FiscalYear AdoptedAnnualBudget

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1 CityofLosAngelesHarborDepartment FiscalYear AdoptedAnnualBudget AdoptedMay20,2010

2 PORT OF LOS ANGELES ANNUAL BUDGET FISCAL YEAR 2010/2011 As Adopted May 20, 2010 Los Angeles Board of Harbor Commissioners Cindy Miscikowski, President Jerilyn López Mendoza, Vice President Kaylynn L. Kim, Commissioner Douglas P. Krause, Commissioner Joseph R. Radisich, Commissioner Geraldine Knatz, Ph.D., Executive Director

3 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/2011 Adopted Budget Contents INTRODUCTION... 1 HARBOR REVENUE FUND REPORT COMPARATIVE STATEMENT OF OPERATIONS REPORT OF REVENUES REPORT OF EXPENSES MAJOR CAPITAL PROJECTS REPORT... 14

4 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget OVERVIEW Despite persistently challenging economic conditions in 2009, the Port of Los Angeles (Port) maintained its position as the No. 1 cargo gateway to North America. More than 30 percent of the nation s ocean freight moved through the San Pedro Bay complex, making it North America s leading seaport by container volume and cargo value. The global recession hit the Port s customers especially hard during this past fiscal year with container lines, whose business drives the lion s share of Port revenue, estimated to have lost $20 billion. This necessitated several steps that reduced revenue but helped strengthen the Port s relationships with its customers. Among the actions taken in support of the customer base were price breaks in the form of discounts, incentives, rent concessions, and reduced fees. These measures caused the Port to forego approximately $12 million in potential revenue during the current fiscal year, but they also may have contributed to the Port s holding on to its market share among West Coast ports despite aggressive competition. For the year, the Port handled more cargo containers than any other seaport in the United States (U.S.), helping Los Angeles the nation s largest Customs District move more than $272 billion of goods by sea. Still, container volume, which totaled 6.75 million twenty-foot equivalent units (TEUs) in calendar year 2009, was down by 14 percent from the previous calendar year. Estimated shipping revenue for the current fiscal year is $307 million, a decrease of $69 million from the record-breaking 2006/07 fiscal year when 8.65 TEUs were shipped through the Port. The outlook for the coming year is only slightly improved. Some consolidation of the industry has occurred. One industry challenge is that there are too many ships and not enough cargo, which drives down the shipping rates and customer revenue while the economy waits for the return of consumer confidence (and spending). While some improvement is in the forecast for the coming year, a return to container volume levels of 2006 is not predicted for the next several years. Because a decline in revenue was expected and belt tightening measures had been implemented the prior fiscal year, no mid-year transfers of unappropriated funds were made to the Harbor Department s Fiscal Year (FY) 2009/10 Adopted Operating Expense Budget. Although the Port is self-supporting and receives no funds from the City of Los Angeles (City), it is operated by the City of Los Angeles Harbor Department and, as such, has been affected by the financial crisis that has befallen the City. For example, a number of Port employees elected to participate in an Early Retirement Incentive Program (ERIP) initiated by the City, but that did not lead to a reduction in staffing because of the City s move in response to the financial crisis to place general-funded employees into vacant positions at the proprietary departments such as the Port and other special-funded operations. Even in the difficult economic climate, however, the Port in FY 2009/10 maintained an AA bond rating the highest rating of any U.S. port without taxing authority which reflects its strong competitive position. Deep-draft waterways, a large local consumer base and highly desirable intermodal transportation links to regional and inland markets all contribute to the Port s financial strength, as do ongoing expansion projects such as the TraPac and China Shipping terminals. Along with market share retention and stable financial performance in FY 2009/10, the Port continued to help the Southern California region recover from the recession by advancing its Capital Improvement Program (CIP). Six Environmental Impact Reports have been approved since 2006; current Port projects account for an estimated 8,400 construction jobs.

