Item No. 9c_attach . Meeting Date: August 13, 2019 PORT OF SEATTLE 2019 FINANCIAL PERFORMANCE REPORT AS OF JUNE 30, 2019 TABLE OF CONTENTS Page I. Portwide Performance Report 3-6 II. Aviation Division Report 7-18 III. Maritime Division Report 19-24 IV. Economic Development Division Report 25-30 V. Central Services Division Report 31-36 2 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 EXECUTIVE SUMMARY Financial Summary The Port's operating results for the second quarter of 2019 were very strong. Total operating revenues were $368.2M, $7.9M above budget and $37.7M higher than the same period in 2018. Excluding Aeronautical revenues, which are based on cost recovery, other operating revenues were $192.2M, $9.0M above budget and $9.3M higher than the 2018 actuals mainly due to higher revenues in ADR & Terminal Leased Space, Ground Transportation, Rental Cars, Clubs & Lounges, and Conference & Event Centers. Total operating expenses were $216.8M and $16.0M below budget mainly due to vacancies and project delays. Operating income before depreciation was $151.4M, $23.9M above budget and $12.5M higher than the 2018 actuals. The Port-wide capital spending is projected to be $696.5M for 2019. Operating Summary At the Airport, the total enplanement growth for the second quarter of 2019 was 3.4% comprised of 3.4% for domestic passengers and 3.0% for international passengers. The total landed weight for the second quarter of 2019 was 3.0% higher than the same period last year while total cargo (in metric tons) was 1.2% above the 2018 second quarter numbers. For the Maritime division, the number of cruise passengers is expected to reach 1.2M in 2019 similar to 2018. The occupancy rate at Shilshole Bay Marina for the second quarter was at 95%, a slight decrease of 1% compared to the same period last year. Grain volumes were impacted by tariffs and weather resulting in a decrease of 700K metric tons. For the Economic Development division, the building occupancy rate for the second quarter was 100% at Terminal 91 Uplands, 95% at Maritime Industrial, 86% at Central Harbor, and 85% at Marina Office and Retail. Key Business Events In April, the Port officially kicked off the cruise season with the arrival of Celebrity's Eclipse at Pier 66. This year marks the Port's 20th year as a homeport, and 213 vessels and 1.2M passengers are expected again this year. The Port also completed RFQ process for new cruise terminal with three finalists. Also in April, Port Commission adopted its Energy and Sustainability workplan focusing on key areas that will improve environmental and community health in Puget Sound as well as combat climate change. At the airport, new non-stop services to Hong Kong (via Cathay Pacific Airways), Tokyo-Narita (Japan Airlines), and Osaka (Delta) were launched in response to the growing air travel demand. The Port awarded thirty establishments with tourism grants and twenty four organizations including Lewis County, Suquamish Tribal Museum, Sequim Lavender Farmers, Long Beach Visitors Bureau and Methow Trails received Airport Spotlight advertising grants. Major Capital Projects Phase 1 of the North Satellite Modernization project was completed during the second quarter of 2019 which included the opening of ten new gates, Nursing Suite and Alaska Lounge. Meanwhile, the solar panel installation at the Port's Pier 69 headquarters was completed during the second quarter of this year; this project was funded in part from the Washington State Department of Commerce grant. The new photovoltaic system is expected to generate over 127,000 kwh annually which will offset greenhouse gas emissions by 1.8 metric tons of carbon dioxide. Port Commission also approved the lease and construction funding for T-5 Berth Modernization project and for construction to commence at the Bell Harbor Conference center. Construction project closeouts were issued for several projects: Pier 69 Commission chambers refresh, west side water main repair and Automated Vehicle ID (AVI) replacement. Several more projects were placed under the substantial completion category which includes: video systems upgrade/terminal cameras project, electrical power for Concourses B and C holdroom seating project, and central terminal infrastructure upgrade project. 3 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 PORTWIDE FINANCIAL SUMMARY $ in 000's Aeronautical Revenues Airport Non-Aero Revenues Non-Airport Revenues Total Operating Revenues Total Operating Expenses NOI before Depreciation Depreciation NOI after Depreciation 2017 YTD 2018 YTD Actual Actual 127,780 147,570 112,761 118,864 61,548 64,054 302,088 330,489 174,104 191,577 127,984 138,912 81,860 81,949 46,124 56,963 2019 Year-to-Date Actual Budget 175,927 177,039 124,604 121,045 67,632 62,229 368,164 360,313 216,758 232,756 151,407 127,557 82,481 81,933 68,926 45,624 Fav (UnFav) Budget Variance $ % (1,112) -0.6% 3,560 2.9% 5,403 8.7% 7,851 2.2% 15,999 6.9% 23,850 18.7% (548) -0.7% 23,302 51.1% Incr (Decr) Change from 2018 $ % 2019 Year-to-Date Actual Budget 24,941 21,955 27,368 27,918 10,384 10,017 4,939 2,338 67,632 62,229 40,522 45,171 27,110 17,058 19,623 18,909 7,487 (1,850) Fav (UnFav) Budget Variance $ % 2,986 13.6% (550) -2.0% 367 3.7% 2,601 111.2% 5,403 8.7% 4,649 10.3% 10,051 58.9% (715) -3.8% 9,337 -504.7% Incr (Decr) Change from 2018 $ % (903) -3.5% 1,110 4.2% 619 6.3% 2,752 125.8% 3,578 5.6% 2,381 6.2% 1,197 4.6% (365) -1.8% 1,562 26.4% 2019 Year-to-Date Actual Budget Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2018 $ % 28,357 5,740 3,578 37,676 25,181 12,495 532 11,963 19.2% 4.8% 5.6% 11.4% 13.1% 9.0% 0.6% 21.0% 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 2017 YTD 2018 YTD Actual Actual 27,283 25,844 24,525 26,257 7,727 9,765 2,012 2,187 61,548 64,054 33,783 38,141 27,765 25,913 20,272 19,988 7,493 5,925 MAJOR OPERATING REVENUES SUMMARY $ in 000's Aeronautical Revenues 2017 YTD Actual 2018 YTD Actual 127,780 175,927 40,401 15,560 4,505 32,689 9,979 5,193 7,072 3,665 4,456 8,473 6,228 5,071 2,567 5,019 4,406 5,963 24,941 6,049 192,237 28,357 19.2% 40,969 15,123 4,657 30,754 9,413 4,876 6,703 3,932 3,626 9,114 6,358 4,972 2,423 5,052 4,399 5,604 21,955 3,346 183,274 (1,112) (568) 437 (153) 1,936 567 317 369 (267) 830 (641) (131) 99 144 (33) 7 360 2,986 2,703 8,963 -0.6% 36,958 14,514 3,284 28,420 7,633 4,674 10,708 3,423 2,173 6,325 5,438 4,440 3,042 5,267 4,161 3,545 27,283 3,021 174,309 147,570 39,402 14,922 5,497 30,179 8,885 5,191 7,593 3,438 2,773 6,806 6,125 4,565 3,123 5,628 4,557 5,188 25,844 3,201 182,918 177,039 Public Parking Rental Cars - Operations Rental Cars - Operating CFC ADR & Terminal Leased Space Ground Transportation Employee Parking Airport Commercial Properties Airport Utilities Clubs and Lounges 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) -1.4% 2.9% -3.3% 6.3% 6.0% 6.5% 5.5% -6.8% 22.9% -7.0% -2.1% 2.0% 5.9% -0.6% 0.2% 6.4% 13.6% 80.8% 4.9% 999 637 (993) 2,510 1,094 2 (521) 227 1,683 1,668 102 506 (556) (609) (151) 775 (903) 2,848 9,318 2.5% 4.3% -18.1% 8.3% 12.3% 0.0% -6.9% 6.6% 60.7% 24.5% 1.7% 11.1% -17.8% -10.8% -3.3% 14.9% -3.5% 89.0% 5.1% TOTAL 302,088 330,489 368,164 360,313 7,851 2.2% 37,676 11.4% 4 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 MAJOR OPERATING EXPENSES SUMMARY Fav (UnFav) Incr (Decr) Budget Variance Change from 2018 2019 Year-to-Date Actual Budget $ % $ % 66,334 69,636 3,302 4.7% 3,562 5.7% 64,035 63,866 (169) -0.3% 3,960 6.6% 13,523 16,640 3,117 18.7% (79) -0.6% 4,484 4,136 (347) -8.4% 618 16.0% 5,290 4,452 (838) -18.8% 657 14.2% 43,951 55,365 11,415 20.6% 5,491 14.3% 13,103 14,963 1,860 12.4% (350) -2.6% 2,487 3,909 1,422 36.4% 184 8.0% 890 1,360 470 34.6% (74) -7.7% 27,560 27,939 379 1.4% 12,010 77.2% (24,898) (29,511) (4,613) 15.6% (798) 3.3% 216,758 232,756 15,999 6.9% 25,181 13.1% 2017 YTD 2018 YTD $ in 000's Actual Actual Salaries & Benefits 56,338 62,772 Wages & Benefits 52,948 60,075 Payroll to Capital Projects 12,873 13,602 Equipment Expense 4,311 3,866 Supplies & Stock 4,616 4,633 Outside Services 32,969 38,460 Utilities 11,911 13,453 Travel & Other Employee Expenses 2,338 2,303 Promotional Expenses 460 964 Other Expenses 16,865 15,550 Charges to Capital Projects/Overhead Alloc (21,524) (24,100) TOTAL 174,104 191,577 The 2019 second quarter actuals are $25.2M higher than the 2018 actuals primarily due to the following:  Payroll: $7.5M higher mainly due to the addition of new FTEs and pay for performance increase.  Outside Services: $5.5M higher largely due to more consultant expenses, more capital and expense projects, and some capital to expense write-offs.  