AVIATION DIVISION. Percent ($ in 000's) 2015 of Total

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1 AVIATION DIVISION A BUDGET SUMMARY TABLE IV-1: 2015 CASH FLOW Percent ($ in 000's) 2015 of Total SOURCES OF CASH Operating Revenues $ 427, % Interest Receipts 5, % Proceeds from Bond Issues 300, % Grants and Capital Contributions 40, % Tax Levy 2, % Passenger Facility Charges 73, % Rental Car Customer Facility Charges 23, % Fuel Hydrant Receipts 7, % Other Receipts % Total 879, % USES OF CASH Expenses from Operations: Operating & Maintenance expense 167, % Corporate & Capital Development Division Costs 60, % Law Enforcement Costs 17, % Environmental Remediation Liability Expense 2, % Total Operating Expenses 248, % Debt Service: Interest Payments 109, % Bond Redemptions 97, % Total Debt Service 206, % Other Expenses 1, % Public Expense 2, % Capital Expenditures 328, % Total $ 787, % cashflow.xlsx, AV IV-1

2 FIGURE IV-1: SOURCES OF CASH ($ in 000 s) Rental Car Customer Facility Charges 2.7% Passenger Facility Charges 8.4% Grants and Capital Contributions 4.6% Tax Levy 0.2% Fuel Hydrant Receipts 0.8% Proceeds from Bond Issues 34.1% Operating Revenues 48.6% Total Sources: $879,648 Interest Receipts 0.6% FIGURE IV-2: USES OF CASH ($ in 000 s) Capital Expenditures 41.8% Operating & Maintenance expense 21.2% Corporate & Capital Development Division Costs 7.7% Public Expense 0.3% Bond Redemptions 12.4% Interest Payments 13.9% Law Enforcement Costs 2.2% Environmental Remediation Liability Expense 0.3% Other Expenses 0.2% Total Uses: $787,484 IV-2

3 B. BUSINESS PLAN FORECAST TABLE IV-2: BUSINESS PLAN FORECAST ($ in 000's) Budget Budget Forecast OPERATING BUDGET Compound Growth Aeronautical Revenues $ 241,443 $ 242,352 $ 269,159 $ 293,309 $ 307,700 $ 319, % Non-Aeronautical Revenues 166, , , , , , % SLOA III Incentive Straight Line Adj (3,576) (3,576) (3,576) (3,576) - - Total Operating Revenues 404, , , , , , % Operating & Maintenance Expense 161, , , , , , % Corporate & Capital Development Division Costs 58,066 60,873 62,672 64,274 65,942 67, % Law Enforcement Costs 16,982 17,413 17,928 18,386 18,863 19, % Airline Realignment % Environmental Remediation Liability Expense 2,356 2,642 2,720 2,790 2,862 2, % Total Operating Expense 238, , , , , , % Net Operating Income Before Depreciation 165, , , , , , % Total Depreciation Expense 121, ,205 Net Operating Income After Depreciation 43,358 59,896 Total Committed Capital Budget 194, , , , , ,464 1,367,413 Business Plan Prospective 35,859 29,536 69,099 66,518 57, , ,966 Total Capital Budget $ 230,519 $ 328,782 $ 443,390 $ 376,570 $ 269,175 $ 301,462 $ 1,719,379 TABLE IV-3: AVIATION KEY MEASURES Budget Forecast Key Measures Cost per Enplanement (CPE) O&M per Enplanement Non-Aero Revenue per Enplanement Debt per Enplanement Debt Service Coverage Traffic (in 000's) Enplanements 19,354 19,935 20,533 21,149 21,784 IV-3

4 Enplanements in Millions Fcst 2015 BUD Enplaned passengers are expected to grow by 7.1% in For 2015, the budget assumes growth of 4.0%. For the financial forecast, enplaned passengers are assumed to grow by 3.0% per year. This is slightly lower than the assumed growth rate in the draft master plan forecast (shown in red above). C. AVIATION DIVISION BUSINESS PLAN MISSION: Connecting our region to the world through flight. VISION: Sea-Tac is a welcoming front door, embodying the spirit of the Northwest an economic engine and a source of regional pride. MAJOR AND NEW INITIATIVES: Reconstruct Runway 16C/34C in 2015 to replace aging concrete and add new technologies. Complete the Sustainable Airport Master Plan (SAMP) in 2015 and complete the environmental review in Finalize organizational adjustments and add resources required to ensure successful implementation of major capital program. Provide Airport emergency-back-up electrical power. Attract and complete lease(s) with developers of air cargo and/or aeronautical related property. Design and construct the new International Arrivals Facility. Design and construct the major elements of the NorthSTAR project, including construction of Concourse C and baggage system improvements in 2015; renovation / expansion design of North Satellite in 2016; completion of main terminal in 2018; and completion of the satellite transit system (STS) and north satellite construction in Implement a new Airport Master Record As-built Drawing System to reduce costs associated with change orders and design costs and to minimize operational disruptions. Renovate the South Satellite (SSAT) concourse level as interim effort in anticipation of subsequent major renovation. Articulate new long-term environmental goals within the Sustainable Sea-Tac Strategy Plan (S3). IV-4

5 Implement Airport Dining and Retail (ADR) Master Plan, including infrastructure upgrades, lease expiration phasing strategy and new competitive solicitations and resulting leases. Implement improvements to the parking revenue control system to ensure full functionality. Complete RFP for taxi and limousine contracts. Grow Continuous Process Improvement across the Port. Implement new programs under the updated Part 150 noise mitigation plan. Renegotiate the Port of Seattle / City of SeaTac Interlocal Agreement (ILA) in Increase value of Airport contracts with small businesses. STRATEGIES SUMMARY: Operate a world-class international airport by: o Ensuring safe and secure operations o Anticipating and meeting the needs of tenants, passengers and the region s economy o Managing Airport assets to minimize long-term total cost of ownership Become one of the top customer service airports in North America. Lead the U.S. airport industry in environmental innovation and minimize the airport s environmental impacts. Keep airline costs as low as possible without compromising operational and capital needs. Maximize non-aeronautical net operating income consistent with current contracts, appropriate use of Airport properties and market demand. Continually invest in a culture of employee development, organizational improvement and business agility. Maintain valued community partnerships based on mutual understanding and socially responsible practices. DIVISION DESCRIPTION: The Port of Seattle owns and operates Seattle-Tacoma International Airport, the 14 th largest airport in the U.S. in 2013 based on passengers. The Airport is located approximately 12 miles south of downtown Seattle. Currently the Airport has facilities for commercial passengers, air cargo, general aviation and aircraft maintenance on a site of approximately 2,800 acres. Airport facilities include the Main Terminal, the South and North Satellites, a parking garage, and a consolidated rental car facility. The Airport has three runways that are 11,900 feet, 9,425 feet and 8,500 feet in length. INDUSTRY ASSESSMENT: Over the past five years, the U.S. airline industry has transformed its structure and its approach to cost management to achieve substantial profitability, with prospects for continued profits going forward. From 2001 to 2005, the industry lost money every year, with a combined net loss of $58 billion. The $26 million in profits earned in were eliminated by equivalent losses in driven by high and volatile fuel prices followed by a deep economic recession. After multiple bankruptcies, industry consolidation, capacity reductions and a disciplined approach to managing costs, the industry has achieved profits each year from 2010 to Industry consolidation has left three major legacy carriers: American, United and Delta. Together with Southwest, these four airlines dominate the U.S. market. Other smaller carriers, such as Alaska, Jet Blue, Frontier and Virgin America, constitute the next largest group of commercial airlines. Consolidation has allowed the industry to reduce excess capacity, achieve higher load factors (passengers per aircraft) and realize sustained profitability. However, not all airlines have been equally profitable. Alaska Airlines has the highest operating profit margin among U.S. airlines. Of the major carriers, Delta has been the profit leader as measured by operating profit margins. United has struggled with the Continental merger, and the combined American and U.S. Airways is IV-5

6 just beginning to realize benefits from their merger. Sea-Tac s two largest airlines, Alaska and Delta, are currently the two most profitable airlines in the U.S. The U.S. economy, while slowed in Q due in part to bad weather, continues to recover from the great recession. Job growth has picked up, resulting in lower unemployment. Historically, the airline industry has performed well when the economy is growing, so prospects are good for continued airline industry profitability. BUSINESS ASSESSMENT: Since 2000, passenger growth at Sea-Tac has exceeded the average growth for U.S. airports and other West Coast airports. During this time, the Alaska Air Group (Alaska and Horizon -- AAG) has expanded its focus from principally operating West Coast routes to offering many transcontinental flights from the West Coast, predominately from Sea-Tac, its primary hub. Alaska s strong financial performance has allowed it to add aircraft and expand its routes and frequencies. For the past two years, AAG has accounted for over 50% of Sea-Tac s passengers. For the past few years, Delta Airlines has added significant international service from Sea-Tac to both Europe and Asia. For example, in 2014, Delta launched new service to London, Seoul, and Hong Kong and has identified Sea-Tac as its primary Asian gateway. Sea-Tac offers Delta geographic advantages over other U.S. airports due to its proximity to Asian destinations. In the second half of 2013, Delta began announcing new domestic service growth from Sea-Tac. With continuing announcements of new service in 2014, it is clear that Delta plans to greatly expand its presence at Sea-Tac and to provide its own domestic feed to its international flights. Delta and Alaska are now significant competitors as well as partners. By this summer, Delta will have 86 flights a day, and has indicated that it will, by 2017, approximately double that number. Year-to-date growth in enplaned passengers through September 2014 is 6.7% and the forecasted growth for the year is 7.1% due to additional capacity that will be added in Q International enplaned passenger growth is up 5.8%, while domestic is up 6.8%. Based on the recently completed master plan activity forecast, the 2015 assumes growth in enplaned passengers of 4.0%, and the annual growth rate for is 3.0%. Load factors for airlines serving Sea-Tac are higher here than their national averages, suggesting that Sea-Tac is underserved and that above average growth rates can be realized. The passenger mix at Sea-Tac has been primarily origin and destination (O&D). The O&D percentage has varied between 73% and 76% in recent years. Due to Delta s strategy to use Sea-Tac as a hub, an increasing percentage of passengers at Sea-Tac will be connecting passengers especially between international and domestic flights. In relative terms, this will increase the demand for gates and terminal facilities compared to landside facilities such as roadways. This will also place increased importance on customer service; anticipating, and building, facilities to meet airlines needs; and on efforts to reduce the airport s minimum connect times (MCT). CHALLENGES AND OPPORTUNITIES: The highlights of a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) are presented below. The items below were key considerations in the development of the business plan: High near-term passenger growth could require faster new facility development than is anticipated in the current capital program. Sea-Tac is becoming a more significant international travel gateway that will benefit the local economy and drive more domestic connections (routes and frequencies). The size and complexity of the anticipated capital program is growing. With limited aeronautically-generated net income - and the requirement in the new airline agreement to share a portion of non-airline revenue with the airlines - there is a need to increase non-aero revenue and income from parking, concessions, off-airport development, and ground transportation. IV-6

7 Federal budget cuts will likely mean fewer federal grants. There likely will be an increase in climate change regulation, including direction regarding adaptation. Washington state and the greater Seattle area enjoy a relatively strong economy; the Seattle area is becoming increasingly visible internationally. Technology advances for both customers and airlines will grow in availability and importance. There is an improved market and community climate for off-airport property development. The next realistic possibility for a higher PFC is 2016; an increase could lead to lower future debt. The NorthSTAR program will establish standards or expectations in several areas e.g., technology, common use / self-service tools, architectural finishes. Despite fifteen years of investment, the airport still has substantial older infrastructure which will require replacement or reconstruction. While higher than ten years ago, aircraft fuel costs are stable and more likely to decrease modestly than to increase. Business needs and the universality of technology will require more staff training on technological tools and business intelligence. The Port will need to continually focus on process improvement to mitigate cost growth. An increase in capital spending will require additional resources and a need to focus on cost-effective management. Airport systems will become more complex and dependent upon electricity over time; ensuring uninterrupted electrical service will be even more important in the future. STRATEGIES AND OBJECTIVES: The business plan is organized by strategy. Many of the Airport strategies directly support the implementation of the Century Agenda and the Port-wide strategies. In the following section, strategies and objectives that directly support the Century Agenda and the Port-wide strategies are highlighted. To avoid unnecessary duplication, the related details for performance measures, targets and actions for each are found immediately following within the Airport Strategies. Century Agenda Implementation Triple air cargo volume to 750,000 metric tons Strategy 1.2, Objective 7: Increase air cargo tonnage by 20% to a total of 364,000 metric tons in Make Sea-Tac Airport the west coast Gateway of Choice for international travel Strategy 1.2, Objective 3: Commence operations from a new International Arrivals Facility (IAF) by December 31, 2018 (to be refined). Strategy 1.2, Objective 4: Facilitate/accommodate growth in international operations until new IAF is completed. Double the number of international flights and destinations Strategy 1.2, Objective 8: Add four new international routes by Meet the region s air transportation needs at Sea-Tac Airport for the next 25 years Strategy 1.1, Objective 2: Reconstruct Runway 16C/34C by Q Strategy 1.2, Objective 1: Complete the Sustainable Airport Master Plan to meet the needs of our tenants, passengers and regional economy for the next 20 years. Strategy 1.2, Objective 5: Complete all NorthSTAR program improvements by Q Strategy 1.2, Objective 6: Increase productivity of existing terminal facilities. Strategy 1.2, Objective 9: Renew aging landside infrastructure. Strategy 1.2, Objective 11: Provide an efficient and updated baggage system that incorporates new technology and efficient conveyor systems necessary to improve system performance and allow for future growth. Strategy 1.2, Objective 14: Identify and plan for all necessary refurbishments in the South Satellite. IV-7

8 Increase the proportion of funds spent by the Port with qualified small business firms on construction, goods and services to 40% of the eligible dollars spent Strategy 7.0, Objective 6: Foster new aviation division opportunities for local businesses. Increase workforce training, job and business opportunities for local communities in maritime, trade, travel and logistics Strategy 7.0, Objective 5: Implement new aviation division programs that support Port-wide workforce development strategies and Commission Quality Jobs policies. Meet all increased energy needs through conservation and renewable sources Strategy 4.0, Objective 3: Implement conservation practices that will enable Airport to meet all future electricity load growth (2010 baseline) through conservation and renewable energy. Meet or exceed agency requirement for storm water leaving Port owned or operated facilities Strategy 3.0, Objective 5: Water Resources and Wildlife: Achieve and maintain Best Management Practices for water quality treatment and flow control over 100% of Airport industrial areas. Reduce air pollutants and carbon emissions Strategy 3.0, Objective 2: Air Quality and Climate Change: 1) Sea-Tac will reduce Airport-owned and controlled greenhouse gas emissions by 15% below 2005 levels by 2020, and 2) implement programs with business partners to reduce their emissions as much as possible. Port-Wide Strategy Implementation Consistently Live by our Values The Port s values guide how we go about our daily work throughout the aviation division. The Airport strategies below demonstrate our focus on employee development and succession planning: Strategy 6, Objective 2: Complete a Work Continuity and Succession Planning Departmental pilot program. Strategy 6, Objective 3: Complete a Post-Graduate Fellowship pilot and produce recommendations for a follow on program. Manage our Finances Responsibly Managing our finances responsibly is a necessary foundation for all of the Airport strategies and the successful implementation of the Century Agenda. The Airport strategies that support this include: Strategy 4.0, Objective 1: Maintain passenger airline cost per enplaned passenger (CPE) and forecasted CPE within the middle third of peer airports (list of 22 airports focusing on large hubs and Western U.S. airports) through Strategy 4.0, Objective 5: Manage financial activity to achieve targeted metrics. Includes specific performance measures for: o Financial results (net operating income or NOI) o Competitive airport costs (CPE, see above) o Cash flow (debt service coverage) o Liquidity (minimum cash balance) o Leverage (debt per enplaned passenger) Strategy 5.0: Maximize non-aeronautical net operating income (NOI) consistent with current contracts, appropriate use of Airport properties and market demand. Exceed Customer Expectations Customer service is a specific Airport Strategy: Strategy 2.0: Become one of the top customer service airports in North America. Strategy 2.0, Objective 1: Achieve Top 5 ranking among 25 selected North American peer airports in IV-8

