Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
10a
ACTION ITEM
Date of Meeting
October 25, 2022
DATE: October 18, 2022
TO: Stephen P. Metruck, Executive Director
FROM: Jeff Moken, Interim Director, Aviation Business and Properties
Eileen Francisco, Director, Aviation Project Management Group
SUBJECT: SEA Gateway/North Main Terminal Redevelopment Program (C801204) – Phase A
Supplemental Construction Funding Authorization
Amount of this request:
$159.5 million
Total estimated project cost:
$500 million
ACTION REQUESTED
Request Commission authorization for the Executive Director to 1) increase the program budget
to the amount of $500 million, 2) authorize an additional $159,500,000 to continue Phase A
construction, and 3) execute a Tenant Reimbursement Agreement with Alaska Airlines, Inc.
(Alaska) for this portion of the work of the North Main Terminal Redevelopment Program at
Seattle-Tacoma International Airport.
EXECUTIVE SUMMARY
Alaska desires to redevelop the north end of the Main Terminal at the Airport to increase
passenger throughput and security screening capacity and to improve the overall passenger
experience. This request is to authorize an increase of the overall program budget by $100 million
to $500 million and to authorize an additional $159.5 million of this amount for Phase A
construction. Phase A converts the currently undeveloped Bridge/Promenade level into
approximately 24,500 square feet of usable space for Alaska and other Port tenants and also
updates other portions of the Main Terminal and associated building systems required to support
the buildout of the Bridge/Promenade level.
Since the last Commission authorization, Alaska has continued to refine its customer service
program and the new technologies needed to implement it. The Port and Alaska are jointly
recommending changes to the earlier Phase A scope of work to achieve alignment with these
updated goals. This requires the shifting of some Phase B scope to the Phase A construction
scope.
The additional work being added to this request consists of:
COMMISSION AGENDA – Action Item No. _10a___ Page 2 of 8
Meeting Date: October 25, 2022
Template revised June 27, 2019 (Diversity in Contracting).
• Additional selective demolition and regulated materials abatement on the Ticketing level
• Relocation of three doors on the Ticketing level to facilitate expansion of the window wall
to make room for additional Alaska proprietary check-in and bag drop capacity
• Additional baggage handling system modifications
• Additional tenant relocations
The amount of this request is $159.5 million - $75 million for additional Phase A construction,
$36 million for Phase B enabling construction, $27.5 million for associated Port and Alaska staff
costs and $21 million for Port-held program contingency. The current cost estimate for the overall
program is $500 million.
JUSTIFICATION
The ticketing area used by Alaska at the north end of the Main Terminal regularly experiences
serious overcrowding during peak departure periods throughout the day and is in critical need of
code upgrades and an aesthetic refresh.
Although previous work has been done by Alaska to alleviate passenger queuing and processing
gridlock, more than 10 years later the ticketing area is again in need of modernization to address
existing and projected passenger volume increases, keep pace with technology advances and
improve the overall passenger experience.
The Port anticipates completing similar building system and architectural improvements for the
remainder of the ticketing level to the south under the upcoming Main Terminal Improvements
Program (MTIP), which is currently in the Program Definition Document phase. Working groups
of key Port stakeholders and members of the MTIP team meet regularly with the North Main
Terminal Redevelopment team to review changes and updates as the design progresses.
Lastly, with its current staggered screening lane configuration, Security Screening Checkpoint #5
(SSCP#5) has long been unable to accommodate increased passenger volumes, regularly resulting
in a processing bottleneck during peak travel periods that creates further delays for departing
passengers. A portion of the offices being built as part of this Phase 1 Enabling Work will be
replacement for approximately 6,500 square feet of existing offices on the north end of the
terminal that will allow Checkpoint #5 to be reconfigured with 6 side-by-side lanes.
This program supports the Port’s Century Agenda’s strategic goal of “Advancing this region as a
leading tourism destination and business gateway” by:
• Continuously improving operational efficiency and customer experience at the Airport.
• Strengthening the competitiveness of the Airport in the regional and global marketplace.
• Meeting the region’s air transportation needs by delivering vital facilities and infrastructure
in sustainable and cost-effective manner.