Other Expenses: $12.0M higher due to Environmental Remediation Liabilities, Litigated Injuries & Damages Expense, Third Party Management Operating Expense which would be more than offset by higher revenues. PORTWIDE FINANCIAL YEAR-END FORECAST SUMMARY $ in 000's Aeronautical Revenues Airport Non-Aero Revenues Non-Airport Revenues Total Operating Revenues Total Operating Expenses NOI before Depreciation Depreciation NOI after Depreciation 2017 Actual 264,114 236,803 131,114 632,031 372,982 259,049 165,021 94,028 2018 Actual 291,268 257,707 140,415 689,390 397,638 291,752 164,362 127,390 2019 Forecast 364,646 270,014 133,328 767,988 448,162 319,826 168,676 151,150 Fav (UnFav) 2019 Budget Variance $ % Budget 365,604 (958) -0.3% 259,537 10,477 4.0% 128,115 5,213 4.1% 753,255 14,733 2.0% 454,986 6,824 1.5% 298,269 21,557 7.2% 168,676 0.0% 129,593 21,557 16.6% Incr (Decr) Change from 2018 $ % 73,378 25.2% 12,307 4.8% (7,087) -5.0% 78,598 11.4% 50,524 12.7% 28,074 9.6% 4,314 2.6% 23,760 18.7% Year-End Forecast:  Operating Revenues $14.7M higher than budget mainly due to revenue growth in Rental Car, Airport Dining and Retail, Clubs and Lounges, Ground Transportation, Conference and Event Centers, NWSA Distributable Revenue.  Operating Expenses $6.8M lower than budget due to project delays, less program spending and staff vacancies.  NOI before depreciation $21.6M above budget due to higher revenues while effectively managing operating costs. 5 I. PORTWIDE FINANCIAL & PERFORMANCE REPORT 06/30/19 KEY PERFORMANCE METRICS 2018 YTD 2019 YTD 2018 Actual Actual Actual 2019 Forecast Fav (UnFav) Incr (Decr) 2019 Budget Variance Change from 2018 % Budget Chg. Chg. % Enplanements (in 000's) 11,688 12,079 24,894 25,890 25,394 496 2.0% Landed Weight (lbs. in 000's) 14,476 14,903 30,350 30,637 30,986 (349) -1.1% 288 0.9% n/a n/a 10.79 13.09 13.39 0.30 2.2% 2.30 21.3% Grain Volume (metric tons in 000's) 2,688 1,988 4,379 3,488 3,580 (92) -2.6% (891) -20.3% Cruise Passenger (in 000's) 403 467 1,115 1,204 1,203 1 0.1% 89 8.0% 96.0% 95.0% 96.4% 96.2% 96.2% 0.0% 0.0% -0.2% -0.2% Passenger CPE (in $) Shilshole Bay Marina Occupancy 996 4.0% CAPITAL SPENDING RESULTS $ in 000's Aviation Maritime Economic Development Central Services & Other (note 1) TOTAL 2019 YTD 2019 2019 Budget Variance Actual Forecast Budget $ % 280,124 659,813 767,732 107,919 14.1% 1,879 15,105 17,638 2,533 14.4% 1,444 5,040 5,713 673 11.8% 4,007 16,581 25,203 8,622 34.2% 287,454 696,539 816,286 119,747 14.7% Note: (1) "Other" includes Street Vacation projects and Storm Water Utility Small Capital projects. PORTWIDE INVESTMENT PORTFOLIO During the Second quarter of 2019, the investment portfolio earned 2.16% versus the benchmark's (the Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index) 1.80%. Over the last twelve months the portfolio and the benchmark have earned 2.12% and 2.36%, respectively. Since the Port became its own Treasurer in 2002, the life-to-date earnings of the Port's portfolio and the benchmark are 2.45% and 1.84%, respectively. 6 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY 2018 Actual 2019 Forecast 2019 Budget Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2018 $ % $ in 000's 2017 Actual Operating Revenues: Aeronautical Revenues 264,114 291,268 364,646 365,604 (957) -0.3% 73,378 25.2% Non-Aeronautical Revenues 236,803 257,707 270,014 259,537 10,477 4.0% 12,307 4.8% Total Operating Revenues 500,916 548,975 634,660 625,140 9,520 1.5% 85,685 15.6% Total Operating Expense 299,114 318,849 363,640 366,105 2,465 0.7% 44,791 14.0% Net Operating Income 201,802 230,126 271,020 259,036 11,985 4.6% 40,894 17.8% Capital Expenditures 293,785 579,135 659,813 767,732 107,919 14.1% 80,678 13.9% (1) Annual non-cash amortization of $17.9M lease incentive related to the 5 year SLOA III agreement which ended in 2017. Division Summary 2019 Forecast vs. 2019 Budget  Net Operating Income (NOI) for 2019 is forecasted to be ($12M or 4.6%) favorable to budget, driven by: o Increase in Non-Aeronautical revenue (10.5M or 4% favorable) where we are seeing stronger performance on the Landside, particularly in Public Parking due to increased parking ticket rates and continued growth in Ground Transportation (TNCs). Inside the terminals, strong performance continues in Clubs and Lounges and Al Clear revenues. In-flight sales revenue is also experiencing strong growth due to longer wait times in the TSA and concession lines. o Operating Expenses are forecasted to be ($2.5M or 0.7%) favorable to budget based on forecasted cost savings of $5.3M in allocations from other divisions, largely from Central Services and due to spending delays in Capital Development (AVPMG), which absorbed over-runs in direct airport expenses that was due to Snow removal disruptions earlier in the year of approximately $2.5M. Division Summary 2019 Forecast vs. 2018 Actuals  Net Operating Income for 2019 is forecasted to be ($40.9M or 17.8%) higher than prior year - primarily driven by: o Higher Operating Revenue ($85.7M or 15.6%) compared to prior year due to:  Higher Aeronautical revenue ($73.4M higher) due to increased rate based costs and lower revenue sharing.  Stronger Non-Aeronautical revenue performance ($12.3M higher) in Public Parking, Clubs and Lounges, Commercial Properties, Ground Transportation, Non-Arline Terminal Lease Spaces, and Airport Dining & Retail. o Higher Operating Expenses ($44.8M or 14.0%) compared to prior year due to:  Higher payroll costs related to increased staffing of approximately $16M.  Higher outside services expenses of approximately $13.8M primarily due to non-recurring expenses focused on addressing strategic initiatives throughout the airport.  Higher charges from other divisions of $12M and Environmental Liability Expense of $8.6M, offset by lower Capital to Expense costs of $6.9M. 7 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 A. BUSINESS EVENTS           Safety: o Airfield composite safety score of 20.5 exceeds annual target of 18 o Major ground incidents YTD = 32 vs. annual goal ≤ 67 o Individual not going home: Q2 YTD 19 vs. 2019 goal < 52 (on track) o Developed policy for standardized personal protective equipment required in Bagwell Security: o Phase II Employee Screening authorized in May o Implemented new Credentialing Office processes to reduce wait times to receive badge Employee Engagement: o Goal is to increase employee engagement in the Aviation Division as evidenced by a 3% increase over the 2018 survey results by Q4 2019. o Create department specific survey action plans by end of Q2 (in progress) Innovations & Efficiencies: o Preparation for second Shark Tank innovations forum (held July 30) o Implement two efficiencies or innovations in each department (in process) Asset Management: o Asset condition assessment inventory (in process) Social Responsibility: o Airport Concessions Disadvantaged Business Enterprise (ACDBE) share of sales = 22.5% vs. goal of 22% o Disadvantaged Business Enterprise (DBE) share of 13.9% vs. goal of 8% o Women and Minority Business Enterprise share of spending on personal services contracts = 14.2% vs. goal of 12% Customer Service: o Through Q2 exceeding five-year average for 2 of 6 key measures (goal is 2) o Q2 increase for washroom cleanliness and internet access/wi-fi o 76% of AV Division staff completed WE ARE customer service training Environment and Sustainability: o Completed A&E/Construction contract for condo sound insulation o Reviewing proposals for purchase of renewable natural gas o Completed sound insulation for 9 single family homes Financial Performance: o Forecasting to achieve both 2019 goals: o Non-aeronautical NOI of $149.2M vs. budget of $136.6M o Airline costs (CPE) of $13.09 vs. budget of $13.39 o Commission authorized Concessions Lease Group 5 in June Capital Project, Planning, and SAMP: o SAMP:  Submitted revised NEPA scope of work and forecast report  Commission authorized $10 million for project planning and preliminary design for SAMP projects (July) o Briefed Commission on main terminal optimization plan (MTOP) in July o Completed phase 1 of North Satellite and opening of Alaska Lounge (July) 8 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 B. KEY PERFORMANCE METRICS YTD 2017 YTD 2018 YTD 2019 % Change from 2018 Total Passengers (000's) Domestic International Total 19,666 2,484 22,150 20,897 2,611 23,508 21,616 2,689 24,304 3.4% 3.0% 3.4% Operations 199,610 210,722 214,749 1.9% 1,025 12,416 13,441 1,147 13,328 14,476 1,165 13,738 14,903 1.5% 3.1% 3.0% 110,915 57,633 28,882 197,430 114,627 64,749 28,326 207,702 118,401 63,388 28,314 210,103 3.3% -2.1% 0.0% 1.2% Landed Weight (In Millions of lbs.) Cargo All other Total Cargo - Metric Tons Domestic freight International freight Mail Total Key Performance Measures 2017 Actual 2018 Actual 2019 Forecast 2019 Budget Fav (UnFav) Budget Vairance $ % Key Performance Metrics Cost per Enplanement (CPE) Non-Aeronautical NOI (in 000's) 10.52 133,101 10.79 149,959 13.09 149,250 13.39 136,534 0.29 12,716 2.2% 9.3% 2.31 (709) 21.4% -0.5% 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) 12.77 12.81 10.11 10.35 114 133 1.57 1.66 379 235 (42,311) (36,863) 14.05 10.43 121 1.67 298 (17,192) 14.42 10.22 123 1.65 278 (15,682) 0.37 0.21 2 0.03 20 (1,510) 2.6% 2.1% 1.6% 1.6% 7.1% -9.6% 1.24 0.08 (12) 0.02 63 19,672 9.7% 0.8% -8.9% 1.0% 26.6% 53.4% Activity (in 000's) Enplanements 23,416 25,890 25,394 496 2.0% 996 4.0% 24,894 Incr (Decr) Change from 2018 $ % Key Performance Metrics - 2019 Forecast compared to 2019 Budget:  Cost per Enplanement (CPE) Forecast: o o  Forecasted CPE is ($0.29, or 2.2%) favorable to 2019 budget. Forecasted CPE is $2.31 higher compared to prior year due to increase in rate based costs and decrease in revenue sharing (from 40% to 20%) percentage under SLOA IV. Non-Aero NOI: o o Non-Aero NOI forecast is expected to be ($12.7M or 9.3%) favorable to budget due to both higher revenues and deferred expenses. Non-Aero NOI forecast is expected to be $709K lower than prior year due to higher expenses to be incurred in 2019 compared to the rate of growth in revenue. The increases are primarily from new FTEs added for 2019 and non-recurring expenses focused on addressing strategic initiatives throughout the airport. 