9 Airport Strategies and Objectives: Strategies and objectives that directly support the Century Agenda objectives are designated with CA at the end. Those that directly support the Port-wide strategic objectives are designated with PS. Strategy 1.1: Operate a world-class international airport by ensuring safe and secure operations. Major and New Initiatives Reconstruct Runway 16C/34C in 2015 to replace aging concrete and add new technologies. Objective 1: Improve overall safety of aircraft and vehicular movement measured by an increase in a composite annual score of 100 possible points, ranking runway incursions, wildlife strikes, taxi lane and apron area surface incidents and Part 139 discrepancies. Background: safety is the preeminent expectation of our airborne society. Due to the inherent nature and complexity of the airfield operating environment, it is appropriate to focus on the minimization of risk where aircraft interface with the physical plant of the Airport, wildlife, vehicles, and personnel. In 2014, Sea-Tac joined Airport Excellence in Safety (APEX), the global airport safety cooperative of Airports Council International-World to glean the resources of other international airports around the globe in sharing best management practices. In 2015, the FAA is expected to adopt International Civil Organization (ICAO) guidelines for the holistic management of airfield safety as Safety Management System (SMS) regulatory requirements. Objective 1: Improve overall safety of aircraft and vehicular movement measured by an increase in a composite annual score of 100 possible points, ranking runway incursions, wildlife strikes, taxi lane and apron area surface incidents and Part 139 discrepancies. Annual improvement in individual components of the composite score Reduce runway incursions from 2013 baseline of 2.25 to 1.3 per 100,000 operations in 2015 Complete redesigned intersection at Runway 16L/34R and Taxiways H and J by Q during 16C/34C reconstruction project Install thermoplastic painted holding position markings at 18 runway/taxiway intersections IV-9

10 Reduce Wildlife Strikes from 2012 baseline of 2.5 per 10,000 aircraft operations to 2.1 in 2015 and Convert Tyee Golf Course to Shrub- Scrub vegetation, a natural deterrent to bird activity by Q Increase raptor relocation activities utilizing existing operating expense budget Conduct cost benefit analysis to consider new radar sensors to extend avian radar coverage to the midfield of the airfield by Q Consolidate existing wildlife databases to validate all baseline and subsequent performance metrics by Q Evaluate integration of Avian Radar and Foreign Object Debris radar systems to include surface detection coverage by Q utilizing existing staff resources Analyze historical avian radar data for bird trend distributions by Q Comply with all anticipated FAA Safety Management System (SMS) regulations Reduce Surface Incidents from 2013 baseline of 2.30 to 1.65 per 100,000 operations in 2015 Incur zero FAA Airport Certification discrepancies during annual inspections Implement all regulatory requirements within published FAA timeline Automate ramp insurance validation at airfield access points utilizing new ID Access badging software to ensure only insured vehicle operators are allowed access to Airport Operations Area by Q Implement new weekly special inspections based on specific FAA areas of focus by Q Remove all trees newly identified as obstructions to navigation and safety of flight by Q Complete enhanced Qualified Personnel training for Movement Area (Runways/Taxiways) by Q Actions to be defined following anticipated issuance of FAA regulations in October 2014 Objective 2: Reconstruct Runway 16C/34C by Q (CA) Background: Originally opened in 1972, Sea-Tac s Runway 16C/34C will be completely reconstructed in The 6-month project will replace aging concrete and incorporate leading technologies including automated Foreign Object Debris (FOD) detection equipment and light emitting diode (LED) airfield lighting, while reducing a primary source of runway incursions through the redesign of taxiways H and J. IV-10

11 Objective 2: Reconstruct Runway 16C/34C by Q (CA) Runway reconstructed Project completed by Q CIP $103M Objective 3: Increase overall runway availability during snow events. Background: The previous snow removal plan closed Runway 16R/34L during snow events. Creation of a dedicated removal team for 16R/34L and ongoing delivery of additional equipment allows for increased runway availability. Under the new scenario, two separate snow removal teams are deployed, operating an enlarged fleet of new technology equipment. Deployment of two distinct teams, as requested by Alaska Airlines, requires additional equipment and the incremental replacement of the original fleet purchased 25 years ago in Objective 3: Increase overall runway availability during snow events. Runway availability Two of the Airport s three runways remain open during snow events representative of Seattle s typical average occurrence Procure 2 additional snow blowers by Q Procure 4 combination plow/ brooms by Q Objective 4: Increase airline departure rate during snow events through centralized deicing facilities. Background: Significant savings and efficiencies can be achieved through centralized procurement and distribution of deicing glycol by the existing Sea-Tac Fuels consortium. Overall airfield efficiencies and increased flight completion factors can be achieved through the development of centralized deicing pads. Requested by Alaska Airlines and Delta Air Lines. Objective 4: Increase airline departure rate during snow events through centralized deicing facilities. FAA Hourly Aircraft Departure Rate Increase departure rate during snow events from 2013 baseline of 12 per hour to 18 per hour while providing an uninterrupted supply of glycol to all Sea- Tac airlines Negotiate agreement for development of consolidated glycol storage facility with existing Sea-Tac Fuels airline consortium by Q Complete preliminary design of centralized common use deicing pads by Q IV-11

12 Objective 5: Ensure uninterrupted supply of jet fuel to Sea-Tac fuel farm from existing Olympic Pipeline Renton terminal through creation of redundant feed source. Background: Sea-Tac is the largest commercial hub airport in the United States without a redundant feed source for jet fuel. Sea-Tac facilitates the delivery of approximately 1.1 Million gallons of jet fuel per day to airline customers and maintains an average inventory of 9 days supply. Preliminary analysis indicates that a catastrophic failure, or interruption of the existing system, could not be supplied through over-the-road tankering. Objective 5: Ensure uninterrupted supply of jet fuel to Sea-Tac fuel farm from existing Olympic Pipeline Renton terminal through creation of redundant feed source. Jet Fuel Availability 100% redundancy in fuel supply availability Conduct analysis during Master Plan to determine potential risks and alternative delivery methods by Q Objective 6: Mitigate risk of security breaches and associated downtime. Background Approach: Sea-Tac has maintained an essentially flawless record with both TSA compliance and in addressing security anomalies. The projected growth of the Airport and improvements in technology drive the need for continuous analysis of available technology to maintain compliance and ensure there are no holes in our security environment. Objective 6: Mitigate risk of security breaches and associated downtime. Performance Objective Performance Target Actions Increase performance and coverage of CCTV system System upgrade in place using TSA grant funds by (Q1 2016) Cameras included on new construction in high risk areas (ongoing) Install cameras, video analytics and mapping by 2016 Increase access control and provide detailed security data by user TSA redeploys staff stationed at exits to screening functions Installation of biometrics on all new access doors including baggage processing points in each future project All five main passenger exits will have exit technology that will provide proven, continuous monitoring, detection and control ( ) through TSA funding North Satellite doors will be included in new construction NorthSTAR program Continue work to obtain TSA/Congressional funding for automated Exit Lane Breach Control technology Objective 7: Constantly improve overall readiness of the Port to respond to and recover from an emergency, disaster, and any event that would substantially disrupt business/operational continuity at the Airport. IV-12

13 Background: Any significant disruption to the Airport s routine functions can have a substantial negative impact on the Port and region. The Port and the Airport must be able to respond to and recover from emergencies effectively and efficiently. Objective 7: Constantly improve overall readiness of the Port to respond to and recover from an emergency, disaster, and any event that would substantially disrupt business/operational continuity at the Airport. Mitigate risks to effective response and recovery Airport emergency plans accurately define Port and staff actions and capabilities Port staff are prepared to support emergencies as needed Update Port Threat and Hazard Identification and Risk Assessment (THIRA) All Airport Plans are up-todate and in use: Airport Emergency Plan (AEP) Continuity Of Operations Plan (COOP) Airport Evacuation (for all employees/ public/ passengers) Port staff readiness is assessed and training and exercising activities are provided Develop a summary of issues/ interests based on the THIRA results for the Policy and ECC functions Update THIRA in Q Recommend new initiatives based on THIRA in Q Assess each plan against industry best practice Q Review and update against internal processes and capabilities Q Distribute Q Identify and report significant budget items/ requests Q Schedule and manage personal preparedness events Q Deliver an exercise to assess staff knowledge/skills Q Produce a report of staff readiness/gaps Q Carry out annual exercises focused on response, COOP, and recovery for all Airport employees starting Q Strategy 1.2: Operate a world-class international airport by anticipating and meeting needs of tenants, passengers, and the region s economy. Major and New Initiatives Complete the Sustainable Airport Master Plan (SAMP) in 2015 and complete the environmental review by Q Finalize organizational adjustments and add resources required to ensure successful implementation of major capital program. Provide emergency-back-up electrical power. Attract and complete lease(s) with developers of air cargo and/or aeronautical-related property. Design and construct the new International Arrivals Facility. Design and construct the major elements of the NorthSTAR project, including Concourse C and baggage system improvements completed in 2015; renovation / expansion design of the North Satellite in 2016; completion of main terminal in 2018; and completion of the satellite transit system (STS) and north satellite construction in IV-13

14 Objective 1: Complete the Sustainable Airport Master Plan (SAMP) to meet the needs of our tenants, passengers and regional economy for the next 20 years. (CA) Background: The last airport master plan was completed in the mid-1990 s. In order to appropriately plan future facility requirements and capital investments, the airport must update the aviation activity forecast, and articulate the 20-year master plan for the airport facilities. The SAMP will integrate the planning for the region s needs at the Airport along with the environmental and sustainability goals articulated by the Commission in the Century Agenda. Objective 1: Complete the Sustainable Airport Master Plan (SAMP) to meet the needs of our tenants, passengers and regional economy for the next 20 years. (CA) Sustainable Airport Master Plan By 2016 future airport facilities to accommodate forecasted 20 year growth are planned, and near term (5 year) facilities are approved for construction Complete the Sustainable Airport Master Plan by 2015 Complete Draft Airport Layout Plan (ALP)/Airport Geographical Information Systems (AGIS) by 2015 Complete Environmental review and FAA approval of the ALP by 2016 Objective 2: Adequately prepare for the growing capital program to ensure program success. Background: The capital program has over 100 active projects, including four very large programs measuring between $100 and $500 Million. The size and duration of the program rivals the largest program that the Airport has ever undertaken. In addition, the program is growing in size and complexity as a result of the recent surge in airline needs for facilities. Effective delivery of the capital program requires four key factors to be accomplished: The capital program must be recalibrated to ensure it does not grow beyond the capability of the Port to deliver the program. staffing (building inspectors, fire inspectors, utility shutdown coordinators, etc.) to be added to complement and fully support the program. Dedicated off-airport land for contractor materials staging, construction management trailer offices, and employee parking will need to be developed. Updated Airport facility standards (providing consistency of design across the Airport campus and maintenance parts to ensure lower maintenance costs in future years) must be completed and made available to designers of future facilities. Objective 2: Adequately prepare for the growing capital program to ensure program success. Effective delivery of the capital program A recalibrated capital project plan and improved set of procedures by Q Develop improvement considerations and scenarios, analyze alternatives, and make recommendations; then initiate certain initial recalibration steps immediately Implement all recommendations and perform follow up to test effectiveness of recommendations IV-14

15 adequately staffed to ensure timely and informed project-support decision making Suitable land area and associated infrastructure is developed as soon as possible Complete updated architectural and engineering standards by Q Determine schedule for staff additions Add staff as necessary Determine land and necessary infrastructure requirements (See Strategy 5, Objective 3) Gain airline MII and Commission authorizations to design and construct logistical land area Create IDIQ contract for consultant to assist staff in updating all standard Objective 3: Commence operations from new International Arrivals Facility (IAF) by December 31, 2018 (to be confirmed). (CA) Background: The Airport has seen unprecedented growth in its international services since Between 2007 and 2013, passenger volume on intercontinental routes grew 62.8%; in contrast, domestic passengers grew just 9.3%. By summer 2014, Sea-Tac will have had a net gain of nine intercontinental flights since seven since Delta Air Lines made Sea-Tac its primary pacific gateway and has rapidly expanded its hub in Seattle. From just two intercontinental services on its legacy carrier Northwest Airlines in 2008, Delta will have ten intercontinental flights in summer Objective 3: Commence operations from a new International Arrivals Facility (IAF) by December 31, 2018 (to be confirmed). (CA) IAF designed and constructed to meet established program objectives New IAF facilitates expeditious passenger processing with improvements in gate availability, CBP processing, and bag claim device availability. See Strategy 1.3 for Airport-wide definition of analysis to determine capability to lower Minimum Connect Time (MCT) from 90 to 75 minutes or less. Increase the number of international contact gates Use of technology to minimize required CBP officers Complete selection of Design-Build team by Q NEPA/SEPA environmental review and permitting by Q Construction begins 2016 New facility opens Q (to be confirmed) IV-15

16 Objective 4: Facilitate/accommodate growth in international operations until new IAF is completed. (CA) Background: Short-term improvements in the existing FIS and South Satellite (SSAT) are necessary to meet passenger demands prior to the opening of the new IAF. Strong growth in international flights has led to increasing numbers of arriving passengers held on-board aircraft or held in the International Corridor. Objective 4: Facilitate/accommodate growth in international operations until new IAF is completed. (CA) Facility and operational improvements necessary to reduce processing time By 2016, progressively reduce monthly passenger hold on board aircraft and processing time as compared year over year through: APC kiosk additions for 50% reduction in primary inspection time Add wide body gates accessible to FIS Hardstand arrival facility completed and busing operation in place. Objective 5: Complete all NorthSTAR program improvements by Q (CA) IV-16 Upgrade existing APC kiosks to Visa Waiver and Permanent Resident cardholders Q Add APC kiosks to accommodate additional eligible foreign national guests Q Construct 12 th and 13 th FIS gates in SSAT Q Commission Hardstand Arrivals Facilities Improvements Q Purchase 3 high capacity over the ramp buses for remote aircraft arrivals and departures Augment current Automated Passport Control kiosk investment with the mobile device application CBP is anticipated to approve by Q Background: In 2013, the Port completed the realignment of multiple airlines to allow Alaska Airlines to centralize its operations on the North Satellite. The North Satellite element of the NorthSTAR program is currently at 30% design, incorporating current and evolving design characteristics to meet passenger experience needs. Objective 5: Complete all NorthSTAR program improvements by Q (CA) Consolidation, optimization and expansion of AAG operations on Concourse C and N with associated capital improvements to meet program milestones Complete NorthSTAR program by 2020, including all North Satellite improvements (eight additional jet bridgeequipped gates, additional concessions, adequate hold rooms, circulation, baggage system capability, and a new Alaska Board Room to meet passenger demand at a level of service to exceed IATA level C) Concourse C Vertical Circulation Project construction completed by Q Associated Concourse C Vertical Circulation AAG Tenant Improvement Work and egse relocations and reinstallations construction completed by Q Baggage System construction completed by Q Complete 100% design for renovation of NorthSTAR North STS Lobbies Project by Q Complete 100% design for renovation of North Satellite by 2016 Complete 100% design for NorthSTAR Main Terminal Improvements by Q1

