Item No. 9b attach . Meeting Date: September 11, 2018 PORT OF SEATTLE 2018 FINANCIAL & PERFORMANCE REPORT AS OF JUNE 30, 2018 TABLE OF CONTENTS Page I. Portwide Performance Report 3-5 II. Aviation Division Report 6-19 III. Maritime Division Report 20-24 IV. Economic Development Division Report 25-30 V. Central Services Division Report 31-36 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/18 EXECUTIVE SUMMARY Financial Summary The Port's operating revenues for the second quarter of 2018 were $330.5M, which is $12.7M above budget and $28.4M higher than the same period in 2017. Excluding Aeronautical revenues, which are based on cost recovery, other operating revenues were $182.9M, $9.9M above budget and $8.6M higher than the 2017 actuals mainly due higher revenues from Public Parking, Rental Cars, ADR & Terminal Leased Space, Ground Transportation, Employee Parking, Recreational Boating, Maritime Portfolio Management, Central Harbor Management, and Conference & Event Centers. Total operating expenses were $191.6M, $17.3M below budget mainly due to vacancies, hiring delays, and outside services. Operating income before depreciation was $138.9M, $30.1M above budget and $10.9M higher than the 2017 actuals. The Portwide capital spending is forecasted to be $652.6M for 2018. Operating Summary At the Airport, the total enplanement growth for the second quarter of 2018 was 6.1% compared to the same period in 2017. This number is comprised of enplanement growth rate of 6.3% for domestic passengers and 5.1% for international passengers. The total landed weight for the second quarter of 2018 was 7.7% higher than the same period last year. Total cargo metric tons were 5.3% above the second quarter 2017. For the Maritime division, the occupancy rate at Shilshole Bay Marina increased to 96.3% compared to 94.0% in 2017. The number of cruise passengers is 403K for the second quarter of 2018 slightly higher compared to 394K for the same period in 2017. For the Economic Development division, building occupancy for Central Harbor and T-91 uplands are lower compared to the same period in 2017 while the building occupancy for Marina Office and Retail, T-91 Industrial and T-106 Warehouse remained the same as the second quarter of 2017. Key Business Events The Port welcomed the largest cruise ship on the West Coast this season, Norwegian Cruise Line (NCL) Bliss, in May. The U.S. Army Corps of Engineers approved the Seattle Harbor Deepening Project making it eligible for congressional authorization. The Commission authorized the Port Valet program allowing cruise passengers to obtain their airline boarding passes and check-in their luggage prior to leaving the cruise ship; this provides cruise passengers with an opportunity to spend time in Seattle before flying home. The Port finalized a license with Ecco Wireless providing a new Wi-Fi network to Shilshole Bay Marina customers. The Commission approved $200,000 in grants to fund 26 tourism-related projects across Washington State. This matching funds program, currently in its third year, will provide up to $10,000 in matching funds to local communities, destination marketing organizations, ports, chambers of commerce, tribal organizations and non-profits to promote their destinations. The Port launched the Spotlight Advertising Program application process at Sea-Tac International Airport in June and its new website with emphasis on providing infrastructure for organizational content updates and engaging customers. The Port successfully hosted the Clipper Around the World at Bell Harbor Marina in June. Major Capital Projects The Port's capital spending is expected to be $223M less than originally budgeted due to delayed spending in several projects including the International Arrivals Facility (IAF), Automated Security Lane, North Satellite (NSAT) Expansion, and restroom and paving at Shilshole Bay. Construction started at Des Moines Creek North property in SeaTac. Notice to proceed with on-site construction activities issued for the following contracts: South 160th Street Ground Transportation Building Renovation Project, Wi-Fi Enhancement Gina Marie Lindsey Hall, Baggage Claim, Bagwell and STS Stations Project, and T46 Dock Rehabilitation and Improvement Project. Construction Project Closeouts were issued for C4 UPS Systems Improvements and the SR 518 Interchange and Des Moines Memorial Drive - Emergency Contract for repair of a failed slope. Physical Completion issued for Concourse A, B, D and South Satellite WiFi Enhancement, Terminal 91 Pier 91 Berth G Finder System Replacement, WiFi Enhancements Concourse C and Central Terminal and Concourse B 400Hz Gate Improvements. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/18 PORTWIDE FINANCIAL SUMMARY $ in 000's Aeronautical Revenues Airport Non-Aero Revenues Other Port Operating Revenues Total Operating Revenues Total Operating Expenses NOI before Depreciation Depreciation NOI after Depreciation 2016 YTD 2017 YTD Actual Actual 117,765 127,780 100,336 112,761 61,322 61,548 279,422 302,088 147,874 174,104 131,549 127,984 82,277 81,860 49,271 46,124 2018 Year-to-Date Actual Budget 147,570 144,761 118,864 113,264 64,054 59,748 330,489 317,773 191,577 208,920 138,912 108,853 81,949 81,614 56,963 27,238 Fav (UnFav) Budget Variance $ % 2,809 1.9% 5,601 4.9% 4,306 7.2% 12,716 4.0% 17,343 8.3% 30,059 27.6% (335) -0.4% 29,724 109.1% Incr (Decr) Change from 2017 $ % 2018 Year-to-Date Budget Actual 23,323 25,844 26,257 25,023 9,242 9,765 2,160 2,187 59,748 64,054 43,868 38,141 15,880 25,913 20,176 19,988 (4,295) 5,925 Fav (UnFav) Budget Variance $ % 10.8% 2,521 4.9% 1,234 5.7% 524 1.3% 27 4,306 7.2% 5,727 13.1% 63.2% 10,032 187 0.9% -237.9% 10,220 Incr (Decr) Change from 2017 % $ 2018 Year-to-Date Actual Budget Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2017 $ % 1.9% 19,791 15.5% 3.5% 2.4% 1.2% 7.7% 10.2% 12.7% 7.2% -9.0% -2.0% 4.9% 8.7% 21.4% 3.1% 2.4% 8.6% 10.8% -56.9% 5.7% 2,444 408 2,213 1,759 1,252 517 (3,115) 14 481 687 125 81 361 396 1,644 (1,439) 780 8,610 6.6% 2.8% 67.4% 6.2% 16.4% 11.1% -29.1% 0.4% 7.6% 12.6% 2.8% 2.7% 6.9% 9.5% 46.4% -5.3% 15.0% 4.9% 4.0% 28,400 9.4% 19,791 6,104 2,506 28,400 17,473 10,927 89 10,838 15.5% 5.4% 4.1% 9.4% 10.0% 8.5% 0.1% 23.5% NON-AIRPORT FINANCIAL SUMMARY $ in 000's NWSA Distributable Revenue Maritime Revenues EDD Revenues SWU & Other Total Operating Revenues Total Operating Expenses NOI before Depreciation Depreciation NOI after Depreciation 2016 YTD 2017 YTD Actual Actual 27,283 28,990 24,525 22,027 7,727 8,338 2,012 1,968 61,548 61,322 33,783 29,057 27,765 32,265 20,272 21,046 7,493 11,219 (1,439) 1,732 2,038 175 2,506 4,358 (1,852) (283) (1,569) -5.3% 7.1% 26.4% 8.7% 4.1% 12.9% -6.7% -1.4% -20.9% MAJOR OPERATING REVENUES SUMMARY $ in 000's Aeronautical Revenues 2016 YTD Actual 2017 YTD Actual 117,765 147,570 39,402 14,922 5,497 30,179 8,885 5,191 7,593 3,438 6,806 6,125 4,565 3,123 5,628 4,557 5,188 25,844 5,974 182,918 38,080 14,579 5,434 28,017 8,060 4,608 7,082 3,778 6,944 5,839 4,201 2,572 5,459 4,448 4,776 23,323 13,871 173,012 2,809 1,322 343 63 2,162 825 584 511 (340) (139) 286 364 551 169 109 412 2,521 (7,898) 9,906 330,489 317,773 12,716 Public Parking Rental Cars - Operations Rental Cars - Operating CFC ADR & Terminal Leased Space Ground Transportation Employee Parking Airport Commercial Properties Airport Utilities Cruise Recreational Boating Fishing & Operations Grain Maritime Portfolio Management Central Harbor Management Conference & Event Centers NWSA Distributable Revenue Other Total Operating Revenues (w/o Aero) 34,166 15,271 3,872 26,617 5,668 4,563 4,286 3,571 5,410 5,083 4,419 2,010 5,100 3,393 4,518 28,990 4,721 161,658 127,780 36,958 14,514 3,284 28,420 7,633 4,674 10,708 3,423 6,325 5,438 4,440 3,042 5,267 4,161 3,545 27,283 5,194 174,309 TOTAL 279,422 302,088 4 144,761 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/18 MAJOR OPERATING EXPENSES SUMMARY Fav (UnFav) Incr (Decr) 2016 YTD 2017 YTD 2018 Year-to-Date Budget Variance Change from 2017 $ in 000's Actual Actual Actual Budget $ % $ % Salaries & Benefits 51,795 56,338 62,772 66,506 3,734 5.6% 6,434 11.4% Wages & Benefits 48,261 52,948 60,075 60,199 124 0.2% 7,127 13.5% Payroll to Capital Projects 10,040 12,873 13,602 14,311 710 5.0% 728 5.7% Equipment Expense 2,923 4,311 3,866 4,373 507 11.6% (445) -10.3% Supplies & Stock 3,454 4,616 4,633 4,336 (297) -6.9% 17 0.4% Outside Services 25,663 32,969 38,460 53,117 14,657 27.6% 5,491 16.7% Utilities 10,510 11,911 13,453 12,844 (608) -4.7% 1,542 12.9% Travel & Other Employee Expenses 1,879 2,338 2,303 3,482 1,179 33.9% (35) -1.5% Promotional Expenses 362 460 964 1,198 234 19.5% 504 109.4% Other Expenses 8,450 16,566 15,361 14,831 (530) -3.6% (1,205) -7.3% Charges to Capital Projects (15,463) (21,226) (23,911) (26,278) (2,366) 9.0% (2,685) 12.7% TOTAL 147,874 174,104 191,577 208,920 17,343 8.3% 17,473 10.0% KEY PERFORMANCE METRICS Fav (UnFav) 2018 2018 Budget Variance 2017 YTD 2018 YTD 2017 % Actual Actual Actual Forecast Budget Chg. Enplanements (in 000's) 11,008 11,688 23,416 24,654 24,654 Landed Weight (lbs. in 000's) 13,441 14,475 28,431 29,203 29,203 - 0.0% 772 2.7% n/a n/a 10.52 11.52 11.35 (0.17) -1.5% 1.00 9.5% 2,609 2,688 4,363 4,146 4,146 - 0.0% (217) -5.0% Passenger CPE (in $) Grain Volume (metric tons in 000's) Cruise Passenger (in 000's) - 0.0% Incr (Decr) Change from 2017 Chg. % 1,238 5.3% 394 403 1,072 1,084 1,081 3 0.3% 12 1.1% Shilshole Bay Marina Occupancy 94.0% 96.3% 94.9% 95.9% 95.9% 0.0% 0.0% 1.0% 1.1% Fishermen's Terminal Occupancy 87.0% 87.0% 81.9% 86.0% 86.0% 0.0% 0.0% 4.1% 5.0% CAPITAL SPENDING RESULTS $ in 000's Aviation Maritime Economic Development Corporate & Other (note 1) 2018 YTD 2018 2018 Budget Variance Actual Forecast Budget $ % 224,817 593,941 796,200 202,259 25.4% 21,702 32,800 46,749 13,949 29.8% 1,363 6,028 6,149 121 2.0% 1,887 19,826 26,779 6,953 26.0% TOTAL 249,769 652,595 875,877 223,282 25.5% Note: (1) "Other" includes Street Vacation projects and Storm Water Utility Small Capital projects. PORTWIDE INVESTMENT PORTFOLIO During the second quarter of 2018, the investment portfolio earned 1.69% versus the benchmark's (the Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index) 2.53%. Over the last twelve months the portfolio and the benchmark have earned 1.56% and 2.05%, respectively. Since the Port became its own Treasurer in 2002, the life-to-date earnings of the Port's portfolio and the benchmark are 2.46% and 1.80%, respectively. 