SPECIAL COMMISSION BUSINESS MEETING October 16, 2018 at 9:00am AGENDA. EARLY PUBLIC COMMENT SESSION (total session up to 20 minutes)

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1 SPECIAL COMMISSION BUSINESS MEETING October 16, 2018 at 9:00am AGENDA I. CALL TO ORDER / PLEDGE OF ALLEGIANCE II. III. EARLY PUBLIC COMMENT SESSION (total session up to 20 minutes) WORK SESSION A Marina Rate Proposal (pg. 1-3) B Projected Year End and 2019 Operating Budget (pg. 4-17) IV. PUBLIC COMMENTS SESSION (total session up to 20 minutes) V. NEXT MEETINGS (pg ) A. October 23, 2018 Special Commission Meeting B. October 29, 2018 Special Commission Meeting (tentative) C. October 29, 2018 Special Joint Commission Meeting with the County at the Port at 11:00am VI. UPCOMING EVENTS A. November 18-20, 2018 Pacific Marine Expo in Seattle, WA B. December 5-7, 2018 WPPA Annual Meeting in Bellevue, WA VII. BROWN BAG LUNCH AND OPEN DISCUSSION WITH THE COMMISSION (time permitting) VIII. IX. EXECUTIVE SESSION The Board may recess into Executive Session for those purposes authorized under Chapter RCW, the Open Public Meetings Act. ADJOURN

2 RULES FOR ATTENDING COMMISSION MEETING Signs, placards, and noise making devices including musical instruments are prohibited. Disruptive behavior by audience members is inappropriate and may result in removal. Loud comments, clapping, and booing may be considered disruptive and result in removal at the discretion of the Chair. RULES FOR SPEAKING AT A COMMISSION MEETING Members of the public wishing to address the Board on general items may do so during the designated times on the agenda or when recognized by the Chair. Time allotted to each speaker is determined by the Chair and, in general, is limited to 3 minutes. Total time planned for each public comment period is 20 minutes, subject to change by the Chair. All comments should be made from the speaker s rostrum and any individual making comments shall first state their name and address for the official record. Speakers should not comment more than once per meeting unless their comments pertain to a new topic they have not previously spoken about. In the event of a contentious topic with multiple speakers, the Chair will attempt to provide equal time for both sides.

3 ITEM FOR CONSIDERATION BY THE BOARD OF PORT COMMISSIONERS October 16, 2018 Subject: 2019 Moorage Rates & Proposed Change in Methodology Presented by: Mike Nimmo, Maritime Manager Melinda Smithson, Controller RCW & POLICY REQUIREMENTS: RCW allows Port Districts to lease land, wharves, docks and real and personal property for such purposes and upon such terms as the Port Commission deems proper. RCW states that every lease of lands, wharves, docks and real and personal property for a term of more than one year shall be secured. The Port Delegation of Authority stipulates marina moorage rates will be set by the Commission. BACKGROUND: Port staff made a presentation to the Commission on October 2, 2018, in which staff discussed previous years rate studies, the current rate study methodology, and a potential change in methodology including using a different mix of regional marinas in the rate study. The current methodology is as follows: - Calculate the average moorage rate for a 30 vessel based on 8 regional marinas - Calculate a PABH/JWM 30 vessel moorage rate at 90%/110% of that average - Scale all other PABH/JWM rates at 5% rate change per 10 slip length change - Limit any slip rate increase to no more than CPI+1% = 4% based on the August 2018 CPI of 3%. Although the current methodology was intended to gradually bring the Port s moorage rates to a market average, the rates have not met or kept pace with the average regional rates. Additionally, the rates are not adequate to cover the cost of replacing the future capital infrastructure needs. As a result, the Port is recommending the following proposed marina rate methodology: - Calculate the average moorage rate for a 30 vessel based on 6 regional marinas eliminating 2 marinas which are small and not comparable to the Port s marinas and adding in a new marina that is more comparable and where the age of the infrastructure is more current. - Continue to calculate the PABH/JWM 30 vessel moorage rate at 90%/110% of that average - Scale PABH/JWM rates per 10 slip increments on an increasing scale in order to achieve rates closer to the average market rates 1

4 - Limit slip rate increases to no more than CPI+3% (6%) for 20, 30, and 40 slips and CPI+4% (7%) for and 80 slips - Continue to monitor the regional average moorage rates and periodically adjust if appropriate Additionally, we are recommending the following changes for live-aboard rates. - Establish a minimum vessel length of 32 for live-aboard status. Existing liveaboard tenants with smaller vessels will be grandfathered in. - Increase the live-aboard fee to $85/month for 2 people with an additional $42.50 per person for any additional people. ANALYSIS: A cash flow analysis was done from the inception of the John Wayne Marina (JWM) through 12/31/17. This analysis illustrated the need for increased moorage rates. As of 12/31/17, the Port had still not recovered the total cost of capital expended beginning in 1982 through the end of The shortfall at the end of 2017 was $1.3 million excluding interest, and $7.4 million, including interest. Because floats and pilings will need to be replaced in the near future at Port Angeles Boat Haven (PABH), the Port will be undergoing a similar analysis for PABH. Even without the analysis completed yet, staff projects that the cost to replace floats and pilings in the western half of PABH will be substantial. In-water construction is, by nature, more expensive than on-land construction and currently the inflation rate for on-land construction is estimated to be 2.8% per year. Based on the recent cash flow analysis for JWM, an increase in marina rates to CPI + 3% will allow the Port to cover approximately ½ of the cost of replacing floats and pilings in 2035 in JWM. This would still leave $11 million for the Port to finance in We believe a similar situation exists with PABH Proposed Regional Marina Rate Survey With Leasehold Tax (except private) monthly/foot MARINA NAME Port of Kingston Marina n/a flat rate ---- Bremerton Marina Port Hadlock Marina (private) n/a Port Ludlow Marina (private) Port of Port Townsend Marina Port Orchard Marina n/a John Wayne Marina Port Angeles Boat Haven Average Rates for 6 Marinas (sans POPA) % for PABH % for JWM