17 Objective 6: Increase productivity of existing terminal facilities. (CA) 2017 Complete Main Terminal construction by Q Complete STS Lobby construction by Q Complete North Satellite construction by Q Background: In 2009, the Airport launched the Terminal Development Strategy (TDS) initiative to develop a unified airline/airport approach to align and streamline terminal facility planning in anticipation of future needs with the goal of reducing costs through use of technology and higher facility throughput. Objective 6: Increase productivity of existing terminal facilities. (CA) Accommodate 5-year demand forecast of up to 40 Million passengers within the existing terminal envelope through additional gates, passenger selfservice, technology and checkpoint expansions By Q2 2015, define projects needed to meet terminal capacity needs Self-bag tagged and selfdrop Available aircraft gates in service Checkpoints adequate for growing passenger demand Office spaces for airlines, tenants, and staff 25 percent of passengers use by Q Install Common self-bagdrop in Zone 7 by Q Maximize available gates in service by Q Checkpoint 5 expanded by Q Adequate just-in-time supply of vacant space ready and waiting with utilities supplies to space Finalize implementation plan for use of new technology and processes for: Passenger check-in Curbside utilization Checkpoints Baggage acceptance Assuming approval from TSA, install Common self-bag drop in ticketing Zone 2 CIP Reactivate aircraft parking at Gate C3 Complete Checkpoint 5 Expansion as part of main terminal improvements of NorthSTAR program Analyze amount of space terminal-wide to meet growing demand; determine necessary emergency exiting for mezzanine spaces Program utility needs for remaining space between USO and Host on 2 nd floor Construct Concourse A Bridge Level space Program scope requirements for additional off-site airport office space following master plan analysis of need IV-17

18 Objective 7: Increase Air Cargo tonnage by 20% to a total of 364,000 metric tons in 2019, in line with the Century Agenda. (CA) Background: Meeting the 2011 Port Commission Century Agenda 25-year goal for air cargo tonnage growth requires an approximately 3.8% compound annual growth rate (CAGR) from 2012 to A three-part strategy will achieve the portion of overall goal and position the business to meet the 25-year Century Agenda goal: Additional air service growth to expand air cargo lift capacity Gain ownership control, modernize, and expand on-airport facilities Develop off-airport land for warehouse and logistics support facilities Objective 7: Increase Air Cargo tonnage by 20% to a total of 364,000 metric tons in 2019, in line with the Century Agenda. (CA) International cargo airlines serving Sea-Tac Availability of leasable Port-owned on-airport cargo warehousing facilities Availability of leasable off- Airport warehouse and logistics support facilities Increase international dedicated freighter aircraft from five to eight by 2019 Q Q Attract one new international air cargo freighter customer in 2015 utilizing a new cargo air service incentive program. Attract 2 additional services by 2019 Replace former United Airlines cargo HVAC systems (dependent upon a longterm lease and master plan results) Replace roofs of port-owned commercial area Cargo 6 warehouse, and former United Airlines cargo building dependent upon design scenario and master plan results Convert all remaining air cargo leaseholds in Cargo 4 campus to port ownership by Q Convert Cargo 1 ground lease (ProLogis) to Port-ownership Redevelop new airside cargo building capacity at Cargo 4 campus or flight kitchen sites consistent with master plan 2019 Burien NERA acres: Review potential transactions from the listing broker; pursue transactions as warranted with priority placed on air cargo support facilities SeaTac L-Shape 26.2 acres: Review potential transactions from the listing broker; pursue transactions as warranted with priority placed on air cargo support or other aeronautical-related facilities IV-18

19 Objective 8: Add four new international airline routes by (CA) Background: Despite the Puget Sound region s strong economic and population growth, Seattle remains significantly underserved internationally as compared to other West Coast airports. With economic growth in Asia far outpacing that of the mature economies of North America and Europe, U.S. carriers are increasingly shifting their attention to transpacific routes. Seattle, as the closest major U.S. city to Asia, has benefitted and will continue to benefit from these growth markets. While these services are of great importance to the local economy, they also signal a shift in the role of Sea-Tac towards being a key international gateway for connecting passengers. Objective 8: Add four new international airline routes by (CA) International long-haul passenger routes Achieve net increase of four long-haul international routes Objective 9: Renew aging landside infrastructure. (CA) Cultivate strong relationships with strategically identified airlines Work closely with Sea-Tac s largest international carrier, Delta, to support its route development Target key connecting markets to increase share of connecting traffic Background: These projects are necessitated by aging infrastructure, an overall increase in ground transportation activity and seismic requirements associated with the service tunnel. Objective 9: Renew aging landside infrastructure. (CA) Availability of critical ground transportation infrastructure Extend existing facilities life cycle by 20 years Complete South 160 th Ground Transportation Lot Achieve Federal Highway Administration Seismic Retrofitting Requirements Complete Service Tunnel renewal and replacement project Objective 10: Make economical Airport cruise ship facility improvements where possible to support Seaport Division cruise business. Background: The Port s cruise ship business sector continues to expand, potentially requiring associated investment in new facilities at Sea-Tac to complement Seaport operations and facilities. Segregating cruise passengers and their baggage would provide a significant improvement in customer service and reduction in demand on Airport baggage processing systems. Objective 10: Make economical Airport cruise ship facility improvements where possible to support Seaport Division cruise business Percent of passengers carried aircraft-to-ship-toaircraft independent of their checked baggage 100 % of cruise passenger baggage delivered directly from aircraft to ship Implement direct bag transfer from aircraft to ship Q IV-19

20 Increase ship-to-aircraft from 33% 2013 baseline to 66% by 2019 Seek cruise ship commitment and business investment in on-ship baggagetagging for direct delivery to airport and final destination Objective 11: Provide an efficient and updated baggage system that incorporates new technology and efficient conveyor systems necessary to improve system performance and allow for future growth. (CA) Background: The existing outbound baggage system is comprised of six separate systems that will soon reach the end of their estimated life span. The Airport has partnered with the Transportation Security Administration (TSA), which plans to replace their explosive detection and bag search systems, to create a jointly optimized system. Building a single new system in phases will enable the TSA to cost effectively replace their systems, and enable the Airport to reconfigure the whole conveyance system as a single unit that will support the ultimate airport passenger demand. Objective 11: Provide an efficient and updated baggage system that incorporates new technology and efficient conveyor systems necessary to improve system performance and allow for future growth. (CA) Phased system reconstruction Meet TSA security requirements (PGDS design standards), airline approvals of MII ballots, energy savings, and system capacity for 60 million annual passengers Design Complete Q Phased construction completions through 2021 Objective 12: Provide emergency-back-up electrical power. Background: Operations at the Airport are dependent upon continuous electrical service. Without continuous electricity, many of the Airport vital systems will fail and stop operations including power to gated aircraft, baggage delivery systems, jet-bridge movements, emergency lighting, etc. Objective 12: Provide emergency-back-up electrical power. Continuous electrical service availability for the Airport Re-establishment of Airport electrical service within 1 hour after disruption from the grid by Q Present project to Commission, AAAC, and achieve affirmative MII ballot before end of Q Receive Commission authorization for full design by end of Q Complete Generator facility project by Q Complete SCADA controls project by Q IV-20

21 Objective 13: Provide adequate Airport-wide Wi-Fi infrastructure capacity. Background: Wi-Fi demand by passengers and tenants has grown dramatically and exceeds the capacity of our existing system. Airline and concession tenants are moving to hand-held device solutions for their employees which require far more capacity. Objective 13: Provide adequate Airport-wide Wi-Fi infrastructure capacity. Traveler and operational Wi-Fi infrastructure capacity for 60 million Travelers experience zero drops, and tenants and operating entities can Complete Concourse C by Q Complete remaining concourses and main terminal by 2016 annual passengers (MAP) connect easily to the cabling Complete ramp Wi-Fi and security infrastructure cameras by Q Plan and implement further improvements on just-in-time schedule in future years Objective 14: Identify and plan for all necessary long-term refurbishments in the South Satellite. (CA) Background: The South Satellite is a 45-year-old aging facility that is heavily used and will continue to be used in the future as international and domestic service grows. The facility will need renovations of aging infrastructure, and concourse improvements (hold-rooms, concessions, restrooms, daylighted ceilings, etc.) to improve it to be on a par with other concourses. Analysis is needed to determine the necessary improvements to interior concourse spaces, vertical circulation, restrooms, seismic strength, air-conditioning, building size, etc. Note: nearer-term aesthetic improvements such as carpeting, wall coverings, door panels, signage, furniture, possibly window panels, etc. are included in s customer service strategy action list. Objective 14: Identify and plan for all necessary long-term refurbishments in the South Satellite. (CA) South Satellite is refurbishment Final design of project can begin in 2017 Analysis of SSAT refurbishments prepared by end of Q Prepare project scoping document (notebook), cost estimate, schedule, etc. by Q for subsequent capital project(s) Objective 15: Prepare a benefit/cost analysis for improvements to Minimum Connect Time (MCT). Background: Competition with other airports includes many variables, one of which is the Minimum Connect Time (MCT) which defines in industry publications and airline schedules the time necessary for baggage transfer, passenger movement from the arriving gate to the connecting departure gate as well as and immigration processing between international and domestic flights. As the Airport prepares its master plan and baggage optimization program, the time is right to set Airport and system-wide MCT targets. IV-21

22 Objective 15: Prepare a benefit/cost analysis for improvements to Minimum Connect Time (MCT). MCT as published by the Official Airline Guide of airline scheduled flights If possible and economical, lower minimum connect time from current 90 minutes to 75 minutes Prepare report of Airport-wide scenarios to determine capability to lower MCT. Scenarios will consider baggage processing times; walking, service cart, and wheel-chair times between concourse gates; and security processing times related to services provided by CBP/TSA Strategy 1.3: Operate a world-class international airport by managing airport assets to minimize long-term total cost of ownership. Major and New Initiatives Implement a new Airport Master Record As-built Drawing System to reduce costs associated with change orders and design costs and to minimize operational disruptions. Objective 1: Create a new Airport Master Record As-built Drawing System. Background: The Port s existing record drawing system is the most significant tool used to prepare for both renovating aging buildings (or portions thereof), and in maintaining over $4 billion of existing facilities (campus buildings) and utilities (heating, air conditioning, elevators and escalators, fire alarm systems, etc. The inaccuracy of the current drawing system causes construction change orders, extends operational downtime, prevents rapid repairs when system failures occur, and requires designers to recreate background footprint drawings of the Airport project areas each time a new project begins. An improved record drawing system will enable future projects to save costs in change orders, map utilities behind the walls to minimize utility and operational shutdowns, and save costs during design. Objective 1: Create a new Airport Master Record As-built Drawing System. Reliable As-built records/drawings Five percent fewer building renovation change orders, and one percent reduction in cost IV-22 Develop business case for Master Record Drawings by Q Present case to Director and brief Commission by Q Pending approvals, initiate hiring processes, office space development, and system purchases to begin creation of master record as-built drawing system by Q Objective 2: Complete initial comprehensive inventory of all physical assets across the Airport, continue periodic inspections to assess age and condition, and develop a system to facilitate forecasting of capital renewal projects and improve on-going maintenance. Background: A forward-looking list of necessary renewal projects will enable staff to forecast capital spending in future years. With recurring inspections and a good long-term forecast of renewal projects, staff can better predict funding needs and level the amount of work for the project management department. Without detailed asset information, an accurate future forecast of renovation is not possible.

23 Objective 2: Complete initial comprehensive inventory of all physical assets across the Airport, continue periodic inspections to assess age and condition, and develop a system to facilitate forecasting of capital renewal projects and improve on-going maintenance. Comprehensive and reliable asset inventory listing, condition data base, and forecast of necessary projects Completed asset inventory by 2018 Initiate and complete periodic inspections of aging assets on a 3 year basis Completed automation of forecast and integrated with PeopleSoft and annual capital plan by Q Devote more staff hours to inspection efforts until caught up with campus wide inspections Utilize in house staff Develop computerized tool Strategy 2: Become one of the top customer service airports in North America. (PS) Major and New Initiatives Renovate the South Satellite concourse interior as interim effort in anticipation of subsequent major renovation. Objective 1: Achieve Top 5 ranking among 25 selected North American peers in 2018 ACI Airport Service Quality (ASQ) survey. (PS) Background: Sea-Tac utilizes two key sources of information to drive customer service improvements. To proactively glean guest feedback, Sea-Tac adopted the Airport Service Quality (ASQ) index in 2011 as the industry benchmark for customer service as coordinated globally by Airports Council International (ACI World). Additionally, Sea-Tac maintains a robust real-time database of customer comments from website, social media, and traditional communication feedback sources. While significant improvements to Sea-Tac s terminal facilities have been made in the last 10 years, parts of the terminal are now over 40 years old, and remain largely unchanged since opening in Objective 1: Achieve Top 5 ranking among 25 selected North American peers in 2018 ACI ASQ. (PS) Airports Council International (ACI World) Airport Service Quality (ASQ) Quarterly Survey All security checkpointrelated ASQ rankings improved to top 12 of peer group of 25 by Q Current rankings: Wait times (20th) Feeling safe and secure (17 th ) Thoroughness of Inspection (12 th ) Courtesy of Staff (13 th ) Implement specific changes to address areas of needed improvement identified in baseline 2014 security checkpoint passenger experience survey IV-23

24 All security checkpointrelated ASQ rankings improved to top 5 of peer group of 25 by Q Improve ranking to 12 th from current ranking of 15 th in ASQ wayfinding by Q Improve ranking to 12 th from current ranking of 19 th. in ASQ Gate Comfort by Q Improve ranking to 5 th in ASQ Gate Comfort by Q Improve ranking to 8 th from current ranking of 12 th in ASQ Airport Ambiance by Q Improve ranking to 5th from current ranking of 12 th by Q Improve ranking to 11 th from current ranking of 17 th in ASQ Restroom Cleanliness by Q Improve ranking to 5th from current ranking of 17 th in ASQ Restroom Cleanliness by Q Improve ranking to 14 th from current ranking of 19 th in ASQ Terminal Cleanliness by Q Improve ranking to 12 th from current ranking of 19 th in ASQ Terminal Cleanliness by Q Implement specific changes to address areas of needed improvement identified in annual baseline security checkpoint passenger experience survey Install dynamic interactive directories to improve wayfinding in coordination with Concessions Master Plan Provide additional gate seating in two selected gate lobbies Install additional gate seating Extend music in terminal to garage elevators Extend music in terminal to 4 th floor plaza of parking garage Upgrade terminal-wide voice paging system Complete Phase 1 South Satellite Interior Renovations comprised of carpet, signage and paint Complete Phase 2 South Satellite Interior Renovations comprised of wall panels, column covers, door panels and casework Implement real-time customer feedback technology for restrooms in terminal with new operating expense Evaluate appropriate timing and, as soon as practical complete design for 14 restrooms on Concourses B, C, D Complete construction when can be included in capital program Replace carpeting on Skybridges 1 and 6 Implement real-time customer feedback technology throughout remainder of Airport IV-24

