Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
10c
ACTION ITEM
Date of Meeting
March 28, 2023
DATE: March 17, 2023
TO: Stephen P. Metruck, Executive Director
FROM: Jeff Moken, Senior Manager, Airline Affairs & Aviation Properties
Eileen Francisco, Director, Aviation Project Management Group
SUBJECT: SEA Gateway/North Main Terminal Redevelopment Program (C801204) – Phase B
Construction Authorization
Amount of this request:
$159.5 million
Total estimated project cost:
$550 million
ACTION REQUESTED
Request Commission authorization for the Executive Director to 1) authorize $156,400,000 for
Phase B construction, 2) authorize the transfer of $1,559,000 from the Main Terminal Low
Voltage Program, 3) authorize $3,100,000 for final design addressing existing building code
compliance, and 4) 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 is redeveloping 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 additional $156.4 million for Phase B construction, including
associated Port and Alaska soft costs. The Phase B scope redevelops Alaska’s ticket lobby in the
northern-most section of the Main Terminal Ticketing level, reconfigures Security Screening
Checkpoint #5 (Checkpoint #5) and updates associated building systems and architectural
finishes.
This request also seeks authorization for the transfer of $1,559,000 from the Main Terminal Low
Voltage Program (C800061) for electrical work being moved to the North Main Terminal
Redevelopment Program (Program) as well as authorization of $3,100,000 for the final design to
address existing building and fire code compliance issues that were not known during the Project
Definition phase.
COMMISSION AGENDA – Action Item No. 10c Page 2 of 8
Meeting Date: March 28, 2023
Template revised June 27, 2019 (Diversity in Contracting).
As the design has progressed several items have been added to the Program work to resolve pre-
existing building and fire code compliance issues. The impacts of these corrective actions on
follow on projects/programs in the Main Terminal are also directly influencing the design
approaches being used to address these items.
As a result, establishing the final Phase B construction cost and the Final Guaranteed Maximum
Price (FGMP) for the overall Program have been delayed. Staff intends to return to the
Commission for authorization of these remaining items on 06/27. Currently, the estimated cost
for these, including associated Port and Alaska soft costs, is approximately $50 million. The
current estimated cost for the overall Program is $550 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 as well as an update to the architectural finishes.
Although previous work was 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 terminal to the south under the upcoming Main Terminal Improvements
Program (MTIP), which is currently in the Program Definition Document phase.
With its current staggered screening lane layout, Checkpoint #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. Phase B work will
reconstruct Checkpoint #5 to have 6 side-by-side lanes and provide a greatly enlarged recompose
area for passengers, which is a significant improvement over the current configuration. Further,
the Checkpoint #5 reconfiguration is being phased and coordinated with work planned at other
screening checkpoints to minimize the number of search lanes out of service at any given time.
Determining the method and extent of correcting the previously described fire and building code-
related compliance issues has become a precondition for the Airport Building Department to
issue building permits and later, certificates of occupancy for the Program. These items include:
1. Providing 1-hr fire rating compliance at the wall separating the Baggage Claim from the
Bagwell within the Program scope of work.
2. Providing 2-hr fire rating compliance at vertical utility shafts within the Program scope of
work.
3. The addition of fire sprinklers in Skybridges 2 through 6 to allow occupancy of the newly
constructed tenant and operational spaces on the Bridge/Promenade level.
COMMISSION AGENDA – Action Item No. 10c Page 3 of 8
Meeting Date: March 28, 2023
Template revised June 27, 2019 (Diversity in Contracting).
4. The addition of a two-way communication system at several elevator lobbies within the
Program footprint that have been identified as areas of refuge for mobility limited
individuals.
5. The addition of supplementary electrical infrastructure required to support connection to
an emergency backup power system to be provided in a future project.
In addition, the Program is continuing to progress key design elements related to the baggage
handling system, signage and wayfinding, HVAC, smoke control, and scope transferred between
adjacent projects/programs that also affect the overall Program scope, the construction schedule
and the FGMP. Again, the impacts of these changes to adjacent and follow-on projects/programs
in the Main Terminal are also directly influencing the design approaches being used by the Design
Build team to address them.
The Program team is pursuing final design funding for these added scope items under this
authorization. The final design will refine the code-related and additional scope items over the
next several months to determine the final Program budget and FGMP.
Finally, this Program also 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
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/Small Business Enterprise (SBE) combined goal for their consultant support and for
construction.
Currently the Port’s consultant support services contract is achieving 22% WMBE utilization, and
Alaska’s consultant support and construction teams are attaining 15% SBE/WMBE utilization.
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 (Q4 2022 – Q2 2026)
COMMISSION AGENDA – Action Item No. 10c Page 4 of 8
Meeting Date: March 28, 2023
Template revised June 27, 2019 (Diversity in Contracting).
• Construct approximately 24,000 square feet of new tenant and operational space on the
Bridge/Promenade level.
• Install structural upgrades and provide building systems infrastructure throughout the
Baggage Claim level to support the construction of the Bridge/Promenade level.
• Install ADA compliant ramps at nine Baggage Claim exit doors.
• Relocate three entry doors on the Departures Drive to improve passenger flow.
• Create ‘bump-outs’ at the window walls on the Ticketing level to provide additional space
for passenger check-in and bag drop.
• Remove asbestos containing material and install fire sprinklers throughout the work
areas.
• Upgrade/refresh architectural finishes, signage, and lighting throughout the work areas.
Phase B (Q3 2023 – Q3 2026)
• Remove the Mezzanine level above Alaska’s existing ticketing Pods.