Diversity in Contracting
COMMISSION AGENDA – Action Item No. _10a___ Page 3 of 8
Meeting Date: October 25, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Diversity in Contracting has established a Women/Minority Business Enterprise (WMBE) goal of
15% for the Port’s consultant support procurement. Alaska has separately established a 20%
WMBE/SBE goal for their consultant support and for construction.
DETAILS
Alaska is completing this work under a multi-phased Tenant Reimbursement Agreement (TRA)
using the Progressive Design Build (PDB) project delivery method.
The construction work is currently broken down into two distinct phases.
Phase A
• Develop the currently unused Promenade Level for Alaska check-in, bag drop and
operations spaces and locations to accommodate most of the tenants that will be
displaced during Phase B work
• Buildout existing locations in the Main Terminal to accommodate the remaining tenants
displaced during Phase B work
• Modifications/upgrades to existing building systems (HVAC, Baggage Handling, Electrical
and Communications Systems etc.) to support the newly built Promenade spaces, to
mitigate future operational impacts and control costs in Phase B
• Enabling work on the departures level for the relocation of three Ticketing-level entry
doors and associated expansion of Alaska’s ticketing areas at the window wall
• Perform ADA upgrades to the ramps at the exit doors on the Baggage Claim level
Phase B
• Abatement and demolition of a portion of the Mezzanine Level above Alaska ticketing
• Abatement, demolition, and reconfiguration of Alaska’s ticketing in the northern-most
section of Main Terminal Ticketing Level
• Reconfiguration of the northern-most Mezzanine level
• Reconfigure SSCP#5 with 6 side-by-side lanes with an enlarged post screening recompose
area. The checkpoint is being designed to be able to be quickly expanded to 7 lanes in the
future
• Installation of new building systems and providing code upgrades/modifications to
existing building systems (smoke control, fire suppression and ADA modifications) to
support the reconfigured spaces on the Mezzanine, Ticketing and Baggage Claim levels
The program is finalizing its Sustainable Design Approach (SDA) and staff is preparing to present
the SDA to the Sustainability Environment and Climate (SEAC) Committee for acceptance in Q1
2023. A key element of the SDA is for the program to achieve LEED Silver certification for
Commercial Interiors.
The Port and Alaska are continuing to refine the overall program budget of $500 million,
including:
COMMISSION AGENDA – Action Item No. _10a___ Page 4 of 8
Meeting Date: October 25, 2022
Template revised June 27, 2019 (Diversity in Contracting).
• reconciliation of Alaska’s estimate with the Port’s Independent 3
rd
Party estimate
• agreement for cost-sharing between Alaska and the Port
• agreement on a Final Guaranteed Maximum Price (FGMP) from Alaska by the end of Q4
2022
Schedule
The PDB project delivery method involves overlap between many of these design and
construction milestones, with the result that some activities in both Phase A and Phase B will
take place concurrently.
Activity
2022 Quarter 4
2022 Quarter 4
2024 Quarter 1
2022 Quarter 4
2022 Quarter 4
2023 Quarter 1
2023 Quarter 2
2023 Quarter 3
2026 Quarter 2
To provide clear project decision points and to ensure there are key concurrence milestones
between the Port and Alaska, the reimbursement of project funds to Alaska is projected to
happen in phases (as outlined above).
• On April 27, 2021, Commission authorized up to $10 million for both Alaska and Port costs
to complete up to 30% design. A Phase 1 North Main Terminal Redevelopment
Agreement (“Design TRA”) was executed by the Port and Alaska to memorialize this.
• On November 9, 2021, Commission authorized an additional $21.5 million to complete
the remaining design of the overall program. This was memorialized as an amendment
to the Design TRA.
• On December 14, 2021, Commission authorized an additional $149.5 million for Phase A
construction. Port staff and Alaska continue to negotiate the language for the Phase A
(Construction) Reimbursement Agreement – North Main Terminal Redevelopment
(“Construction TRA”).
• This request seeks authorization for an additional $159.5 million to construct the revised
scope of Phase A and enabling work to facilitate Phase B construction. It is anticipated
that this will either be incorporated into the Construction TRA during negotiations or by
amendment.