9 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 C. OPERATING RESULTS Division Summary - YTD Incr (Decr) Change from 2018 $ % 2018 YTD Actual Aeronautical Revenues (1) Non-Aeronautical Revenues Total Operating Revenues 127,780 112,761 240,540 147,570 118,864 266,435 175,927 124,604 300,532 177,039 121,045 298,084 (1,112) 3,560 2,448 -0.6% 2.9% 0.8% 28,357 5,740 34,097 19.2% 4.8% 12.8% Operating Expenses: Payroll Outside Services Utilities Other Airport Expenses Total Airport Direct Charges 55,798 17,203 8,389 13,680 95,070 63,139 21,015 9,589 9,788 103,530 68,388 24,456 9,288 14,240 116,372 68,833 29,412 10,683 11,605 120,533 445 4,956 1,395 (2,636) 4,161 0.6% 16.9% 13.1% -22.7% 3.5% 5,249 3,441 (300) 4,452 12,842 8.3% 16.4% -3.1% 45.5% 12.4% Environmental Remediation Liability Capital to Expense Total Exceptions 2,714 24 2,738 4,484 8 4,492 12,543 83 12,627 14,204 14,204 1,661 (83) 1,578 11.7% N/A 11.1% 8,060 75 8,135 179.8% 937.6% 181.1% Total Airport Expenses 97,808 108,021 128,998 134,737 5,739 4.3% 20,977 19.4% Police Costs Capital Development Other Central Services Maritime/Economic Development Total Charges from Other Divisions 9,146 6,486 25,000 1,879 42,512 10,659 6,072 26,714 1,970 45,414 11,117 6,860 27,221 2,039 47,237 12,589 8,265 29,416 2,578 52,848 1,472 1,405 2,195 540 5,612 11.7% 17.0% 7.5% 20.9% 10.6% 458 788 507 69 1,823 4.3% 13.0% 1.9% 3.5% 4.0% Total Operating Expense 140,320 153,436 176,235 187,585 11,350 6.1% 22,799 14.9% Net Operating Income 100,220 112,999 124,297 110,498 13,798 12.5% 11,298 10.0% $ in 000's Operating Revenues: 2019 Year-to-Date Actual Budget Fav (UnFav) Budget Variance $ % 2017 YTD Actual (1) Aero revenues are net of revenue sharing. Operating Expenses - 2019 YTD Actuals compared to 2019 YTD Budget: Total Operating Expenses are ($11.4M or 6.1%) favorable to YTD Budget due to the net of the following:  YTD Aviation Direct Operating Expenses are favorable to budget by $4.2M Positive Variance of $6.8M Payroll - vacancies & hiring delays Vacancies & hiring delays Snow Removal Impact Outside Services Suspension of the Airspace Study project Facilities and Infrastructure Project Delays Capital Program Accrual Adjustments Other Outside Services Savings Utilities Surface Water run rate lower than budgeted Natural Gas - PSE additional delivery cost Suspension or delays of projects Other Negative Variance of $2.6M $0.4M 1.4M (1.0M) $5.0M 1.0M 1.3M 1.0M 1.7M $1.4M 1.4M (0.3M) 0.4M (0.1M) 10 Other Airport Expenses Snow Removal Impact Increase in Legal Reserves Other expenses $2.6M 1.5M 0.8M 0.3M II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Operating Expenses - 2019 YTD Actuals compared to 2019 YTD Budget - continued:  YTD Operating Expenses Exceptions are ($1.6M or 11.1%) favorable to budget by $1.6M Positive Variance of $1.6M Environmental Remediation Liability Soils -NSAT Contaminated Soils Removal Asbestos - IAF- SSAT Interior Corridor Extension Other ERL savings or deferrals  Negative Variance - none $1.6M 0.6M 0.8M 0.2M YTD Operating Expense charges from Central Services and other divisions are ($5.6M or 10.6%) favorable to budget by $5.6M Positive Variance of $5.6M Other Central Services savings Police savings Maritime/Economic savings CDD savings Aviation PMG (projects delayed/deferred) Port Construction Services Other Negative Variance - none $2.2M $1.5M $0.5M $1.4M 1.3M (0.5M) 0.6M Operating Expenses - 2019 YTD Actuals compared to 2018 YTD Actuals: Total Operating Expenses are ($22.8M or 14.9%) higher than YTD 2018 Actuals due to the net of the following:  YTD Aviation Direct Operating Expenses are higher than YTD 2018 Actuals by $12.8M Increase of $13.1M Payroll Increased staffing Snow Removal Impact Outside Services Other Aviation Expenses  Decrease of $0.3M $5.2M $0.3M $3.4M $4.5M YTD Operating Expenses Exceptions are higher than 2018 YTD Actuals by $8.1M Increase of $8.1M Environmental Remediation Liability  Utilities 4.2M (1.0M) Decrease - no material amount $8.1M YTD Operating Expense charges from Central Services and other divisions are higher than YTD 2018 Actuals by $1.8M Increase of $1.8M Capital Development Police Other Central Services Decrease - none $0.8M $0.5M $0.5M 11 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Division Summary - YE Forecast Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2018 $ % $ in 000's Operating Revenues: Aeronautical Revenues Non-Aeronautical Revenues Total Operating Revenues 2017 Actual 2018 Actual 2019 Forecast 2019 Budget 264,114 236,803 500,916 291,268 257,707 548,975 364,646 270,014 634,660 365,604 259,537 625,140 (957) 10,477 9,520 -0.3% 4.0% 1.5% 73,378 12,307 85,685 25.2% 4.8% 15.6% Operating Expenses: Payroll Outside Services Utilities Other Airport Expenses Total Airport Direct Charges 114,463 41,055 16,374 28,292 200,184 125,341 47,638 18,237 25,125 216,341 141,341 61,428 18,949 25,710 247,429 141,316 60,950 20,235 22,692 245,192 (25) (479) 1,285 (3,018) (2,237) 0.0% -0.8% 6.4% -13.3% -0.9% 15,999 13,791 712 586 31,088 12.8% 28.9% 3.9% 2.3% 14.4% Environmental Remediation Liability Capital to Expense Total Exceptions 8,812 2,856 11,668 6,233 6,891 13,124 14,865 14,865 14,259 14,259 (605) (605) -4.2% 0.0% -4.2% 8,632 138.5% (6,891) 1,741 -100.0% 13.3% Total Airport Expenses 211,852 229,465 262,294 259,451 (2,842) -1.1% 32,829 14.3% Police Costs Capital Development Other Central Services Maritime/Economic Development Total Charges from Other Divisions 17,652 14,701 51,004 3,904 87,262 19,231 12,607 53,121 4,425 89,384 25,137 13,196 57,869 5,145 101,346 25,137 16,242 60,129 5,145 106,654 3,047 2,260 1 5,307 0.0% 18.8% 3.8% 0.0% 5.0% 5,906 588 4,748 720 30.7% 11,962 4.7% 8.9% 16.3% 13.4% Total Operating Expense 299,114 318,849 363,640 366,105 2,465 0.7% 44,791 14.0% Net Operating Income 201,802 230,126 271,020 259,036 11,985 4.6% 40,894 CFC Surplus (2,750) 3,481 3,576 (131,060) 75,050 (6,157) 4,406 (136,218) 92,157 (4,683) 6,069 (161,132) 111,275 (3,993) 6,069 (158,696) 102,416 (689) (2,436) 8,859 -17.3% 0.0% 0.0% 1.5% 8.6% 1,474 1,664 (24,913) 17.8% 23.9% Net Non-Operating Items in / out from ADF (3) SLOA III Incentive Straight Line Adj Debt Service Adjusted Net Cash Flow 19,119 37.8% n/a -18.3% 20.7% Operating Expenses - 2019 YE Forecast compared to 2019 YE Budget: Total Operating Expenses are forecasted to be ($2.5M or .7%) favorable to Budget due to the net of the following:  Aviation Direct Operating Expenses are forecasted to be ($2.2M or 0.9%) unfavorable to Budget Positive Variance of $1.3M Negative Variance of $3.5M Payroll $0.0M Vacancies & hiring delays 1.0M Snow Removal Impact (1.0M) Utilities $1.3M Surface Water & Water Utility run rate is lower than budgeted 1.8M Late 2018 invoices for Sewer and Natural Gas (0.5M) Outside Services Snow Removal Impact in Apron Area 1.2M Snow Removal Impact on Landside 0.4M Airfield Study Project Savings (1.0M) FSS Cust. Svc. Seasonal Staffing Savings (0.5M) Curbside assistance for taxi in Q4 based on SP+ estimates. 0.5M Other offsets to over-runs (0.1M) Other Aviation Expenses Legal Reserve Increase 1.0M Maintenance Deicer for Airfield and Landside 0.9M Commercial Management Food Prep Labor Tax 0.5M Under-accrued Airline Incentives 0.2M Other 0.4M 12 $0.5M $3.0M II.  AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aviation Operating Expense Exceptions are forecasted to be ($0.6M or 4.2%) unfavorable to Budget Positive Variance - no variance Negative Variance of $0.6M Environmental Remediation Liability NSAT Contaminated Soils Removal Savings (0.6M) Asbestos - IAF- SSAT Interior Corridor and Other 1.1M Other ERL Expenses 0.1M  $0.6M Operating Expense charges from Central Services and other divisions are forecasted to be ($5.3M or 5%) favorable to Budget Positive Variance of $5.3M Central Services savings CDD savings (projects delayed/deffered) Negative Variance - none $2.3M $3.0M Operating Expenses - 2019 YE Forecast compared to 2018 YE Actuals: Total Operating Expenses are forecasted to be ($44.8M or 14%) higher than 2018 Actuals due to the net of the following:  Aviation Direct Operating Expenses are forecasted to be higher than 2018 Actuals by $31M Increase of $31.1M Payroll Increased Staffing Snow Removal Impact Outside Services Advance Planning Seasonal Customer Service Staff & Other Master Planning Infrastructure Systems Executive Program Management Consulting Support SAMP Environment Review Planning Snow Removal Impact Other Ourside Services Utilities Other Airport Expenses  Decrease - none $16.0M 15.0M 1.0M $13.8M 0.8M 3.1M 3.0M 1.6M 1.2M 1.6M 2.5M $0.7M $0.6M Operating Expense Exceptions are forecasted to be higher than 2018 Actuals by $1.7M Increase of $8.6M Environmental Remediation