5 2019 Proposed Marina Rates Based on the above marina rate survey and applying the proposed methodology the following table shows the target rate and proposed 2019 rate based on the maximum cap increase per year. 90% Target Current as a % of Target Average Regional Market Rate Monthly Rate Monthly Increase The above table also shows that applying the proposed methodology result in rates that are slightly below the market rate adjusted for 90%/110% of the average. RECOMMENDED ACTION: Staff recommends the Commission discuss the proposed changes and determine if any additional information is needed. If appropriate, authorize the change to the moorage rate methodology and increase the moorage and live aboard rates as presented. Annual Increase Current PABH Final Spread Spread 50',60',80' at 7%) % Rate $$ % By 10' Rate $$ % % -5% % % % % 4.6% % % 5% % 6.1% % % 7% % 5.1% % % 9% % 4.8% % % % 7.3% % % Target 2018 Rates as a % of Avg Market Target Rates With Proposed Target Rates With Proposed Current Average Market Rates Change From Current Rates to Target Rates with Proposed Final Change From Current Rates to Target Rates with Proposed Final 2019 Rates with Maximum Increase of 6% = CPI + 3% (Cap 20',30',40' at 6%; Cap 2019 Rates with Maximum Increase of 6% = CPI + 3% (Cap 20',30',40' at 6%; Cap Monthly Rate Monthly Increase Annual Increase Current JWM Final Spread Spread 50',60',80' at 7%) % Rate $$ % By 10' Rate $$ % % -5% % % % % 9.1% % % 5% % 5.0% % % 9% % 6.6% % % 11% % 5.0% %

6 Port of Port Angeles Summary by Department **PRELIMINARY** Projected & 2019 Budget - **PRELIMINARY** 2018 Proj 2019 Budget Over/(Under) Over/(Under) ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET 2018 Budget 2018 Proj OPERATING REVENUES 11 MARINE TERMINAL 2,957,713 3,173,011 3,335,355 3,516,427 3,848,992 3,838, ,565 (10,567) 15 MARINE TRADES AREA 419, , , , , ,540 (14,465) 32, LOG YARD 1,224,692 1,786,523 1,922,935 2,331,774 2,132,625 2,204,136 (199,149) 71, FAIRCHILD INTERNATIONAL AIRPORT 228, , , , , ,587 64,430 27, AIRPORT RENTAL PROPERTIES 1,039,731 1,170,554 1,296,289 1,346,753 1,318,549 1,173,985 (28,204) (144,564) 32 SEKIU AIRPORT 16,144 15,130 15,682 14,900 15,149 15, PA BOAT HAVEN 1,293,893 1,334,291 1,371,598 1,362,184 1,442,687 1,521,073 80,503 78, JOHN WAYNE MARINA 1,173,676 1,198,648 1,289,799 1,269,749 1,399,692 1,503, , , RENTAL PROPERTY 248,081 79, ,569 75, , ,415 38,674 8, MECHANICAL MAINTENANCE FACILITIES MAINTENANCE ADMINISTRATION & GENERAL BUSINESS (Economic) DEVELOPMENT TOTAL OPERATING REVENUES 8,601,734 9,432,835 10,060,095 10,611,770 11,016,317 11,183, , , OPERATING EXPENSES 11 MARINE TERMINAL 735, , , , ,255 1,870,698 23, , MARINE TRADES AREA 286, , , , , ,512 (80,444) 140, LOG YARD 1,147,138 1,274,511 1,618,641 1,661,963 1,543,796 1,493,714 (118,167) (50,082) 31 FAIRCHILD INTERNATIONAL AIRPORT 655, , , , , ,810 (215,514) 238, AIRPORT RENTAL PROPERTIES 282, , , , , ,000 (69,232) 152, SEKIU AIRPORT 21,803 20,813 20,802 27,251 23,332 33,456 (3,919) 10, PA BOAT HAVEN 562, , , , , ,805 (42,070) 51, JOHN WAYNE MARINA 846, , , , , ,160 74, RENTAL PROPERTY 177, , , , , ,193 (14,980) (26,356) 91 MECHANICAL MAINTENANCE 130, , , , , ,895 5,922 (4,266) 92 FACILITIES MAINTENANCE 262, , , , , ,706 69,947 (25,739) 80 ADMINISTRATION & GENERAL 2,016,813 1,895,435 1,695,440 2,229,152 2,156,155 2,341,562 (72,997) 185, BUSINESS (Economic) DEVELOPMENT 510, ,968 1,027, , , ,981 (19,831) 279,068 TOTAL OPERATING EXPENSES 7,634,782 7,847,691 8,384,597 8,678,361 8,215,631 10,146,493 (462,730) 1,930, OPERATING SURPLUS (DEFICIT) 966,952 1,585,144 1,675,498 1,933,409 2,800,686 1,037, ,277 (1,763,597) IV - 5 4

