Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
10a
ACTION ITEM
Date of Meeting
June 27, 2023
DATE: June 16, 2023
TO: Stephen P. Metruck, Executive Director
FROM: Rick Duncan, Director, Aviation Business & Properties
Eileen Francisco, Director, Aviation Project Management Group
Ben Brookman, Managing Director of Airport Affairs, Alaska Airlines
SUBJECT: SEA Gateway/North Main Terminal Redevelopment Program (C801204) - FGMP &
Phase B Supplemental Construction Funding
Amount of this request:
$46 million
Total estimated project cost:
$546 million
ACTION REQUESTED
Request Commission authorization for the Executive Director to 1) authorize $46,000,000 of
supplemental funding to meet current building code requirements and complete Phase B
construction, 2) approve the Final Guaranteed Maximum Price of $546,000,000 for the overall
program, and 3) execute a Tenant Reimbursement Agreement (TRA) 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
This request is to authorize an increase of the Program budget by $46 million to meet current
building code requirements in the construction work area and approve the Final Guaranteed
Maximum Price (FGMP) for the overall Program at $546 million. Phase B construction redevelops
Alaska’s ticket lobby in Zones 6 & 7, reconfigures Security Screening Checkpoint #5, and updates
associated building systems and finishes.
On March 28, 2023, staff reported to the Commission that establishing the final Phase B
construction cost and the FGMP for the overall Program had been delayed until the full extent of
the additional work required was established. At that time, the estimated cost to complete these
items, including associated Port and Alaska soft costs, was $50 million.
JUSTIFICATION
Under this authorization, the Program team is pursuing construction funding for these additional
scope items, which include:
COMMISSION AGENDA – Action Item No. 10a Page 2 of 8
Meeting Date: June 27, 2023
Template revised June 27, 2019 (Diversity in Contracting).
1. Providing 2-hr fire rating compliance at vertical utility shafts within the Program scope of
work.
2. The addition of fire sprinklers inside Skybridges 2 through 6 to allow occupancy of the
newly constructed tenant and operational spaces on the Bridge/Promenade level.
3. 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.
4. The addition of supplementary electrical infrastructure required to support connection to
an emergency backup power system being installed by a future project.
5. Renovating the restrooms adjacent to Security Screening Checkpoint #5 to comply with
emergency exiting requirements.
6. Providing additional exit signage at Baggage Claim.
These code-related items were originally intended to be addressed by future projects currently
being planned. The Authority Having Jurisdiction (AHJ) determined that they needed to be shifted
instead to this Program’s scope of work to allow occupancy once the work is completed.
Other key work elements related to the baggage handling system, signage and wayfinding, HVAC
and smoke control have continued to evolve during design and the updated costs for these have
been added to the Program scope.
Phase A design is currently at 100% and Phase B design is at 90%. The budget reconciliation by
the Port’s third-party estimator has been completed with <5% variance between their estimate
and the cost model provided by the Design Build team.
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 a sustainable and cost-effective manner.
Diversity in Contracting
Diversity in Contracting has established a Women/Minority Business Enterprise (WMBE)
aspirational 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.
COMMISSION AGENDA – Action Item No. 10a Page 3 of 8
Meeting Date: June 27, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Currently the Port’s consultant support services contract is achieving 26% WMBE utilization, and
Alaska’s consultant support and construction teams are attaining 15% SBE/WMBE utilization. The
Design Build team is approximately 50% complete with buying out the project scope and are
increasing their WMBE/SBE outreach to attain this goal.
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 divided into two distinct phases.
Phase A (Q4 2022 – Q2 2026)
• 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 northernmost 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.
The Program team is implementing the Sustainable Design Approach (SDA) approved by the
Sustainability Environment and Climate (SEAC) Committee on February 21, 2023. The Program is
also applying strategies toward the achievement of a 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.
COMMISSION AGENDA – Action Item No. 10a Page 4 of 8
Meeting Date: June 27, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Activity
Phase A construction start
Execution of TRA #3
In-use date – Phase A
Commission authorization revised Phase A construction & TRA #4
Execution of TRA #4
Commission authorization initial Phase B construction & TRA #5
Execution of TRA #5
Final Guaranteed Maximum Price (FGMP), Phase B construction & TRA #6
Execution of TRA #6
Phase B construction start
Phase B In-Use-Date
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, the 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, the 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, the Commission authorized an additional $149.5 million for Phase
A construction and an associated TRA with Alaska.
• On October 25, 2022, the 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.
• On March 28, 2023, the Commission authorized $159.5 million for Phase B construction
and final design for new scope addressing code compliance and an associated TRA with
Alaska.
• This request seeks authorization for a further $46 million for Phase B construction to
address several pre-existing building code compliance issues in the construction work
area and approve the Final Guaranteed Maximum Price (FGMP) for the overall Program
at $546 million.
