclusion favorable variance of $655K primarily due to lower Outside Services of $389K, lower Payroll of $223K due to delayed hiring and Pension Credit of $64K offset by higher Property Rentals of ($25K) and General Expenses of ($16K). Human Resources favorable variance of $1.4M primarily due to vacancies, lower High School interns and Veteran Fellows of $751K, Pension Credit of $537K, lower Outside Services of $130K, Travel of $58K, and General Expenses of $338K from reduced Advertising and credits from King County Metro. Labor Relations favorable variance of $53K due to Pension Credit of $93K offset by higher Payroll from unplanned job refresh and retroactive pay adjustment of ($56K). Internal Audit favorable variance of $55K primarily due to Pension Credit of $112K offset by higher Payroll of ($59K) due to job refresh. Accounting and Financial Reporting Services favorable variance of $672K due to Pension Credit of $532K and lower Outside Services of $145K. Information & Communication Technology favorable variance of $1M primarily due to Pension Credit of $1.4M offset by higher Outside Services of ($479K). Information Security favorable variance of $262K due to lower Outside Services of $218K, Pension Credit of $88K, charges to Capital Projects of $19K and lower Travel of $14K offset by higher Payroll from job refresh and retroactive pay of ($73K) and unplanned spending in General Expenses of ($11K). Finance & Budget favorable variance of $239K mainly due to Pension Credit of $468K and Charges to Capital of $35K offset by higher Payroll of ($102K) and higher Outside Services of ($175K). Business Intelligence favorable variance of $338K primarily due to lower Outside Services of $204K, Payroll of $23K, Pension Credit of $83K, Travel of $11K, and Equipment of $16K. Risk Services favorable variance of $33K due to Payroll savings from vacancies of $240K and Pension Credit of $45K offset by ($279K) increase on Property Insurance. Office of Strategic Initiative favorable variance of $266K due to delay in hiring two vacant positions of $116K, Pension Credit of $67K, reductions in Outside services of $61K, and lower Travel of $15K. Central Procurement Office favorable variance of $1M due to Pension Credit of $427K, lower Payroll of $288K, Supplies and Stock of $117K, Charges to Capital Projects of $98K, General Expenses of $54K, and Equipment of $17K. Police $3.8M favorable variance primarily due to lower Payroll of $2.6M, Pension Credit of $2.5M, and Travel of $104K offset by unbudgeted higher Worker's Compensation of ($388K) and higher costs for General Expenses of ($1.1M). Engineering favorable variance of $245K due to Pension Credit of $1.3M, lower Equipment of $135K, Supplies & Stock of $76K, Travel of $43K, and Outside Services of $281K offset by ($1.5M) lower than planned charges to Capital Projects and lower Intra-department Allocations of ($83K). PCS unfavorable variance of ($658K) primarily due to lower than planned charges to Capital Projects of ($1.5M), higher Equipment of ($132K) for unbudgeted AV Capital to Expense project, and higher Workers Compensation Claims of ($88K) which were offset by overall cuts to Payroll of $582K, Pension Credit of $231K, Supplies and Stock of $60K, Outside Services of $113K, and General Expenses of $58K. Environment & Sustainability favorable variance of $50K: o AV Environmental: Increase of Outside Services of ($283K) mainly due to acceleration of the SAMP EA, unplanned Permitting, Ultrafine Particles Study, NPDES and Living Wall. 26 V. CENTRAL SERVICES DIVISION FINANCIAL & PERFORMANCE REPORT 12/31/20 o Maritime Environmental: Unplanned Outside Services of ($699K) due to salvage costs at Fisherman's Terminal and higher Payroll of ($116K). o Noise: Outside Services lower by $91K due to reduced operations. o Environment & Sustainability: Outside Services lower by $608K due to project/program delays. Contingency favorable variance of $90K due to lower General Expenses. Capital to Expense unfavorable variance of ($193K) due to Surface Hubs Expansion project being changed to an expense project. 2020 Actuals vs. 2019 Actuals Operating Expenses were $3.5M higher than 2019 actuals mainly due to: o Core Central Support Services $5.1M higher than 2019 primarily due to higher payroll due to 2020 new hires, annual pay increases, full year salaries of people hired in 2019, higher than expected Legal Outside Services of $2.5M, and lower Charges to Capital Projects. o Police $258K below 2019 due to most expense categories lower than prior year, but almost offset by higher Worker's Compensation and General Expenses. o Capital Development $1M lower than 2019 primarily due to planned reductions in hiring in 2020 and multiple delays to Capital projects. o Environment & Sustainability $400K below 2019 due to planned reductions in hiring in 2020 and multiple delays in projects in Outside Services. D. CAPITAL RESULTS 2020 2020 Actual/Rvsd Budget Revised $ % $ in 000's Actual Budge t Infrastructure - Small Cap 1,179 2,100 921 56.1% Services Tech - Small Cap 1,721 1,350 (371) 127.5% Radio System Upgrade 532 3,687 3,155 14.4% New Budget System 302 583 281 51.8% Regional Workforce Tracking - 500 500 0.0% Learning Management System - 400 400 0.0% Maximo Upgrade 289 462 173 62.6% Phone System Upgrade 60 900 840 6.7% Customer Relationship Mgmt 1,015 1,400 385 72.5% CDD Fleet Replacement 502 1,644 1,142 30.5% Corporate Fleet Replacement 243 1,065 822 22.8% CIP Cashflow Adjustment - (3,000) (3,000) 0.0% Other (note 1) 504 1,600 1,096 31.5% TOTAL 6,347 12,691 6,344 50.0% Note: (1) "Other" includes remaining ICT projects and small capital projects/acquisitions. 27
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