5 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 FINANCIAL SUMMARY Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2017 $ % $ in 000's 2016 Actual 2017 Actual 2018 Forecast 2018 Budget Operating Revenues: Gross Aeronautical Revenues 247,811 267,690 305,005 301,082 3,923 1.3% 37,315 13.9% (3,576) (3,576) - - - 0.0% 3,576 -100.0% 244,235 264,114 305,005 301,082 3,923 1.3% 40,891 15.5% SLOA III Incentive Straight Line Adj (1) Aeronautical Revenues Non-Aeronautical Revenues 221,021 236,803 250,728 244,786 5,942 2.4% 13,925 5.9% Total Operating Revenues 465,256 500,916 555,733 545,867 9,865 1.8% 54,816 10.9% Total Operating Expense 261,226 299,114 333,374 334,856 1,482 0.4% 34,259 11.5% Net Operating Income 204,030 201,802 222,359 211,011 11,348 5.4% 20,557 10.2% Capital Expenditures 153,887 293,785 593,941 796,200 202,259 25.4% Debt Service (2) 133,982 131,060 138,177 136,075 (2,102) -1.5% 300,156 102.2% 7,117 5% (1) Annual non-cash amortization of $17.9M lease incentive related to the 5 year SLOA III agreement which ended in 2017. (2) 2018 Budget debt service amount inadvertently understated by the $2.1M debt service exclusion adjustment which impacts Aero Rate Based Revenues only. Total 2018 Aeronautical debt service obligation is reflected in the 2018 Forecast column. Division Summary 2018 Forecast vs. 2018 Budget • Net Operating Income for 2018 is forecasted to be $11.3M higher than budget (5.4% favorable) o Operating Revenue is expected to be $9.9M higher than budget (1.8% favorable) - from higher Aeronautical revenue primarily due to the decrease in revenue sharing percentage (from 50% down to 40%) negotiated in the new airline lease agreement which was not known when the 2018 Budget was approved. Non-Aero revenue is currently forecasted at $5.9M higher than 2018 Budget (2.4% favorable). o Operating Expenses are expected to be $1.5M lower than budget (0.4% favorable) primarily due to lower charges from other divisions $6.6M (6.0% favorable) which includes some planned spending deferred to future years rather than actual cost savings, as well as payroll costs expected to be lower than budget due to vacancies and hiring delays. Division Summary 2018 Forecast vs. 2017 Actuals • Net Operating Income for 2018 is forecasted to be $20.6M higher than prior year (10.2% favorable) o Operating Revenue is expected to be $54.8M higher than prior year (10.9% favorable) - primarily due to higher Aeronautical revenue from higher rate based costs and lower revenue sharing. In addition, revenues will be higher this year due to the SLOA III incentive amortization which ended in 2017 ($3.6M). NonAero revenue is also expected to be $13.9M higher in 2018 from Landside business activities, which more than offset the ($5.4M) one-time lump sum frontage fee reimbursement received in Commercial Properties in 2017. o Operating Expenses are expected to be $34.3M higher than prior year (11.5% variance) - due to higher payroll related to increased staffing ($16.3M), higher outside services expense ($14.0M) primarily due to non-recurring expenses focused on addressing strategic initiatives throughout the airport, and higher charges from other divisions ($15.2M). These planned 2018 increases in expenses are partially offset by the one-time amortization for prepaid frontage fees in 2017 ($3.6M) and lower expected costs in Environmental Liability Expense ($3.9M), and Capital to Expense costs ($2.5M). 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 A. BUSINESS EVENTS • • • • • Activity: Passenger growth through Q2 tracking slightly ahead of budget at 6.1% Customer Service: below target through Q2 - Airport Service Quality scores below 2017 in all 6 categories Business: o Airport dining and retail sales holding up better than anticipated with closure of Central Terminal due to kiosks and more "grab-and go" options. o Transportation Network Company transactions grew 36.6% in Q2, while taxis transactions declined 4.3% Capital Program: Completed Alternate Utility Facility and progressing with construction on North Satellite, International Arrivals Facility and Concourse D Hardstand Terminal. Planning for future: Sustainable Airport Master Plan - initiated environmental review in July B. KEY PERFORMANCE METRICS YTD 2016 YTD 2017 YTD 2018 % Change from 2017 Total Passengers (000's) Domestic International Total 19,249 2,257 21,506 19,666 2,484 22,150 20,897 2,611 23,508 6.3% 5.1% 6.1% Operations 197,152 199,610 210,722 5.6% 843 12,044 12,886 1,025 12,416 13,441 1,147 13,328 14,475 12.0% 7.3% 7.7% 83,079 55,287 27,562 165,928 111,015 57,534 28,882 197,431 122,259 57,279 28,326 207,864 10.1% -0.4% -1.9% 5.3% Landed Weight (In Millions of lbs.) Cargo All other Total Cargo - Metric Tons Domestic freight International freight Mail Total 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Key Performance Measures Fav (UnFav) Budget Vairance $ % Incr (Decr) Change from 2017 $ % 2016 Actual 2017 Actual 2018 Forecast 2018 Budget Key Performance Metrics Cost per Enplanement (CPE) Non-Aeronautical NOI (in 000's) 10.10 128,727 10.52 133,101 11.52 134,164 11.35 126,861 (0.17) 7,303 -1.5% 5.8% 0.99 1,063 9.4% 0.8% Other Performance Metrics O&M Cost per Enplanement Non-Aero Revenue per Enplanement Debt per Enplanement (in $) Debt Service Coverage Days cash on hand (10 months = 304 days) Aeronautical Revenue Sharing ($ in 000's) 11.46 12.77 9.70 10.11 104 114 1.53 1.57 416 379 (37,395) (42,311) 13.52 10.17 116 1.60 307 (31,908) 13.58 9.93 116 1.51 304 (35,799) 0.06 0.24 0.09 3 3,891 0.4% 2.4% 0.0% 5.8% 1.0% 10.9% 0.75 0.06 2 0.02 (72) 10,403 5.9% 0.6% 1.3% 1.5% -19.0% 24.6% Activity (in 000's) Enplanements 22,796 24,654 24,654 - 0.0% 1,238 5.3% 23,416 Key Performance Metrics - 2018 Forecast compared to 2018 Budget: • • Cost per Enplanement (CPE) Forecast: o CPE $0.17 unfavorable to budget - 2018 Budget assumed 50% Revenue Sharing. The 2018 Forecast reflects 40% Revenue Sharing as negotiated in the SLOA IV agreement, which was not known when the 2018 Budget was approved. Note: Adjusted CPE Budget is 11.63 based on 40% Revenue Sharing per SLOA IV agreement bringing the adjusted CPE to $0.11 favorable to budget. o CPE increase of $0.99 compared to prior year - due to increase in rate base costs and decrease in revenue sharing percentage under SLOA IV. Non-Aero NOI: o Non-Aero NOI 2018 Forecast expected to be $7.3M favorable to 2018 budget due to both higher revenues and deferred expenses. o Non-Aero NOI 2018 Forecast expected to be $1.1M higher than prior year due primarily to increased Ground Transportation activity, increased transactions in Public Parking, and stronger performance in Airport Dining and Retail. 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 C. OPERATING RESULTS Division Summary - YTD 2017 YTD Actual Gross Aeronautical Revenues (1) SLOA III Incentive Straight Line Adj (2) Aeronautical Revenues Non-Aeronautical Revenues Total Operating Revenues 119,553 (1,788) 117,765 100,336 218,100 129,567 (1,788) 127,780 112,761 240,540 147,570 147,570 118,864 266,435 144,761 144,761 113,264 258,025 2,809 2,809 5,601 8,410 1.9% 18,003 N/A 1,788 1.9% 19,791 4.9% 6,104 3.3% 25,894 13.9% 100.0% 15.5% 5.4% 10.8% Operating Expenses: Payroll Outside Services Utilities Other Airport Expenses Total Airport Direct Charges 49,708 15,736 7,358 9,132 81,934 55,798 17,203 8,389 13,680 95,070 63,139 21,015 9,589 9,788 103,530 64,511 24,978 9,072 9,920 108,481 1,372 3,963 (516) 132 4,951 2.1% 15.9% -5.7% 1.3% 4.6% 7,341 3,812 1,200 (3,892) 8,460 13.2% 22.2% 14.3% -28.5% 8.9% 33 33 2,714 24 2,738 4,484 8 4,492 2,980 2,980 (1,504) (8) (1,512) -50.5% N/A -50.7% 1,770 65.2% (16) 1,753 -66.8% 64.0% Total Airport Expenses 81,968 97,809 108,021 111,461 3,439 3.1% 10,212 10.4% Police Costs Capital Development Other Central Services Maritime/Economic Development Total Charges from Other Divisions 8,943 3,358 22,723 1,826 36,849 9,146 6,486 25,000 1,879 42,512 10,659 6,072 26,714 1,970 45,414 11,070 11,422 28,414 2,685 53,591 411 5,351 1,700 715 8,177 3.7% 46.8% 6.0% 26.6% 15.3% 16.5% 2,902 -6.4% 6.9% 4.8% 6.8% Total Operating Expense 118,817 140,321 153,436 165,052 11,617 7.0% 13,115 9.3% Net Operating Income 99,283 100,219 112,999 92,972 20,026 21.5% 12,780 12.8% $ in 000's Operating Revenues: Environmental Remediation Liability Capital to Expense Total Exceptions 2018 Year-to-Date Actual Budget Fav (UnFav) Incr (Decr) Budget Variance Change from 2017 $ % $ % 2016 YTD Actual 1,513 (415) 1,714 91 (1) Aero revenues are net of revenue sharing. (2) Annual non-cash amortization of $17.9M lease incentive related to the SLOA III agreement for the 5 year period from 2013-2017. Operating Expenses - 2018 YTD Actuals compared to 2018 YTD Budget: Total Operating Expenses are lower than the YTD 2018 Budget by $11.6 million due to the net of the following: • YTD Aviation Direct Operating Expenses are lower than budget by $5.0 million due to the following: Positive Variance of $5.5M Negative Variance of $0.5M Payroll - vacancies & hiring delays $1.4M Outside Services (savings & work deferred to future year) $4.0M NERA 3 grant (FAA pilot program) 0.9M AV Maintenance temporary timing issues 0.7M Capital Program Mgmt delay in key planning projects 0.7M SAMP - Environmental assessment delayed 0.8M CBP reimbursable program not yet spent 0.3M Safety Management Programs still in early stages 0.2M All other Outside Services 0.4M Other Aviation Expenses $0.1M Utilities Increased Surface Water activity Lower Natural Gas activity 9 $0.5M 0.7M (0.2M) II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Operating Expenses - 2018 YTD Actuals compared to 2018 YTD Budget - continued: • YTD Operating Expenses Exceptions are higher than budget by $1.5 million due to the following: Positive Variance - no material variance Negative Variance of $1.5M Environmental Remediation Liability Soils: IAF (soils) estimate increase Taxiway Improvement Project Asbestos: Obligating events not expected until 2019 NSAT (asbestos) estimate increase IAF- SSAT Interior Corridor Terminal Security Other projects • $1.5M 1.5M 0.2M (2.2M) 1.0M 0.5M 0.2M 0.3M YTD Operating Expense charges from Central Services and other divisions are lower than budget by $8.1M million due to the following: Positive Variance of $8.1M Other Central Services savings Police savings Maritime/Economic savings CDD savings Aviation PMG (projects delayed/deferred) PCS Engineering Other CDD Negative Variance - none $1.7M $0.4M $0.7M $5.3M 3.0M 1.6M 0.8M (0.1M) Operating Expenses - 2018 YTD Actuals compared to 2017 YTD Actuals: Total Operating Expenses are higher than YTD 2017 Actuals by $13.1 million due to the net of the following: • YTD Aviation Direct Operating Expenses are higher than YTD 2017 Actuals by $8.4 million due to the following: Increase of $12.3M Payroll - increased staffing Outside Services Utilities Decrease of $3.9M $7.3M $3.8M $1.2M Other Aviation Expenses One-time amortization frontage fees All other Aviation Expenses 10 $3.9M $3.7M $0.2M II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Operating Expenses - 2018 YTD Actuals compared to 2017 YTD Actuals - continued: • YTD Operating Expenses Exceptions are higher than 2017 YTD Actuals by $1.8 million due to the following: Increase of $1.8M Environmental Remediation Liability Asbestos: IAF- SSAT Interior Corridor SSAT Structural Improvements Other projects • Decrease - no material amount $1.8M 0.5M 0.8M 0.5M YTD Operating Expense charges from Central Services and other divisions are higher than YTD 2017 Actuals by $2.9 million due to the following: Increase of $3.3M Other Central Services Police Costs Decrease of $0.4M $1.8M $1.5M CDD savings 11 $0.4M II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Division Summary - YE Forecast Fav (UnFav) Budget Variance $ % 2016 Actual 2017 Actual 2018 Forecast 2018 Budget Gross Aeronautical Revenues (1) SLOA III Incentive Straight Line Adj (2) Aeronautical Revenues Non-Aeronautical Revenues Total Operating Revenues 247,811 (3,576) 244,235 221,021 465,256 267,690 (3,576) 264,114 236,803 500,916 305,005 305,005 250,728 555,733 301,082 301,082 244,786 545,867 3,923 3,923 5,942 9,865 Operating Expenses: Payroll Outside Services Utilities Other Airport Expenses Total Airport Direct Charges 94,559 31,636 14,667 21,934 162,797 114,463 41,055 16,374 28,292 200,184 130,809 55,002 17,927 21,940 225,677 132,156 52,532 17,320 19,776 221,784 - 8,812 2,856 11,668 4,851 367 5,218 Total Airport Expenses 162,797 211,852 Police Costs Capital Development Other Central Services Maritime/Economic Development Total Charges from Other Divisions 18,183 9,319 58,617 12,310 98,429 Total Operating Expense $ in 000's Operating Revenues: 2.4% 1.8% 37,315 3,576 40,891 13,925 54,816 13.9% 100.0% 15.5% 5.9% 10.9% 1,347 (2,469) (607) (2,165) (3,893) 1.0% -4.7% -3.5% -10.9% -1.8% 16,346 13,947 1,553 (6,352) 25,493 14.3% 34.0% 9.5% -22.5% 12.7% 4,030 4,030 (821) (367) (1,188) -20.4% 0.0% -29.5% (3,961) -44.9% (2,489) (6,450) -87.1% -55.3% 230,896 225,814 (5,082) -2.3% 19,044 9.0% 17,652 14,701 51,004 3,904 87,262 22,174 17,936 57,032 5,336 102,478 22,174 23,092 58,265 5,511 109,042 5,156 1,233 175 6,564 0.0% 22.3% 2.1% 3.2% 6.0% 4,522 3,235 6,028 1,431 25.6% 15,216 22.0% 11.8% 36.7% 17.4% 261,226 299,114 333,374 334,856 1,482 0.4% 34,259 11.5% Net Operating Income 204,030 201,802 222,359 211,011 11,348 5.4% 20,557 10.2% CFC Surplus (4,899) 2,160 3,576 (133,982) 70,885 (2,750) 3,481 3,576 (131,060) 75,050 (6,637) 4,406 (138,177) 81,951 (7,142) 4,406 (136,075) 72,200 505 (2,102) 9,751 7.1% 0.0% 0.0% 1.5% 13.5% (3,887) -141.4% 26.6% 925 (3,576) -100.0% -5.4% (7,117) 9.2% 6,901 Environmental Remediation Liability Capital to Expense Total Exceptions Net Non-Operating Items in / out from ADF (3) SLOA III Incentive Straight Line Adj Debt Service (4) Adjusted Net Cash Flow 1.3% 0.0% Incr (Decr) Change from 2017 $ % (1) Aero revenues are net of revenue sharing. (2) Annual non-cash amortization of $17.9M lease incentive related to the SLOA III agreement for the 5 year period from 2013-2017. (3) Per SLOA III definition of Net Revenues. (4) 2018 Budget debt service amount inadvertently understated by the $2.1M debt service exclusion adjustment which impacts Aero Rate Based Revenues only. Total 2018 Aeronautical debt service obligation is reflected in the 2018 Forecast column. 12 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Operating Expenses - 2018 YE Forecast compared to 2018 YE Budget: Total Operating Expenses are forecasted to be lower than the 2018 Budget by $1.5 million due to the net of the following: • Aviation Direct Operating Expenses are forecasted to be higher than the 2018 Budget by $3.9 million due to the following: Positive Variance of $1.3M Payroll - vacancies & hiring delays • Negative Variance of $5.2M $1.3M Outside Services Aviation Planning Taxi Operations (SP & curbside mgmt) Customer Service (new dept. expenses) UPM Pest Management All other Outside Services Utilities IWTP overflow event All other Utilities Other Aviation Expenses Increase in Envirnonmental Reserves Charges to capital lower than expected Construction Access Support Fire Fighters for 2nd Care Car Maintenance All other Aviation Expense $2.5M 1.3M 0.7M 0.6M 0.4M (0.5M) $0.6M 0.4M 0.2M $2.1M 0.8M 0.4M 0.6M 0.8M 0.5M (1.0M) Aviation Operating Expense Exceptions are higher than budget by $1.2 million due to the following: Positive Variance - no material variance Negative Variance of $1.2M Environmental Remediation Liability Soils: IAF (soils) estimate increase 1.5M Taxiway Improvement Project 0.2M Other soils related (.2M) Asbestos: Obligating events not expected until 2019 (2.2M) NSAT (asbestos) estimate increase 1.0M IAF- SSAT Interior Corridor 0.5M Capital to Expense - write-off Main Terminal/NSTAR • $0.8M $0.4M Operating Expense charges from Central Services and other divisions are forecasted to be lower than budget by $6.6M million due to the following: Positive Variance of $6.6M Other Central Services savings Maritime/Economic savings CDD savings Aviation PMG (projects delayed/deferred) PCS Engineering Other CDD Negative Variance - none $1.2M $0.2M $5.2M 4.0M 0.7M 0.6M (0.1M) 13 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Operating Expenses - 2018 YE Forecast compared to 2017 YE Actuals: Total Operating Expenses are forecasted to be higher than 2017 Actuals by $34.25 million due to the net of the following: • Aviation Direct Operating Expenses are forecasted to be higher than 2017 Actuals by $25.5 million due to the following: Increase of $31.9M Payroll - increased staffing Outside Services Onsite Consultants - Airport Dining and Retail Personal Services - Non-Aero Commercial Properties Personal Services - AV Facilities and Capital Program Small Works Construction Services - Airfield Operations Other Contracted Services - Baggage Systems All other Outside Services increases Utilities • Decrease of $6.4M $16.3M $14.0M 4.0M 2.7M 4.0M 1.2M 1.3M 0.8M Other Aviation Expenses One-time amortization frontage fees Litigated & Non-litigated damages All other Aviation Expenses $6.4M 3.6M 1.5M 1.4M $1.6M Operating Expense Exceptions are forecasted to be lower than 2017 Actuals by $6.5M due to the following: Increase - none Decrease of $6.5M Environmental Remediation Liability IAF soils 3.6M All other ERL expense 0.4M Capital to Expense Obsolete exit lane equipment 1.9M SSAT - HVAC equipment 0.7M Projected Main Terminal/Nstar write off (0.4M) All other Capital to Expense items 0.3M • $4.0M $2.5M Operating Expense charges from Central Services and other divisions are forecasted to be higher than 2017 Actuals by $15.2 million due to the following: Increase of $15.2M Police CDD Other Central Services Maritime/Economic Development divisions Decrease - no material amount $4.6M $3.2M $6.0M $1.4M 14 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Aeronautical Business Unit Summary- YTD 2016 YTD 2017 YTD 2018 Year-to-Date Incr (Decr) Fav (UnFav) Budget Variance Change from 2017 $ in 000's Actual Actual Actual Budget $ % $ % Revenues: Movement Area Apron Area Terminal Rents Federal Inspection Services (FIS) Total Rate Base Revenues 45,551 6,088 75,640 5,174 132,453 50,849 7,636 78,051 6,708 143,243 59,656 8,209 83,956 6,641 158,462 59,421 7,654 84,140 6,470 157,684 235 555 (183) 171 778 0.4% 7.2% -0.2% 2.6% 0.5% 8,806 573 5,906 (67) 15,219 17.3% 7.5% 7.6% -1.0% 10.6% Commercial Area Subtotal before Revenue Sharing 4,479 136,932 4,959 148,202 5,072 163,534 4,976 162,660 97 874 1.9% 0.5% 114 15,332 2.3% Revenue Sharing Total Aeronautical Revenues (17,379) 119,553 (18,635) 129,567 (15,964) 147,570 (17,899) 144,761 1,935 2,809 10.8% 1.9% 2,671 18,003 Total Aeronautical Expenses 76,280 91,209 100,511 106,450 5,939 5.6% 9,302 10.2% 8,701 22.7% Net Operating Income 43,272 38,358 47,059 38,311 8,749 22.8% 10.3% 14.3% 13.9% Aeronautical - Q2 2018 Actuals vs. Q2 2018 Budget • Net Operating Income for Q2 2018 is $8.7M higher than budget (22.8% favorable) o Operating Revenue is $2.8M higher than budget (1.9% favorable) primarily due to the decrease in revenue sharing percentage (from 50% down to 40%) negotiated in the new airline lease agreement which was not known when the 2018 Budget was approved. o Operating Expenses are $5.9M lower than budget (5.6% favorable) primarily due to timing delays in Outside Services spending and lower charges from other divisions. Aeronautical - Q2 2018 Actual vs. Q2 2017 Actual • Net Operating Income for Q2 2018 is $8.7M higher than Q2 2017 (22.7% favorable) o Operating Revenue is $18.0 M higher than Q2 2017 (13.9% favorable) due to higher rate based costs to support increased airline activity and lower revenue sharing due to reduction in revenue sharing percentage under new airline agreement. o Operating Expenses are $9.3M higher than Q2 2017 (10.2% variance) due to higher airport direct operating expenses to support increased airline activity and higher charges from other divisions. 