25 Strategy 3: Lead the U.S. airport industry in environmental innovation and minimize the airport s environmental impacts. Major and New Initiatives Articulate new long-term environmental goals within the Sustainable Sea-Tac Strategy Plan (S 3 ). While new objectives and actions will be identified in the S 3 Plan by Q3 2015, we will continue to make progress on existing strategic objectives through measures such as: o Using Renewable Natural Gas o Increasing the number of electric vehicle charging stations in the garage and RCF o Evaluating the utility of fast chargers o Aggressive measures such as mandatory recycling and use of compostable service ware in future airport concessions contracts, and o Low Impact Development (LID) Stormwater Program Objective 1: Complete the next Sustainable Sea-Tac Strategy (S 3 ) Plan by Q Background: Seattle s sustainability objectives will be benchmarked with other leading edge airports to outline efforts necessary to keep Sea-Tac a leader in environmental innovation. Staff will develop recommendations to Commission for our next strategic plan. Objective 1: Complete the next Sustainable Sea-Tac Strategy (S 3 ) Plan by Q Sustainable Sea-Tac Strategy Finalize and implement plan Complete Draft plan and gain Commission approval by Q Establish detailed milestones by Q The remaining objectives focus on continued progress towards the Environmental Strategy Plan goals while we finalize and gain approval for the new sustainability goals in the S 3 These include actions to advance the Airport s progress towards unmet goals, as well as continued work towards goals where airport growth results in the need for additional action to sustain our previous attainment of a goal. Objective 2: Air Quality and Climate Change: 1) Sea-Tac will reduce airport-owned and controlled greenhouse gas emissions by 15% below 2005 levels by 2020, and 2) implement programs with business partners to reduce their emissions as much as possible. (CA) Background: Actions to achieve these objectives focus on reducing emissions from the largest sources. These actions will reduce emissions from Port-owned vehicles, ground support equipment on the airfield, aircraft parked at gate through use of pre-conditioned air, transportation to and from the Airport, and aviation biofuels. With increasing indicators that climate change is occurring, the Airport must also plan for climate change adaptation. IV-25

26 Objective 2: Air Quality and Climate Change: 1) Sea-Tac will reduce airport-owned and controlled greenhouse gas emissions by 15% below 2005 levels by 2020, and 2) implement programs with business partners to reduce their emissions as much as possible. (CA) Green Fleets and Fuels: Reduce emissions from Airport fleet through reduced fuel consumption and alternative fuels Electric Ground Support Equipment Preconditioned Air Transportation to and from the Airport All Sea-Tac owned compressed natural gas (CNG) buses run on renewable natural gas (RNG) generated in Washington Q STIA fleet is green fleet certified by Q Alternative Fuels Plan completed and, if feasible, complete fleet acquisition by 2018 All phases of egse stations installed and 90% of all GSE vehicles use electricity by 2019 Achieve 100% preconditioned air use by 2019 Facilitate electric vehicle (EV) leasing at the Consolidated Rental Car Facility by 2017 Provide for Bicycle access to Airport by Q Provide sufficient EV charging capacity in garage to ensure market demand is met Evaluate renewable natural gas and, if appropriate, contract with producer to fuel CNG buses with new source of RNG (would save ~4000 tons per year (TPY) of carbon emissions) Evaluate fleet certification options and, if beneficial, seek certification Develop a plan to meet Washington State mandate that governments use 100% alternative fuels for all vehicles by 2018, as practicable and determined by WA Dept. of Commerce Make recommendations to senior management Q and brief Commission and, if appropriate, request Commission authorization Procure 100% alternative vehicle fuels by Q Monitor egse charger use and resolve issues Develop and implement plan to ensure 90% of GSE vehicles use electricity Determine airline use of and barriers to use by Q Develop plan for full use by Q Fully implement plan and maintain use by Q Assess customer demand for EVs at Rental Car Facility Develop EV program at RCF Q Implement bike plan to facilitate bike access and infrastructure for employees and passengers at Sea-Tac Evaluate EV charger use in parking garage and complete Plan in 2015 If beneficial, provide Level 2 and/or DC Fast Charging sites Increase number of EV charging stations in parking garage IV-26

27 GHG reporting Climate Adaptation planning Biofuels File with Climate Registry and WA State annually Begin implementation of climate adaptation plan by 2019 Facilitate airline use of aviation biofuel, if feasible Continue with both mandatory and voluntary GHG reporting for Scope 1 and 2 emissions Develop climate adaptation plan in the SAMP by Q Develop prioritized project list for consideration in CIP Implement plan Recommend port role in advancing biofuel delivery Assess infrastructure to identify opportunities for biofuel supply line Develop and implement plan to facilitate the procurement and use of biojet fuel at Sea-Tac, if feasible Objective 3: Materials Use & Recycling: Increase solid waste recycling rate to 50% by Develop goal for airfield recycling program. Background: The Airport terminal recycling program has achieved 30% recycling rate and increased efforts are needed to meet 50% objective. The targets and actions below will be pursued pending the completion of updated goals in the new Plan. Objective 3: Materials Use & Recycling: Increase solid waste recycling rate to 50% by Develop goal for airfield recycling program. Mandatory airport recycling program Janitorial services environmental requirements Mandatory compostable serviceware Solid waste management planning Green Maintenance Products Increase recycle rate by 10-20% Increase recycle rate by 10% Increase recycle rate by 5% Increase recycle rate by 10% Use new less toxic products in maintenance shops to small quantity generator levels (220 pounds/month) by 2017 Evaluate costs and benefits to implement mandatory Airport recycling for tenants and employees by Q Develop and implement plan for 5-year waste reduction/recycling goal and objectives by Q Evaluate innovative waste reduction proposals including a secondary sorting pilot project, paper towel composting, and others Evaluate mandatory use of compostable service ware and implement policy by Q Evaluate recommendations of 2014 solid waste management plan by Q Implement selected actions by Q Research and recommend less toxic substitutes for products (e.g., paint thinner, etc.) and other waste reduction opportunities for AV/M Secure maintenance agreement for use of these substitutes Change procurement IV-27

28 Construction & Demolition (C&D) Debris Green Products and Printers Minimize and reduce C&D debris Increase use of environmentally preferable office products, paper, and printer services Complete evaluation of historical project recycling rates by Q Set achievable C&D recycling targets for future projects Implement Construction Waste Specification on all construction projects and evaluate performance Obtain new green office products/paper and green printer contract by Q Identify and recommend new environmentally preferable products by Q Objective 4: Water Conservation: Reduce operational (non-construction) potable water consumption rate 5% below 2008 levels by Background: The previous conservation goal of reducing potable water consumption rate 5% below 2008 levels was achieved in 2012 and To maintain the goal in the midst of Airport growth and increased water usage, additional water conservation actions need to be identified and implemented. Objective 4: Water Conservation: Reduce operational (non-construction) potable water consumption rate 5% below 2008 levels by Water Use Reduction Emergency Backup Water Supply Using Tyee Well Rainwater Capture from Parking Garage Water use reduction opportunities and projects identified Use Tyee Well to increase stream flows in summer months and provide emergency source of water for Airport by 2016 If feasible, capture rainwater from garage roof for use in the cooling tower Finalize the Water Use Reduction Plan by Q2 and implement feasible projects Complete Temporary Donation of water right into State Trust Water Right Program by Q Complete Change of Use Application by Q Department of Ecology issues Certificate by Q Complete Emergency Water Supply design by 2018 and construction by 2019 Conduct feasibility and cost benefit analysis for garage rainwater capture Make recommendations by Q IV-28

29 Restroom Standards Industrial Waste Treatment Plant (IWTP) Water Reuse Plan Reduce restrooms use of power, paper and water Reuse of IWTP water results in reduction in potable water use Complete environmental performance standards for restrooms by Q Implement standards in future bathroom projects Evaluate feasibility of reuse of IWTPtreated water Secure regulatory approval to reuse IWTP water by Q Objective 5: Water Resources and Wildlife: Achieve and maintain Best Management Practices for water quality treatment and flow control over 100% of Airport industrial areas. (CA) Background: The existing objective for 100% water quality treatment and flow control for existing facilities has been achieved. While all Airport water is captured and treated, additional progress can be made in discharging cleaner and less water through potential vegetated roofs, and development of a custom media to remove metals. In addition, to keep pace with emerging regulations, development of an Airport Low Impact Development (LID) program is necessary. Objective 5: Water Resources and Wildlife: Achieve and maintain Best Management Practices for water quality treatment and flow control over 100% of Airport industrial areas. (CA) Water quality and flow control best management practices Green Roofs Copper and zinc reductions Maintain 100% treatment and flow control Define parameters for safe application of vegetative roof on Airport Remove more metals from Airport stormwater as required or cost-effective Construct water quality treatment and flow control requirements on all future projects Complete vegetated roof guidelines by Q Incorporate into new projects if and when appropriate Develop and pilot test a custom Airportspecific media mix pilot project for enhanced metals removal Construct treatment using media in SEPL project Low Impact Development Use LID when appropriate Develop Airport specific LID policy and implementation guide by Q Objective 6: Education & Integration: Institute an environmental education campaign to promote environmental stewardship and raise awareness of Airport environmental and sustainability initiatives. Integrate environmental and sustainability considerations into core business operations. Background: While progress has been made on our sustainability education program, expansion of the program will advance our objective. Green building and LEED will be pursued for NSAT and IAF and a LEED master site designation will be pursued. IV-29

30 Objective 6: Education and Integration: Institute an environmental education campaign to promote environmental stewardship and raise awareness of Airport environmental and sustainability initiatives. Integrate environmental and sustainability considerations into core business operations. Sustainable In-Sights Passenger Educational Program Green Buildings/LEED Provide passengers educational opportunities to learn about Airport environmental programs New Airport buildings achieve high levels of environmental performance in energy, building materials, water conservation and indoor environmental quality Achieve LEED certification for IAF and NSAT Obtain LEED Master Site Designation by Q IV-30 Develop new window clings and explore other environmental education programs in the terminal Complete LEED strategy for NSAT by 2015, certification 2020 Complete IAF LEED recommendation by Q Integrate LEED into NSAT project and begin certification process Evaluate IAF opportunities to pursue LEED Pursue LEED Master Site Designation Strategy 4: Keep airline costs (CPE) as low as possible without compromising operational and capital needs. Objective 1: Maintain passenger airline cost per enplaned passenger (CPE) and forecasted CPE within the middle third of peer airports (list of 22 airports focusing on large hubs and Western U.S. airports) through (PS) Background: CPE includes both operating and capital costs attributable to the passenger airline rate base. Under SLOA III, CPE is also impacted by revenue sharing. Over the next ten years, we currently plan to invest approximately $2.5 Billion in capital improvements. With these investments, there will be continued growth in airline rates and charges, causing CPE to grow. Maintaining a CPE in the middle third of our peer airports indicates that costs will be reasonable and that the investments are affordable. Objective 1: Maintain passenger airline cost per enplaned passenger (CPE) and forecasted CPE within the middle third of peer airports (list of 22 airports focusing on large hubs and Western U.S. airports) through (PS) Passenger airline cost per enplanement (CPE) CPE within the middle third of 22 peer airports through 2019 Compile peer airport CPE annually for most recent year for which comparative information is available (one or more year lag) Compile/update annually most recent forecasts of peer airport CPE by July 1 so that target range is understood prior to launching annual budget process Consistently measure budget proposals and capital budget plans against these metrics Annually, set capital budget limit so that total five-year capital spending does not cause forecasted CPE to exceed

31 forecasted CPE of middle third of 22 peer airports. Set capital budget priorities and adjust timing of project spending as needed to stay within limit Objective 2: Maintain Airport baseline O&M costs (excluding Corporate, CDD and Police) at or below $181.7 Million through Background: This represents a 2.8% compound annual growth rate (CAGR) based on 2013 baseline budget costs (original basis when target was set in 2013). Airport baseline budget excludes any agreed upon target exceptions (e.g., Regulated Materials, Airline Realignment, Master Plan, etc.). These target exceptions are non-recurring or are driven by capital projects. This target does not include the O&M costs associated with major new facilities such as the proposed International Arrivals Facility. Objective 2: Maintain Airport baseline O&M costs (excluding Corporate, CDD and Police) at or below $181.7 Million through Baseline operating and maintenance costs $181.7 Million through 2019 Set aggressive budget targets consistent with the target Evaluate every open position (FTE) for repurposing or elimination before filling Use Continuous Process Improvement (CPI) to mitigate cost growth (See Strategy 6.0) Use energy conservation projects (see Objective 3 below) to reduce growth in energy costs Objective 3: Implement conservation practices that will enable Airport to meet all future electricity load growth (2010 baseline) through conservation and renewable energy (CA). Background: The baseline electrical consumption for 2010 was average megawatts (amw). This represents the maximum amount of electricity the Port can acquire from the Bonneville Power Administration at the low Tier I rate. For consumption above this level, the Airport pays the higher Tier II rate (currently 31% higher). To avoid paying this higher rate, the Airport will seek to reduce electrical consumption through conservation and upgrading to energy efficient lighting and mechanical systems. Capital improvements will focus on facilities and systems with greatest opportunities for improvement, but all investments will target a positive net present value (NPV). Objective 3: Implement conservation practices that will enable Airport to meet all future electricity load growth (2010 baseline) through conservation and renewable energy. (CA) Annual electrical consumption in average megawatts (amw) < amw Complete garage lighting conservation project: floors 1 and 4 by 2016, floors 2-3 by 2017, floors 5-6 by 2018, and floors 7-8 by 2019 Complete central mechanical plant mechanical conservation stage 3 project by 2016 Complete design & installation of Smart Facility Management System by 2016 IV-31

32 Develop electrical load growth forecasting tool via Master Plan by 2017 Continue to optimize Pre-Conditioned Air (PCA) system to deliver PCA at lowest possible energy use Continue to optimize central mechanical plant systems to deliver HVAC at lowest possible energy use Objective 4: Optimize use of Passenger Facility Charges (PFCs) to minimize CPE and to ensure that specific rates (e.g., FIS, terminal rents, and landing fees) do not become a disincentive for airlines to operate at Sea- Tac Airport. Background: Capital costs paid with PFCs are not included in the airline rate base. Under the current airline agreement (SLOA III), airline rates are determined by cost and volume metrics for each major cost center. PFCs can be used to directly pay capital costs during construction or to pay revenue bond debt service in order to manage the capital costs to be recovered in a cost center. Under SLOA III, the Federal Inspections Services (FIS) cost center (international arrivals) was separated from the terminal as a separate cost center. With the planned construction of a new International Arrivals Facility and the accompanying capital costs, maintaining a market FIS rate will require the use of PFCs to manage the capital costs to be recovered in the FIS cost center. Objective 4: Optimize use of Passenger Facility Charges (PFCs) to minimize CPE and to ensure that specific rates (e.g., FIS, terminal rents, and landing fees) do not become a disincentive for airlines to operate at Sea-Tac Airport. FIS rate FIS rate is within the range of five peer Airports (Los Angles, San Francisco, Denver, Portland, Vancouver) Submit PFC application to gain FAA authorization to use PFCs on International Arrivals Facility (IAF), NorthSTAR, and Baggage Optimization projects in 2015 Develop annually the plan of finance so that upon completion of the IAF, ~90% of PFCs are used to pay eligible revenue bond debt service Use PFCs in funding plan for International Arrivals Facility to maintain competitive cost structure within FIS cost center through combination of PFCs used to directly pay capital costs and PFCs used to pay revenue bond debt service IV-32