7 Port of Port Angeles Summary by Type of Revenues & Expenses **PRELIMINARY** Projected & 2019 Budget - **PRELIMINARY** OPERATING REVENUES 2018 Proj 2019 Budget Over/(Under) Over/(Under) ACTUAL ACTUAL ACTUAL BUDGET PROJECTED BUDGET 2018 Budget 2018 Proj DOCKAGE 1,214,387 1,213,266 1,153,036 1,249,189 1,377,120 1,327, ,931 (49,366) WHARFAGE 754, ,810 1,018,672 1,017,200 1,032,396 1,010,991 15,196 (21,405) SERVICE & FACILITIES 440, , , , , ,312 (56,220) (17,508) LOADING & UNLOADING MT HANDLING 2, , , , ,373 76,827 LABOR SERVICES 202, , , , , , ,512 (19,831) LOG YARD STAGING 70,073 37,178 25,666 69,065 70,711 87,480 1,646 16,769 LOG YARD LAND SERVICES 593,812 1,279,681 1,419,622 1,538,120 1,442,722 1,442,362 (95,398) (360) LOG YARD WATER SERVICES 220, ,994 79, , , ,889 (105,872) 75,691 MOORAGE 1,868,748 1,942,984 2,030,458 1,998,551 2,142,746 2,271, , ,565 MARINA & YARD FEES 247, , , , , ,021 (4,259) 7,452 LANDING/PARKING FEES 6,265 6,709 6,864 7,242 7,328 7, HANGAR/TIE DOWN 92, , , , , ,000 14,185 3,551 STORAGE OTHER USER FEES 32,751 23,042 45,994 63,800 81,834 74,367 18,034 (7,467) EQUIPMENT RENTAL 327, , , , , ,136 9,063 4,304 LAND LEASE/RENT 643, , , , , ,148 71,704 14,827 STRUCTURE LEASE/RENT 1,170,077 1,307,992 1,473,186 1,545,368 1,500,911 1,373,512 (44,457) (127,399) USE AGMT AND OTHER RENT 42,008 46,773 47,393 44,367 38,779 61,902 (5,588) 23,123 UTILITY PASS THRU & PRODUCT SALES 644, , , , , , ,245 39,546 MISC & INTERDEPT REVENUE 28,663 68,375 6,842 53,500 30,670 50,445 (22,830) 19, TOTAL OPERATING REVENUES 8,601,734 9,432,835 10,060,095 10,611,770 11,016,317 11,183, , ,265 OPERATING EXPENSES SALARIES, BENEFITS & INTERDEPT CHRGS 3,286,831 3,294,986 3,187,901 3,361,666 3,329,941 3,561,153 (31,725) 231,212 SUPPLIES 292, , , , , ,209 8,763 10,911 OUTSIDE SERVICES 1,206,732 1,579,495 1,895,976 1,597,767 1,260,483 2,799,970 (337,284) 1,539,487 PUBLIC INFORMATION 42,463 50, , , , ,764 50,999 (3,323) MARKETING 16,186 31,168 29,840 40,000 24,727 37,200 (15,273) 12,473 COMMUNITY RELATIONS 49 4,484 3,144 5,600 10,000 10,000 4,400 0 ADS, DUES & PUBLICATIONS 60,782 43,808 39,017 49,896 39,343 44,555 (10,553) 5,212 TRAVEL MEETINGS 35,572 30,126 50,592 54,850 41,027 50,700 (13,823) 9,673 TRAINING/TRAVEL 71,265 60,911 46,060 81,715 63,070 48,080 (18,645) (14,990) PROMOTIONAL HOSTING 11,817 7,926 10,240 24,800 9,804 19,750 (14,996) 9,946 RENT, UTILITIES, INSURANCE, TAXES 900, , , , ,554 1,027,943 11,339 54,389 UTILITY (Pass Thru) & COST OF GOODS SOLD 471, , , , , ,062 51,000 (32,253) OTHER EXPENSES (Misc & Interdept) 42,645 38,448 90,740 62,870 88, ,600 25,252 23,478 CONTINGENCY , , , MAINT LABOR, BENEFITS & INTER-DEPT 778, , , , , ,508 (110,388) 88,505 MAINTENANCE (Materials & Services) 417, , , , , ,000 (61,793) (3,857) TOTAL OPERATING EXPENSES 7,634,782 7,847,691 8,384,597 8,678,361 8,215,631 10,146,493 (462,730) 1,930,862 - OPERATING SURPLUS (DEFICIT) 966,952 1,585,144 1,675,498 1,933,409 2,800,686 1,037, ,277 (1,763,597) 5