15 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Aeronautical Business Unit Summary - YE Forecast Incr (Decr) Change from 2017 Fav (UnFav) Budget Variance 2016 2017 2018 2018 $ in 000's Actual Actual Forecast Budget $ % Revenues: Movement Area Apron Area Terminal Rents Federal Inspection Services (FIS) Total Rate Base Revenues 94,725 14,028 155,852 11,227 275,832 108,638 16,771 155,431 18,612 299,452 125,275 16,023 171,260 14,143 326,701 125,422 15,979 171,854 13,413 326,668 (147) 44 (594) 730 33 Commercial Area Subtotal before Revenue Sharing 9,379 285,211 10,574 310,026 10,212 336,913 10,212 336,880 Revenue Sharing (37,395) (42,311) (31,908) Other Prior Year Revenues Total Aeronautical Revenues (5) 247,811 (26) 267,690 Total Aeronautical Expenses 168,932 Net Operating Income Debt Service (1) Net Cash Flow $ % -0.1% 0.3% -0.3% 5.4% 0.0% 16,637 (748) 15,830 (4,469) 27,249 15.3% -4.5% 10.2% -24.0% 9.1% 33 0.0% 0.0% (362) 26,887 -3.4% (35,799) 3,891 10.9% 10,403 24.6% 305,005 301,082 3,923 0.0% 1.3% 26 37,315 100.0% 195,414 216,810 216,931 121 0.1% 21,397 10.9% 78,879 72,276 88,195 84,151 4,044 4.8% 15,919 22.0% (89,130) (10,251) (86,564) (14,288) (92,425) (4,230) (90,323) (6,173) (2,102) 1,943 -2.3% 31.5% (5,861) 10,058 -6.8% 8.7% 13.9% 70.4% (1) 2018 Budget debt service amount inadvertently understated by the $2.1M debt service exclusion adjustment which impacts Aero Rate Based Revenues only. Total 2018 Aeronautical debt service obligation is reflected in the 2018 Forecast column. Airline Rate Base Cost Drivers $ in 000's 2016 Actual 2017 Actual O&M Debt Service Gross Debt Service PFC Offset Amortization Space Vacancy TSA Operating Grant and Other Rate Base Revenues Commercial area Total Aero Revenues 165,427 192,188 118,641 113,832 (32,831) (33,057) 28,215 29,654 (2,638) (2,264) (982) (901) 275,832 299,452 9,379 10,574 285,211 310,026 2018 Forecast 2018 Budget 210,685 120,555 (33,015) 32,373 (2,638) (1,259) 326,701 10,212 336,913 210,433 120,555 (33,015) 32,373 (2,650) (1,028) 326,668 10,212 336,880 Fav (UnFav) Budget Variance $ 252 12 (231) 33 33 Incr (Decr) Change from 2017 % $ % 0.1% 0.0% 0.0% 0.0% -0.4% 22.4% 0.0% 0.0% 0.0% 18,498 6,723 42 2,719 (374) (358) 27,249 (362) 26,887 9.6% 5.9% -0.1% 9.2% 16.5% 39.8% 9.1% -3.4% 8.7% Aeronautical - 2018 YE Forecast vs. 2018 YE Budget • Aeronautical net operating income is forecasted to be $4.0M higher than budget (4.8% favorable). o Aeronautical revenues are forecasted to be $3.9M higher than budget (1.3% favorable) - primarily due to the decrease in revenue sharing percentage (from 50% down to 40%) negotiated in the new airline lease agreement which was not known when the 2018 Budget was approved. o Aeronautical operating expenses are forecasted to be closely aligned with the 2018 Budget. 16 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Aeronautical - 2018 YE Forecast vs. 2017 YE Actuals • Net Operating Income for 2018 is expected to be $15.9M higher than prior year (22.0% favorable) o Operating Revenue is expected to be $37.3M higher than prior year (13.9% favorable) due to higher rate based costs to support increased airline activity and lower revenue sharing due to reduction in revenue sharing percentage ($10.4M) under new airline agreement. o Operating Expenses are expected to be $21.4M higher than prior year (10.9% variance) due to higher airport direct operating expenses to support increased airline activity and higher charges from other divisions. Non-Aero Business Unit Summary -- YTD $ in 000's Non-Aero Revenues Rental Cars - Operations Rental Cars - Operating CFC Public Parking Ground Transportation Airport Dining & Retail & Leased Space Commercial Properties Utilities Employee Parking Clubs and Lounges Other Total Non-Aero Revenues Total Non-Aero Expenses Net Operating Income 2016 YTD Actual 2017 YTD Actual 2018 Year-to-Date Actual Budget Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2017 $ % 15,271 3,872 34,166 5,668 27,118 4,286 3,571 4,563 1,378 443 100,336 42,537 14,514 3,284 36,958 7,633 28,420 10,708 3,423 4,674 2,173 973 112,761 49,111 14,922 5,497 39,402 8,885 30,179 7,593 3,438 5,191 2,773 983 118,864 52,925 14,579 5,434 38,080 8,060 28,017 7,082 3,778 4,608 2,694 932 113,264 58,602 343 63 1,322 825 2,162 511 (340) 584 79 51 5,601 2.4% 1.2% 3.5% 10.2% 7.7% 7.2% -9.0% 12.7% 2.9% 5.5% 4.9% 408 2,213 2,444 1,252 1,759 (3,115) 14 517 599 10 6,104 2.8% 67.4% 6.6% 16.4% 6.2% -29.1% 0.4% 11.1% 27.6% 1.1% 5.4% 5,677 9.7% 3,813 7.8% 57,799 63,649 65,940 54,662 11,278 20.6% 2,290 3.6% Non-Aeronautical - Q2 2018 Actuals vs. Q2 2018 Budget • Net Operating Income for Q2 2018 is $11.3M higher than budget (20.6% favorable) o Operating Revenue is $5.6M higher than budget (4.9% favorable) primarily due to Airport Dining & Retail revenue stronger than expected in Q2 due to schedule delays in quick-serve restaurant units remaining open into Feb 2018 which were expected to close in late-2017. In addition, Employee Parking continues to experience strong demand driven growth. o Operating Expenses are $5.7M lower than budget (9.7% favorable) primarily due to slower than anticipated grant spending on NERA 3 FAA pilot program and schedule delays on ADR tenant buildout projects. Non-Aeronautical - Q2 2018 Actual vs. Q2 2017 Actual • Net Operating Income for Q2 2018 is $2.3M higher than Q2 2017 (3.6% favorable) o Operating Revenue is $6.1M higher than Q2 2017 (5.4% favorable) primarily due to the one-time lump sum frontage fee reimbursement ($5.4M) received in Commercial Properties in 2017, which is partially offset by higher Rental Car operating CFC revenue due to lower debt service costs, and higher Public Parking revenue due to higher rates in effect in Q1 compared to the prior year. o Operating Expenses is $3.8M higher than Q2 2017 (7.8% increase) primarily due to payroll staffing vacancies being filled and the Commissary Kitchen build payout to Ivar's within the Airport Dining and Retail areas. Also, there has been increased activity in both staffing and non-payroll costs due to the growth in revenue in Clubs and Lounges. 17 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Non-Aero Business Unit Summary - YE Forecast Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2017 $ % 2016 Actual 2017 Actual 2018 Forecast 2018 Budget 37,082 12,122 69,540 12,803 58,405 9,992 7,233 9,329 3,028 1,487 221,021 92,294 35,051 10,641 75,106 15,684 58,980 18,042 7,018 9,617 5,041 1,624 236,803 103,702 35,084 14,653 80,046 18,401 61,980 15,236 7,317 10,214 5,830 1,966 250,728 116,564 35,294 15,563 78,572 16,884 59,087 14,706 7,556 9,457 5,630 2,036 244,786 117,925 (210) (910) 1,474 1,517 2,893 529 (239) 757 200 (70) 5,942 -0.6% -5.8% 1.9% 9.0% 4.9% 3.6% -3.2% 8.0% 3.6% -3.4% 2.4% 33 4,012 4,940 2,717 3,000 (2,807) 300 597 790 343 13,925 0.1% 37.7% 6.6% 17.3% 5.1% -15.6% 4.3% 6.2% 15.7% 21.1% 5.9% 1,362 1.2% 12,861 12.4% Net Operating Income 128,727 133,101 134,164 126,861 7,303 5.8% 1,063 0.8% Less: CFC (Surplus) / Deficit (1) Adjusted Non-Aero NOI (4,899) 123,828 (2,750) 130,351 (6,182) 127,982 (7,142) 119,719 960 8,263 13.4% 6.9% (3,432) -124.8% (2,369) -1.8% Debt Service (1) Net Cash Flow (43,984) 79,844 (44,495) 85,856 (45,752) 82,230 (45,752) 73,967 8,263 0.0% 11.2% (1,257) (3,625) $ in 000's Non-Aero Revenues Rental Cars - Operations Rental Cars - Operating CFC Public Parking Ground Transportation Airport Dining & Retail & Leased Space Commercial Properties Utilities Employee Parking Clubs and Lounges Other Total Non-Aero Revenues Total Non-Aero Expenses -2.8% -4.2% (1) CFC excess and Debit service are forecasted/budgeted on an annual basis only. Thus, quarterly data is not available. Non-Aeronautical - 2018 Forecast vs. 2018 Budget • Non-Aeronautical net operating income is forecasted to be $7.3M higher than budget (5.8% favorable). o Non-Aeronautical revenues are forecasted to be $5.9M higher than budget (2.4% favorable):  Airport Dining & Retail - favorable ($2.9M) forecast reflects strong performance in both Food and Beverage, Retail Sales despite transitions to new leases, and increased revenue from Advertising.  Commercial Properties - favorable $0.5M due to earlier than anticipated occupancy of DMCBP Phase II building.  