33 Landing fee rate Landing fee rate no higher than middle third of 22 peer airports Use PFCs in funding plan to maintain competitive cost structure within Airfield Movement Area cost center through use of PFCs to pay eligible revenue bond debt service Objective 5: Manage financial activity to achieve targeted metrics. (PS) Background: Achieving CPE objectives requires a comprehensive approach to managing financial performance taking into account a number of measures. Objective 5: Manage financial activity to achieve targeted metrics. (PS) Financial results Achieve budgeted Net Operating Income each year Review financial results and update forecast at quarterly, adjust spending as Competitive airport costs Cash flow Liquidity Leverage Passenger airline cost per enplaned passenger (CPE) within middle third of 22 peer airports Achieve debt service coverage > 1.25x each year Maintain unrestricted cash and investments 10 months of O&M costs Maintain debt/enplaned passenger within middle third of 22 peer airports needed Annually review peer airports CPE and publicly available projected CPE Review capital spending plan and financial forecast of CPE against this metric. Adjust spending as needed Maintain 10-year cash flow forecast, adjust capital spending and expenses as needed Build funding plan in accordance with assumed minimum cash balance Review cash balance monthly, adjust funding plan or spending as needed Annually review peer airports debt per enplaned passenger and publicly available projections of debt Review capital spending plan and financial forecast of CPE against this metric. Adjust spending as needed Strategy 5: Maximize non-aeronautical net operating income (NOI) consistent with current contracts, appropriate use of airport properties and market demand. (PS) Major and New Initiatives Implement Airport Dining and Retail (ADR) Master Plan, including infrastructure upgrades, lease expiration phasing strategy and new competitive solicitations and resulting leases. Implement improvements to the parking revenue control system to ensure full functionality. Complete RFP for taxi and limousine contracts. Objective 1: Grow Airport Dining and Retail sales per enplanement (SPE) from a 2014-budgeted SPE of $11.52 to $12.60 by the end of IV-33

34 Background: Within the next two years, leases for approximately 90% of the dining and retail units will be terminating The Airport Dining and Retail Master Plan was initiated to prepare for this significant change. Elements of the master plan completed in 2014 include passenger demand forecasts, facility block planning of needed offerings, unit planning and sales forecasts along with a forecast of potential employment growth. Implementation of a phasing plan for the expirations of current leases will, pending Commission approval in 2014, begin in earnest in 2015 with expiration of the Phase 1 leases, all located in the Central Terminal. Objective 1: Grow Airport Dining and Retail sales per enplanement (SPE) from a 2014-budgeted SPE of $11.52 to $12.60 by the end of Sales per Enplanement (SPE) $12.60 by end of 2018 Dining & Retail Program Transition Conduct one outreach activity for prospective tenants by end of Q2 and one by end of Q Conduct competitive evaluation processes with leasing agent for direct leasing and issue RFPs in accordance with ADR Master Plan (phasing and leasing plan elements) for all units in Phase 1 by end of Q Open new full-service South Satellite restaurant by end of Q IV-34 Finalize long-term plan for small business kiosk program by end of Q Develop staffing plan for Airport Dining and Retail team as well as associated departments in order to accommodate program growth by end of Q Open new Concourse A anchor restaurant with integrated live music performance capacity by end of 2016 Execute transition of units in accordance with ADR Master Plan phasing plan each year Develop and lease North and South Satellite units in conjunction with major capital projects (e.g., NorthSTAR) Evaluate potential new retail/duty free in conjunction with the International Arrivals Facility Terminal Space & Infrastructure Improvements Initiate first construction contract for infrastructure work identified in Terminal Utility Upgrade Project (Phase 1) by end of Q Convert 6000 sq. ft. of underutilized and/or vacant terminal space and bring into revenue-generating service in accordance with the terminal block plan

35 IV-35 in the ADR Master Plan with improvements initiated by end of Q Complete re-demising of units in ADR Master Plan (phasing and leasing plan elements) Phase I by end of Q in preparation for new leasing in Relocate and expand terminal support space for food service and retail in conjunction with Baggage Optimization Project Initiate first construction contract for infrastructure work identified in Terminal Utility Upgrade Project (Phase 2) by end of Q Finalize planning and design for infrastructure to support new dining and retail in North Satellite by end of 2016 Develop an integrated restaurant and sustainability experience concept at the North Satellite by end of 2017 Marketing Implement new dining and retail marketing strategy to coincide with opening of new units Utilize solicitation process to encourage increased offerings of healthy food choices by ADR tenants and implement a new marketing program to promote these healthy food choices with a particular emphasis on children by end of 2015 Objective 2: Grow parking revenues from $52.1 Million budgeted in 2014 to $64 Million by the end of Background: The airport parking market at Sea-Tac is one of the most competitive in the nation with approximately 32 different operators competing for the 1+ day airport parking transactions. The economic environment since 2008, as well as the introduction of additional private sector parking capacity, has negatively impacted the Airport s parking business. Objective 2: Grow parking revenues from $52.1 Million budgeted in 2014 to $64 Million by the end of Parking revenues $64 Million by the end of 2018 New Programs and Services Improve the parking revenue control system to enable full implementation of revenue-generating programs and services by the end of 2015 Implement parking pre-booking system by end of 2015 Introduce differentiated parking products at lower price points (e.g. 8 th floor) by

36 IV-36 end of Integrate pre-booking system with revenue control system by end of 2016 Customer Experience Continue implementation of the Garage Improvement Plan with maintenance/ appearance improvements to Floor 3 by end of Elements to include deep cleaning, striping removal and replacement, and column and beam painting Complete garage emergency phone system replacement project to improve reliability and reduce maintenance costs by end of 2015 Improve accuracy and user-friendliness of existing floor count system by end of 2015 Continue implementation of the Garage Improvement Plan, deep-cleaning and restriping/painting one floor per year: Objective 3: Grow annual revenues from leasing Airport property to $2.8 Million per year by the end of Background: The Airport has 353 acres of property that have been identified for development. The vast majority of these properties were acquired using funds provided by the FAA through their mandated Noise Mitigation Program. Within the FAA grant assurances associated with these funds, there is a requirement to put these properties back into productive, airport-compatible use. The primary focus is to prepare these properties for offerings to private sector developers as ground leases to generate non-airline revenue for the Airport as well as create jobs and opportunities in the community. (The Real Estate Division manages these real estate initiatives; Business Development is the Airport Client.) Objective 3: Grow annual revenues from leasing Airport property to $2.8 Million per year by the end of Lease revenues $2.8 Million per year by end of 2018 Properties in Burien: Northeast Redevelopment Area (NERA) / NERA acres / NERA acres: See Strategy 7.0, Objective 3 regarding FAA pilot program NERA acres: See Strategy 1.2, Objective 6 regarding property development for air cargo Lora Lake 13.3 acres: Monitor City s construction of off-ramp and relocation of the existing storm water pipe traversing the site. Initiate preparation of disposition plan for site s redevelopment by end of 2015

37 Properties in Des Moines: Des Moines Creek Business Park (DMCBP) 1 87 acres: Monitor construction of Phase 1 improvements during Monitor construction of Phase 2 improvements in Coordinating with the Real Estate Division DMCBP 2 17 acres: Prepare plan for site s redevelopment by end of 2016 Properties in SeaTac: L Shape acres: See Strategy 1.2, Objective 6 regarding property development for air cargo DMCBP acres: Initiate conceptual planning by end of Prepare plan for site s redevelopment by end of th Avenue S. Development Area 35.7 acres: Develop recommendation regarding future accommodation of alternative fuel facility at the Airport by end of See Strategy 1.2, Objective 14 regarding use of property to support capital program Objective 4: Grow revenues from ground transportation service providers operating at the Airport from $7.9 Million budgeted in 2014 to $9.4 Million by the end of Background: Ground transportation services at Sea-Tac consist of ten different operating classes ranging from taxis to courtesy shuttles. New types of services, referred to as transportation network companies (TNC s Uber, Lyft, etc.), have entered the Seattle-area market in recent years. It is not yet clear how the City of Seattle or King County will regulate these new services. With the Airport s taxi contract expiring in late 2015 and its limousine contract in early 2016, it is important to develop a strategy regarding if and how best to incorporate these new services into planning for the taxi and limousine contract RFP processes. Objective 4: Grow revenues from ground transportation service providers operating at the Airport from $7.9 Million budgeted in 2014 to $9.4 Million by the end of Revenues from ground transportation service providers operating at the Airport $9.4 Million by the end of 2018 Evaluate and recommend to Commission if and how to accommodate transportation network companies (TNC s) at the Airport Conduct RFP for Airport taxi service in time for expiration of current taxi contract on 11/1/2015 Initiate RFP for Airport limousine service in time for expiration of current limousine contract that expires in Q IV-37

38 Objective 5: Increase the revenues generated from the Airport s common-use lounge business from $1.2 Million budgeted in 2014 to $2 Million by the end of Background: The Airport has been operating the remodeled Club International on the South Satellite and a more recently remodeled Club Cascade on Concourse A through a management contract. Seven airlines now use these facilities. There is an opportunity to increase the number of common-use lounges at the Airport as well as increase the revenues generated by these lounges, specifically through increased utilization of the available capacity. Objective 5: Increase the revenues generated from the Airport s common-use lounge business from $1.2 Million budgeted in 2014 to $2 Million by the end of Revenues from commonuse lounge services Lounge revenues reach $2 Million by the end of 2018 IV-38 Complete RFP selection process for lounge management services with contractor in place by 3/1/2015 Develop a business plan for a loyalty program based on usage of the lounge and/or parking services Develop long-term Airport-wide shared club capacity analysis and plan, looking at both international and domestic demand/capacity by the end of Q Develop additional lounge capacity, either common-use or proprietary, on Concourse B by the end of Q Strategy 6: Continually invest in a culture of employee development, organizational improvement, and business agility. Major and New Initiatives Grow Continuous Process Improvement across the Port. Objective 1: Grow Continuous Process Improvement (CPI/Lean) across the Port. Background: In the first two years of CPI efforts, the Port has made business transaction process improvements in areas such as Maintenance, Security Badging, Paid-Time-Off planning, an element of Central Procurement, employee pay process, etc. The Port is poised to spread CPI fully throughout the various Port departments and increase the number of improvements. Objective 1: Grow Continuous Process Improvement (CPI/Lean) across the Port. CPI/Lean culture and capability Grow the number of process improvement workshops (multi-department, singledepartmental, team, or individual) by 20% per year to save $1.2 mil in employee capacity by 2018 Train 1/3 of Senior Executives in CPI/Lean during 2015 and assign them to sponsor and lead a workshop once per year in one of their departments. Train the remaining Executives over 2016 and Utilize consultant services to train executives Assign a full time Lean resource to accomplish four improvements with the Maintenance Department

39 Celebrate and advertise each successful CPI/Lean improvement in one Commission briefing per year, on the Port Compass page, with managers, and hold celebrations for teams who completed improvement Objective 2: Complete a work continuity and succession planning departmental pilot program. (PS) Background: The expertise of our staff is critical to keep the complex systems of the airport operating 24/7/365 and to meet demanding airline and tenant needs. However, many staff experts are long-tenured and/or nearing retirement eligibility. In order not to lose this institutional knowledge lost due to attrition, retirements, or transfer/promotions, the Airport has undertaken a Work Continuity and Succession Planning Departmental Pilot Program, the learnings of which will be shared with all managers across the Airport and the Port. Objective 2: Complete a work continuity and succession planning departmental pilot program. (PS) Work continuity and succession planning Complete report for use by others by Q3 2014, and initiate similar work in next departments in 2015 Complete first work and succession plan in Q Select next aviation departments using same focus and complete their plan in Complete necessary departments in in 2016 Objective 3: Complete a Post-Graduate Fellowship Pilot Program and produce recommendations for a follow-on program. (PS) Background: This pilot supports both business agility and future employee development in the Division. The approach will be to hire a recent graduate (baccalaureate or graduate degree) for two years and to rotate that individual through three or more departments while performing significant work in a nonsupervisory capacity. Research has been completed with universities to design an effective fellowship. Objective 3: Complete a Post-Graduate Fellowship Pilot Program and produce recommendations for a follow-on program. (PS) Create added opportunity to support business needs and create opportunity for future staff aspiration and development Define and fill position in 2014, complete and assess results in 2016 Hire in Q3 2014, rotate departments in approximate 8-month intervals, and complete assessment and action plan via in-house staff for future program by Q IV-39

40 Objective 4: Grow a mature Business Intelligence (BI) and performance management capability, which will achieve broad data-driven decision making by Background: Business intelligence describes a set of resources, processes, and tools that allows the analysis of data or information already at hand in new and novel ways which can produce better business decisions in a shorter period. The Airport s BI program enables employees to answer business questions with agility, improves employee efficiency, and supports data-driven and informed planning and decision-making. Objective 4: Grow a mature Business Intelligence (BI) and performance management capability, which will achieve broad data-driven decision making by BI Strategy Plan execution progress (including BI resourcing and governance; data and analytic standards and capabilities) Increase staff use of BI content Airport staff analytical production and consumption capabilities Expand Port-wide BI Capabilities Implement first set of 2014 BI Strategy Plan recommendations and track against related performance targets by end of 2015 BI content is actively used by 50% of Division staff 2019 Participation of staff in workshops All Port divisions are actively using BI on 5 projects by 2017 Develop governance policy and procedures, data standards and analytics best practices Assess best practices and identify necessary skills to develop predictive analytics capability Complete 3 predictive analytics projects by Q Complete eight new BI projects in 2015 driven by business needs and providing measurable benefit across various Airport departments Complete an additional 8, or more projects per year through 2019 Conduct second round of graphical literacy training workshops by Q Continue internal internships exposing non-aviation personnel to BI capabilities Continue to mentor and consult with other Port divisions Establish strategy for Port-wide expansion by Q Strategy 7 Maintain valued community partnerships based on mutual understanding and socially responsible practices. Major and New Initiatives Implement new programs under the updated Part 150 noise mitigation program. Renegotiate the Port of Seattle/City of SeaTac Interlocal Agreement (ILA) in Increase value of Airport contracts with small businesses. Objective 1: Implement noise mitigation programs consistent with updated Part 150 and Commission direction. IV-40

41 Background: The Federal Regulation (FAR) Part 150 Noise and Land Use Compatibility Study has been updated and was approved by the FAA in June The Airport has received the FAA Record of Approval and staff will develop plans and budget requests to implement recommended programs. Certain new programs (i.e., insulation of churches and apartment buildings and purchase of navigation easements for mobile home parcels) will require feasibility studies to determine cost and approach. Once the feasibility studies are complete, new capital projects will be defined and brought forward for Commission consideration. Objective 1: Implement noise mitigation programs consistent with updated Part 150 and Commission direction. Pre-2014 Part 150 single family homes School projects Complete pre-2014 Part 150 single family noise remedy program by end of 2015 Insulate school buildings (timing TBD) New Part 150 programs Implement new Part 150 programs by 2016 Ground Run Up Enclosure Ground Run Up Enclosure (GRE) sited, designed and constructed by end of 2019 Insulate 33 remaining single family homes in 1985 noise remedy boundary by end of Q Insulate school buildings (timing determined by Highline Public Schools financing availability) Complete two feasibility studies (TBD) by end of Q Develop proposed program plan and new capital program for Commission approval by end of Q Initiate procurement processes and grant applications for new projects by end of Q Secure grant funding and commence new programs Identify location of GRE during master planning process by end of Q Conduct GRE environmental review, design and permitting Construct GRE Objective 2: Collect accurate data to monitor compliance with noise abatement procedures and investigate stakeholder inquiries about Airport noise. Background: The Noise Programs Office operates a noise and operations monitoring system (ANOMS) to ensure airline compliance with noise abatement procedures, analyze data and investigate inquiries about noise. The system consists of noise monitors, a software system and public website. ANOMS data is used to manage the Port s annual Fly Quiet Program and is critical to producing information required by the FAA and responding to more than 2,000 noise inquiries annually. Objective 2: Collect accurate data to monitor compliance with noise abatement procedures and investigate stakeholder inquiries about Airport noise. Data collection and processing New system deployed by end of Q Complete upgrade by end of Q Draft new Flight Quiet Program criteria for FAA review by end of Q Implement new Fly Quiet Program criteria IV-41