8 PRELIMINARY 2019 BUDGET 2018 PROJECTED YEAR END - ASSUMPTIONS All Departments The following assumptions apply to all Departments unless the Department includes a specific assumption in their Projected Year-End Operations narrative. Revenues 2018 Projected 1. Rates, fees and applicable leases were increased by not less than the 2.3% CPI, except as specifically identified. 2. Marine Terminal cargo volume will be approximately 85.7 million board feet with 5 additional cargo vessels projected for Q Budget is 84.0 million board feet. Possible trade tariffs on logs originating from the U.S may affect end of year volume additional tanker days through the EOY (total 56 days for 2018) Budget is 80 days. 4. Log Yard activities and associated revenues will be slightly less than budget, with revenues still expected to exceed $2.0 million, barring the effects of possible trade tariffs imposed on logs originating from the U.S. 5. Lease Revenue is projected to be slightly above budget. Airport Rental Property, the building, is expected to be vacated by December 31, 2018 (this was budgeted for 12 months in 2018). 6. Moorage revenues at PABH & JWM projected to be above budget primarily due to favorable recreational fishing opportunities. Expenses 2018 Projected 1. Net salary/benefit savings of $142k are projected; savings from the retirement of 1 employee; management structure change between departments (Log Yard, Facilities Maintenance, Airport & Business Development). 2. Insurance renewals occur twice a year with property insurance renewing in July of each year and liability insurance renewing in October of each year. The property insurance premiums increased $34k or 13% in July Because the nation has experienced the largest insured loss in recorded history over the last year due to catastrophic natural disasters, the majority of the increase is attributed to a 9% increase for earthquake & flood premiums. The remaining 4% increase is due to rising property values in general and the fact that the Port insures for replacement cost. The crime insurance premiums remained flat while the liability insurance premiums increased $3k or 2% in October of Washington State Auditor s Office Annual Report Audit and Single Federal Audit will be approximately $41k plus an estimated $4k for auditor travel costs. 4. Non-Operating: Environmental insurance litigation costs for legacy projects will continue until an insurance coverage decision is made. 6

9 PRELIMINARY 2019 BUDGET 2019 Budget - Ops Assumptions General 1. CPI: August CPI West Size Class B/C All Urban Consumer (CPI-U) of 3.0%. 2. General Inflation outlook at 2.4%. Revenues 1. Rates, fees and applicable leases will increase by not less than the 3.0% CPI-U. 2. Marine Terminal rates will be adjusted based on the results of the NWMTA Blended CPI Study for August 2018, with a floor of not less than the blended study rate. This includes rate adjustments for Dockage, Vessel Repair Dockage, Equipment Rental, Wharfage, Service and Facilities Charges, Electrical Service Fees, Passenger Fees, Fuel Handling Fees and Security Fees. Marine Terminal tariff rates will reflect the implementation of an environmental fee assessed against all cargo, to recover storm water operating expenses. Continued work will be done towards recovering storm water capital infrastructure costs. Possible trade tariffs on logs originating from the U.S. may begin in January 2019, with revenue affects unknown at this time. 3. Marine Terminal activity includes associated revenue and expenditures based on 84 million board feet of log exports (14 vessels) and 60 days of tanker repair dockage. No cruise vessel calls are expected in Marine Trades fee for Travel-Lift Pier usage will be increased based on the overall length of the vessel The Travel-lift Pier is an essential component of the Marine Trades Area. It is used by the local marine industry to transport vessels in and out of the water for both maintenance and repair. 5. Marine Trades fee for Wash Down facility usage will be established to cover the estimated operating costs. After experience is gained, the fee will be revisited. 6. Log Yard Land Services revenue anticipated to be at or near EOY Possible trade tariffs on logs originating from the U.S. may begin in January 2019 with revenue affects unknown at this time. 7. Log Yard Water Services include revenue from rafting, round booming and dewatering of log volume originating from Canada (via raft or barge). Log volumes and associated revenues expected to be at or near EOY Barge activity is both inbound (from Canada) and outbound shipments to Coos Bay. 8. Log Yard Equipment Rental includes revenue for loading equipment used at the marine terminal for cargo operations. Equipment Rental revenue is based on a volume of 84 million board feet loaded X-dock. 7