Liability  Decrease of $6.9M $8.6M Capital to Expense $6.9M Operating Expense charges from Central Services and other divisions are forecasted to be higher than 2018 Actuals by $12M Increase of $12.0M Police CDD Other Central Services Maritime/Economic Development divisions Decrease - no material amount $5.9M $0.6M $4.7M $0.7M 13 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aeronautical Business Unit Summary - YTD 2017 YTD 2018 YTD 2019 Year-to-Date Fav (UnFav) Budget Variance Incr (Decr) Change from 2018 $ in 000's Actual Actual Actual Budget $ % $ % Revenues: Movement Area Apron Area Terminal Rents Federal Inspection Services (FIS) Total Rate Base Revenues 50,849 7,636 78,051 6,708 143,243 59,656 8,209 83,956 6,641 158,462 61,289 9,883 100,229 7,271 178,672 61,987 9,456 100,032 7,086 178,561 (697) 427 197 185 111 -1.1% 4.5% 0.2% 2.6% 0.1% 1,634 1,674 16,272 630 20,210 2.7% 20.4% 19.4% 9.5% 12.8% Commercial Area Subtotal before Revenue Sharing 4,959 148,202 5,072 163,534 5,569 184,241 6,319 184,880 (750) (639) -11.9% -0.3% 497 20,707 9.8% 12.7% Revenue Sharing Total Aeronautical Revenues (18,635) 129,567 (15,964) 147,570 (8,314) 175,927 (7,841) 177,039 (473) (1,112) -6.0% -0.6% 7,650 28,357 47.9% 19.2% Total Aeronautical Expenses 91,209 100,511 106,581 112,212 5,630 5.0% 6,070 6.0% Net Operating Income 38,358 47,059 69,346 64,827 4,519 7.0% 22,287 47.4% Aeronautical - Q2 2019 Actuals vs. Q2 2019 Budget  Net Operating Income for Q2 2019 is ($4.5M or 7.0%) favorable to budget primarily due to savings in Aeronautical expenses due to spending and timing delays in Outside Services and lower charges from other divisions. Aeronautical - Q2 2019 Actual vs. Q2 2018 Actual  Net Operating Income for Q2 2019 is ($22.3M or 47.4%) higher than Q2 2018 due mainly to higher revenues ($28.4M or 19.2% increase) from rate-based costs to recover for increased airline activity and lower revenue sharing to the Airlines due to reduction in revenue sharing percentage under SLOA IV. Operating Expenses are ($6.1M or 6.0%) higher than Q2 2018 due to higher airport direct operating expenses to support increased airline activity. 14 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aeronautical Business Unit Summary - YE Forecast Fav (UnFav) Budget Variance Incr (Decr) Change from 2018 2017 2018 2019 2019 $ in 000's Actual Actual Forecast Budget $ % $ % Revenues: Movement Area Apron Area Terminal Rents Federal Inspection Services (FIS) Total Rate Base Revenues 108,638 16,771 155,431 18,612 299,452 116,703 15,627 169,318 16,226 317,874 128,896 12,380 212,274 15,171 368,722 130,873 19,714 203,319 14,521 368,426 (1,976) (7,334) 8,956 650 296 -1.5% -37.2% 4.4% 4.5% 0.1% 12,194 (3,246) 42,956 (1,055) 50,848 10.4% -20.8% 25.4% -6.5% 16.0% Commercial Area Subtotal before Revenue Sharing 10,574 310,026 10,257 328,131 13,116 381,838 12,859 381,286 256 552 2.0% 0.1% 2,858 53,707 27.9% 16.4% Revenue Sharing (42,311) (36,863) (17,192) (15,682) (1,510) -9.6% 19,672 53.4% Other Prior Year Revenues Total Aeronautical Revenues (26) 267,690 291,268 364,646 365,604 (957) 0.0% -0.3% 73,378 25.2% Total Aeronautical Expenses 195,414 211,101 242,808 243,102 294 0.1% 31,706 15.0% Net Operating Income 72,276 80,167 121,839 122,502 (663) -0.5% 41,672 52.0% Debt Service (1) Net Cash Flow (86,564) (14,288) (91,673) (11,506) (111,673) 10,166 (109,343) 13,159 (2,330) (2,993) -2.1% 22.7% (20,000) -21.8% 21,672 188.4% Airline Rate Base Cost Drivers $ in 000's 2017 Actual 2018 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 192,188 206,076 113,832 115,419 (33,057) (32,987) 29,654 32,371 (2,264) (2,132) (901) (873) 299,452 317,874 10,574 10,257 310,026 328,131 2019 Forecast 2019 Budget 236,175 137,696 (33,060) 30,583 (1,614) (1,058) 368,722 13,116 381,838 237,387 136,513 (33,045) 30,121 (1,521) (1,028) 368,426 12,859 381,286 Fav (UnFav) Budget Variance $ % (1,212) -0.5% 1,183 0.9% (15) 0.0% 463 1.5% (93) 6.1% (30) 2.9% 296 0.1% 256 2.0% 553 0.1% Incr (Decr) Change from 2018 $ % 30,099 22,277 (73) (1,787) 518 (185) 50,848 2,858 53,707 14.6% 19.3% 0.2% -5.5% -24.3% 21.2% 16.0% 27.9% 16.4% Aeronautical - 2019 YE Forecast vs. 2019 YE Budget  Aeronautical net operating income is forecasted to be ($0.7M or 0.5%) slightly unfavorable to budget driven by: o Lower forecasted Aeronautical revenues of approximately $1M or .3% lower than budget due to higher revenue sharing to the Airlines based on higher projected Non-Aeronautical revenues, despite the decrease in revenue sharing percentage (from 40% in 2018 to 20% in 2019) per SLOA IV. Aeronautical expenses are forecasted to be ($0.3M or 0.1%) nearly in-line with budget driven by lower cost allocations from other divisions due to delayed spending from Capital Development programs which helped to absorb overruns in Airport expenses due to snow removal costs from Q1 that impacted the Airfield Movement area. 15 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Aeronautical - 2019 YE Forecast vs. 2018 YE Actuals  Net Operating Income for 2019 is forecasted to be ($41.7M or 52%) higher than prior year due to: o $74.3M higher revenue from rate-based costs to recover increased airline activity, and due to lower revenue sharing to the Airlines per SLOA IV airline. o $31.7M higher expenses due to increased airport direct operating expenses to support increased airline activity and higher charges from other divisions (Central Services and Capital Development). 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 Non-Airline Terminal Leased Space Commercial Properties Utilities Employee Parking Clubs and Lounges Other Total Non-Aero Revenues Total Non-Aero Expenses Net Operating Income 2017 YTD 2018 YTD Actual Actual 2019 Year-to-Date Actual Budget Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2018 $ % 14,514 3,284 36,958 7,633 26,349 2,071 10,708 3,423 4,674 2,173 973 14,922 5,497 39,402 8,885 27,694 2,485 7,593 3,438 5,191 2,773 983 15,560 4,505 40,401 9,979 29,581 3,108 7,072 3,665 5,193 4,456 1,085 15,123 4,657 40,969 9,413 28,199 2,555 6,703 3,932 4,876 3,626 993 437 (153) (568) 567 1,383 553 369 (267) 317 830 92 2.9% -3.3% -1.4% 6.0% 4.9% 21.6% 5.5% -6.8% 6.5% 22.9% 9.3% 637 (993) 999 1,094 1,887 623 (521) 227 2 1,683 102 4.3% -18.1% 2.5% 12.3% 6.8% 25.1% -6.9% 6.6% 0.0% 60.7% 10.4% 112,761 49,111 63,649 118,864 124,604 57,316 67,288 121,045 62,229 58,816 3,560 2.9% 5,740 4.8% 4,913 8,472 7.9% 14.4% 4,391 1,349 8.3% 2.0% 52,925 65,940 Non-Aeronautical - Q2 2019 Actuals vs. Q2 2019 Budget  Net Operating Income for Q2 2019 is ($8.5M or 14.4%) favorable to budget driven by a combination of: o Higher Operating Revenue due to strong YTD performance in Clubs and Lounges, Al Clear, Airport Dining & Retail, and Ground Transportation. o Lower Operating Expenses due to slower than anticipated project expense charges from other divisions (primarily in Capital Development). Non-Aeronautical - Q2 2019 Actual vs. Q2 2018 Actual  Net Operating Income for Q2 2019 is ($1.3M or 2%) higher than Q2 2018 (2.0% higher) driven by: o Strong revenue performance in both Food and Beverage and Retail sales despite transitions to new leases. Clubs and Lounges have also outperformed expectations, along with increased TNC activity in Ground Transportation, and increased transactions in Public Parking. While revenue was (4.8% higher) compared to prior YTD, it was offset by higher expenses (8.3% higher) which reflected planned initiatives in the 2019 budget and snow removal related costs earlier in the year. 16 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 Non-Aero Business Unit Summary - YE Forecast Fav (UnFav) Budget Variance $ % Incr (Decr) Change from 2018 $ % 2018 Actual 2019 Forecast 2019 Budget 35,051 10,641 75,106 15,684 54,611 4,369 18,042 7,018 9,617 5,041 1,624 37,306 16,263 80,212 18,772 59,021 5,302 15,434 7,206 10,269 6,802 1,119 37,663 13,624 86,070 20,706 59,962 5,879 15,471 8,026 10,134 10,329 2,150 36,455 13,624 82,350 19,734 59,484 4,909 14,219 8,058 10,134 8,520 2,049 1,208 3,720 972 478 970 1,251 (32) 1,809 101 3.3% 0.0% 4.5% 4.9% 0.8% 19.8% 8.8% -0.4% 0.0% 21.2% 4.9% 357 (2,639) 5,859 1,934 941 577 37 820 (135) 3,527 1,030 236,803 103,702 133,101 257,707 107,748 149,959 270,014 120,832 149,181 259,537 123,003 136,534 10,477 4.0% 12,307 4.8% Total Non-Aero Expenses Net Operating Income 2,171 12,648 1.8% 9.3% 13,085 (778) 12.1% -0.5% Less: CFC (Surplus) / Deficit (1) Adjusted Non-Aero NOI (2,750) 130,351 (6,157) 143,802 (4,683) 144,499 (3,993) 132,540 (689) 11,958 -17.3% 9.0% 1,474 696 23.9% 0.5% Debt Service (1) Net Cash Flow (44,495) 85,856 (44,545) 99,257 (49,459) 95,040 (49,352) 83,188 (107) 11,852 -0.2% 14.2% (4,914) (4,217) -11.0% -4.2% $ in 000's Non-Aero Revenues Rental Cars - Operations Rental Cars - Operating CFC Public Parking Ground Transportation Airport Dining & Retail Non-Airline Terminal Leased Space Commercial Properties Utilities Employee Parking Clubs and Lounges Other Total Non-Aero Revenues 2017 Actual 1.0% -16.2% 7.3% 10.3% 1.6% 10.9% 0.2% 11.4% -1.3% 51.9% 92.1% (1) CFC excess and Debit service are forecasted/budgeted on an annual basis only. Thus, quarterly data is not available. Non-Aeronautical - 2019 Forecast vs. 2019 Budget  Non-Aeronautical net operating income is forecasted to be ($12.7M or 9.3%) favorable to budget due to a combination of: o Higher projected revenues ($10.5M or 4% higher) in the following areas: Public Parking due to increased parking ticket rates and continued growth in Ground Transportation (TNCs); inside the terminals, strong performance continues in Clubs and Lounges and Al Clear revenues; and In-flight sales revenue is also experiencing strong growth due to longer wait times in the TSA and concession lines. o Lower projected expenses ($2.2M or 1.8% lower) due largely to forecasted cost savings in allocations from other divisions which absorbed impact of snow removal costs to Landside in Q1. Non-Aeronautical - 2019 Forecast vs. 2018 Actuals  Net Operating Income growth for 2019 is forecasted to be ($0.7M or 0.5%) flat compared to prior year despite higher forecasted revenues in Airport Dining & Retail, Public Parking, Ground Transportation, and Clubs and Lounges. While growth in revenue is forecasted to be ($12.3M or 4.8%) higher, expenses are anticipated to be ($13.1M or 12.1%) higher 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. 