• Reconfigure the most northern section of the Mezzanine.
• Reconfigure Alaska’s Ticketing areas and Checkpoint #5.
• Remove asbestos containing material and install fire sprinklers throughout the work
areas.
• Upgrade/refresh architectural finishes, signage, and lighting throughout the work areas.
Since the last Commission authorization in October 2022, the program received acceptance of
the Sustainable Design Approach (SDA) by the Sustainability Environment and Climate (SEAC)
Committee on February 21, 2023. The Program is implementing strategies to achieve the United
States Green Buildings Council’s (USGBC) Leadership in Energy and Environmental Design (LEED)
Silver Certification for Commercial Interiors on Phase B construction.
Schedule
The PDB project delivery method includes several overlaps 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
2023 Quarter 1
2024 Quarter 2
2022 Quarter 4
2023 Quarter 1
2023 Quarter 1
2023 Quarter 2
2023 Quarter 2
2023 Quarter 3
COMMISSION AGENDA – Action Item No. 10c Page 5 of 8
Meeting Date: March 28, 2023
Template revised June 27, 2019 (Diversity in Contracting).
2023 Quarter 3
2026 Quarter 3
This multi-phased approach allows Alaska to continue to develop work packages quickly, while
affording both Alaska and the Port clear project decision points to ensure alignment of scope,
schedule, and budget.
The reimbursement of project funds to Alaska is also occurring in phases (as outlined above).
Each of these decision points includes a TRA or TRA amendment to memorialize the agreement
between the Port and Alaska.
• On April 27, 2021, Commission authorized up to $10 million for both Alaska and Port costs
to complete up to 30% design and an associated TRA with Alaska.
• On November 9, 2021, Commission authorized an additional $21.5 million to complete
the remaining design of the overall program and an associated TRA with Alaska.
• On December 14, 2021, Commission authorized an additional $149.5 million for Phase A
construction and an associated TRA with Alaska.
• On October 25, 2022, Commission authorized $159.5 million to construct the revised
scope of Phase A and enabling work to facilitate Phase B construction and an associated
TRA with Alaska.
• This request seeks authorization for a further $159.5 million for Phase B construction and
final design for new scope addressing code compliance and an associated TRA with
Alaska.
• We anticipate returning to the Commission to request authorization for the FGMP, the
balance of Phase B construction funding and an associated TRA with Alaska in Q2 2023.
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
$75,000,000
$0
$0
$75,000,000
Phase B Construction
$36,000,000
$140,900,000
$0
$176,900,000
Alaska Soft Cost
$21,200,000
$1,500,000
$0
$22,700,000
Port Soft Cost
$20,900,000
$14,000,000
$0
$34,900,000
Port-held Contingency
$21,000,000
$0
$0
$21,000,000
Design – Code-Related Scope
$0
$3,100,000
$0
$3,100,000
Estimated Supplemental Cost Increase
$0
$0
$50,000,000
$50,000,000
Total
$340,500,000
$159,500,000
$50,000,000
$550,000,000
COMMISSION AGENDA – Action Item No. 10c Page 6 of 8
Meeting Date: March 28, 2023
Template revised June 27, 2019 (Diversity in Contracting).
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Don’t continue with Phase A construction and do not begin Phase B construction.
Cost Implications: Potential $450-$500 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 Checkpoint #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) Enabling construction, design and other soft cost expenses spent to date [approximately
$50 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.
Cons:
(1) Does not achieve the desired capacity improvement on the Ticketing level or at
Checkpoint #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 - $550 million
Pros:
(1) Achieves the desired capacity improvements on the Bridge/Promenade and Ticketing
levels and at Checkpoint #5.
(2) Implements the desired technology improvements.
(3) Addresses existing code and ADA inadequacies.
COMMISSION AGENDA – Action Item No. 10c Page 7 of 8
Meeting Date: March 28, 2023
Template revised June 27, 2019 (Diversity in Contracting).
(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
Estimated supplemental cost increase
$50 million
$0
$50 million
AUTHORIZATION
Previous authorizations
$338,400,000
$2,100,000
$340,500,000
Current request for authorization
$156,600,000
$2,900,000
$159,500,000
Total authorizations, including this request
$495,000,000
$5,000,000
$500,000,000
Remaining amount to be authorized
$50,000,000
$0
$50,000,000
Annual Budget Status and Source of Funds
This project, CIP C801204, was included in the 2023-2027 capital budget and plan of finance with a budget
of $400,000.000. A budget increase of $95 million was transferred from the Aeronautical Reserve CIP
(C800753) resulting in zero net change to the Aviation capital budget. The remaining supplemental cost
increase will be transferred when the FGMP is known. The funding sources will be revenue bonds and
Airport Development Fund (ADF). This project received Majority in Interest airlines approval on December
13, 2021.
This request would allow the Commission Authorization transfer of $1,559,000 from the Main Terminal
Low Voltage Program (C800061) for electrical scope being moved to the North Main Terminal
Redevelopment Program (Program C801204).
Financial Analysis and Summary
Project cost for analysis
$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
$1.29 in 2026
COMMISSION AGENDA – Action Item No. 10c Page 8 of 8
Meeting Date: March 28, 2023
Template revised June 27, 2019 (Diversity in Contracting).
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.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
October 25, 2022 – North Main Terminal Redevelopment Program – Phase A Supplemental
Construction Funding Authorization (C801204) which authorized an additional
$159,500,000 to continue Phase A construction, and to execute a fourth Tenant
Reimbursement Agreement with Alaska Airlines, Inc. (Alaska).
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.