10 PRELIMINARY 2019 BUDGET 2019 Budget - Ops Assumptions (continued) 9. Log Yard rates for most log handling services (and fees) will increase not less than the 3.0% CPI-U. Log Yard rates will reflect the implementation of an environmental fee to recover storm water operating expenses, with work towards recovering storm water capital infrastructure costs. 10. Marina rates for 2019 will increase by CPI plus 3.0% (with a cap of 6%) for PA Boat Haven and John Wayne Marina. 11. Airport Rental Property revenues will see an increase in existing rents plus the addition of new tenants which will reduce the impact of the building vacancy (anticipated at January 1, 2019). 12. The Port will continue to use property tax revenues for new capital projects, debt service for prior capital projects and the Community Partner program. Expenses 1. Salaries & Wages. For non-represented staff the Commission approved a pay for performance compensation philosophy and adopted a market pay rate index in The proposed increase for non-represented staff is to stay with the 3% CPI plus a $30k merit pool. For 2018, individual manager and director positions were replaced with manager 1, manager 2, manager 3, director 1 and director 2. Staff is reviewing proposals for consulting services to perform job analysis and assist in slotting non-represented staff into the appropriate grade levels. Represented staff will be adjusted by the CPI rate, which is 3% and also be adjusted for pay step increases, which results in approximately $7,600 (step increases are at 2.5% spread over multiple years). At the time of budgeting, several positions are in transition. The budget assumes ½ year overlap of the Maritime Manager, replacement of in-house counsel and a part-time temporary position to support increased communications. 2. Health insurance premiums will decrease by -0.58% ($1,566) for monthly premiums during January 1, 2019 to June 30, Premiums for July 1, 2019 to December 31, 2019 are projected to increase by 4% ($10,755). The PERS (Public Employee Retirement System) premiums are on a biennium cycle (July 1, 2017 June 30, 2019). The current employer contribution rate is 12.70% which will remain until June of New in 2019 is the employer premium for Paid Family Medical Leave per RCW 50A.04. The employer premium is approximately $4,550 or 37% of the total premium. The remaining 63% of the premium will be paid by the employee. The Port s Labor and Industries rates have also increased over the past few years. From the rates for the Port s class codes increased by 5% each year. In addition, the Port s current experience rating (1.38) is higher than the industry average due to three compensable claims from

11 PRELIMINARY 2019 BUDGET 2019 Budget - Ops Assumptions (continued) 3. Legal services on environmental legacy issues will continue for litigation/ negotiations with insurance companies and third parties. 4. Major non-capital maintenance projects budgeted for in 2019 include dredging expense of $1.0 million for Terminal 3 (expense is budgeted in Marine Terminal Outside Services) and removal of trees for the FIA runway approach for $250k. Other unusual or infrequent expenses include broker fees for the building for $176k; strategic plan for $50k; and a feasibility study for recycled carbon fiber and thermally modified hemlock for $67k offset by a CERB operating grant of $50k. 5. Insurance renewals occur twice a year with property insurance renewing in July of each year and liability insurance renewing in October of each year. The property insurance premiums increased $34k or 13% in July of Because the nation has experienced the largest insured loss in recorded history over the last year due to catastrophic natural disasters, the majority of the increase is attributed to a 9% increase for earthquake & flood premiums. The remaining 4% increase is due to rising property values in general and the fact that the Port insures for replacement cost. The crime insurance premiums remained flat while the liability insurance premiums increased $3k or 2% in October a. Property insurance is distributed to the Divisions based on the value of the land, improvements and buildings. b. Liability insurance is distributed based on the pro rata share of operating expenses. c. Other insurance is charged to the Divisions using an appropriate base (Auto insurance is based on vehicles; Airport Liability charged to Airport, Skiff (owned small vessel) insurance charged to Log Yard). 6. Washington State Auditor s Office Annual Report Audit and Single Federal Audit will be approximately $46k ($42k audit work plus $4k travel). 7. District 3 (West) Commissioner s term expires at the end of Election costs paid to the Clallam County Auditor s Office for both the primary and general elections are based on the number of items on the ballot. Staff estimates the 2019 expense to be approximately $22k. 8. All department contingency is budgeted at $150k. 9

12 Port of Port Angeles Revenues & Expenses by Department **PRELIMINARY** Projected vs 2018 Budget - **PRELIMINARY** REVENUES 2018 Projected Over (Under) Budget Marine Terminal $ 3,848,992 $ 332,565 9% % Comments 2018 Budget Cargo vessels (Log exports), chip handling volume and long term layberth dockage results in favorable variance 3,516,427 Marine Trades Area $ 446,368 $ (14,465) (3%) Boat Yard revenue slightly lower than planned 460,833 Log Yard $ 2,132,625 $ (199,149) (9%) Reduced usage of LY handling services (export volume) and lower barge log volume than anticipated (Water Services) results in decreased revenues. 2,331,774 Airport $ 1,631,936 $ 36,475 2% On budget for the year 1,595,461 Marinas $ 2,842,379 $ 210,446 8% Rental Properties $ 114,016 $ 38,674 51% Total Op Revenues $ 11,016,317 $ 404,547 4% Increase in recreational fishing oppurtunities results in additional moorage & fuel sales Increase is due to current lease adjustments & new additions for properties not classified in other LOB's. Higher due to Log Exports through MT and moorage/fuel sales at the Marinas. 2,631,933 75,342 10,611,770 Page 1 of 1 10

13 Port of Port Angeles Revenues & Expenses by Department **PRELIMINARY** Projected vs 2018 Budget - **PRELIMINARY** EXPENSES 2018 Over (Under) % Comments 2018 Budget Projected Budget Marine Terminal $ 891,255 $ 23,575 3% On budget for the year 867,680 Marine Trades Area $ 287,501 $ (80,444) (22%) Log Yard $ 1,543,796 $ (118,167) (7%) Airport $ 1,038,471 $ (288,666) (22%) Marinas $ 1,523,385 $ 32,912 2% Rental Properties $ 151,549 $ (14,980) (29%) Marine Trades Development consulting planned for 2018 did not take place. Reduced log handling services results in lower expenses. In addition, 2018 Budget included a LY Manager. Current staff responsibility shift results in expense savings. Broker services not utilized as planned and FIA approach/tree removal delayed to 2019 Increased usage of Credit Card payment option causes higher than budgeted processing fees; JWM purchase inquiry resulted in use of staff resources & public outreach that was not included in 2018 Budget. Actual labor from Maintenance less than original budget estimation 367,945 1,661,963 1,327,137 1,490, ,529 Business Development $ 226,913 $ (19,831) (8%) Consulting services not utilitzed as budgeted 246,744 Administration $ 2,552,761 $ 2,872 0% Facilities & Mechanical Maintenance estimated to be slightly over budget with an overall offset by Admin expense management 2,549,889 Total Op Expenses $ 8,215,631 $ (462,730) (5%) 8,678,361 Page 1 of 1 11