Utilities - unfavorable ($0.2M) due to reduced tenant billings while garbage program undergoes process improvement planning. o Non-Aeronautical operating expenses are forecasted to be $1.3M lower than budget (1.2% favorable) - primarily due to lower than anticipated charges from other divisions due to AVPMG terminal project delays. Non-Aeronautical - 2018 Forecast vs. 2017 Actuals • Net Operating Income for 2018 is expected to be $1.1M higher than prior year (0.8% favorable) o Operating Revenue is expected to be $13.9M higher than prior year (5.9% favorable) primarily due to increased Landside business activity, which more than offsets the ($5.4M) one-time lump sum frontage fee reimbursement received in Commercial Properties in 2017. o Operating Expenses are expected to be $12.9M higher than prior year (12.4% variance) due to higher payroll costs related to increase in staffing, higher outside services expense primarily due to non-recurring expenses focused on addressing strategic initiatives throughout the airport, and higher charges from other divisions. 18 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 D. CAPITAL RESULTS Capital Variance $ in 000's Description International Arrivals Facility (1) ASL Conversion at Checkpoints (2) NS NSAT Renov NSTS Lobbies (3) N. Terminals Utilities Upgrade (4) Add'l Baggage Makeup Space IAF (5) Terminal Security Enhancements (6) SSAT Infrastructure HVAC (7) 2018 Taxiway Improvement Proj Concourse D Hardstand Holdroom Alternate Utility Facility Checked Bag Recap/Optimization All Other Total Spending 2018 YTD Actual 75,176 725 58,656 213 1,234 189 128 8,988 15,159 17,169 16,009 31,171 224,817 2018 Forecast 215,298 1,175 131,716 413 10,520 2,189 1,218 37,378 28,433 18,263 38,009 109,330 593,941 2018 Budget 324,221 16,800 140,738 8,200 15,998 5,925 4,910 36,250 27,986 18,350 38,000 158,822 796,200 Budget Variance $ % 108,923 33.6% 15,625 93.0% 9,022 6.4% 7,787 95.0% 5,478 34.2% 3,736 63.1% 3,692 75.2% (1,128) -3.1% (447) -1.6% 87 0.5% (9) 0.0% 49,492 31.2% 202,259 25.4% (1) Delays in design-build progress, consultant billings/purchases for construction and project/construction management services. (2) $8.7M of capital budget deemed to be public expense as the equipment will be transferred to TSA. 1 of 3 lanes has been installed; remaining lanes pushed out to Q4 2018 - Q2 2019. (3) Actual projected billings as provided by contractor have been less than anticipated. (4) Early works construction cancelled and combined with main construction phase due to better coordination with adjacent projects. (5) Delays in construction due to changes in sequencing of work by contractor. (6) Favorable bids for Phase I (shatter proof windows) will result in less spending in 2018. (7) Bid bust has resulted in one year delay of project. Project was re-scoped and design is currently in progress. 19 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 FINANCIAL SUMMARY Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2017 $ % 2016 Actual 2017 Actual 2018 Forecast 2018 Budget Revenues: Operating Revenue 50,810 54,183 55,293 55,053 240 0% 1,109 2% Total Revenues 50,810 54,183 55,293 55,053 240 0% 1,109 2% Total Operating Expenses 40,283 42,164 48,510 49,578 1,068 2% 6,347 15% Net Operating Income 10,526 12,020 6,783 5,475 1,308 -24% (5,237) 44% Capital Expenditures 5,746 20,489 32,800 46,749 13,949 30% 12,311 60% $ in 000's Division Summary 2018 Forecast vs. 2018 Budget • Operating Revenues are forecasted to be $240K above budget due to favorable moorage revenue, offset by earlier termination of lease at T106. • Operating Expenses are forecasted to be $1,068K below budget primarily due to movement of tenant improvements at the Maritime Industrial Center to capital, underspend in Cruise consulting, and Central Services payroll. • Net Operating Income forecasted to be $1,308K above budget. • At the end of the second quarter, capital spending for full year 2018 is forecasted to be $32.8 million or 70% of the approved budget of $47.7 million. Division Summary 2018 Forecast vs. 2017 Actuals • Operating Revenues are expected to be $1,109K above 2017 primarily due to higher tariff rates. • Operating Expenses are expected to be $6,347K greater than 2017 primarily increased wage rates, Cruise Port Valet, and acquisition of Salmon Bay Marina. • Net Operating Income is forecasted to be $5,237K less than 2017. Net Operating Income before Depreciation by Business $ in 000's 2016 YTD 2017 YTD Actual Actual 2018 Year-to-Date Actual Budget Fav (UnFav) Incr (Decr) Budget Variance $ % Change from 2017 $ % Fishing & Operations (1,563) (910) (1,139) (1,643) 504 31% (230) -25% Recreational Boating 748 799 987 34 953 2840% 187 23% Cruise 2,223 2,697 2,093 956 1,137 119% (604) -22% Bulk 1,442 2,388 2,249 1,672 577 35% (139) -6% Maritime Portfolio 450 121 391 (314) 705 224% 270 223% All Other Total Maritime (48) (478) (39) (308) 269 87% 438 92% 3,252 4,618 4,541 396 4,145 1046% (77) -2% 20 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 A. BUSINESS EVENTS Cruise - Commissioners, Executive, Cruise, and Public Affairs staff participated in the successful inaugural event and first turnaround call of the Norwegian Bliss, May 30-June 02. The event garnered significant media attention. Recreational Boating - Successfully hosted the Clipper Around the World at Bell Harbor Marina in June. Fishing and Commercial Operations - Transitioned management of Salmon Bay Marina in June. Maritime Portfolio Management -Finalized a license with Ecco Wireless that will bring a new Wi-Fi network to Shilshole Bay Marina with faster speeds and better coverage over the whole site for all customers. Stormwater Utility - Obtained permit from US Army Corp of Engineers to proceed with T18 Outfall Renewal and Replacement project. Tracking to exceed the 75% assessment target. B. KEY PERFORMANCE METRICS Grain Volume - Metric Tons in 000's 700 600 500 400 300 200 100 0 2017 Actuals 2018 Budget 2018 Actuals Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cruise Passengers in 000's 300 250 200 2017 Actuals 150 2018 Budget 100 2018 Actuals 50 0 Jan Feb Mar Apr May Jun Jul Aug 21 Sep Oct Nov Dec III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 C. OPERATING RESULTS $ in 000's Fishing & Operations Recreational Boating Cruise Bulk Maritime Portfolio Management Other Total Revenue Expenses Fishing & Operations Rec Boating Cruise Other Maritime Maintenance Expenses Portfolio Management Other ED Expenses Total Maritime & EDD expenses Enviromental & Sustainability CDD Expenses Police Expenses Other Central Services Aviation Division Total Central Services & Aviation Envir Remed Liability Total Expense NOI Before Depreciation Depreciation NOI After Depreciation 2016 YTD 2017 YTD Actual Actual 4,440 4,419 5,083 5,438 5,410 6,325 2,010 3,042 5,100 5,267 5 14 22,027 24,525 2,206 1,524 954 373 4,716 1,679 166 11,617 303 522 1,925 4,294 66 7,109 48 18,774 3,252 8,655 (5,403) 2,305 1,852 558 585 4,740 1,770 353 12,162 598 419 1,889 4,401 67 7,374 371 19,907 4,618 8,442 (3,824) 2018 Year-to-Date Budget Actual 4,201 4,565 6,125 5,839 6,806 6,944 3,123 2,572 5,628 5,459 11 9 26,257 25,023 Fav (UnFav) Budget Variance % $ 364 9% 286 5% (139) -2% 551 21% 169 3% 2 28% 1,234 5% 2,461 1,989 1,135 266 5,576 2,031 320 13,778 519 437 2,169 4,842 70 8,037 (99) 21,716 4,541 8,823 (4,281) (63) 297 851 388 66 160 141 1,840 479 193 (68) 377 (9) 972 99 2,911 4,145 45 4,190 2,399 2,285 1,987 655 5,642 2,191 460 15,618 998 630 2,101 5,219 61 9,009 0 24,627 396 8,868 (8,471) -3% 13% 43% 59% 1% 7% 31% 12% 48% 31% -3% 7% -15% 11% NA 12% 1046% 1% -49% Incr (Decr) Change from 2017 % $ 125 3% 687 13% 481 8% 81 3% 361 7% (3) -23% 1,732 7% 156 137 577 (318) 836 261 (33) 1,616 (79) 18 280 441 2 662 (469) 1,809 (77) 381 (458) 7% 7% 103% -54% 18% 15% -9% 13% -13% 4% 15% 10% 3% 9% -127% 9% -2% 5% 12% 2018 YTD Actuals vs. Budget • Operating Revenues were $1,234K higher than budget from favorable occupancy rates in Recreational Boating and Fishing & Operations along with higher than expected grain volumes. • Operating Expenses were $2,911K lower than budget: o Cruise $851K lower than budget due to timing and savings of Port Valet and consulting invoices. o Rec Boating $297K lower than budget due to open positions. o Other Maritime $388K lower than budget from Marketing open FTEs and Habitat expenses applied to non-operations and capital. o Portfolio Management $160K below budget from tenant improvements at Maritime Industrial Center. o Environment & Sustainability $479K lower than budget due to vacant positions and capital/expense mix. o Capital Development (CDD) $193K below budget due to fewer contractors than expected. o Other Central Services $377K lower than budget primarily due to lower charges from Public Affairs $123K, Human Resources $94K, and Exec $66K. o All other expenses net to $166K lower than budget. • Net Operating Income was $4,145 above budget. 