• We anticipate requesting authorization for the Final Guaranteed Maximum Price (FGMP)
and the balance of Phase B construction in Q1 2023, which would be incorporated into
the Construction TRA by amendment.
COMMISSION AGENDA – Action Item No. _10a___ Page 5 of 8
Meeting Date: October 25, 2022
Template revised June 27, 2019 (Diversity in Contracting).
This multi-phased approach allows Alaska to continue to develop work expeditiously, while
affording both Alaska and the Port clear project decision points to ensure alignment of scope,
schedule, and budget.
Cost Breakdown
Previous
Requests
This
Request
Future
Request
Program
Total
Complete PDD and 30% Design
$9,000,000
$0
$0
$9,000,000
Design – Phases A and B
$16,900,000
$0
$0
$16,900,000
Phase A Construction
$140,500,000
$0
$0
$140,500,000
Phase A Supplemental Construction
$0
$75,000,000
$0
$75,000,000
Phase B Construction
$0
$36,000,000
$144,200,000
$180,200,000
Alaska Soft Cost
$8,500,000
$12,700,000
$1,300,000
$22,500,000
Port Soft Cost
$6,100,000
$14,800,000
$14,000,000
$34,900,000
Port-held Contingency
$0
$21,000,000
$0
$21,000,000
Total
$181,000,000
$159,500,000
$159,500,000
$500,000,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Don’t move forward with the Program.
Cost Implications: Potential $475 million savings
Pros:
(1) Reduces the Port’s capital expenditure
(2) Eliminates scope, schedule, and budget uncertainties due to inflation and supply chain
disruptions
Cons:
(1) Does not achieve the desired capacity improvements on the Bridge/Promenade and
Ticketing levels or at SSCP#5
(2) Does not implement desired technology improvements
(3) Does not address existing code and ADA inadequacies
(4) Does not provide base building infrastructure upgrades
(5) Design and other soft cost expenses spent to date [approximately $25 million] would
need to be expensed
This is not the recommended alternative.
Alternative 2 – Complete only Phase A construction.
Cost Implications: $304.5 million
Pros:
(1) Reduces the Port’s capital expenditure
(2) Eliminates scope, schedule, and budget uncertainties due to inflation and supply chain
disruptions
COMMISSION AGENDA – Action Item No. _10a___ Page 6 of 8
Meeting Date: October 25, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Cons:
(1) Does not achieve the desired capacity improvement on the Ticketing level or at SSCP#5
(2) Does not implement desired technology improvements
(3) Does not address existing code and ADA inadequacies
(4) Does not provide base building infrastructure upgrades
(5) Design and soft costs associated with Phase B construction would need to be expensed
This is not the recommended alternative.
Alternative 3 – Proceed with the full scope of work as described.
Cost Implications: $500 million
Pros:
(1) Achieves the desired capacity improvements on the Bridge/Promenade and Ticketing
levels and at SSCP#5
(2) Implements the desired technology improvements
(3) Addresses existing code and ADA inadequacies
(4) Provides base building infrastructure upgrades
Cons:
(1) Risk of continuing scope, schedule, and budget uncertainties due to inflation and supply
chain disruptions
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Early estimated program cost
$350 - $450 million
$0
$350 - $450 million
Current estimated program cost
$495 million
$5,000,000
$500 million
AUTHORIZATION
Previous authorizations
$181,000,000
$0
$181,000,000
Current request for authorization
$157,400,000
$2,100,000
$159,500,000
Total authorizations, including this request
$338,400,000
$2,100,000
$340,500,000
Remaining amount to be authorized
$156,600,000
$2,900,000
$159,500,000
Annual Budget Status and Source of Funds
This project, CIP C801204, was included in the 2022-2026 capital budget and plan of finance with
a budget of $400,000,000. A budget increase will be transferred from the Aeronautical Reserve
CIP (C800753) resulting in zero net change to the Aviation capital budget when the Final
Guaranteed Maximum Price (FGMP) is available. The funding sources will be revenue bonds and
COMMISSION AGENDA – Action Item No. _10a___ Page 7 of 8
Meeting Date: October 25, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Airport Development Fund (ADF). This project received Majority in Interest airlines approval on
December 13, 2021.