14 Port of Port Angeles Revenues & Expenses by Department **PRELIMINARY** Budget vs 2018 Projected - **PRELIMINARY** REVENUES 2019 Budget Over (Under) 2018 Marine Terminal $ 3,838,425 $ (10,567) (0%) Marine Trades Area $ 478,540 $ 32,172 7% Log Yard $ 2,204,136 71,511 Airport $ 1,515,172 $ (116,763) (7%) Marinas $ 3,024,892 $ 182,513 6% Rental Properties $ 122,415 $ 8,399 7% % Comments 2018 Projected Cargo vessels (Log exports) unusually high in ,848,992 Increased Travel Lift Pier rates and storage shed rent 446,368 $ 3% Increase in Log Yard water services 2,132,625 Vacancy at AIP offset by rate increases and building option fee 1,631,936 Increase in moorage fees by CPI + 3% - bring marina rates closer to market rates. 2,842,379 Slight increase due to CPI increases and additional tenants 114,016 Total Op Revenues $ 11,183,582 $ 167,265 2% Increases due to Travel Lift Pier rates, Log Yard water services, and increased marina moorage. 11,016,317 12

15 Port of Port Angeles Revenues & Expenses by Department **PRELIMINARY** Budget vs 2018 Projected - **PRELIMINARY** EXPENSES 2019 Budget Marine Terminal $ 1,870,698 $ 979, % Marine Trades Area $ 427,512 $ 140,011 49% Log Yard $ 1,493,714 (50,082) Airport $ 1,440,267 $ 401,796 39% Marinas $ 1,574,965 $ 51,580 3% Rental Properties $ 125,193 $ (26,356) (17%) Business Development $ 505,981 $ 279, % Administration $ 2,708,163 $ 155,402 6% Over (Under) % Comments Projected $1 million T3 dredging will be paid from capital reserves. Last dredge was approx 40 yrs ago. 891,255 Increase in maintenance labor charge outs and materials. Projects vary from year to year. 287,501 $ (3%) Condition Assessment of Coffer Dam occurred in ,543, includes FIA approach/tree removal of $250k for ; Broker Services for vacant Bldg at 1,038,471 Airport Park $176k. Staff allocations increased to reflect admin services; increased cost of goods sold and utility pass through costs. Personnel shift from RP to FIA & ARP causes reduction in total expenses. The shift in reporting is to more accurately capture expenses associated with LOB leases. Increase in consulting services and admin staff allocations due to vacant Director of Business Development position Increase in consulting (info technology, govt affairs, communications, strategice plan) and election costs. 1,523, , ,913 2,552,761 Total Op Expenses $ 10,146,493 $ 1,930,862 24% 8,215,631 13