22 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 2018 YTD Actuals vs. 2017 YTD Actuals • Operating Revenues were $1,732K higher than 2017 actual due to increased moorage rates, improved occupancy at Shilshole Bay Marina, and longer than anticipated occupancy by fishing vessels at Terminal 91. • Operating Expenses were $1,809K higher than 2017 actual: o Cruise $577K greater than 2017 due to property rental at P66 and Consulting. o Marine Maintenance $836K greater than 2017 due to increased wages and mix of Maritime projects. o Portfolio Management $261K greater than 2017 due to higher utility expense. o Central Services $662K increase from 2017 related to Police allocation and general increases. o Environmental Remediation $469K below 2017. o All other Expenses net to $68K above 2017. • Net Operating Income was $77K below 2017 actual. $ in 000's Fishing & Operations Recreational Boating Cruise Bulk Maritime Portfolio Management Other Total Revenue Expenses Fishing & Operations Rec Boating Cruise Other Maritime Maintenance Expenses Portfolio Management Other ED Expenses Total Maritime & EDD expenses Enviromental & Sustainability CDD Expenses Police Expenses Other Central Services Aviation Division Total Central Services & Aviation Envir Remed Liability Total Expense NOI Before Depreciation Depreciation NOI After Depreciation 2016 Actual 9,108 10,255 15,422 5,382 10,255 388 50,810 2017 2018 Actual Forecast 9,297 8,748 11,086 12,446 17,596 18,150 5,427 5,163 10,787 10,769 (9) 17 54,183 55,293 2018 Budget 8,388 12,166 18,150 5,163 11,169 17 55,053 Fav (UnFav) Budget Variance % $ 360 4% 280 2% 0 0% 0 0% (400) -4% 0 0% 240 0% Incr (Decr) Change from 2017 $ % (550) -6% 1,361 12% 554 3% (263) -5% (18) 0% 26 -297% 1,109 2% 4,308 3,164 2,600 666 9,900 3,367 420 24,425 1,358 1,010 3,921 9,315 139 15,743 115 40,283 10,526 17,351 (6,824) 4,599 3,813 2,674 462 10,420 3,507 665 26,140 1,125 748 3,756 9,869 138 15,635 389 42,164 12,020 17,410 (5,390) 4,641 4,595 4,748 1,399 11,261 3,750 833 31,226 2,168 1,212 4,209 10,641 123 18,352 0 49,578 5,475 17,868 (12,394) 0 0 300 0 0 200 0 500 173 182 0 213 0 568 0 1,068 1,308 0 1,308 42 782 1,774 937 840 43 168 4,586 869 282 453 559 (15) 2,149 (389) 6,347 (5,237) 459 (5,696) 4,641 4,595 4,448 1,399 11,261 3,550 833 30,726 1,994 1,030 4,209 10,428 123 17,784 0 48,510 6,783 17,868 (11,086) 0% 0% 6% 0% 0% 5% 0% 2% 8% 15% 0% 2% 0% 3% NA 2% 24% 0% -11% 1% 20% 66% 203% 8% 1% 25% 18% 77% 38% 12% 6% -11% 14% -100% 15% -44% 3% 106% 2018 Forecast vs. 2018 Budget • Operating Revenues are forecasted to be $240K higher than budget: o Favorable revenue in Fishing and Rec. Boating, offset by earlier than expected termination of WSDOT lease at Terminal 106. • Operating Expenses are forecasted to be $1,068K lower than budget: o Tenant improvements at the Maritime Industrial Center capitalized rather than expensed. 23 III. • MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 o Delay in hiring and consulting cost in Cruise. o Favorable payroll savings from Central Services. Net Operating Income is forecasted to be $1.3M above budget. 2018 Forecast vs. 2017 Actuals • Operating Revenues are forecasted to be $1.1M higher than 2017 actual: o Increased rates were offset by loss of net shed revenue. • Operating Expenses are forecasted to be $6.3M higher than 2017 actual with increases seen in: o Cruise $1.8M due to Port Valet service and consulting. o Maintenance $.8M from increase of projects and higher wage rates. o Other Maritime $.9M from Habitat Initiatives. o Rec Boating $.8M due to new headcount in 2018 and open headcount in 2017. o Central Services $2.1M driven by increased projects and FTE in Environment & Sustainability along with Police. • Net Operating Income is forecasted to be $5.2M below 2017 actual. D. CAPITAL RESULTS $ in 000's Salmon Bay Marina ACQ SBM Restrms/Service Bldgs Rep FT Re Development Phase I P91 South End Fender Maritime Fleet Replacement Contingency Renewal & Replace. SBM Paving Cruise Terminal Tenant Improv Salmon Bay Marina Uplands FT Docs 3,4,5 Fixed Pie Restoration All Other Projects Total Maritime 2018 YTD Actual 2018 Forecast 2018 Budget 15,703 131 813 1,981 238 0 83 323 13 74 56 2,287 21,702 15,728 1,553 1,363 2,055 2,158 1,150 399 1,531 13 274 66 6,510 32,800 15,804 7,162 2,700 2,202 2,158 2,000 1,673 1,531 1,505 1,424 1,140 7,450 46,749 Budget Variance $ 76 5,609 1,337 147 0 850 1,274 0 1,492 1,150 1,074 940 13,949 % 0% 78% 50% 7% 0% 43% 76% 0% 99% 81% 94% 13% 30% Comments on Key Projects: Through the 2nd quarter of 2018, Maritime spent 46% of the annual approved capital budget. Full year spending is estimated to be 70% of budget. Projects with significant changes in spending were: • SBM Restrms/Service Bldgs Rep - Construction Delay. Work schedule to begin Q3 2018. • FT Re Development Phase I - Project Delay. • Contingency Renewal & Replace - $850k used for Portwide Radio System Upgrade. • SBM Paving - Construction Delay. Moved to Q2 2019. • FT Docs 3,4,5 Fixed Pie - Design phase extended to Q3 2018. • Restoration - Project delayed until 2020. 24 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 FINANCIAL SUMMARY Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2017 $ % 2016 Actual 2017 Actual 2018 Forecast 2018 Budget Revenues: Operating Revenue 15,903 17,791 19,046 18,522 524 3% 1,255 7% Total Revenues 15,903 17,791 19,046 18,522 524 3% 1,255 7% Total Operating Expenses 21,135 25,397 28,055 28,751 697 2% 2,657 10% Net Operating Income (5,232) (7,606) (9,008) (10,229) 1,221 12% (1,402) -18% Capital Expenditures 4,757 3,739 6,028 6,149 121 2% 2,289 61% $ in 000's Division Summary 2018 Forecast vs. 2018 Budget • Operating Revenues are forecasted to be $524K above budget primarily due to higher than expected Conference and Event Center activity. • Operating Expenses are forecasted to be $697K below budget primarily due to EDD Initiative programs. • Net Operating Income forecasted to be $1,221K above budget. • At the end of the second quarter, capital spending for full year 2018 is forecasted to be $6M or 98% of the approved budget of $6.1M. Division Summary 2018 Forecast vs. 2017 Actuals • Operating Revenues are expected to be $1,255K above 2017 primarily due to stronger sales at Bell Harbor Conference Center. • Operating Expenses are expected to be $2,657K greater than 2017 primarily due to increased volumes at Conference and Event Centers $827K, EDD Initiatives $952K, Other Central Services $443K, and Economic Development Expenses other $442K. • Net Operating Income is expected to be $1,402K less than 2017. A. BUSINESS EVENTS Portfolio Management • Elevator modernization project for two passenger elevators and the service elevator at Pier 66 completed May 3, which was 3.5 weeks ahead of schedule • Collaborating with NWSA on potential new Seattle facility for Customs and Border Protection. They would co-locate their two groups who currently are at T-102 and T-106. Preliminary estimates have been created and discussions about how to share the costs are underway between NWSA and POS. Tourism • Port Commissioners authorized the Executive Director to execute all related contract agreements for the 26 awardees of the 2018 Tourism Marketing Support Program. • Launched the Spotlight Advertising Program application process at Sea-Tac Int'l Airport in June. 25 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 Real Estate Development • In April Trammell Crow started construction at Des Moines Creek North property in SeaTac. • Salmon Bay Marina acquisition closed in June. • Design work at FT suspended pending final CIP resolution. Small Business • Presented the Diversity in Contracting implementation plan to Commission on June 12th to address port wide goal setting, outreach, contracting, tracking, evaluation, and accountability. Workforce Development • Airport Career Pathways Convening - Discussion co-facilitated with airport employers convened by Airport Director Lance Lyttle to identify potential opportunities for developing career pathways training to drive opportunities for low-wage workers to increase skills and wages. 26 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 B. KEY PERFORMANCE METRICS Building Occupancy by Location: 100% 98% 96% 94% Central Harbor 92% T-91 Uplands 90% Marina Office & Retail 88% T-91 Industrial 86% T-106 Warehouse 84% 82% 80% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Net Operating Income before Depreciation by Business $ in 000's Portfolio Management 2016 YTD 2017 YTD Actual Actual (1,514) (2,539) 2018 Year-to-Date Actual Budget (2,062) Fav (UnFav) Incr (Decr) 2018 Bud Var $ % Change from 2017 $ % (2,144) 82 4% 477 19% Conference & Event Centers 643 (483) (17) (608) 591 97% 466 96% Tourism (432) (528) (640) (762) 122 16% (112) -21% Workforce Development (143) (353) (368) (1,072) 705 66% (1) (427) (28) (480) 452 EDD Grants Env Grants/Remed Liab/ERC Total Econ Dev (33) (1) 0 0 0 (1,479) (4,331) (3,115) (5,067) 1,951 27 39% (14) -4% 399 NA 1 -100% 1,216 28% IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 C. OPERATING RESULTS $ in 000's Revenue Conf & Event Centers Total Revenue Expenses Portfolio Management Conf & Event Centers P69 Facilities Expenses RE Dev & Planning EconDev Expenses Other Maintenance Expenses Maritime Expenses (Excl Maint) Total EDD & Maritime Expenses Small Business Workforce Development Tourism EDD Grants Total EDD Initiatives Environmental & Sustainability CDD Expenses Police Expenses Other Central Services Aviation Division Total Central Services & Aviation Envir Remed Liability Total Expense NOI Before Depreciation Depreciation NOI After Depreciation 2016 YTD 2017 YTD Actual Actual 3,818 4,182 4,518 3,545 8,337 7,727 1,536 3,665 81 211 321 1,248 14 7,076 9 150 420 0 579 9 113 81 1,907 51 2,161 0 9,816 (1,479) 1,881 (3,360) 2,050 3,660 96 120 383 1,483 25 7,817 26 228 514 427 1,195 130 200 85 2,576 56 3,046 0 12,058 (4,331) 1,860 (6,191) 2018 Year-to-Date Actual Budget 4,577 4,465 5,188 4,776 9,765 9,242 Fav (UnFav) Budget Variance $ % 112 3% 412 9% 524 6% 1,952 4,306 114 74 473 1,996 76 8,992 37 228 620 28 912 121 139 81 2,576 59 2,976 0 12,880 (3,115) 1,999 (5,114) (51) (48) 57 32 111 (468) 85 (282) 37 713 130 452 1,332 67 33 (2) 276 4 378 0 1,428 1,951 84 2,036 1,901 4,258 171 107 584 1,528 161 8,710 74 941 750 480 2,244 188 172 79 2,852 63 3,354 0 14,308 (5,067) 2,084 (7,150) -3% -1% 33% 30% 19% -31% 53% -3% 50% 76% 17% 94% 59% 36% 19% -3% 10% 7% 11% NA 10% -39% 4% -28% Incr (Decr) Change from 2017 $ % 395 9% 1,644 46% 2,039 26% (98) 646 18 (46) 90 513 52 1,175 10 (1) 106 (399) (283) (8) (61) (3) (0) 3 (70) 0 823 1,216 139 1,077 -5% 18% 19% -38% 23% 35% 210% 15% 39% 0% 21% -93% -24% -7% -31% -4% 0% 6% -2% NA 7% 28% 7% 17% 2018 YTD Actuals vs. Budget • Operating Revenues were $524K higher than budget due to unplanned leases at T91 and higher volumes at the conference and event center. • Operating Expenses were $1,428K lower than budget: o Workforce Development $713K lower than budget due to timing of spending for Construction Trades Regional Partnership, K-12 Career Connected Learning, Maritime Initiative, and Airport Career Pathways implementation. o EconDev Other $111K lower than budget due to unspent Opportunity Fund. o EDD Grants $452K and Tourism $130K favorable to budget due to timing of invoices. o Maintenance cost unfavorable to budget by ($468K) due to unbudgeted HVAC repairs at Bell Street common areas and T91 work that should have been charged to Maritime. o Other Central Services $276K lower than budget primarily due to lower charges from Public Affairs $115K and Human Resources $50K. o All other expenses net to $214K lower than budget. • Net Operating Income was $1,951K above budget. 