42 Conduct required noise contour review related to prior litigation by end of Q Objective 3: Maintain productive relationships with surrounding jurisdictions in order to facilitate support for redevelopment of Port-owned land in Airport communities. Background: Collaborating with Airport cities to redevelop Port-owned property under their regulatory jurisdiction aligns and leverages resources, with the common goal of returning these properties to productive use. These actions advance Century Agenda economic development goals and help sustain mutually supportive relationships with Airport community residents, city leaders and policy-makers. Objective 3: Maintain productive relationships with surrounding jurisdictions in order to facilitate support for redevelopment of Port-owned land in Airport communities. Community engagement and outreach Collaboration on redevelopment projects Airport community awareness of Port priorities and Commission goals Airport jurisdictions approve Port projects Conduct a community open house to share information about noise and community relations efforts by end of Q Facilitate meetings with community coalitions - Highline Forum and Soundside Alliance Provide financial support to and participate as a board member of the SW King County Chamber Develop and distribute Airmail, Airport Check-In and other written communications Assess and respond to aviation division needs for communicating with diverse audiences Facilitate meetings between Port and Airport community leaders and decisionmakers to resolve Airport land use compatibility issues, assure alignment of interests and identify and act on opportunities for resource development Seek, receive and administer FAA Pilot Program grant for infrastructure planning associated with Burien s Northeast Redevelopment Area (NERA) by end of Q Administer existing Port of Seattle/City of SeaTac ILA Feb 2016 IV-42

43 Objective 4: Renegotiate the Port of Seattle/City of SeaTac Interlocal Agreement (ILA). Background: The current ILA expires in February The ILA establishes a system for interagency cooperation and exercise of jurisdictional authorities related to land use and zoning, surface water management (SWM), critical areas, transportation, SEPA, and public safety. The ILA will be renegotiated in 2015, per Commission direction provided to staff by the end of2014. One key issue related to the ILA is the legacy of SWM payments to the City, despite the Port managing all surface water within the Airport fence line. Objective 4: Renegotiate the Port of Seattle/City of SeaTac Interlocal Agreement (ILA). ILA Commission approves negotiated amendments to ILA by end of Q Establish process benchmarks and schedule (using Commission priorities identified in 2014) by end of Q Secure necessary FAA approvals and authorizations by end of Q Obtain legal review of draft documents by end of Q Obtain SeaTac City Council approval by end of Q Administer new ILA 2016 through 2019 Objective 5: Implement new aviation division programs that support Port-wide workforce development strategies and Commission Quality Jobs policies. (CA) Background: The Port is committed to developing sustainable programs and services that provide opportunities for individuals to access training and career advancement. Commission will set policy in 2014 to guide implementation of Port-wide quality jobs initiatives. This work will require ongoing collaboration with a variety of partners to create strategies for increasing workforce training and employment opportunities. Objective 5: Implement new aviation division programs that support Port-wide workforce development strategies and Commission Quality Jobs policies. (CA) division Quality Jobs programs New programs successfully deployed by end of Q Objective 6: Foster new aviation division opportunities for local businesses. (CA) Respond to additional Airport space needs by end of Q Implement new programs, as defined by service provider contract(s) by end of Q Manage high school internships and expand aviation career awareness programs by Q Background: The Port encourages and supports small businesses from communities around the Airport seeking access to Airport/Port business opportunities. Results of the 2014 Disparity Study will serve as the basis of goals for 2015 small business participation. IV-43

44 Objective 6: Foster new aviation division opportunities for local businesses. (CA) Small business contracts Increase number and/or value of small business contracts by percentage to be determined by Q Create a reliable mechanism to capture aviation small business participation by end of Q Implement strategies to increase small business participation by end of Q D OPERATING BUDGET SUMMARY Background From a financial perspective, the Division has two sides to its business: Aeronautical and Nonaeronautical. On the Aeronautical side, where airline rates are set to recover costs, the Port s goal is to manage costs. The primary measure of an airport s cost to the airlines is the airline cost per enplanement (CPE). The costs include the operating and maintenance costs attributable to the airfield and the airline share of the terminal operating and maintenance costs (based on the percentage of revenue producing space split between airlines and other Port tenants), as well as the corresponding capital costs (either debt service or equity amortization). The Port does not charge airlines for the capital costs of any asset funded by Passenger Facility Charges (PFCs) or grants. On the Non-aeronautical side of the business, the primary goal is to increase cash flow as measured by net operating income (NOI). The net cash flow can be used to directly fund capital improvements and build up cash reserves to meet liquidity targets. This cash flow also provides the vast majority of the revenue sharing that is credited to the signatory airlines in accordance with the terms of the Signatory and Lease and Operating Agreement (SLOA III). Under the terms of SLOA III, of the net cash flow available for debt service that exceeds 125% of debt service (if any), 50% is credited to the signatory airlines. Overview of Major Changes in 2015 Budget The 2015 budget reflects the significant growth in enplanements in 2014 (7.1%) and continued growth in 2015 (4.0%). This activity growth and a strong regional economy has stimulated passenger spending for parking, rental cars and terminal dining and retail. The increase in non-aeronautical revenue contributes to greater revenue sharing, minimizing the growth in aeronautical revenues will be the peak year spending for the multi-year Sustainable Airport Master Plan also marks the beginning of a major ramp up in the capital program. This is reflected in the 2015 budget request of 14 new FTE to support the capital program. Revenues Non-aeronautical revenues are up $21.9 million or 13.1% above the 2014 budget due to increased enplaned passengers at Sea-Tac and increased spending per passenger. Growth expected in all business units, but particularly strong in public parking, airport dining and retail, and rental cars. Aeronautical rate base revenues are budgeted to increase by 6.4%, reflecting increases in both capital and operating costs. Anticipated revenue sharing of over $19 million will offset this growth so that total airline revenues are budgeted to increase by only 0.3%. For 2015, revenues will be reduced by $3.6 million to amortize the lease incentive that was incorporated into the Signatory Lease and Operating Agreement in A similar amount will be amortized in 2016 and IV-44

45 Operating Expense Drivers Total airport operating expenses (including Corporate costs and environmental remediation costs) are budgeted to increase by $8.9 million, or 3.7% will be the peak year of spending ($2.9 million) on the Sustainable Airport Master Plan. The budget reflects increases in payroll costs for existing staff, increases to contracted services, increased utility costs, and increased costs associated with increased non-aeronautical revenues. The budget also includes the impact of a net increase of 14.5 full-time equivalents (FTEs). Links to Century Agenda: The 2015 Operating Budget includes staff resources that work on many elements of the Century Agenda. New budget requests for 2015 that specifically support the Century Agenda include the following: 1. Make Sea-Tac the west coast Gateway of Choice for international travel and double the number of international flights and destinations: Meet commitments under international incentive program for new services introduced in Meet the region s air transportation needs at Sea-Tac Airport for the next 25 years: Sustainability Master Plan - $2,900,000 in 2015, total of approximately $6.0 million. The following tables explain the detailed changes to the Division budget. The total operating and maintenance costs of the airport also include costs from Corporate and the Capital Development division Budget Summary Compared to 2014 Budget: in $000's 2014 Approved Budget 164,028 Less: 2014 exceptions to baseline: (6,008) A 2014 Baseline Budget 158, Baseline Budget: Cost increases 6,780 B Savings/budget cuts (6,758) C Proposed 2015 budget requests 5,152 D 2015 Proposed Baseline Budget 163, % 2015 Exceptions to Baseline Budget 6,820 E 2015 Proposed Budget 170, % Consistent with the long-term objective of managing the growth of operating and maintenance costs, the focus of the 2015 budget was to manage the growth of baseline Airport O&M. Consequently, major non-recurring costs are segregated as exceptions to the baseline budget. The baseline budget has been closely scrutinized and the 2015 proposed budget is based on actual spending needs for 2015, not the prior year s budget. As a result, the cost increases for payroll, contracted services and utilities have been largely offset by cuts or savings in the baseline budget. The growth in the baseline budget of 3.3% is higher than originally targeted, but was considered necessary to support the growth in activity and the planned growth in the capital program. IV-45

46 The following tables highlight the exceptions to the baseline budget as well as all of the changes to the baseline budget Budget Exceptions (A): in $000's 2014 Exceptions to Baseline Budget Sustainable Airport Master Plan (CA) 2,300 Regulated Materials 2,356 International Incentive (CA) 902 ADR Master Plan & Implementation 450 Total Exceptions to Baseline Budget 6, Budget Cost Increase Detail (B): 2015 Baseline Cost Increases: in $000's Payroll Increases (before new FTE requests) (4) Additional FTE's during Other adjustments for existing FTE's Budget - standard payroll increase 2,554 Total Payroll Increase (before new FTE's) 3,349 Contractual Increases Janitorial contract 873 FIS Management contract (CISS) 396 Parking System - Scheidt Bachmann 150 Other contract increases 187 Total Contractual Increases 1,606 Utility cost increases Natural Gas increase 623 Electricity increase 187 Garbage disposal increase 237 Other Utility increases 152 Total Utility Cost Increases 1,199 Non-Aero costs related to revenue growth B&O tax increase 189 Increase in credit card fees 175 VIP lounge expenses 262 Total Non-Aero Cost Increases 627 Total 2015 Baseline Cost Increases 6,780 IV-46

47 2015 Budget Savings/Budget Cuts Detail (C): 2015 Baseline Budget Savings: in $000's Reverse one-time items in 2014 Budget 2,641 Increased Payroll Charges to Capital (existing FTE's) 1,107 Payroll Savings - repurpose (13.9) FTE's 550 Other Payroll savings/cuts (zero based budgeting) 1,004 Reduction in B&O tax (loading bridges) 296 Other Non-Payroll savings/cuts (zero based budgeting) 1,159 Total 2015 Baseline Budget Savings 6,758 Summary of Strategic Initiatives Included in 2015 Baseline Budget (D): 2015 Baseline Budget Requests: in $000's Capital Program Support 664 Airport Strategies: Safe, Secure Airport 300 Customer Needs/Capacity 423 Asset Management 1,527 Customer Service 288 Environmental Innovation 30 Airline Cost Management 100 Non-Airline Revenue Development 1,010 Employee/Organizational Development 172 Community Partnership 150 Other 487 Total 2015 Baseline Budget Requests 5,152 The following tables provide details for each category: Capital Program Support Description in $000's (1) FTE - Capital Project Liaison Manager 60 (1) FTE - Maintenance Manager 41 (1) FTE - Maintenance Engineer 31 (1) FTE - Conveyance System Specialist 30 (4) FTE - Electronic Technicians 145 (1) FTE - Maintenance Capital Support Specialist 48 (1) FTE - Art Program Coordinator 52 (1) FTE - Architect 4 67 (1) FTE - ABD Assistant Manager/ Engineer 88 (2) FTE - Operations Program Development Manager 102 Capital Program Support - Total: 664 IV-47

48 Successfully supporting the significant growth in the capital program will require increased staff resources in Maintenance, Facilities and Infrastructure and Airport Operations. Resources are needed for design reviews and construction coordination for utility shutdowns, and operational workarounds in affected areas. Safe, Secure Airport Description in $000's Ramp Service Contract Scope Increase 280 Annual Exercise Event 20 Safe, Secure Airport - Total: 300 Consistent with the Airport s focus on safety, the 2015 Budget includes additional Ramp Tower controller staffing (3) to support increased operating activity. In 2015, the Airport will conduct a smaller scale airport emergency exercise. Capacity and Customer Needs Description in $000's (1) FTE - Ground Transportation Controller 62 (1) FTE - Airline Scheduling Supervisor 123 (1) FTE - Baggage Operations System Specialist 88 Curbside Traffic Mitigation Study 50 On-call Gate Planning Contract Support 100 Capacity and Customer Needs - Total: 423 Increased activity requires one additional ground transportation controller. The need to schedule parking positions and the use of common use facilities and equipment requires an additional resource in operations focusing on scheduling. Increased baggage volumes and systems limitations require one additional baggage operations system specialist (Bag Boss). IV-48

49 Asset Management Description in $000's (1) FTE - Facility Master Record Drawing Manager 99 (2) FTE - Facility Master Drawing Engineers 149 (3) FTE - Electronic Technician 290 Additional C60 Baggage System Equpment 146 Automated Passport Control Maintenance Agreement 108 Airport Multi-lanes Marker Installation 75 Terrazzo Floor & Restroom Repairs 110 Airport Office Building Carpet Replacement 96 Arc Flash Mitigation - Phase Microsoft Software Licenses 53 Asset Management- Total: 1,527 Successfully delivering the capital program will require the review and update of existing facility as-built drawings. Future renovation projects will be more cost effective and efficient with updated drawings. The 2015 budget proposes adding three FTEs to support this initiative. Maintenance work loads for electronic technicians has increased. Budgeted hours of ongoing work translate to a need for three additional FTEs. The automated passport control (APC) stations installed in 2014 require an annual maintenance contract. New electric code requires the Port to evaluate how to eliminate arc flash hazards. Customer Service Description in $000's Centralized International Support Services Contract Rate Adjustment 288 Customer Service - Total: 288 This increase relates to the centralized international support services driven by the Port s quality jobs resolution. Environmental Innovation Description in $000's Tyee Water Right Change of Use Application 30 Environmental Innovation - Total: 30 Airline Cost Management Description in $000's Financial Consulting 100 Airline Cost Management - Total: 100 The financial consultant will assist the Airport in conducting the annual SLOA settlement, analyzing emerging rates and charges issues, optimizing use of PFCs and other financial issues. IV-49

50 Non-aeronautical Revenue Development: Description in $000's (1) FTE - Airport Dining and Retail Specialist 92 Music Initiative Programming and Development 125 Property Development Liaison 100 Business Development Outside Services Support 30 Air Cargo Real Estate Broker 80 Garage Facility Improvements 250 Parking Consulting Services 30 Parking Pre-booking System Implementation 105 Search Engine Marketing Consulting Services 48 Burien Northeast Redevelopment Area - FAA Pilot Program 50 Des Moines Creek Business Park Owner's Liaison 100 Non-Airline Revenue Development - Total: 1,010 The implementation of the airport dining and retail release program will require an additional staff resource. $125,000 for the Airport Music Initiative will be matched by $125,000 from the tenant marketing fund for a total of $250,000 to provide live music in the terminal. Real estate consultant for Burien NE Redevelopment Area will assist with grant application and feasibility study. Garage improvements will focus on the 4th floor. The public parking pre-booking system is intended to generate additional revenues. Employee/Organizational Improvement Description in $000's (1) FTE - Continous Process Improvement Practioner 68 Continous Process Improvement Consulting Services 74 Business Intelligence Analytical Support Services 30 Employee/Organizational Development - Total: 172 Continuous Process Improvement Initiative (CPI) will be augmented by adding an FTE and continuing with consulting support. Community Partnerships Description in $000's Part 150 Noise Abatement Apartment Feasibility Study 75 Part 150 Noise Abatement Church Feasibility Study 75 Community Partnership - Total: 150 After the completion of the Part 150 Study in 2014, two noise abatement feasibility projects will be conducted in 2015 on specialized building types. IV-50