16 Line DEPT PURPOSE # BUDGET BUDGET BUDGET 2019 Notes 1 MT Dive Inspections ,000 2 MTA Boat Yard Travel Lift Pier 0 15,000 15,000 3 BusDev Marine Trades Development Assistance - MTA See BD 75,000 50,000 Reduced $25k per KG 4 MTA Cathodic Protection Analysis 20,000 0 n/a Completed in LY Condition Asessment of Coffer Dam 0 40,000 n/a Completed in LY Equipment Replacement Schedule n/a n/a 10,000 7 Airport Runway approach/tree removal 0 150, ,000 8 Airport Design services for marketing/public information (Airport portion) 5, ,000 Per Dan, need it in Airport Air service business development - contingency fund No dollars, placeholder 10 Airport Marketing incentive for new passenger service - (if needed will request during year) 105, Expires Dec Airport Airport terminal development - conceptual design 0 20,000 n/a Completed in ARP Broker Services Bldg & 2210 site 125,000 85, ,350 Placeholder 13 ARP Landscape design - north business park 0 10,000 10, Marina Design services for marketing/public information (Marina portion - $5k per marina) 10,000 10,000 10, RP Facilities Marketing 20, ,500 RBA bldg marketing 16 BusDev Port promotional video 0 3,000 0 Staff will complete 17 BusDev Signage - design consultant 0 15,000 0 Staff will complete 18 CRTC Contract for economic development services BusDev (investment from Capital Reserves) 615,000 n/a n/a completed in CRTC - BD promised time converted to cash payout BusDev 92,828 n/a n/a completed in 2017 (investment from Capital Reserves) 20 BusDev 21 BusDev - MTA 22 BusDev Market/Feasibility analysis for Maritime Commerce, Fishing/Seafood & other 25, ,000 MTIP lease analysis, grant writing, recruitment 50, ,000 Reduced $25k per KG Sustainable Harvest, Advanced Wood Products & Other Timber Advocacy efforts PORT OF PORT ANGELES PRELIMINARY - CONSULTING & SPECIAL PROJECTS 30,000 50,000 30,000 Reduced budget since we established a good base in 2018 CERB Planning Project Thermally Modified Hemlock 23 BusDev n/a n/a 67,000 Nov 2018 application and rcf (recycled carbon fiber) Communications Plan - Business development 24 BusDev 15,000 10,000 15,000 Working on estimate portion Slight increase due to Design services for Port Pilot & misc marketing/public 25 BusDev 10,000 10,000 15,000 new communications information (BD portion) plan implementation. 26 Admin Communications Plan - Community outreach portion 15,000 10,000 15,000 Working on estimate 27 Admin Design services for Port Pilot & misc marketing/public information (Admin portion) 10,000 30,000 30, : Added $50k for 28 Admin Govt Affairs/Lobbying for Port 0 50, ,000 federal efforts plus travel 29 Admin Strategic Plan (2017: followup); 2019: create Develop new strategic 7, , plan for Admin LOB analysis follow-up on data (Economic Impact, Marina, MTA, etc.) 5,000 10,000 10,000 Reduced $5k per KG 31 Admin Grant writing assistance (Did not spend in 2017) 25,000 25,000 25,000 Placeholder 32 Admin HR job analysis and market data , Finance Annual Report/Acctg research 5,000 5,000 5, Reduced $10k to zero Purchasing review (base policies, training, check list); Finance 10,000 10,000 0 per KG, in-house counsel (Carryover project, did not spend in 2017 or 2018) will complete 35 GASB 49 Environmental Pollution Liabilities requires Finance a change in methodology to fair value 7,000 7,000 7, Tech Cybersecurity (75% grant funded) 2019: existing grant ended, likely to apply in 2019 for ,000 35,000 0 Grant period ended 2018 TOTAL CONSULTING & SPECIAL PROJECTS 1,242, , ,850 NON-STANDARD EXPENSES (see table below) 287, , ,350 TOTAL 2019 BUDGET LESS NON-STANDARD EXPENSES 954, , ,500 See Community Support for EDC support. 30,000 40,000 40,000 Total 2018 Budget NOT spent $ 255,000 14

17 PORT OF PORT ANGELES PRELIMINARY - EXPENSES: NON-STANDARD Line Dept Non-standard Expenses # BUDGET BUDGET BUDGET 2019 Notes 1 Airport Marketing campaign new air service 105, not spent 2 Airport Runway approach/tree removal 0 150, , not spent 3 ARP Broker Services 125,000 85, , & 2018 not spent 4 Lines 3 & 21 from above - Bus Dev assistance for the BusDev Marine Trades & MTIP lease analysis, grant writing, - MTA recruitment 50,000 75,000 75, & 2018 not spent 5 BusDev CERB Planning Grant n/a n/a 67,000 6 Admin Strategic Plan 7, ,000 Develop new strategic plan for Total Non-Standard Expenses 287, , ,350 Note: Marine Terminal (MT) includes $1 million in Operating Expense for Terminal 3 Dredging. Due to the extensive process, this work will be managed like a project. For details, see Section V - Capital Projects. 15

18 PRELIMINARY - COMMUNITY SUPPORT BUDGET Line COMMUNITY SUPPORT - CASH # BUDGET BUDGET BUDGET 1 Clallam County EDC Contract 30,000 40,000 40,000 2 Forks Chamber of Commerce North Olympic Development Council (NODC) ,000 4 North Olympic Timber Action Committee (NOTAC) Port Angeles Association of Realtors Port Angeles Business Association (PABA) Port Angeles Chamber of Commerce Rotary Clubs & Other Service Groups Sekiu Chamber of Commerce Sequim Association of Realtors Sequim Chamber of Commerce Small Business Development Center (SBDC) 46,000 23,000 23, WA Realtor Association (thru PA Realtor Assc) TOTAL COMMUNITY SUPPORT - CASH 77,890 64,890 76,890 Line COMMUNITY SUPPORT - IN KIND # BUDGET BUDGET BUDGET 1 Facilities Maintenance for CRTC (labor, mtrls, etc) 22, North Olympic Development Council (NODC) - Waived Rent ,208 3 North Olympic Timber Action Committee (NOTAC) waived rent 2,500 2,500 2,500 4 Peninsula College space at CRTC - 12 months of waived rent in 2017 & 2018; partial waived rent in ,100 35,100 29,703 5 Port Angeles Yacht Club (2019 discounted rent) 0 0 TBD 6 Port Angeles Yacht Club ( waived moorage) 2,610 2,610 TBD 7 Sequim Bay Yacht Club ( rent discount begins with Lease renewal) (2019: 50% rent discount) 0 3,816 5,724 8 Sequim Bay Yacht Club (2019: 50% moorage discount) 5,080 3,934 3,361 9 Sequim Bay Yacht Club waived Hendrick's Room Fees 3,888 5,166 5, SBDC (office space) waived rent 6,800 6,800 6, Miscellaneous Fee Waivers & Discounts (2017 actual) 13,144 13,000 13,000 TOTAL COMMUNITY SUPPORT - IN KIND 91,122 73,294 68,462 MEMBERSHIP & DUES POLICY In Resolutions 727 & the Commissioners encourage administrative staff to participate in civic and service organizations as part of the commitment of the Port to serve the citizens of Clallam County. This resolution authorizes staff to be reimbursed for reasonable costs associated with participation in civic Employee Handbook, Section VI.E "Memberships and Dues" includes a list of appropriate civic organizations. Participation in local business and other public service organizations places Port employees in direct frequent contact with other community leaders, thus providing an opportunity to promote the Port while increasing its visibility within the community. Membership deemed to be beneficial to the Port should be submitted as part of the Port's annual budget process. Memberships List:. Economic Development Council(s). Chamber(s) of Commerce. Civic service organizations (Rotary, Soroptimist, Exchange Club, Kiwanis, Lions, United Way). Business organizations (Port Angeles Business Association, Port Angeles Downtown Association). Trade Organizations (NW Marine Trade Assoc., NW Marine Terminal Assoc., Gov't Finance Officers Assoc., WA Public Ports Assoc.) This list is not inclusive and may be modified by the Executive Director with notification to the Commission. VIII