28 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 2018 YTD Actuals vs. 2017 YTD Actuals • Operating Revenues were $2,039K higher than 2017 actual due to stronger sales resulting from the completion of the Pier 66 Cruise Terminal Expansion Project that disrupted the availability of space for conference events. • Operating Expenses were $823K higher than 2017 actual: o Conference and Event Center $646K greater than 2017 due to higher sales activity at Bell Harbor International Conference Center. o Maintenance Expenses $513K greater than 2017 due to Maintenance at P66 Common Area and Terminal 91 Uplands. o EDD Grants ($399K) lower than 2017 due to timing of payments. o All other Expenses net to $63K above 2017 • Net Operating Income was $1,216K above 2017 actual. $ in 000's Revenue Conf & Event Centers Total Revenue Expenses Portfolio Management Conf & Event Centers P69 Facilities Expenses RE Dev & Planning EconDev Expenses Other Maintenance Expenses Maritime Expenses (Excl Maint) Total EDD & Maritime Expenses Small Business Workforce Development Tourism EDD Grants Total EDD Initiatives Environmental & Sustainability CDD Expenses Police Expenses Other Central Services Aviation Division Total Central Services & Aviation Envir Remed Liability Total Expense NOI Before Depreciation Depreciation NOI After Depreciation 2016 Actual 7,881 8,022 15,903 2017 2018 Actual Forecast 8,658 9,097 9,133 9,949 17,791 19,046 2018 Budget 8,985 9,537 18,522 Fav (UnFav) Incr (Decr) Budget Variance Change from 2017 $ % $ % 112 1% 439 5% 412 4% 816 9% 524 3% 1,255 7% 3,084 6,932 180 1,037 628 2,787 31 14,679 21 522 1,093 20 1,656 62 250 157 4,223 107 4,800 0 21,135 (5,232) 3,682 (8,914) 3,879 7,639 206 214 773 3,666 52 16,429 64 850 1,234 751 2,900 260 387 51 5,257 113 6,068 0 25,397 (7,606) 3,863 (11,469) 3,778 8,465 289 211 1,227 3,055 344 17,370 140 1,992 1,460 960 4,552 398 329 158 5,816 127 6,829 0 28,751 (10,229) 4,156 (14,385) 0 0 0 0 0 (221) 0 (221) 0 700 0 0 700 35 65 2 116 0 218 0 697 1,221 0 1,221 3,778 8,465 289 211 1,227 3,276 344 17,591 140 1,292 1,460 960 3,852 363 264 156 5,700 127 6,611 0 28,055 (9,008) 4,156 (13,164) 0% 0% 0% 0% 0% -7% 0% -1% 0% 35% 0% 0% 15% 9% 20% 1% 2% 0% 3% NA 2% -12% 0% -8% (101) 827 84 (3) 454 (390) 292 1,163 76 442 225 209 952 103 (123) 105 443 15 542 0 2,657 (1,402) 293 (1,695) -3% 11% 41% -1% 59% -11% 557% 7% 118% 52% 18% 28% 33% 40% -32% 205% 8% 13% 9% NA 10% 18% 8% 15% 2018 Forecast vs. 2018 Budget • Operating Revenues are forecasted to be $524K higher than budget: o Higher than expected occupancy at Terminal 102 Corporate Center and Terminal 91 Uplands. o Higher conference sales activity at Bell Harbor International Conference Center. • Operating Expenses are forecasted to be $697K lower than budget: 29 IV. • ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/18 o Under-spent in Workforce Development Initiatives ($700K). o Unbudgeted HVAC repair at P66. Net Operating Income is forecasted to be $1,221K above budget. 2018 Forecast vs. 2017 Actuals • Operating Revenues are forecasted to be $1.3 M higher than 2017 actual: o High occupancy at most properties, annual increases for existing leases, and higher lease rates for new leases. o Stronger sales activity at Bell Harbor Conference Center due to the completion of the P66 Cruise Terminal expansion project. • Operating Expenses are forecasted to be $2.7M higher than 2017 actual: o Economic Development Initiatives $952K. o Conference & Events Centers: higher sales activity resulting in higher expense $827K. o Other Central Services $443K. • Net Operating Income is forecasted to be $1.4M below 2017 actual. D. CAPITAL RESULTS $ in 000's P66 Elevator 2,3,4 Upgrades RE: Contingency Renew.&Replace BHICC Interior Modernization Small Projects Tenant Improvements -Capital P69 Solar Panel System T-102 Outdoor Lighting T91 Upland PreDevelopment CW Elevator Modernization All Other projects Total Economic Development 2018 YTD Actual 2018 Forecast 2018 Budget 956 0 100 59 23 39 19 11 0 156 1,229 1,000 900 525 897 482 209 150 100 536 1,363 6,028 Budget Variance $ % 1,175 1,000 710 516 532 502 437 425 325 527 (54) 0 (190) (9) (365) 20 228 275 225 (9) 0 -5% 0% -27% -2% -69% 4% 52% 65% 69% -2% N 6,149 121 2% Comments on Key Projects: Through the 2nd quarter of 2018, Economic Development spent 22% of the annual approved capital budget. Full year spending is estimated to be 98% of budget. Projects with significant changes in spending were: • • • Tenant Improvements Capital - Additional $365K Tenant Improvements originally budgeted as expense. T-102 Outdoor Lighting - Project cost refinement based on final design. Central Waterfront Elevator Modernization- Scope reduction and shift of work to 2019/2020. 30 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/18 FINANCIAL SUMMARY $ in 000's Total Operating Revenues Core Central Support Services Police Capital Development Environment & Sustainability Total Operating Expenses 2016 Actual 2017 Actual 2018 Forecast 2018 Budget 1,330 68 182 182 69,196 23,045 12,218 8,824 113,284 71,071 22,095 17,370 6,975 117,511 78,720 26,955 21,058 10,486 137,218 80,367 27,065 26,289 11,504 145,225 Fav (UnFav) Budget Variance $ % 0.0% Incr (Decr) Change from 2017 $ % 113 166.0% 1,647 110 5,231 1,019 8,008 7,648 4,860 3,688 3,511 19,707 10.8% 22.0% 21.2% 50.3% 16.8% 2.0% 0.4% 19.9% 8.9% 5.5% Division Summary 2018 Forecast vs. 2018 Budget • Operating Revenues are forecasted to be $182K, on par with the budget for 2018. • Operating Expenses are forecasted to be $8.0M favorable to budget mainly due to vacant positions, projects spending delay and lower Outside Services Costs. • Capital spending is forecasted to be $17.7M, 72.6% of the 2018 budget. Division Summary 2018 Forecast vs. 2017 Actuals • Operating Revenues are expected to be $113K above 2017 mainly due to higher reimbursed revenue for Police. • Operating Expenses are forecasted to be $19.7M higher than 2017 mainly due to higher payroll expenses and more expense projects. A. BUSINESS EVENTS • • • • • • • • • • The Port Commission approved $200,000 in grants for 26 tourism-related projects across the state of Washington. Port of Seattle, City of SeaTac, and IAC Properties Brook Ground on an Industrial Site to create a 460,000 square foot industrial facility that will employ approximately 400 full time workers. The Port welcomed the inaugural flight of Thomas Cook Airlines nonstop service to Manchester. The Port Commission has appointed a panel of four experts to independently review costs and schedules associated with the new International Arrivals Facility (IAF) now under construction at Seattle-Tacoma International Airport. The Port welcomed the Norwegian Bliss, the newest ship in the Norwegian Cruise Line fleet. At over 168,000 gross tons and a capacity of 4,004, double occupancy, which is the largest cruise vessel on the west coast and was built especially for the Alaska cruise market. The Norwegian Bliss marked a major milestone for the Port of Seattle, which over the last 18 years has transformed into the largest and fastest growing cruise business on the west coast, while earning a reputation for progressive environmental protections. Seattle Harbor Deepening Project Received U.S. Army Corps of Engineers Leadership Approval. Sponsored the First Annual Safety Stand Down, which included 8 sessions and an online version for employees who could not attend. Issued Intermediate Lien Revenue Bonds of $555,564,000 to finance or refinance capital improvements to aviation facilities. Work included conducting Rating Agency meetings and due diligence meeting and negotiated sale. Replaced the Port of Seattle Website. The new site reflects the current organizational structure, focuses on engaging our customers, and provides infrastructure for organizational content updates. Added new functionality to the Sea-Tac Hardstand Equipment Management System, which is tightly integrated to the flight information system allowing for proactive updates as flight data is provided by airlines. 