17 II. AVIATION DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS Capital Variance $ in 000's Description 2019 YTD Actual 153,500 2019 Forecast 338,500 2019 Budget 376,548 NS NSAT Renov NSTS Lobbies (2) 64,866 133,086 141,054 7,968 5.6% Service Tunnel Renewal/Replace (3) 5,083 11,083 15,000 3,917 26.1% (3,426) (3,426) 100 3,526 3525.9% Arc Flash Mitigation (5) 29 189 3,636 3,448 94.8% Fire Station - Westside (6) 358 958 4,000 3,042 76.0% Highline School Insulation (7) 3 6,043 3,300 (2,743) -83.1% 6 406 2,800 2,394 85.5% 157 1,317 3,590 2,273 63.3% ASL Conversion at Checkpoints (10) 536 1,536 3,400 1,864 54.8% PLB Renew & Replace Phase 2 (11) 1,606 4,168 5,834 1,666 28.6% Perimeter Intrusion Detect Sys (12) 26 123 1,775 1,652 93.1% RCF Pavement Remediation (13) All Other Total Spending 173 3,573 5,200 1,627 31.3% 57,206 280,124 162,257 659,813 201,494 39,237 767,732 107,919 19.5% 14.1% International Arrivals Facility (1) SSAT Renovation Project (4) Electric Utility SCADA (8) Parking Garage Elevators Modernization (9) Budget Variance $ % 38,048 10.1% 1. The Design Builder construction in place has lagged behind projections, primarily because of steel fabrication delays and overall manpower shortages. 2. One month lag on construction invoicing is contributing to positive variance. 3. Original estimate assumed traffic management change order was to be implemented which has not yet occurred. Estimate did not account for decrease in spending as work in the main garage is completed. 4. Project cancelled. 5. Design delays have deferred construction start to 2020. 6. A change in delivery method from two major works contracts to one contract has resulted in delaying the construction to start in Q1 2020. 7. FAA issued a grant, issuance of grant accelerated projected cash flows for the two schools. 8. Project delayed to address design deficiencies and additional scope. 9. Elevator shafts and vestibules are being delayed until 2020 construction season due to design delays and weather windows. 10. Work delays are due to the lack of electrical contracting and sprinkler damage delays with CP2/CP3. 11. Two bridges are pushed out from 2019 to 2020 due to gate S12 PLB failure. Payments to suppliers are later than forecasted. 12. RFP Took longer than originally anticipated to get off the ground. 13. Original estimate prepared prior to scope revision for fencing that delayed construction two months. 18 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY $ in 000's Total Revenues 2017 Actual 54,183 2018 Actual 57,575 2019 Forecast 59,629 2019 Budget 59,729 Fav (UnFav) Budget Variance $ % (100) 0% Incr (Decr) Change from 2018 $ % 2,055 4% Total Operating Expenses 42,164 43,252 48,481 50,822 2,341 5% 5,229 12% Net Operating Income 12,020 14,323 11,149 8,908 2,241 25% (3,174) 22% Capital Expenditures 5,746 20,489 15,105 17,638 2,533 14% (5,384) -26% Division Summary 2019 Forecast vs. 2019 Budget  Operating Revenues are forecasted $100K below budget.  Operating Expenses are forecasted to be $2.3M below budget with savings expected to be split between the Maritime Division ($1.8M) and Central Services ($0.5M).  Net Operating Income forecasted to be $2.2M above budget.  At the end of the 2nd quarter, capital spending for full year 2019 is forecasted to be $15.1 million or 86% of the approved budget of $17.6 million. Division Summary 2019 Forecast vs. 2018 Actuals  Operating Revenues are forecast to be $2.1M above 2018 due to higher tariff rates primarily in Cruise.  Operating Expenses are expected to be $5.2M greater than 2018 primarily from increased wage rates, one-time favorable 2018 pension adjustment, and higher expected Cruise outside services.  Net Operating Income is forecasted to be $3.2M less than 2018. Net Operating Income before Depreciation by Business $ in 000's Ship Canal Fishing & Operations Elliott Bay Fishing & Commercial Operations 2017 YTD 2018 YTD Actual Actual 2019 Year-to-Date Actual Budget Fav (UnFav) Incr (Decr) Budget Variance $ % Change from 2018 $ % (1,162) (1,148) (800) (1,215) 414 34% 348 30% 355 13 515 (282) 797 282% 501 NA Recreational Boating 791 982 1,045 263 782 297% 62 6% Cruise 2,829 2,093 3,216 2,920 296 10% 1,123 54% Bulk 2,388 2,249 1,737 1,534 203 13% (513) -23% Maritime Portfolio 111 391 (435) (1,225) 790 64% (826) -211% All Other (478) (39) (219) (372) 153 41% (180) -456% Total Maritime 4,835 4,541 5,058 1,623 3,435 212% 516 11% 19 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 A. BUSINESS EVENTS Cruise - Successful first arrival of the Norwegian Joy and Royal Caribbean's Ovation of the Seas. Eighty percent of business volume now under contracted commitment. Received feedback on RFQ and selected three entities to participate in the RFP process. Elliott Bay Fishing & Commercial Operations - The 680' Ocean Phoenix fished her last season of Pollock. She has been a 30+year tenant of the port, employing 225 crew, and bringing 4,200 tons of product annually to Pier 90. The 367' M/V Excellence has been overhauled to help absorb the processing capacity of the Ocean Phoenix. Recreational Boating - Bids closed for Shilshole Bay Marina's customer service facility buildings. Building on 4th year in a row with zero injuries. Seaport Environmental - Completed installation of 390 solar panels, each with 300 watts at P69. Project came in under budget with 66% of costs recovered by the grant. Stormwater Utility - Completed installation of a rain garden adjacent to the bike path at Terminal 86 and new drainage system in Cruise passenger area at Pier 91. B. KEY PERFORMANCE METRICS Grain Volume - Metric Tons in 000's 600 500 2018 Actual 400 2019 Budget 300 2019 Actual 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cruise Passengers in 000's 400 2018 Actual 300 2019 Budget 200 2019 Actual 100 0 Jan Feb Mar Apr May Jun Jul 20 Aug Sep Oct Nov Dec III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 C. OPERATING RESULTS 2017 YTD 2018 YTD $ in 000's Actual Actual Ship Canal Fishing & Operations 1,456 1,610 Elliott Bay Fishing & Commercial Operations 2,984 3,012 Recreational Boating 5,438 6,068 Cruise 6,325 6,806 Bulk 3,042 3,123 Maritime Portfolio Management 5,267 5,628 Other 14 11 Total Revenue 24,525 26,257 2019 Year-to-Date Actual Budget 2,004 2,010 3,067 2,961 6,228 6,358 8,473 9,114 2,567 2,423 5,019 5,052 10 0 27,368 27,918 Fav (UnFav) Budget Variance $ % (6) 0% 105 4% (131) -2% (641) -7% 144 6% (33) -1% 10 NA (550) -2% 1,227 1,202 2,027 998 280 5,521 2,136 232 13,624 1,082 415 1,988 5,055 135 8,675 11 22,310 5,058 8,911 (3,853) 266 205 285 1,309 (11) 706 266 123 3,149 212 5 252 406 (28) 847 (11) 3,985 3,435 (107) 3,328 Incr (Decr) Change from 2018 $ % 394 24% 55 2% 160 3% 1,668 25% (556) -18% (609) -11% (1) -8% 1,110 4% Expenses Ship Canal Fishing & Operations 1,021 Elliott Bay Fishing & Commercial Operations 1,289 Rec Boating 1,857 Cruise 427 Other Maritime 221 Maintenance Expenses 4,658 Portfolio Management 1,770 Other ED Expenses 353 Total Maritime & EDD expenses 11,595 Enviromental & Sustainability 598 CDD Expenses 419 Police Expenses 1,889 Other Central Services 4,725 Aviation Division 93 Total Central Services & Aviation 7,724 Envir Remed Liability 371 Total Expense 19,690 NOI Before Depreciation 4,835 Depreciation 8,442 NOI After Depreciation (3,606) 1,183 1,315 1,952 1,136 365 5,576 2,031 320 13,878 519 437 2,169 4,707 105 7,937 (99) 21,716 4,541 8,823 (4,281) 1,493 1,407 2,312 2,307 270 6,227 2,402 356 16,773 1,294 420 2,240 5,461 107 9,522 0 26,295 1,623 8,804 (7,181) 18% 15% 12% 57% -4% 11% 11% 35% 19% 16% 1% 11% 7% -26% 9% NA 15% 212% -1% 46% 44 (113) 75 (138) (85) (55) 105 (87) (254) 563 (22) (181) 349 30 738 110 594 516 88 429 4% -9% 4% -12% -23% -1% 5% -27% -2% 108% -5% -8% 7% 28% 9% -111% 3% 11% 1% 10% 2019 YTD Actuals vs. Budget  Operating Revenues were $550K lower than budget from Cruise sailing schedule and contractual changes after budget. The shortfall should be made up in Q2.    