19 PRELIMINARY - MEMBERSHIP BUDGET Line DEPT PROFESSIONAL # ORGANIZATION (alphabetical order) BUDGET BUDGET BUDGET 1 BD Aerospace Futures Alliance (AFA) 0 2, FIA Aircraft Owners & Pilots Association FIA American Association of Airport Executives ADMIN American Association of Port Authorities (AAPA) BD American Composites Manufacturers Association (ACMA) FM American Public Works Association (APWA) ADMIN American Forest Resource Council RP Building Owners & Mgrs Association International (BOMA) 0 1, RP Certified Commercial Investment Member (CCIM) FIA Clallam County Pilots Association ADMIN Dynamics SL User Group ADMIN Engineering License ADMIN Government Finance Officers Association (GFOA -3) ADMIN International Living Future Institute MT Marine Exchange of Puget Sound ADMIN Miscellaneous Memberships ADMIN Municipal Research & Services Center (MRSC thru WPPA) FIA National Business Aviation Association (NBAA) BD North Olympic Development Council (NODC) - formerly: Peninsula Development Authority/Resource Conservation & 1,000 1,000 1,000 Development District, the two merged. 20 MT Northwest Marine Terminal Association (NWMTA) 1,020 1,020 1, MTA Northwest Marine Trade Association (NMTA) ADMIN Olympic Region Municipal Clerks Association BD Pacific Northwest Aerospace Alliance ADMIN Pacific Northwest Waterways Association 1, ADMIN Society for Human Resources Management (SHRM) ADMIN Washington Agriculture & Forestry Leadership Program FIA Washington Airport Managers Association ADMIN Washington Bar Association n/a n/a BD Washington Clean Tech Alliance 2, ADMIN Washington Finance Officers Association (WFOA -3) ADMIN Washington Maritime Federation Free ADMIN Washington Public Ports Association (WPPA) 18,009 17,981 18, Washington Public Treasurers Association (WPTA - 4) Note: ADMIN Name change in 2018, prior name was Washington Municipal Treasurers Association (WMTA) TOTAL PROFESSIONAL ORGANIZATIONS 31,289 32,410 28,235 VIII

20 Future Agenda Items Commission Meeting 10/16/18 Special Commission Meeting October 23, 2018 at 8:00am (Special Commission Meeting) Budget Work Session Present preliminary operating 2019 budget North Olympic Development Council proposed lease Arrow Marine Lease Performance Security Review October 29, 2018 at 9:00am (Tentative Special Meeting) Tentative budget meeting October 29, 2018 (Joint Port and County Meeting at 11am at the Port) Strategic role of the Log Yard Emergency Preparedness ORCAA report on CoGen plant emissions November 5, 2018 (Special Commission Meeting) Public hearing on 2019 budget and tax levy Introduce budget resolutions Introduce property tax levy November 14, 2018 (Special Commission Meeting) Formal adoption of tax levy and 2019 budget Upcoming Events/Announcements AFRC Board of Director Meeting Dates o December 12, pm meeting, 5-7pm holiday reception Sheraton Hotel Portland Airport Washington Environmental Council October 30, 2018 Cedarbrook Lodge, SeaTac, WA WPPA Annual Meeting December 5-7, 2018 Bellevue Hyatt, Bellevue, WA Future Resolution Investment Policy Sea Scouts Governance: Employee Handbook and resolutions 18

21 Future Joint Meetings 2019 Clallam County o January 28, 2019 from 11:00am to 12:45pm at Port o April 29, 2019 from 11:00am to 2:00pm at BOCC o July 29, 2019 from 11:00am to 2:00pm at Port o October 28, 2019 from 11:00am to 2:00pm at BOCC 2018 Other Joint Meetings o Clallam County EDC Executive Board o City of PA o City of Sequim o City of Forks o Clallam County PUD o Lower Elwha Klallam Tribe o Jamestown S Klallam Tribe o Port of Port Townsend 19