Financial Analysis and Summary
Project cost for analysis
$400M - $500M
Business Unit (BU)
Terminal Building
Effect on business performance
(NOI after depreciation)
NOI after depreciation will increase due to inclusion of
capital (and operating) costs in airline rate base.
IRR/NPV (if relevant)
N/A
CPE Impact
$1.12 - $1.29 in 2026
Future Revenues and Expenses (Total cost of ownership)
It is anticipated that there will be increased costs to ongoing operating and maintenance work
performed by Aviation Maintenance (AVM) in the new North Main Terminal space. AVM will
continue to work through design challenges while also anticipating increased O&M costs.
ADDITIONAL BACKGROUND
Over the past 4 months, the Port and Alaska have worked together to refine the baseline scope
of work specific to the passenger check-in and bag drop layouts on the Ticketing and Bridge/
Promenade levels and have jointly agreed to request authorization to modify the Phase A scope
of work during a combined design validation meeting with Port and Alaska stakeholders on
August 5, 2022. The following are the key elements included in this recommended modification:
• Relocate three entry doors on the Ticketing-level to enhance the reconfiguration of
Alaska’s window wall check-in and bag drop areas.
• Retain and reconfigure the existing Alaska check-in and bag drop function along the
backwall separating Ticketing and Security Screening Checkpoint #5 (SSCP#5).
• Construct SSCP#5 with 6 screening lanes that is also being designed to quickly expand
to an additional 7
th
screening lane when passenger screening volume requires.
o This expansion will require Alaska to relinquish their check-in and bag drop
positions on the Ticketing level adjoining SSCP#5
o The Port will establish the metric(s) used to determine when this expansion will
take place
• Install up to 24 traditional check-in and bag drop positions for Alaska proprietary use
on the Bridge/Promenade Level as originally specified in the Project Definition
Document.
As well as the additions described above, Phase A construction costs have increased between 8-
10%, or $15 million, due to unprecedented cost escalation in the construction market. Further,
$20 million of new scope has been included in the overall Program work to address unforeseen
infrastructure and building code deficiencies identified during design development, including the
addition of new HVAC equipment and a new pump to support the fire suppression system.
COMMISSION AGENDA – Action Item No. _10a___ Page 8 of 8
Meeting Date: October 25, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Many of the mechanical, smoke control, and fire suppression system upgrades and updated
architectural finishes and treatments being incorporated into the design for the North Main
Terminal Redevelopment Program will be applied throughout the rest of the facility by the Main
Terminal Improvement Program, which is currently in the Project Definition phase.
The ongoing collaboration between these programs will facilitate continuity of systems and
updated architectural finishes and treatments throughout the Main Terminal, Ticketing and
Baggage Claim Levels.
In addition, this program is also continuing to collaborate on boundary, scope, and schedule
coordination with:
• Main Terminal Improvements Program
• Baggage Optimization Program
• Main Terminal Low Voltage Upgrades
• Terminal Security Enhancements
ATTACHMENTS TO THIS REQUEST
(1) Presentation
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
December 14, 2021 – North Main Terminal Redevelopment Program – Phase 1 Construction
Funding Authorization (C801204) which authorized $149.5 million for construction of the
Phase 1 Enabling Work of the North Main Terminal Redevelopment Program at Seattle-
Tacoma International Airport, and to execute a third Tenant Reimbursement Agreement
with Alaska Airlines, Inc. (Alaska) to complete the Phase 1 construction work. Note, Phase
1 is now known as Phase B.
November 9, 2021 – North Main Terminal Redevelopment Program – Full Program Design
(C801204) which authorized $21.5 million for the remaining design for all phases of the
North Main Terminal Redevelopment Program, and execution of a second Tenant
Reimbursement Agreement with Alaska Airlines.
April 27, 2021 – North Main Terminal Redevelopment Program – Preliminary Design
(C801204) which authorized up to $10 million in support of the North Main Terminal
Redevelopment Program to complete a Project Definition Document, 30% design and to
execute a Tenant Reimbursement Agreement with Alaska Airlines.