Operating Expenses were $3,985K lower than budget: o Cruise $1,309K lower than budget due to timing of marketing spend and cancellation of consulting work. o Rec Boating $285K lower than budget due to open positions. o Ship Canal Fishing & Operations $266K favorable primarily due to open positions budgeted for Salmon Bay Marina. o Elliott Bay Fishing & Commercial Operations $205K lower than budget from timing of utility expense. o Portfolio Management $266K favorable from open headcount and timing of consulting. o Maintenance $706K favorable do to timing of project spend. o Environment & Sustainability $212K lower than budget due to vacant positions. o Police $252K under budget. o Other Central Services $406K lower than budget primarily due to lower charges from Public Affairs $78K, Human Resources $141K, and Exec $74K. All other expenses net to $78K lower than budget. Net Operating Income was $3,435 above budget. 21 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 YTD Actuals vs. 2018 YTD Actuals  Operating Revenues were $1,110K higher than 2018 due to growth in Cruise and Fishing/Commercial/Recreational Marinas resulting from increased rates. This growth is offset by WSDOT lease expiration at T106 & T46 and reductions in volumes at the Grain terminal resulting from soybean tariffs.  Operating Expenses were $594K higher than 2018 actual driven primarily by Environmental with a higher ratio of expense work and Central services from annual salary increases. Direct expenses went down Y/Y due to higher than expected open positions.  Net Operating Income was $516K above 2018 actual. $ in 000's Ship Canal Fishing & Operations Elliott Bay Fishing & Commercial Operations Recreational Boating Cruise Bulk Maritime Portfolio Management Other Total Revenue Expenses Ship Canal Fishing & Operations Elliott Bay Fishing & Commercial 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 2017 Actual 2,854 6,443 11,086 17,596 5,427 10,787 (9) 54,183 2018 2019 Actual Forecast 3,502 4,021 6,755 5,827 12,035 12,794 18,880 22,406 5,167 4,254 11,305 10,328 (69) 0 57,575 59,629 2019 Budget 4,021 5,927 12,794 22,406 4,254 10,328 0 59,729 Fav (UnFav) Budget Variance $ % 0 0% (100) -2% 0 0% 0 0% 0 0% 0 0% 0 NA (100) 0% Incr (Decr) Change from 2018 $ % 519 15% (928) -14% 760 6% 3,526 19% (913) -18% (977) -9% 69 100% 2,055 4% 2,011 2,588 3,814 2,674 462 10,420 3,507 665 26,141 1,125 748 3,756 9,803 203 15,634 389 42,164 12,020 17,410 (5,390) 2,261 2,530 3,609 2,683 721 11,416 3,726 621 27,566 1,588 823 4,041 9,469 221 16,141 (455) 43,252 14,323 18,022 (3,699) 2,804 2,629 4,395 4,212 564 11,980 4,279 718 31,580 2,622 821 4,473 11,120 206 19,242 0 50,822 8,908 17,613 (8,705) 250 150 400 575 0 0 300 123 1,798 186 (34) 176 215 0 543 0 2,341 2,241 (200) 2,041 293 (51) 387 954 (157) 563 252 (26) 2,216 847 33 256 1,437 (15) 2,558 455 5,229 (3,174) (209) (2,965) 2,554 2,479 3,995 3,637 564 11,980 3,979 595 29,782 2,436 855 4,297 10,905 206 18,699 0 48,481 11,149 17,813 (6,664) 9% 6% 9% 14% 0% 0% 7% 17% 6% 7% -4% 4% 2% 0% 3% NA 5% 25% -1% 23% 13% -2% 11% 36% -22% 5% 7% -4% 8% 53% 4% 6% 15% -7% 16% 100% 12% -22% -1% -80% 2019 Forecast vs. 2019 Budget  Operating Revenues are forecast $100K below budget from scheduling with Navy vessel during seafair.  Operating Expenses are forecasted to be $2,341K lower than budget: o Fishing and Rec Boating are $800K below budget dues to YTD savings. o Cruise is favorable $575K with $750K consulting contract cancellation offset by a $175K capital write off on the P66 Cruise terminal façade. o Remaining $966K driven by open headcount payroll, not expected to be spent in 2nd half. 22 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 Forecast vs. 2018 Actuals  Operating Revenues are forecasted to be $2.1M higher than 2018 actual: o Increased tariff offset by loss of WSDOT revenue.  Operating Expenses are forecasted to be $5.2M higher than 2018 actual with increases seen in: o Cruise $1M due to higher execution and exterior façade write-off. o Central Services $2.6M up from wage increases, less open headcount, and favorable 2018 pension adjustment. o Maintenance up $563K from allocation change on P66 cruise building.  Net Operating Income is forecasted to be $3.2M below 2018 actual. 23 III. MARITIME DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS Comments on Key Projects: Through the 1st half of 2019, Maritime spent 11% of the annual approved capital budget. Full year spending is estimated to be 86% of budget. Projects with significant changes in spending were:      Small Projects - Numerous projects within CIP are under feasibility discussions to either cancel or defer spending into 2020. T117 Restoration - Schedule delayed due to delayed in Trustee negotiation. New Cruise Terminal - A site for the new cruise terminal became available sooner than expected. Design development proceeding earlier than anticipated. SBM Paving - Construction delayed due to re-evaluation of project scope after bids received 33% over Engineer's estimate. Contract award expected in Q3 2019. Marina Management System - Project on hold as vendor unable to meet security requirements. 24 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY $ in 000's Total Revenues 2017 Actual 17,791 2018 Actual 20,705 2019 Forecast 19,725 2019 Budget 19,725 Fav (UnFav) Budget Variance $ % 0 0% Incr (Decr) Change from 2018 $ % (979) -5% Total Operating Expenses 25,397 27,651 29,172 31,114 1,942 6% 1,522 6% Net Operating Income (7,606) (6,946) (9,447) (11,389) 1,942 17% (2,501) -36% Capital Expenditures 3,739 2,066 4,980 5,713 733 13% 2,914 141% Division Summary 2019 Forecast vs. 2019 Budget  Operating Revenues are forecasted to budget primarily due to Conference and Event Center favorable volumes in the 1st half, offset by construction/modernization related volumes in the 2 nd half of 2019.  Operating Expenses are forecasted to be $1,942K below budget primarily due to unfilled positions, Maintenance allocation changes, Workforce Development contract deferral, and timing of EDD Grants.  Net Operating Income forecasted to be $1,942K above budget.  At the end of the second quarter, capital spending for full year 2019 is forecasted to be $5.0M or 87% of the approved budget. Division Summary 2019 Forecast vs. 2018 Actuals  Operating Revenues are expected to be $979K below 2018 primarily due to expiring lease with WSDOT at T106 and Conference and Event Center volumes.  Operating Expenses are expected to be $1,522K greater than 2018 primarily due to increased execution of Economic Development Initiative programs.  Net Operating Income is expected to be $2.5M less than 2018. Net Operating Income before Depreciation by Business $ in 000's 2017 YTD 2018 YTD Actual Actual 2019 Year-to-Date Actual Budget Fav (UnFav) Incr (Decr) 2019 Bud Var $ % Change from 2018 $ % Portfolio Management (2,548) (2,062) (1,293) (3,093) 1,799 58% 769 37% Conference & Event Centers (483) (17) (162) (85) (78) -92% (145) -848% Tourism (528) (640) (505) (714) 208 29% 134 21% Workforce Development (353) (368) (596) (1,095) 499 46% (229) -62% EDD Grants (427) (28) 4 (624) 628 NA 32 NA (1) 0 (34) (60) 26 NA (34) NA (4,340) (3,115) (2,588) (5,670) 3,082 54% 527 17% Env Grants/Remed Liab/ERC Total Econ Dev 25 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 A. BUSINESS EVENTS Workforce Development - Fourteen aspiring ironworkers graduated from the union's second pre-apprenticeship cohort. Thirteen are now enrolled apprentices. The group has earned $141K ($24+/hour) so far. Diversity in Contracting - Published the first Diversity in Contracting Annual Report. It highlighted the Port's 2018 WMBE results (11.8%) and 2019 WMBE utilization goals (12.4% not including construction). Portfolio Management - Received Commission authorization to start construction/modernization of Bell Harbor Conference Center. Tourism - Thirty organizations received 2019 tourism grants from the Port of Seattle. New recipients include: Goldendale Chamber of Commerce promoting the Goldendale Observatory, the Suquamish Museum targeting travelers in Seattle hotels and Methow Trails will improve their website promoting outdoor winter activities. Selected Core Communications to provide tourism marketing programs on behalf of the Port's international tourism efforts. Real Estate Development - Issued RFP to redevelop Terminal 106. Initiated Commission approval to surplus and sell small property on Harbor Avenue. B. KEY PERFORMANCE METRICS Building Occupancy by Location: 100% 95% 90% Central Harbor T-91 Uplands 85% Marina Office & Retail T-91 Industrial 80% T-106 Warehouse 75% 70% Q2 2018 Q3 2018 Q4 2018 Q1 2019 26 Q2 2019 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 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 Diversity in Contracting 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 2017 YTD 2018 YTD Actual Actual 4,182 4,577 3,545 5,188 7,727 9,765 2019 Year-to-Date Actual Budget 4,421 4,414 5,963 5,604 10,384 10,017 Fav (UnFav) Budget Variance $ % 7 0% 360 6% 367 4% Incr (Decr) Change from 2018 $ % (156) -3% 775 15% 619 6% 2,050 3,660 96 120 396 1,492 24 7,838 26 228 514 427 1,195 130 200 85 2,551 69 3,034 0 12,067 (4,340) 1,860 1,952 4,306 114 74 473 1,996 77 8,992 37 228 620 28 912 121 139 81 2,555 79 2,976 0 12,880 (3,115) 1,999 1,922 4,833 92 48 352 1,563 72 8,882 99 474 526 (4) 1,095 173 148 101 2,520 54 2,995 0 12,972 (2,588) 1,859 2,156 4,687 115 98 644 2,160 196 10,055 106 959 761 580 2,406 193 120 114 2,719 80 3,226 0 15,688 (5,670) 1,908 234 (146) 23 49 292 597 124 1,174 7 485 235 584 1,311 20 (28) 13 199 27 231 0 2,716 3,082 50 11% -3% 20% 51% 45% 28% 63% 12% 7% 51% 31% 101% 54% 10% -23% 12% 7% 33% 7% NA 17% 54% 3% (30) 526 (22) (26) (121) (433) (5) (111) 62 246 (94) (32) 183 52 9 20 (35) (26) 20 0 92 527 (141) -2% 12% -20% -35% -26% -22% -6% -1% 169% 108% -15% -112% 20% 43% 6% 24% -1% -32% 1% NA 1% 17% -7% (6,201) (5,114) (4,447) (7,579) 3,132 41% 668 13% 2019 YTD Actuals vs. Budget  Operating Revenues were $367K higher than budget due to higher than anticipated volumes at the conference and event center.  