31 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/18 B. KEY PERFORMANCE METRICS Key Performance Indicators/Measures YTD 2018 A. Century Agenda Strategies 1. Small Business Participation - Annual / Small Works (portwide) 2. Small Business Participation - Annual / Major Construction (port-wide) including Mega projects 3. Small Business Participation - Annual / Goods & Services (port-wide) 4. Small Business Participation - Service Agreements (port-wide) Annual (including Legal department Service Agreements) 5. Minority/Women-Owned Business Participation in Capital Development Contracts B. High Performance Organization - Customer Satisfaction 1. Respond to Public Disclosure Requests 2. Information and Communication Technology System Availability 3. Customer Survey for Police Service Excellent or Very Good 4. Oversee Implementation and Administration of CBAs agreements 5. Number of Jobs Openings 68.3% 76.9% 12.44% 29.9% 25.9% 24.6% 50.1% 49.3% 4.5% N/A 305 99.2% 264, increased by 41 99.7% 88% 79 83% 99 195 443, decreased by 248 39% 113 6. Percent of annual audit work plan completed each year 100% 7. Request of information and guidelines for integrity & business 136 conduct C. High Performance Organization - Talent Development & Safety 8 classes, 76 1. MIS and Clarity Training attendees 772 2. Employee Development Class Attendees/Structured Learning 3. Required Safety Training 4. Occupational Injury Rate 5. Days Away Severity Rate D. Financial Performance 1. Corporate costs as a % of Total Operating Expenses 2. Construction Soft Costs - Total Soft Costs (36 months avg.) 3. Clean independent CPA audits involving AFR 4. Timely process disbursement payment requests 5. Keep receivables collections 85% current (within 30 days) 6. Investment Portfolio Yield 7. Litigation and Claim Reserves (in $ thousand) 32 YTD 2017/Notes N/A 5.50 32.02 14 classes, 104 attendees 1878, decreased by 1106 64% 4.94 N/A 31.6% 24% yes 4 days 88% 1.69% $348 32.8% 28% yes 3 days 95% 1.42% $1,531 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/18 C. OPERATING RESULTS Financial Summary (YTD) $ in 000's Total Operating Revenues Core Central Support Services Police Capital Development Environment & Sustainability Total Operating Expenses 2016 YTD 2017 YTD Actual Actual 75 82 31,594 11,312 4,747 3,303 50,956 34,692 11,378 7,763 3,347 57,181 2018 Year-to-Date Actual Budget 81 56 Fav (UnFav) Budget Variance $ % 25 45.0% 36,661 13,188 7,733 2,954 60,536 2,517 323 5,342 1,722 9,904 39,178 13,511 13,075 4,676 70,441 6.4% 2.4% 40.9% 36.8% 14.1% Incr (Decr) Change from 2017 $ % (1) -1.2% 1,969 1,810 (30) (393) 3,356 5.7% 15.9% -0.4% -11.8% 5.9% 2018 YTD Actuals vs. Budget • Operating Revenues were $25K favorable to budget due to higher miscellaneous revenues. • Operating Expenses were $9.9M favorable to budget due primarily to vacant positions, hiring delays, and lower Outside Services Costs. 2018 YTD Actuals vs. 2017 YTD Actuals • Operating Revenues were basically on par with 2017 level. • Operating Expenses were $3.4M higher than last year primarily due to higher Payroll and Outside Services Costs. 33 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/18 Financial Summary (Year-End Forecast) $ in 000's Notes 2016 Actual 2017 2018 2018 Actual Forecast Budget Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2017 $ % Total Revenues 1,330 68 182 182 - 0.0% 113 166.0% Executive Commission Legal Public Affairs Human Resources Labor Relations Internal Audit Accounting & Financial Reporting Services Information & Communication Technology Finance & Budget Maritime Finance Seaport Finance Environmental Finance Finance & Budget Aviation Finance & Budget Business Intelligence Risk Services Office of Strategic Initiatives Central Procurement Office Security and Preparedness Contingency Core Central Support Services 2,185 1,569 3,365 6,033 7,001 1,268 1,455 6,550 20,158 4,810 1,212 811 401 1,647 1,950 1,004 3,202 1,393 6,963 1,420 369 69,196 1,287 1,685 3,741 7,112 8,418 1,678 1,603 6,751 21,633 4,998 1,229 737 492 1,871 1,897 1,211 3,077 1,882 3,861 1,754 381 71,071 1,877 1,954 3,706 7,993 9,566 1,222 1,750 7,929 23,483 5,793 1,478 878 600 1,953 2,361 1,485 3,289 1,981 4,261 2,329 100 78,720 2,001 1,984 3,617 8,308 9,689 1,371 1,828 8,148 23,308 5,828 1,478 878 600 1,955 2,395 1,543 3,322 2,265 4,511 2,394 250 80,367 124 30 (89) 315 123 149 78 218 (175) 36 1 34 58 33 284 250 65 150 1,647 6.2% 1.5% -2.5% 3.8% 1.3% 10.9% 4.3% 2.7% -0.8% 0.6% 0.0% 0.0% 0.0% 0.1% 1.4% 3.7% 1.0% 12.5% 5.5% 2.7% 60.0% 2.0% 590 269 (35) 881 1,149 (456) 147 1,179 1,850 795 249 142 107 82 464 274 212 99 401 574 (281) 7,648 45.8% 16.0% -0.9% 12.4% 13.6% -27.2% 9.2% 17.5% 8.5% 15.9% 20.2% 19.2% 21.8% 4.4% 24.5% 22.7% 6.9% 5.3% 10.4% 32.7% -73.7% 10.8% Police 23,045 22,095 26,955 27,065 110 0.4% 4,860 22.0% Total Before Cap Dev & Environment 92,241 93,166 105,674 107,432 1,757 1.6% 12,508 13.4% Capital Development Engineering Port Construction Services Aviation PMG Seaport PMG Capital Development Admin 4,493 3,488 2,823 999 416 5,284 3,709 6,942 1,007 428 7,248 4,981 6,933 1,288 607 7,841 5,685 10,977 1,178 607 592 705 4,044 (110) - 7.6% 12.4% 36.8% -9.3% 0.0% 1,964 1,271 (9) 281 180 37.2% 34.3% -0.1% 27.9% 41.9% Sub-Total Environment & Sustainability Aviation Environmental Maritime Environmental & Planning Noise Programs Environment & Sustainability Sub-Total 12,218 17,370 21,058 26,289 5,231 19.9% 3,688 21.2% 5,857 2,098 722 148 8,824 3,779 2,157 670 368 6,975 5,793 2,796 800 1,096 10,486 6,503 3,046 742 1,214 11,504 710 250 (58) 118 1,019 10.9% 8.2% -7.8% 9.7% 8.9% 2,014 639 130 728 3,511 53.3% 29.6% 19.4% 197.5% 50.3% Total Expenses 113,284 117,511 137,218 145,225 8,008 5.5% 19,707 16.8% 2018 Forecast vs. 2018 Budget • Operating Expenses are forecasted to be $8.0M under budget due primarily to: o Executive - favorable variance is due to the Executive Director's position being vacant for a month and a part time position remains unfilled; less travel and downgrading of a membership. o Commission - favorable variance is due to a vacant position which has been filled. 34 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/18 o o o o o o o o o o o o o o o o o Legal - unfavorable variance is due to Legal Expenses. Public Affairs - favorable variance is due to three vacant positions, lower Outside Services, Promotional Hosting and General Expenses. Human Resources - favorable variance is due to several vacant positions which will be somewhat offset by unbudgeted recruiting expenses for the Sr. Director position. Labor Relations - favorable variance is due to two vacant positions which one has been filled and credit received for a litigation reserve. Internal Audit - favorable variance is due to a vacant position which has been filled. Accounting and Financial Reporting Services - favorable variance is due to 3 vacant positions and credit card rebates. The savings in Salaries and Benefits have been used to cover retro-active pay for positions recently converted to Non-Exempt and to backfilled a vacant position with a temporary employee. Information & Communication Technology - unfavorable variance is due to unbudgeted pay increases associated with the recent job refresh. Finance & Budget - favorable variance is due to vacant positions. Business Intelligence - favorable variance is due to a vacant position. Risk Services - anticipates property insurance renewal and broker fees being lower. Office of Strategic Initiative - favorable variance is due to two vacant positions. Central Procurement Office - favorable variance is due to vacant positions. Security and Preparedness - favorable variance is due to a vacant position. Contingency - plans on spending less than what was anticipated at budget. Police - favorable variance is due to vacant positions and savings in Travel and Other Related Expenses. Capital Development - favorable variance in Outside Services is due to hiring fewer contractors than budgeted, delayed projects and change in design and scope of the South Satellite project. Environment & Sustainability - favorable variance is due to vacant positions and savings in Outside Services due to delayed in SAMP, Energy & Sustainability fund and Forterra Assessment Plan. 2018 Forecast vs. 2017 Actuals • Operating Expenses are forecasted to be $19.7M higher than 2017 actuals mainly due to: o Capital Development - forecast $3.7M above 2017 mainly due to the following:  More project-related expense to support the operating divisions.  Office-moving expense/office rent in 2018. o Police - forecast $4.9M above 2017 due to the following:  Added 3 K-9 Handlers in mid-2017 (and the 2018 number reflects the full-year costs).  Lower payroll costs resulted from a number of vacant positions in 2017, including the vacant Police Chief/Deputy Chief positions for several months.  Adding 12 Police Officers requested by the airlines in 2018.  More overtime in the first quarter of 2018. o Environment & Sustainability - forecast $3.5M over 2017 due to the following:  SAMP Environmental Review expense is $1.7M for 2018 compared only $169K spent in 2017 (even though we budgeted for $2.3M for 2017).  ACE fund, Energy & Sustainability fund, and Forterra Assessment Plan total to be $600K for 2018 while we spent very little last year.  Added 3 new FTEs in the 2018 Environment & Sustainability budget.  Added $175K for Aviation Biofuel Partnership Fund Development Project in the 2018 budget.  Added $140K for terminals/facilities waste audits and reports for Maritime ENV in the 2018 budget.  Included $110K for emission inventory update and three ports Salish Sea water initiative in the 2018 budget. 35 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/18 D. CAPITAL RESULTS $ in 000's Infrastructure - Small Cap Services Tech - Small Cap Project Cost Mgmt System Supplier Database System Corporate Firewall PeopleSoft Financials Upgrade Radio System Upgrade Police Records Mgmt System CDD Fleet Replacement Corporate Fleet Replacement Other (note 1) TOTAL 2018 YTD Actual 210 110 221 137 26 566 7 0 172 45 129 1,623 2018 Forecast 1,500 1,150 600 487 922 1,866 7,800 200 1,040 1,180 929 17,674 2018 Budget 1,500 1,150 600 450 922 3,100 12,000 700 1,210 1,180 1,526 24,338 Budget Variance $ % 0 0.0% 0 0.0% 0 0.0% (37) -8.2% 0 0.0% 1,234 39.8% 4,200 35.0% 500 71.4% 170 14.0% 0 0.0% 597 39.1% 6,664 27.4% Note: (1) "Other" includes remaining ICT projects and small capital projects/acquistions. 36