COMMISSION AGENDA – Action Item No. 10a Page 5 of 8
Meeting Date: June 27, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Cost Breakdown
Previous
Requests
This
Request
Program
Total
Complete PDD and 30% Design
$9,000,000
$0
$9,000,000
Design – Phases A and B
$16,900,000
$0
$16,900,000
Phase A Construction
$140,500,000
$0
$140,500,000
Phase A Supplemental Construction
$75,000,000
$0
$75,000,000
Phase B Construction
$176,900,000
$0
$176,900,000
Alaska Soft Cost
$22,700,000
$0
$22,700,000
Port Soft Cost
$34,900,000
$0
$34,900,000
Port-held Contingency
$21,000,000
$0
$21,000,000
Code-Related Design
$3,100,000
$0
$3,100,000
Phase B Supplemental Construction
$0
$46,000,000
$46,000,000
Total
$500,000,000
$46,000,000
$546,000,000
Itemization of Additional Funding Request
Address Existing Code Compliance Issues:
Provide Additional Infrastructure for Emergency Power System
$5,000,000
Provide 2-way Communication at Elevator Areas of Refuge
$2,000,000
Allowance for Vertical Utility Shaft Repairs
$3,500,000
Renovate Restrooms Next to Security Screening Checkpoint #5
$6,000,000
Install Fire Sprinklers Inside Skybridges 2-6
$2,000,000
Provide Additional Exit Signage on Baggage Claim Level
$500,000
Design Development:
Baggage Handling System
$1,000,000
Digital Signage and Wayfinding
$3,500,000
Structural Upgrades (Terrazzo Flooring and SSCP #5 Reconfiguration)
$6,000,000
HVAC / Smoke Control
$6,500,000
Fall Protection
$1,000,000
Security Blast Film
$500,000
Cost of Scope Transfers from Adjacent Projects
$4,000,000
Washington State Sales Tax (WSST)
$4,500,000
TOTAL
$46,000,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Complete construction of Phase A and limit Phase B construction to work already
started.
Cost Implications: ~$350 million
Pros:
(1) Reduces the Port’s capital expenditure.
COMMISSION AGENDA – Action Item No. 10a Page 6 of 8
Meeting Date: June 27, 2023
Template revised June 27, 2019 (Diversity in Contracting).
(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 Security
Screening Checkpoint #5.
(2) Does not implement desired technology improvements.
(3) Does not address all existing code inadequacies.
(4) Does not provide all 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 2 – Proceed with Phase A and Phase B to complete the full North Main Terminal
Redevelopment Program scope.
Cost Implications: $546 million
Pros:
(1) Achieves the desired capacity improvements on the Bridge/Promenade and Ticketing
levels and at Security Screening Checkpoint #5.
(2) Upgrades the restrooms adjacent to Security Screening Checkpoint #5.
(3) Implements the desired technology improvements.
(4) Addresses existing code and ADA inadequacies.
(5) 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
$541,000,000
$5,000,000
$546,000,000
AUTHORIZATION
Previous authorizations
$495,000,000
$5,000,000
$500,000,000
Current request for authorization
$46,000,000
$0
$46,000,000
Total authorizations, including this request
$541,000,000
$5,000,000
$546,000,000
Remaining amount to be authorized
$0
$0
$0
COMMISSION AGENDA – Action Item No. 10a Page 7 of 8
Meeting Date: June 27, 2023
Template revised June 27, 2019 (Diversity in Contracting).
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 $141 million was transferred from the
Aeronautical Allowance
1
CIP (C800753) resulting in zero net change to the Aviation capital
budget. The funding sources will be revenue bonds and Airport Development Fund (ADF). This
project received Majority in Interest (MII) airlines approval on December 13, 2021. The budget
increase was submitted to the airlines for additional Majority-In-Interest approval on May 22,
2023, and received a YES vote on June 23, 2023.
Financial Analysis and Summary
Project cost for analysis
$546,000,000
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
$1.33 in 2027
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
March 28, 2023 – North Main Terminal Redevelopment Program – Phase B Construction
Funding Authorization (C801204) which authorized $156,400,000 for Phase B
construction, transfer of $1,559,000 from the Main Terminal Low Voltage Program,
$3,100,000 for final design addressing existing building code compliance, and to execute
a fifth Tenant Reimbursement Agreement with Alaska Airlines, Inc. (Alaska).
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).
1
The Aeronautical Allowance is included in the Capital Improvement Plan to ensure funding capacity for
unspecified projects, cost increases for existing projects, new initiatives, and unforeseen needs. This ensures funding
capacity for unanticipated spending within the dollar amount of the Allowance CIP.
COMMISSION AGENDA – Action Item No. 10a Page 8 of 8
Meeting Date: June 27, 2023
Template revised June 27, 2019 (Diversity in Contracting).
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.