Operating Expenses were $2,716K lower than budget: o Portfolio Management $234K favorable from open headcount and timing of tenant improvement expenses. o Conference and Event Center costs $146K unfavorable due to higher volumes. o EconDev Other $292K lower than budget due to unspent Opportunity Fund and delayed hiring. o Maintenance Expenses $597K favorable from new allocation methodology at P66. o Workforce Development $485K lower than budget due to timing of spending for Construction Trades Regional Partnership, K-12 Career Connected Learning, and Maritime Initiative, offset by moving up spending on Airport Career Pathways implementation. o Tourism $235K lower than budget from timing of Visit Seattle invoice and less travel expense than budgeted. o EDD Grants $584K favorable to budget due to timing of invoices. o Other Central Services $199K below budget with savings from open headcount. o All other expenses net to $56K above budget.  Net Operating Income was $3,082K above budget. 27 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 YTD Actuals vs. 2018 YTD Actuals  Operating Revenues were $619K higher than 2018 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 $92K higher than 2018 actual: o Conference and Event Center $526K greater than 2018 due to higher sales activity at Bell Harbor International Conference Center. o Portfolio Management lower $30K from elevator modernization in Q1 2018. o Maintenance Expenses $433K less than 2018 due to allocation methodology change at P66. o EDD Grants $32K lower, EconDev Other $121K lower, Workforce Development $246K higher, and Tourism $94K lower than 2018 due to timing of payments. o All other Expenses net to $30K above 2018.  Net Operating Income was $527K above 2018 actual. 28 IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 $ 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 Diversity in Contracting 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 2017 Actual 8,658 9,133 17,791 2018 2019 Actual Forecast 9,002 8,930 11,703 10,795 20,705 19,725 2019 Budget 8,930 10,795 19,725 Fav (UnFav) Incr (Decr) Budget Variance Change from 2018 $ % $ % 0 0% (72) -1% 0 0% (908) -8% 0 0% (979) -5% 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) 3,571 9,889 235 149 785 3,915 166 18,711 132 702 1,408 838 3,080 281 283 (76) 5,259 113 5,860 0 27,651 (6,946) 3,992 (10,938) 4,128 9,374 225 216 1,262 4,071 389 19,664 199 2,010 1,521 1,160 4,890 395 235 228 5,547 155 6,561 0 31,114 (11,389) 3,819 (15,208) 234 0 0 50 200 500 124 1,108 0 410 0 260 670 57 (12) 8 111 0 164 0 1,942 1,942 0 1,942 3,894 9,374 225 166 1,062 3,571 265 18,556 199 1,600 1,521 900 4,220 338 247 220 5,436 155 6,397 0 29,172 (9,447) 3,819 (13,266) 6% 0% 0% 23% 16% 12% 32% 6% 0% 20% 0% 22% 14% 14% -5% 4% 2% 0% 2% NA 6% 17% 0% 13% 323 (516) (11) 17 277 (344) 99 (155) 67 898 112 62 1,139 58 (36) 296 177 42 538 0 1,522 (2,501) (173) (2,328) 2019 Forecast vs. 2019 Budget  Operating Revenues are forecasted to budget with year to date favorability offset by construction at P66 Conference & Event Center.  Operating Expenses are forecasted to be $1,942K below budget primarily due to unfilled positions and reduction in a couple initiative programs. 2019 Forecast vs. 2018 Actuals  Operating Revenues are forecasted to be $979K lower than 2018 actual: o Loss of T106 WSDOT revenue in 2019. o Potential loss of Conference and Event Center space due to the capital modernization project.  Operating Expenses are forecasted to be $1.5M higher than 2018 actual:  Net Operating Income is forecasted to be $2.5M below 2018 actual. 29 9% -5% -5% 11% 35% -9% 59% -1% 50% 128% 8% 7% 37% 21% -13% -391% 3% 37% 9% NA 6% -36% -4% -21% IV. ECONOMIC DEVELOPMENT DIVISION FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS Comments on Key Projects: Through the 1st half of 2019, Economic Development spent 25% of the annual approved capital budget. Full year spending is estimated to be 87% of budget. Projects with significant changes in spending were:    Tenant Improvements - Capital - Leases forecasted to expire will be renewed and require additional capital investment. Small Projects - Upland Garage EV Charging Station project was cancelled by project sponsor for 2019. Project feasibility for 2020 under discussion T91 Upland Pre-Development - Spending less in 2019 with more spending to occur in 2020 and 2021. 30 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 FINANCIAL SUMMARY $ in 000's Total Operating Revenues Core Central Support Services Police Capital Development Environment & Sustainability Total Operating Expenses 2017 Actual 2018 Actual 2019 Forecast 2019 Budget 68 (500) 498 185 71,071 22,095 17,370 6,975 117,511 73,576 23,908 15,501 8,770 121,755 81,157 29,578 16,227 12,101 139,064 82,710 30,778 18,628 13,224 145,339 Fav (UnFav) Budget Variance $ % 313 169.2% Incr (Decr) Change from 2018 $ % 998 -199.5% 1,552 1,200 2,401 1,123 6,276 7,581 5,670 726 3,331 17,308 10.3% 23.7% 4.7% 38.0% 14.2% 1.9% 3.9% 12.9% 8.5% 4.3% 2019 Forecast vs. 2019 Budget  Operating Revenues are forecasted to be favorable due primarily to Police forfeiture seizures.  Operating Expenses are forecasted to be $6.3M favorable to budget mainly due to staffing vacancies, projects spending delay, and delayed Outside Services costs.  Capital spending is forecasted to be $14.8M, 63.5% of the 2019 budget. 2019 Forecast vs. 2018 Actuals  Operating Revenues are expected to be $1M above 2018 mainly due to higher Police forfeiture seizures in 2019 and ($863K) special funding LEOFF 2 received from the Washington State Department of Retirement Systems (DRS) in 2018.  Operating Expenses are forecasted to be $17.3M higher than 2018 mainly due to higher payroll expenses and more expense projects. A. BUSINESS EVENTS            Adopted the Duwamish Valley Community Equity Program and held the Duwamish Alive community restoration event at T117. Hosted a second Strategic Initiatives Learning Event featuring Hien Dung of King County Wastewater and Henry Maynard, Port Operating Maintenance Engineer. Completed Phase 2 of Port Website Redesign project which included adding the Maritime Moorage Application and filtered lists for Commission items. Replaced the Aviation Stormwater GIS which will allow for upstream or downstream stormwater contamination tracking along a properly constructed pipe network. A new Project Delivery system for smaller and major construction projects is being developed to replace two legacy project management solutions and streamline key processes. Hosted Career Awareness events with Mt. Rainier High School, Foster High School, and Highline High School. Proposal approved for the Port's first Disruption Summit. This is designed to improve the Port's ability to respond to potential opportunities and threats in a strategic and intentional way. Released the Comprehensive Annual Financial Report (CAFR), and received a clean independent Certified Public Accountant (CPA) audit opinion on financial statements. The Port Commission authorized the Airport bond issue. Met with credit rating agencies and prepared bond disclosure documents. The Police department instructors provided Rapid Response trainings to airport/airline employees. The Police department's Drug Interdiction Team has seized 250 lbs. of marijuana, over 19 oz. of meth and heroin, and over a million dollars of cash associated in drug trafficking through Sea-Tac Airport as of June 30th. 31 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 B. KEY PERFORMANCE METRICS Key Performance Indicators/Measures A. Century Agenda Strategies 1. Minority/Women-Owned Business Participation in Capital Development Contracts B. High Performance Organization - Customer Satisfaction 1. Respond to Public Disclosure Requests YTD 2017 YTD 2018 YTD 2019 N/A 10.5% Not Yet Available 264 305 450 100% 99.9% 88% 87% 122 74 353 50% 358 53% 4 classes, 38 attendees 4 classes, 41 attendees 86 509 54% 5.05 32.01 57% 4.75 15.08 31.6% 29.7% 18% 16% Yes 4 days 76% 1.69% $348K Yes 3 days 74% 2.16% $2.5M 2. Information and Communication Technology Network 99.9% Availability 3. Customer Survey for Police Service Excellent or Very 83% Good 4. Oversee Implementation and Administration of CBAs 147 agreements 5. Number of Jobs Openings 443 6. Percent of annual audit work plan completed each year 39% C. High Performance Organization - Talent Development & Safety 4 classes, 28 1. MIS and Clarity Training attendees 2. Employee Development Class Attendees/Structured 190 Learning 3. Required Safety Training 64% 4. Occupational Injury Rate 4.94 5. Days Away Severity Rate N/A D. Financial Performance 1. Corporate costs as a % of Total Operating Expenses 32.8% 2. Construction Soft Costs - Total Soft Costs (36 months 28% avg.) 3. Clean independent CPA audits involving AFR Yes 4. Timely process disbursement payment requests 4 days 5. Keep receivables collections current (within 30 days) 95% 6. Investment Portfolio Yield 1.42% 7. Litigation and Claim Reserves (in $ thousand) $1.5M 32 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 C. OPERATING RESULTS Financial Summary (YTD) $ in 000's Total Operating Revenues Core Central Support Services Police Capital Development Environment & Sustainability Total Expenses 2017 YTD 2018 YTD 2019 Year-to-Date Actual Actual Actual Budget 82 81 331 56 34,692 11,378 7,763 3,347 57,181 36,661 13,188 7,733 2,954 60,536 37,576 13,997 8,155 4,551 64,279 40,544 15,416 9,489 5,857 71,305 Fav (UnFav) Incr (Decr) Budget Variance Change from 2018 $ % $ % 311 552.7% 250 308.5% 2,968 1,419 1,334 1,306 7,026 7.3% 9.2% 14.1% 22.3% 9.9% 915 809 422 1,597 3,743 2.5% 6.1% 5.5% 54.1% 6.2% 2019 YTD Actuals vs. Budget  Operating Revenues were $311K favorable to budget due mainly to Police forfeitures revenues.  