51 Other Description in $000's (.25) - FTE On-call Research Field Worker 23 (1) FTE - Financial Analyst III 126 (1) FTE - Lease Admin. Specialist 62 (1) FTE - Property Manager II 84 Small Works Budget Increase 100 Other 92 Other - Total: 487 During 2013, the finance function at the airport was consolidated into Finance and Budget department resulting in a net reduction of 2.0 FTEs. Under the current airline agreement, with multiple separately reconciling cost centers, one additional FTE is needed to meet work requirement. Increased number of leases and increased complexity has increased workload for the lease administration team requiring one more FTE. Over the last few years AV property managers have taken over additional properties and leases without adding staff. Current work load necessitates adding one additional property manager Budget Exceptions Compared to 2014 Budget (E): in $000's Exceptions to Baseline Budget Sustainable Airport Master Plan (CA) 2,300 2,900 Regulated Materials 2,356 2,642 International Incentive (CA) ADR Master Plan & Implementation Grant funded portion - Burien NERA Total Exceptions to Baseline Budget 6,008 6, will be the peak spending year for the Sustainable Airport Master Plan. Regulated materials represent expense costs associated with capital projects. The current requirements of the international incentive program reflect the 2015 commitments relating to new service added in 2013 and The airport dining and retail master plan implementation will continue in The 2015 budget includes $500,000 for a land development pilot program for redevelopment of Noise Property; $450,000 of this will be grant funded or be paid for by the city of Burien. This amount is treated as a budget exception. This is expected to be a multi-year program that could cost up to $5 million. IV-51

52 Aeronautical Business Budget Change in $000's Actual Budget Forecast Budget $ % Revenues: Movement Area 77,028 74,590 74,442 78,635 4, % Apron Area 7,909 10,214 11,235 11,233 1, % Terminal Rents 147, , , ,167 8, % Federal Inspection Services (FIS) 7,771 8,617 8,655 10,360 1, % Total Rate Base Revenues 240, , , ,395 15, % Commercial Area 8,487 9,517 7,761 8,445 (1,072) -11.3% Subtotal before Revenue Sharing 248, , , ,840 14, % Revenue Sharing (9,901) (6,136) (10,897) (19,488) (13,352) 217.6% Total Airline Revenues 238, , , , % Operating Expense 151, , , ,219 4, % Net Operating Income 86,727 88,342 81,232 85,133 (3,209) -3.6% Debt Service Rate Base 80,654 80,631 80,209 83,167 2, % Debt Service Exclusion 743 1,604 1,604 1,539 (64) -4.0% Net Cash Flow 5,330 6,108 (581) 427 (5,681) -93.0% Aeronautical Cost Drivers Budget Change $ in 000's Actual (1) Budget Forecast Budget $ % O&M 147, , , ,822 6, % Debt Service 77,909 77,791 77,057 80,536 2, % Amortization 18,959 20,001 20,029 24,358 4, % Space Vacancy (3,734) (4,529) (4,685) (3,605) % TSA Grant & Other (296) (1,269) (1,288) (715) % Total Rate Base Revenue Requirement 240, , , ,395 15, % (1) Based on 2013 financial statements, not revenue requirement in the final 2013 settlement. Highlights: Operating Expenses: o Terminal - $1.0m increase in janitorial services, $0.7m increase in ERL, $0.6m increase in small works construction services (mostly SSAT renovation project), $0.5m increase due to non-aerospace allocation percentage decrease o Utilities - $1.1m increase in division-wide utilities expense, primarily natural gas o FIS -$1m increase in contracted services. Debt Service: o Increase to existing debt service amortization Amortization (use of ADF): o FIMS/FIDS $1.2M, PeopleSoft Financial Upgrade $0.6M, SharePoint $0.5M Vacancy - less publicly-accessible vacant space. IV-52

53 Non-Aeronautical Business Highlights: Budget Change in $000's Actual Budget Forecast Budget $ % Non-Aero Revenues Rental Car 39,839 41,167 44,909 44,944 3, % Public Parking 52,225 52,138 56,103 58,925 6, % Airport Dining and Retail 41,551 43,714 45,489 49,883 6, % International Clubs and Lounges 1,051 1,200 1,800 1, % Ground Transportation 7,958 7,881 7,988 8, % Employee Parking 5,461 6,292 6,292 7, % Utilities 6,332 6,891 6,427 8,279 1, % Other 6,657 7,170 7,648 9,108 1, % Total Non-Aero Revenues 161, , , ,465 22, % Non-Aero Expenses RCF Operating Expense 7,049 8,506 8,020 8,002 (505) -5.9% Operating Expense 64,204 73,136 71,285 79,873 6, % Share of terminal O&M 20,055 22,547 22,241 23, % Less utility internal billing (17,294) (18,307) (18,307) (20,221) (1,915) 10.5% Operating Expense 74,014 85,882 83,238 90,922 5, % Net Operating Income 87,061 80,571 93,417 97,544 16, % Less: CFC Surplus 1 (4,594) (4,623) (5,927) (4,264) % Adjusted Non-Aero NOI 82,466 75,948 87,490 93,280 17, % Debt Service 46,434 46,504 45,892 43,636 (2,868) -6.2% Net Cash Flow 2 36,032 29,444 41,597 49,643 20, % Note: (1) $3M in commercial paper will be paid down in 2015, which reduces both CFC Operating Revenues and the related CFC surplus. (2) Non-Aero cash flow is the primary source of airline revenue sharing. Strong growth in Non-Aero revenue is reflected in 2015 increase in airline revenue sharing budget anticipates growth across all major non-airline business units due to growing passengers volumes and improving economy. Other revenues include concession fees on in-flight meals that have grown due to increase in international flights. Non-Airline Key Indicators Budget Change Actual Budget Forecast Budget $ % Revenues per Enplanement Parking % Rental Cars (excludes CFCs) % Ground Transportation % Airport Dining and Retail % Other % Total Revenues % Primary Concessions Sales / Enpl % IV-53

54 OPERATING BUDGET SUMMARY TABLE IV-4: REVENUE BY ACCOUNT ($ in 000's) % Change Bud- Revenue by Account Actual Budget Budget 2014 Bud Operating Revenue Equipment Rental $2,612 $3,267 $2, % Landing Fees 75,723 73,297 77, % Airport Transportation Fees 7,818 7,747 8, % Parking Revenue 55,530 56,429 63, % Rental Car Revenues 37,195 37,646 41, % Revenue from Sale of Utilities 5,853 6,437 8, % Property Rental Revenue 203, , , % Other Revenues 11,081 13,021 16, % SLOA III Incentive Straight Line Adjustment 14,304 (3,576) (3,576) 0.0% Total Operating Revenue $414,011 $404,320 $427, % FIGURE IV-3: AVIATION DIVISION REVENUE BY ACCOUNT SLOA III Incentive Straight Line Adjustment -0.8% Other Revenues 3.7% Equipment Rental 0.6% Property Rental Revenue 49.2% Landing Fees 17.8% Parking Revenue 14.6% Rental Car Revenues 9.5% Airport Transportation Fees 1.9% Total Revenue: $427,242 Revenue from Sale of Utilities 1.8% IV-54

55 TABLE IV-5: OPERATING & MAINTANENCE EXPENSES BY ACCOUNT (in 000's) % Change Bud- Expense by Account Actual Budget Budget 2014 Bud Salaries, Wages, Benefits & Worker's Comp $93,600 $100,399 $104, % Equipment Expense 3,751 3,390 3, % Utilities 12,938 13,650 14, % Supplies & Stock 4,825 4,361 4, % Outside Services 33,998 31,603 32, % Travel & Other Employee Expenses 977 1,630 1, % Promotional Expenses 848 1, % Other Expenses 6,172 7,854 9, % Total O&M without Environmental 157, , , % Environmental Remediation Liability Expense 7,441 2,356 2, % Total O&M with Environmental 164, , , % Charges to Capital/Govt/Envrs Projects (2,131) (2,485) (4,333) 74.3% Total Budgeted Operating Expense 162, , , % FIGURE IV-4: AVIATION DIVISION EXPENSE BY ACCOUNT ($ in 000 s) Travel & Other Employee Expenses 1.0% Other Expenses 5.5% Promotional Expenses 0.4% Outside Services 18.7% Environmental Remediation Liability Expense 1.5% Supplies & Stock 2.4% Utilities 8.5% Salaries, Wages, Benefits & Worker's Comp 60.1% Equipment Expense 1.8% Total Before Charges to Capital/Govt/Envrs Projects: $174,347 Charges to Capital/Govt/Envrs Projects: $4,333 Total Operating Expense: $170,014 IV-55

56 TABLE IV-6: REVENUE AND EXPENSE BY BUSINESS GROUP/DEPARTMENT AVIATION DIVISION OPERATING REVENUES (in 000's) Notes Actual Budget Budget % Change 2015 Bud Bud AIRLINE REVENUES Movement Area 77,028 74,590 78, % Apron Area 7,909 10,214 11, % Terminal Rents 147, , , % Federal Inspection Services (FIS) 7,771 8,617 10, % Subtotal Rate Base Revenues 240, , , % Commercial Area 8,487 9,517 8, % Subtotal Airline Revenues before Revenue Sharing 248, , , % Revenue Sharing (9,901) (6,136) (19,488) 217.6% Total Airline Revenues 238, , , % SLOA III Incentive Straight Line Adj. 14,304 (3,576) (3,576) 0.0% NON-AIRLINE REVENUES Public Parking 52,225 52,138 58, % Rental Cars 39,839 41,167 44, % Ground Transportation 7,958 7,881 8, % Airport Dining & Retail 41,551 43,714 49, % Utilities 6,332 6,891 8, % Other 13,170 14,662 18, % Total Non-Airline Revenues 161, , , % Total Operating Revenues 414, , , % BDAVREEX.xls IV-56

57 AVIATION DIVISION (in 000's) Notes Actual Budget Budget % Change 2015 Bud Bud EXPENSES BEFORE CHARGES TO CAP/GOVT/ENVRS PROJECTS BUSINESS UNITS Airport Operations 47,173 43,887 45, % Airport Operations excluding Airline Realignment 38,580 43,887 45, % Airline Realignment 8, n/a Business Dev & Management 5,444 7,000 7, % Utilities 13,633 14,194 15, % Business Units 66,250 65,081 68, % AVIATION SERVICES Director's Office 1,381 1,753 2, % Division Contingency - 1,650 1, % Fire Department 12,591 13,043 13, % Planning 1,845 3,982 4, % Finance & Budget 978 1,507 1, % Community Partnerships 1,307 1,414 1, % Airport Security 6,756 7,389 7, % Services 24,858 30,739 32, % AVIATION FACILITIES AV Facilities & Infrastructure 2,100 2,878 3, % Signage % Airport Building Department % Airport Office Building 1,748 1,164 1, % AV Environmental Programs Group 3,654 4,000 3, % Maintenance 55,679 57,518 59, % Facilities 64,187 66,812 69, % Risks Expense 1,517 1,525 1, % Environmental Remediation Liability 7,441 2,356 2, % Capital to Expense n/a Total Expenses Before Charges to Cap/Govt/Envrs Projects 164, , , % CHARGES TO CAPITAL/GOVT /ENVRS PROJECTS (2,131) (2,485) (4,333) 74.3% OPERATING & MAINTENANCE EXPENSE BUSINESS UNITS Airport Operations excluding Airline Realignment 38,286 43,435 44, % Airline Realignment 8, n/a Business Dev & Mgmt 5,444 7,000 7, % Utilities 13,632 14,194 15, % Business Units 65,955 64,629 67, % AVIATION SERVICES Director's Office 1,381 1,753 1, % Division Contingency - 1,650 1, % Fire Department 12,536 12,768 13, % Planning 1,842 3,904 4, % Finance & Budget 978 1,507 1, % Community Development 1,246 1,299 1, % Airport Security 6,727 7,389 7, % Services 24,710 30,271 31, % AVIATION FACILITIES AV Facilities & Infrastructure 1,701 2,354 2, % Signage % Airport Building Department % Airport Office Building 1,748 1,164 1, % AV Environmental Programs Group 3,527 3,867 3, % Maintenance 54,683 56,879 57, % Facilities 62,313 65,247 66, % Operating & Maintenance Expense 152, , , % Risks Expense 1,517,464 1,525,245 1, % Environmental Remediation Liability 7,441 2,356 2, % Capital to Expense n/a Total Operating Expense 162, , , % BDAVREEX.xls IV-57

58 E. STAFFING Table IV-7 outlines the full-time equivalent staffing (FTEs) adjusted for temporary positions, interns and other limited duration employees for the division. is budgeting FTE's for 2015, which is 2.2 percent higher than the 2014 budget. TABLE IV-7: AVIATION DIVISION STAFFING STAFFING (Full-Time Equivalent Positions) (a) (b) % Change Bud - BUSINESS GROUP/DEPARTMENT Notes Actual Budget Est. Act. Budget 2014 Bud AIRPORT OPERATIONS Aeronautical Business Group % Landside Business Group % Airport Operations % BUSINESS DEVELOPMENT Properties % Airport Dining & Retail % Business Development % Business Management % Utilities % Business Development % AVIATION SERVICES Airport Director's Office % Fire Department 1 & % Planning % Finance & Budget % Environmental % Community Partnerships % Airport Security 3 & % Total Services % FACILITIES Facilities & Infrastructure % AV Signage % Airport Building Department % Airport Office Building % Maintenance % Total Facilities % TOTAL AVIATION DIVISION % FTE.XLS IV-58

