Often, they are more than just curious.  Since the Port of Seattle generates over 100,000 jobs in King County, how it’s doing is one indicator of our economy’s health.  Here are facts and figures from the first half of 2010:

January-June 2010, overall port revenues are about 0.8% under budget, but operating expenses are 11.3% under budget[1].  As a result, after depreciation, the port’s net operating income is over budget.  (I expect some third and fourth quarter expenses will reduce this surplus somewhat by year’s end.)

SeaTac’s revenues and expenses are down.  Both rental car and concession income are rebounding; parking revenues continue to lag.  Air passenger traffic is about the same as 2009, but could be down as much as 2% by year’s end. More or less, SeaTac is about where it was last year.

2010 marine cargo is up 45%[2] over 2009 YTD.  Increased cargo volume and crane rental income have driven seaport revenues above projections.  (Whether this increased volume can be sustained in the third and fourth quarters will be an interesting indicator to watch and will inform our 2011 budget planning.)  Also contributing to positive revenue forecasts are grain terminal volumes that are 11% above 2009, and about 23% above  the 2010 projection.

Cruise business will set a record this year with 223 ship (up from 218 in 2009) calls.  While the port about breaks even on the cruise business, each of the 223 calls leaves $1.9 million behind in King Co. & WA state’s economy.  Cruise related revenues are anticipated to be on budget or maybe slightly higher than projected.

Real estate is operating about on budget, but despite 89% occupancy (Seattle’s average is 87%) revenues will be below 2009.  It is important to remember that some port properties, such as Fisherman’s Terminal, are not operated to maximize profit, but are supported for public benefit and as private sector job generators.

I know this is a very general overview.  If you have specific questions, please send them to me at: http://www.bryantforport.com/contact/

 [1] An aside: The port commission decided to self-insure medical and dental coverage starting this year.  That decision is paying off: medical and dental costs have only increased about 4%. Under the old plan they would have increased by more than 12%. That translates into about $1 million in savings.

 [2] LA is up about 32%; Long Beach up 19-20%; Oakland up 12-13%; Vancouver, BC up 11-12%; Prince Rupert up 60%-but from a very low base; Tacoma is down.

People often ask me about how the Port of Seattle is doing in these tough times. This past year, the port commission worked very closely with port CEO Yoshitani and port staff to eliminate programs that had outlived usefulness, to cut payroll (6%), to increase employee medical contributions and to scrutinize expenditures.  As we approach year-end, those tough decisions are producing positive results.  Our projected net income is over budget and we were able to cut taxes.

Here is a summary for how we are finishing this challenging year (thru November).

Airport passenger traffic is down only 3.5 percent, much less of a decline  than many other airports

Marine cargo through November is down 9.7%.  As a comparison, Tacoma is down 16.5%, L.A. is down 15.4% and Long Beach is down 24.5%.

The Port of Seattle’s total operating revenue for the first eleven months of 2009 was $432.5M or 3.1% under budget.

However, total operating expense was 14.3% under budget

Net Operating Income (NOI) before Depreciation was $215.2M, or 11.6% over budget

In addition, starting in 2010, the seaport, like the airport, will cover its own capital costs from its own profits and will no longer rely on the property tax levy.

For 2010, the port commission reduced the property tax levy.

During 2009, the port commission emphasized the need for the port to maintain net operating income despite falling revenues.

To accomplish that, in 2009, the commission and port CEO Tay Yoshitani:
• implemented zero based budgeting
• eliminated programs that didn’t meet current needs
• required two week unpaid furloughs
• cut payroll 6% (110 positions)
• revised the medical program to require employees to contribute more
• cut an additional 5.6% from the budget throughout 2009.

These were not easy decisions, but we are not there to make easy decisions; we are there to solve problems and set policies that will help our port be a competitive, environmentally sustainable, job generating engine for our region.

On November 23rd, the port commission did that by passing another fiscally responsible budget. This 2010 budget adds to environmental reserves, creates a new $40 million+ infrastructure and transportation reserve AND CUTS PROPERTY TAXES.

The 2010 reduced port property tax will be spent as follows:

• A little over $40 million on bond debt service for previous dredging, terminal expansion and Fisherman’s Terminal seawall renewal projects
• Over $15 million on road projects including expansion of Spokane Street viaduct, overpasses near Safeco Field, East Marginal Way improvements and freight projects in the Kent Valley
• About $13 million into transportation & infrastructure reserves
• Over $8 million into environmental projects
• Over $9 million for new school construction in the Highline School District (near SeaTac)
• Over $19 million on projects including seawall replacement, dock repair and improvements, storm water upgrades, and environmental initiatives.

Just as important, from 2010 forward, the seaport will cover its capital costs from its own net operating income and will not rely on property taxes.

The recommendations in the state auditor’s report that was issued in December 2007 have been implemented. The recommendations and reforms resulting from the internal fraud investigation that I chaired and concluded in December 2008 have been implemented.

In addition:

• The port commission reasserted its oversight authority and rewrote the division of responsibility between the CEO and the elected commission.
• The port’s internal auditor now reports directly to the commission and the CEO, no longer to the commission through the CEO.
• Port contracting was centralized under a single authority that reports to the CEO and is accountable to the commission.
• The commission revitalized the port’s internal audit committee and added a public member.
• The commission hired its own independent policy analyst, and asserted control over the agenda of commission meetings by having the port records supervisor report to the commission, not the CEO
• A new ethics compliance and workplace responsibility program was implemented with ethics and new policy training for all port employees.
• The commission’s use of executive sessions has been circumscribed.
• Members of the public, stakeholders and local experts now are often invited to sit with the commissioners and publicly discuss major issues and policy options. Like all commission proceedings, these discussions are televised and available to the public on the Internet.
• The same day I receive policy briefs from port staff, those same briefs are to be posted on the port’s website so that the public may read what commissioners are reading.
• Commission meetings are no longer limited to downtown Seattle and SeaTac airport, but are held around King County.

Transforming an institution and changing a culture is not easy, but it is what we have done and continue doing at the Port of Seattle.