Operating Expenses were $7.0M favorable to budget due primarily to staffing vacancies and lower Outside Services costs. 2019 YTD Actuals vs. 2018 YTD Actuals  Operating Revenues were $250K higher than 2018 level due to Police forfeitures revenue.  Operating Expenses were $3.7M higher than last year primarily due to higher Salaries & Benefits and Outside Services costs. 33 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 Financial Summary (Year-End Forecast) 2017 Actual 68 Incr (Decr) Fav (UnFav) 2018 2019 2019 Budget Variance Change from 2018 $ % Actual Forecast Budget $ % (500) 498 185 313 169.2% 998 -199.5% 1,287 1,685 3,741 7,112 8,418 1,678 1,603 6,751 21,633 726 4,998 1,229 1,871 1,897 1,211 3,077 1,882 3,861 1,029 381 71,071 2,136 1,848 3,948 7,362 8,430 1,079 1,521 6,842 21,961 934 5,593 1,445 1,843 2,305 1,323 3,095 1,596 4,630 1,093 185 73,576 1,995 2,133 3,785 8,202 251 9,883 1,330 1,704 8,440 23,966 1,559 6,430 1,623 2,106 2,701 1,929 3,255 1,568 4,678 50 81,157 1,995 2,153 3,568 8,367 351 10,250 1,330 1,916 8,500 23,966 1,774 6,371 1,623 2,132 2,616 2,139 3,328 1,776 4,678 250 82,710 20 (217) 165 100 367 211 60 215 (59) 26 (85) 210 73 207 200 1,552 0.0% 0.9% -6.1% 2.0% 28.5% 3.6% 0.0% 11.0% 0.7% 0.0% 12.1% -0.9% 0.0% 1.2% -3.2% 9.8% 2.2% 11.7% 0.0% 0.0% 80.0% 1.9% (142) 285 (163) 840 251 1,453 251 184 1,598 2,005 624 837 178 263 396 607 160 (28) 48 (1,093) (135) 7,581 -6.6% 15.4% -4.1% 11.4% 0.0% 17.2% 23.3% 12.1% 23.4% 9.1% 66.8% 15.0% 12.3% 14.3% 17.2% 45.9% 5.2% -1.8% 1.0% -100.0% -73.0% 10.3% Police 22,095 23,908 29,578 30,778 1,200 3.9% 5,670 23.7% Total Before Cap Dev & Environment 93,166 97,484 110,735 113,487 2,752 2.4% 13,251 13.6% 5,284 3,709 6,942 1,007 428 17,370 5,477 3,522 4,876 1,052 574 15,501 6,801 2,964 4,426 1,240 333 464 16,227 7,530 2,739 6,794 1,096 470 18,628 730 9.7% (226) -8.2% 2,368 34.8% (144) -13.1% (333) N/A 6 1.3% 2,401 12.9% 1,324 (557) (450) 188 333 (111) 727 24.2% -15.8% -9.2% 17.9% 0.0% -19.3% 4.7% 3,779 2,157 670 368 6,975 5,006 2,418 722 624 8,770 6,225 3,297 825 1,754 12,101 6,510 3,447 811 2,456 13,224 285 150 (14) 702 1,123 4.4% 4.4% -1.8% 28.6% 8.5% 1,218 879 103 1,131 3,331 24.3% 36.4% 14.3% 181.2% 38.0% 117,511 121,755 139,064 145,339 6,276 4.3% 17,309 14.2% $ in 000's Total Revenues Executive Commission Legal External Relations Equity Diversity and Inclusion Human Resources Labor Relations Internal Audit Accounting & Financial Reporting Services Information & Communication Technology Information Security Finance & Budget Maritime 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 Capital Development Engineering Port Construction Services Aviation PMG Seaport PMG Capital Development Facilities Capital Development Admin Sub-Total Environment & Sustainability Aviation Environmental Maritime Environmental & Planning Noise Programs Environment & Sustainability Sub-Total Total Expenses Notes 1 2 3 4 Notes: 1) Previously known as "Public Affairs" 2) A new department created in 2019 3) Became a separate department in 2019. Used to be a part of Security and Preparedness. 4) Deactivated in 2019 34 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 2019 Forecast vs. 2019 Budget  Operating Expenses are forecasted to be $6.3M under budget due primarily to: o Executive - plans on being on budget. o Commission - favorable variance is due to lower Travel Expenses. o Legal - unfavorable variance of $222K is due to Legal Expenses. o External Relations - favorable variance is due to vacant positions, lower Outside Services, Travel and Advertising Expenses. o Equity, Diversity and Inclusion - favorable variance is due to vacant positions. o Human Resources - favorable variance is due to several vacant positions and delayed Outside Services. o Labor Relations - plans on being on budget. o Internal Audit - favorable variance is due to two vacant positions and lower Outside Services from one audit that came in below budget. o Accounting and Financial Reporting Services - favorable variance due to delayed Travel Expenses and lower Outside Services. o Information & Communication Technology - plans on being on budget. o Information Security - favorable variance is due to vacant positions and delayed Outside Services. o Finance & Budget - plans on being on budget. o Business Intelligence - favorable variance is due to vacant positions. o Risk Services - favorable variance is due to vacant positions and anticipates property insurance renewal and broker fees being lower. o Office of Strategic Initiative - favorable variance is due to two vacant positions. o Central Procurement Office - plans on being on budget. o Contingency - favorable variance is due to less spending than anticipated. o Police - favorable variance is due to vacant positions. o Capital Development - favorable variance is due to vacant positions and lower Outside Services costs. o Environment & Sustainability - favorable variance is due to the deferral of the Aviation Fuel & Air Emissions Program, lower than expected spending in Commission-directed COE contract, and delay in SAMP. 2019 Forecast vs. 2018 Actuals  Operating Expenses are forecasted to be $17.3M higher than 2018 actuals mainly due to: o Central Services - one-time $9.5M DRS Pension Plan True-up credit in 2018. o Capital Development - forecast $727K above 2018 mainly due to the following:  More project-related expense to support the operating divisions.  Expenses offset by Aviation PMG Increasing charges to Capital by 3.8M. o Police - forecast $5.7M above 2018 due to the following:  Added 8 Traffic Support Specialist and 2 Drug Interdiction Officers during 2018 (2019 reflects the full-year costs).  Added 4 FTEs, a Police Sergeant and 3 Explosive Airborne Scent Canine Officers which were requested by the airlines in 2019.  Wages increase for the officers and sergeants in 2019. o Environment & Sustainability - forecast $3.5M over 2018 due to the following:  Added the following to the 2019 Budget which were not included in the 2018 Budget: • Environmental and Sustainability department added $750K for South King County Support Program, $150K for the Sustainability Evaluation Framework and $8K for Environmental Excellence Awards. • Maritime Environment and Planning added $200K for the Smith Cove Blue Carbon Pilot Project, $125K for Umbrella Mitigation, $135K for PORTfolio site maintenance/enhancements/support, $70K for Permitting related services, and $55K for Waste Management Program continuation. • Aviation Environmental added $1.6M for the SAMP Environmental Review and Permitting (delayed from 2018 due to delayed FAA approval), $150K for MPU Wetland and stream monitoring, $125K to implement Sustainable Aviation Fuels (SAF) Workplan, $100K to Complete Airport's 5-year NPDES Permit Renewal Application, $100K for Contaminated Site Management, and an additional $326K for a number of environmental initiatives. 35 V. CENTRAL SERVICES FINANCIAL & PERFORMANCE REPORT 06/30/19 D. CAPITAL RESULTS $ in 000's Infrastructure - Small Cap Services Tech - Small Cap PeopleSoft Financials Upgrade Radio System Upgrade Police Records Mgmt System New Budget System Office Wi-Fi Refresh Maximo Upgrade STIA Network Redundancy Fiber Channel Phone System Upgrade Customer Relationship Mgmt CDD Fleet Replacement Corporate Fleet Replacement Other (note 1) TOTAL 2019 YTD 2019 2019 Actual Forecast Budget 433 1,500 1,500 176 600 1,000 809 1,575 1,575 1,511 5,311 9,140 0 300 800 0 500 600 0 250 500 0 30 500 0 750 900 0 350 600 0 300 1,400 0 400 0 125 1,149 1,439 212 212 1,328 462 1,617 2,086 3,728 14,844 23,368 Budget Variance $ % 0 0.0% 400 40.0% 0 0.0% 3,829 41.9% 500 62.5% 100 16.7% 250 50.0% 470 94.0% 150 16.7% 250 41.7% 1,100 78.6% (400) n/a 290 20.2% 1,116 84.0% 469 22.5% 8,524 36.5% Note: (1) "Other" includes remaining ICT projects and small capital projects/acquisitions. 36