59 Notes - Table IV-7: a) Incremental increase of 4 FTE's during 2014 is explained in Notes 1-3 below. In addition, reallocation of 10 FTE's during 2014 occurred between business groups and did not change overall staffing levels. b) 2015 Budget includes an increase of 14.5 FTE's, due to strategic staffing for key capital projects and in response to operational needs. FTE additions by department are explained in Notes ) 2014 Estimated Actuals include 4 additional Firefighter FTEs added in early ) 2014 Estimated Actuals include 1 FTE transferred in from another division - Airport Parking Marketing Manager from Public Affairs 3) 2014 Estimated Actuals reflect 1 FTE eliminated in Airport Security - Airport Security Operations Supervisor 4) 2015 Budget reflects reduction of 4.5 FTE's in the Aeronautical Business group due to repurposing. Repurposed 6.5 FTEs in the Aero Business group, of which 2 FTEs were repurposed within same dept. for: Airline Systems Resource Coordinator and Baggage Operations Systems Specialist. Remaining 4.5 repurposed FTE's being utilized elsewhere within the Division. 5) 2015 Budget reflects reduction of 3.4 FTE's in the Landside group due to repurposing and transfers, partially offset by new FTE. Transferred 2 FTEs to Finance & Budget dept - Audit Coordinator and Audit Assistant, repurposed 2.4 FTE's being utilized elsewhere within the Division, partially offset by increase of 1 new FTE for: Ground Transportation Controller. 6) 2015 Budget includes 2 new FTE's - Lease Administration Specialist & Property Manager 2 7) 2015 Budget includes 1 new FTE - Airport Dining & Retail Specialist 8) 2015 Budget includes 3 new FTEs - Lean Practitioner for Continuous Process Improvement (CPI), Operations Program Development Manager, Runway 16C (capital), and Operations Program Development Manager, IAF & NorthStar (capital) 9) 2015 Budget reflects reduction of 1 FTE in the Fire Dept, repurposed FTE being utilized elsewhere within the Division 10) 2015 Budget includes a 0.25 increase for existing Call Research Field Worker position 11) 2015 Budget reflects 2 FTE transfers from the Landside Business Group 12) 2015 Budget reflects reduction of 0.82 FTE in the Community Partnership group due to repurposing. Repurposing 1 FTE being utilized elsewhere within the Division, partially offset by an 0.18 FTE increase for an existing High School Intern position. 13) 2015 Budget reflects reduction of 1 FTE due to repurposing, being utilized elsewhere within the Division. 14) 2015 Budget includes 5 new FTE's - Art Program Coordinator (capital), Architect 4 (capital), Facility Master Record Drawing Manager and 2 limited duration (4 yr) Senior Infrastructure System Engineers. 15) 2015 Budget includes 1 new FTE - Building Department Assistant Manager (capital) 16) 2015 Budget includes 11 new FTE's and 1 repurposed FTE being used within same department: 3 Electronic Technicians, 2 Electricians (capital), 2 Electronic Technicians (capital), 1 Capital Support Specialist (capital), 1 Conveyance System (capital), 1 Operating Maintenance Engineer (capital), 1 Maintenance Manager (capital), 1 Capital Project Liaison Manager, Baggage Optimization (capital) IV-59

60 Full-Time Equivalent Staff Positions (FTEs) 2015 Proposed Budget FTEs FTEs % 2014 Approved Budget Firefighters - Grade D 4.0 Airport Parking Marketing Manager (transfer in from Public Affairs) 1.0 Airport Security Operations Supervisor (position eliminated) (1.0) 2014 Baseline Budget Changes: Vacant Positions Repurposed in 2015: (13.9) -1.6% New FTE's Driven by Capital Program: Capital Project Liaison Manager, Baggage Optimization 1.0 Maintenance Manager - Capital Program Support 1.0 Operating Maintenance Engineer - Capital Program Support 1.0 Conveyance System - Capital Program Support 1.0 Electricians - Capital Program Support 2.0 Electronic Technicians - Capital Program Support 2.0 Maintenance - Capital Support Specialist 1.0 Art Program Coordinator 1.0 Architect Building Department Assistant Manager 1.0 Operations Program Development Manager, Runway 16C 1.0 Operations Program Development Manager, IAF & NorthStar 1.0 Total Capital Program FTEs % New FTE's Driven by Operational and Strategic Needs: Ground Transportation Controller 1.0 Airline Systems Resource Coordinator 1.0 Baggage Operations Systems Specialist 1.0 Lean Practioner - Continuous Process Improvement (CPI) 1.0 Call Research Field Worker Position - increased hours 0.3 Financial Analyst III - Finance & Budget 1.0 Facility Master Record Drawing Manager 1.0 Senior Infrastructure System Engineers (4 yr limited duration) 2.0 Lease Administration Specialist 1.0 Property Manager Airport Dining & Retail Specialist 1.0 Electronic Technicians 3.0 Community Partnerships Highschool Interns - increased hours 0.2 Total Operational and Strategic FTEs % 2015 Budget Proposed FTEs % IV-60

61 The table below shows the trend of FTEs for the division since Total staffing for 2015 reflects an increase of FTE s over the prior year budget level, as described above, partially driven by strategic staffing for key capital projects. Rental Car Facility staffing remains stable at 87 FTE s. FTEs Capital FTEs 4 14 RCF FTEs Base FTEs Total 849 Total Total Base FTEs RCF FTEs Capital FTEs F. CAPITAL BUDGET The business plan summaries at the beginning of this section provide the context for the following capital budget for the Division. Table IV-8 provides a Summary of the Approved Capital Budget for The Division s capital plan for calls for spending of $1.7 billion. $1.1 billion is for four major projects: NorthSTAR (including expansion of North Satellite), Baggage Recapitalization/Optimization, International Arrivals Facility and Runway 16C Reconstruction. Eight projects, totaling $44 million, were proposed for inclusion as business plan prospective. A total of $228 million remains in the Allowance CIPs, which is undesignated future spending that will account for as yet undefined future projects or budget increases to existing projects. Links to Century Agenda: Included in the capital budget are the following projects that directly support the Century Agenda: 1. Triple air cargo volume to 750,000 metric tons: Will complete Cargo 2 $11.8 million and Cargo 6 $6.4 million facility improvements in late Make Sea-Tac Airport the west coast Gateway of Choice for international travel and double the number of international flights and destinations: South Satellite Interior Renovations (ongoing) New International Arrivals Facility (ongoing) IV-61

62 3. Meet the region s air transportation needs for the next 25 years Baggage Recapitalization/Optimization (ongoing) Expand North Satellite to add gates (ongoing) 4. Meet all increased energy needs through conservation and renewable sources: Stage 3 Mechanical Infrastructure Improvements (ongoing) Parking Garage Area Lighting Improvements - $5.0 million 5. Meet or Exceed Agency Requirements for Storm Water: IWS Segregation Meters (ongoing) 6. Reduce air pollutants and carbon emissions: Pre-conditioned Air project (ongoing) Electrical ground service infrastructure and charging stations (ongoing) Summary by Category Cash Flows (Figures in $000s) CIP Categories Projects Total A. Commission Authorized/Underway , , , , , ,274 1,321,538 B. Pending 2014/2015 Authorization 12 1,635 26,135 32,250 8,372 2,515 1,298 70,570 C. Pending Future Authorization ,110 9,441 6,500 6,500 32,581 D. Small Projects 8 5,468 5,200 5,200 4,000 4,000 4,390 22,790 Total , , , , , ,462 1,447,479 Proposed New Projects ,195 22,199 10,705 1,800-43,899 Allowance CIPs 2 3,000 10,000 24,000 34,000 43, , ,000 Total Proposed CIP , , , , , ,462 1,719,378 Included in Category A are projects that have been partially but not fully authorized by the Port Commission. Authorized line includes total project budgets for projects with at least partial commission authorization Proposing 8 new projects for inclusion in budget Allowance CIPs represent undesignated future spending for future new projects and potential budget increases for existing projects will have sustained high levels of spending as major projects will be under construction IV-62

63 Commission Authorized/Underway: Cash Flows (Figures in $000s) A. Commission Authorized/Underway CIP Total NorthSTAR program 5 CIPs 21,583 43,420 72, , ,223 92, ,013 International Arrivals Facility C ,654 51, , ,799 23,683 1, ,219 Baggage Recapitalization/Optimization C ,287 20,000 45,000 50,000 60,000 50, ,000 Runway 16C/34C Reconstruction C ,046 56,000 37,503 3,675 97,178 SSAT HVAC, Lights, Ceiling C ,000 10,000 16,000 32,220 Highline School Insulation C ,369 7,256 15,681 3,394 26,331 Main Term Low Voltage Sys Upgrade C ,500 9,048 2,388 18,936 GSE Electrical Charging Stations C ,140 13,802 13,802 Vertical Conveyance Modernization C ,608 4,986 5,986 2,084 13,056 CCTV Camera/Data Improvement C ,000 5,000 3,612 10,612 Airfield Pavement Replacement C ,809 7,874 7,874 Single Family Home Insulation C ,276 3,010 3,183 6,193 Parking Garage Lights C ,000 2,000 1, ,051 Aircraft RON Parking USPS C ,027 4,558 4, Roof Replacement C , ,270 Central Plant Preconditioned Air C ,090 3,064 1,000 4,064 Other projects (76) 96,777 46,784 18,055 7,469 6,510 11,343 90,161 Total 196, , , , , ,274 1,321,538 Four major projects highlighted in yellow. Spending for these four projects makes up 82% of the total spending for this category. Descriptions of major projects: NorthSTAR Program: In collaboration with Alaska Airlines, the Port will renovate and expand the North Satellite to address seismic concerns, upgrade HVAC and lighting, upgrade fixtures and add eight gates. This project will also upgrade the baggage system serving the North Satellite, Concourse C vertical circulation, and the Main Terminal at the North end. International Arrivals Facility: This project will build a new FIS facility on the east side of Concourse A in order to expand capacity to process arriving international passengers. The estimated cost to complete this project is under review. Baggage Recapitalization/Optimization: This project will replace and reconfigure baggage screening equipment and operations to improve operational efficiency and increase capacity. Runway 16C/34C Reconstruction: This project will rebuild the center runway. Construction has been accelerated to 2015 from 2016 due to continued deterioration of the pavement and increasing safety concerns. SSAT HVAC, Lights Ceiling Repl.: This project will renovate or replace the HVAC, lighting and ceilings at the South Satellite. Main Terminal Low Voltage: This project will replace the low voltage electrical systems throughout the main terminal. GSE Electrical Charging Stations: This project will install electrical charging stations to permit passenger airlines to charge electrical ground service equipment near all gates. Vertical Conveyance Modernization: This project will modernize elevators and escalators. CC Camera/Data Improvement: This project will add up to 1,000 new cameras in areas with inadequate coverage for security purposes. It will also increase storage capacity. Airfield Pavement Replacement: This project provides the budget for annual replacement of the most damaged airfield pavement. The scope each year is determined based on surveys. Single Family Home Insulation: This project will complete the remaining single family homes to be insulated in connection with the previous Part 150 study IV-63

64 Parking Garage Lights: This project will replace lighting in the parking garage with more energy efficient lighting fixtures thus reducing energy consumption and savings costs. Aircraft RON Parking USPS Site: At the USPS site, this project will develop needed overnight parking positions for aircraft. Pending 2014/2015 Authorization: Cash Flows (Figures in $000s) B. Pending 2014/2015 Authorization CIP Total Emergency Backup Power C ,000 21,080 36,080 ADR Infrastructure C ,000 5,000 2,000 1,515 10,515 Main Terminal HVAC Upgrade C ,000 3,875 8,375 Passenger Loading Bridges C ,250 1,000 1,000 1,000 1,298 5,548 Air Cargo Road Safety Improvements C ,020 1,497 2,920 Domestic Water Piping C , ,850 Fuel System Modifications C ,075 1,075 Cargo 4 (UAL Freight Bldg.) C ,000 1,000 Security Checkpoint Wayfinding C IWS Segregation Meters C Replace Emergency Power Switch C Concourse A Bridge Level C Total 1,635 26,135 32,250 8,372 2,515 1,298 70,570 Descriptions of major projects: Emergency Back-up Power: Permanent Emergency Back-up Power is intended to allow the airport to be fully operational in the event of a power outage. Sea-Tac is recognized as a valuable regional asset in the event of a major emergency. Maintaining power is essential for operations. ADR Infrastructure: This project will add needed infrastructure to permit the expansion of the airport dining and retail program. Main Terminal HVAC: This project will renovate and add capacity to the HAVAC system in the Main Terminal. Passenger Loading Bridge: This project provides a budget to rebuild or replace passenger loading bridges. Pending Future Authorization: Cash Flows (Figures in $000s) C. Pending Future Authorization CIP Total Airfield Ramp Pavement Replacement C ,900 6,500 6,500 6,500 25,400 Vertical Conveyance - Garage C ,941 2,941 Fire Station Improvements C ,280 2,280 South Access Property Acquisition C ,500 1,500 Water Rights Supply Development C Total ,110 9,441 6,500 6,500 32,581 IV-64

65 Small Projects: Cash Flows (Figures in $000s) D. Small Projects CIP Total Small Capital C Small Jobs C ,388 2,086 2,086 Small Capital C AV/IT Small Capital C ,249 1,200 1,200 2,400 Small Capital C ,369 1,500 1, ,100 Small Jobs C ,500 2,500 2,500 2,086 10,000 Small Jobs C Small Capital C ,600 2,369 - Total 5,468 5,200 5,200 4,000 4,000 4,390 22,790 New Projects: Cash Flows (Figures in $000s) CIP Description Budget Total 1 C North Loop Interconnect Piping 11, ,950 6,000 1,800 11,950 2 C New Power Center, Conc. C 9,850 2,238 2,957 4,655 9,850 3 C Automated Electrical Switching 9,600 2,000 7,600 9,600 4 C Construction Logistics Expansion 6,400 3,600 2, ,050 5 C Roof Replacement, Conc. C 3, ,553 3,820 6 C Central Term Mezz Stairways 1, ,250 7 C Grease Interceptor C Emergency Phones TOTAL 44,249 9,195 22,199 10,705 1,800-43,899 Descriptions of new projects: North Loop Interconnect Piping: This project will expand piping for chilled water and steam supply to North Satellite from Central Mechanical plant. Necessary for North Satellite expansion. Helps prevent service outages. New Power Center, Concourse C: Concourse C power supply is at capacity. Can t meet tenant growth needs without upgrade. Automated Electrical Switching: This project will allow for remote operation of electric (12.5 kv, 480 v) switch gear to prevent arc flash hazards. Aides employee safety. Required by new electrical code. Construction Logistics Expansion: This project is needed to support major capital projects. Roof Replacement, Concourse C: Concourse C roof must be replaced, skylights also. Roof is 23 years old. Central Terminal Mezzanine Stairs: The center terminal mezzanine level needs additional stairs to provide required egress to permit leasing currently unoccupied space for which there is customer demand. Grease Interceptor: Need additional grease interceptor to allow additional restaurant on Concourse C. Emergency Phones: This project will replace emergency phones in the garage. IV-65

66 Summary by Major Project/Program: Cash Flows (Figures in $000s) Total Major Projects NorthSTAR 21,583 43,420 72, , ,223 92, ,013 International Arrivals Facility 8,654 51, , ,799 23,683 1, ,219 Baggage Optimization 4,287 20,000 45,000 50,000 60,000 50, ,000 Runway 16C/34C Reconstruction 2,046 56,000 37,503 3,675 97,178 Subtotal 36, , , , , ,430 1,083,410 Other existing projects 167, , ,783 44,366 33,469 40, ,069 Proposed New Projects - 9,195 22,199 10,705 1,800-43,899 Allowance CIPs 3,000 10,000 24,000 34,000 43, , ,000 Total Proposed CIP 206, , , , , ,462 1,719,378 Capital Budget Summary with Major Projects Broken Out ($000) Existing projects Four Major Projects New Projects Allowance CIPs IV-66

67 TABLE IV-8: AVIATION CAPITAL BUDGET SUMMARY ($ in 000's) % of 2015 Total Budget CIP Committed Committed Capital Projects Airfield $97,974 $145, % Business Development 510 2, % Landside 10,310 38, % Air Terminal 138,097 1,015, % Infrastructure 33, , % Airfield Security 3,127 11, % NOISE 10,266 32, % Division-wide Projects 5,386 9, % Total Committed $299,246 $1,367, % Business Plan Prospective Projects $29,536 $351,966 Total CIP $328,782 $1,719,378 capsum.xls FIGURE IV-5: AVIATION DIVISION COMMITTED CAPITAL BUDGET ($ 000 s) Infrastructure 11.2% NOISE 3.4% Airfield Security 1.0% Division-wide Projects 1.8% Airfield 32.7% Air Terminal 46.1% Business Development 0.2% Landside 3.4% Committed CIP Total Spending: $299,246 IV-67