5 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget During the past year, the Port also negotiated San Pedro Bay s first 30-year container terminal lease (with TraPac) under the Clean Air Action Plan (CAAP). The Port continued to aggressively reduce its contribution to air pollution in the South Coast Basin and released the first CAAP Update in April 2010, which includes bay-wide standards aimed at decreasing health risk as much as 85 percent by the year Thousands of older, higher-polluting diesel trucks were banned from the Port through the Clean Trucks Program (CTP) of the CAAP. Through an innovative Clean Truck Incentive Program, the Port has helped spur the purchase of approximately 2,800 USEPA-Compliant 2007 or newer clean trucks. Consequently, harmful air emissions from trucks were reduced by more than 70 percent within 18 months, and the Port was awarded the USEPA s 2009 Environmental Justice Achievement Award. Results of air quality inventories performed by the Port, and results from monitoring stations in and around the Port show continued improvement in air quality. During the past fiscal year, the Port continued to invest in cutting-edge technologies to meet the City s long-term emissions reduction targets and create jobs. Among the steps taken were: Co-founded Port Tech Los Angeles, an incubator for companies developing maritime-related clean technologies; Initiated plans for demonstration of up to five all-electric Balqon drayage trucks assembled at Balqon Corporation s Harbor City plant; Initiated plans for demonstration of hydrogen fuel-cell hybrid electric truck and hybrid electric harbor craft technology; and Continued construction of a one-megawatt solar panel project on the rooftop of the World Cruise Center. In FY 2009/10, the Port adopted the most comprehensive Water Resources Action Plan (WRAP) in the port industry aimed at significantly reducing water pollutant discharges from land, vessels, and the watershed and removing contaminated sediments. Regulatory approval to proceed with the final phase of the U.S. Army Corps of Engineers 13-year, $383 million federal Channel Deepening Project also was secured during the past fiscal year. Expansion at the TraPac and China Shipping terminals, which upon completion will be the cleanest and greenest terminals in the world, also continued to advance. An estimated $320 million was spent on capital projects, and construction was continued or begun on several multi-year projects that will collectively result in more than 19,400 permanent jobs. By closely interacting with customers and responding to their needs, cargo declines were minimized such that market share nationally and on the West Coast was maintained. Approximately $30 million in incentives and discounts was approved, in total, to help customers weather significant business declines, over three fiscal years. About $5 million in incentives has been targeted for FY 2010/11. Extensive state and federal economic stimulus grant applications for infrastructure and environmental initiatives secured an estimated $30 million from the American Recovery and Reinvestment Act. This funded additional projects and allowed the Harbor Department to break ground on the 1.3-mile Harry Bridges Boulevard Improvement Project in Wilmington. More than $1.4 billion in future public waterfront development in Wilmington and San Pedro was entitled ($1.2 billion for the San Pedro Waterfront and $239 million for the Wilmington Waterfront), including entitlements for the future construction of an Outer Harbor cruise facility. 2

6 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget The City of Los Angeles Harbor Department s Adopted FY 2010/11 Budget reflects the twin realities that the shipping industry has just begun a slow economic recovery at the same time the Port faces increased competition from ports in other regions. To help the Southern California region recover from the recession, the Port must retain and grow its shipping business. With financial resources still tight, the Adopted Budget enables the Harbor Department to market aggressively, keep high-priority construction projects on schedule, identify new project funding sources, and focus internally on employee development, communications, and collaboration. Expanding the Port s marketing to an unprecedented degree will include conducting a national search for a marketing director who will be charged with developing a marketing strategy for the coming years. The Department s budget priorities for FY 2010/11 include: Marketing programs that promote and demonstrate the Port of LA (Los Angeles) Advantage with the goal of retaining and growing business in an era that is increasingly competitive for the Port and even more challenging for its customers; An emphasis on internal and external communications to maintain a positive, productive and more collaborative work environment. FY 2010/11 FINANCIAL OVERVIEW The Adopted Budget for FY 2010/11 represents a balanced, fiscally responsible plan with resources dedicated to the Port s primary goals of retaining its status as a premier national economic gateway and building on its record as the leader in environmental stewardship. It was formulated based on certain financial metrics in line with the Harbor Department s Financial Policy, in particular, that a minimum level of revenues would be maintained to ensure a minimum level of debt service coverage, and that a minimum level of cash reserves will be maintained. As such, the Adopted Budget continues to rely on conservative revenue assumptions, including moderate growth in shipping volumes based on tenant input and positive signs of year-on-year growth beginning in February On-schedule continuation of major capital projects, especially the revenue-generating TraPac and China Shipping projects that enable the advancement of important but less revenue-generating projects such as the Wilmington and San Pedro waterfront initiatives; New revenue sources from public and private grants for construction, environmental, economic development, transportation, and security initiatives; A focus on employee development and ways to utilize human resources in the most efficient and effective manner in light of City and Harbor Department budget cuts and staff departures; and The Adopted Expenditure Budget consists of operating expenses of $221.3 million, nonoperating expenses of $37.4 million, and a capital budget of $266.3 million. The Adopted Budget also includes $164.9 million in restricted cash (including future commitments), approximately $6.4 million in balance sheet transactions (e.g., investment income from the Intermodal Container Transfer Facility, Federal and State grant receipts for capital projects, 3

7 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget cash payments on bonds and notes, provisions and accruals, less $20 million in new debt issuance), and $213.4 million in the unappropriated balance (i.e. Strategic Operating Funds and Harbor Operating Funds) representing available resources. interest income and grants related to operations. Overall, the FY 2010/11 Adopted Budget includes total expenses of $258.6 million, a reduction of $43.5 million, or 14.4 percent from the FY 2009/10 Adopted Budget. Salaries and benefits expense for the next fiscal year are estimated at $108.2 million, an increase of $7.7 million, or 7.6 percent, over the previous year's adopted budget. Driving this upward swing are Memorandum of Understanding (MOU) mandated salary adjustments (e.g., Cost of Living Adjustments), increases in pension contribution rates, and staffing levels as the Port absorbs personnel from other City departments into vacancies once held by Harbor Department employees electing to retire under the City s ERIP. The FY 2010/11 Adopted Budget projects total operating revenues of $373.4 million, a decrease of 5.3 percent from the FY 2009/10 Adopted Budget. Shipping revenue is projected to be $320.5 million, representing an increase of approximately 3 percent over last year s budgeted amount. Of this amount, $296 million is anticipated to be generated by wharfage. Anticipated increases in shipping revenues are budgeted to be offset by reductions in other revenue sources. Rental payments of $45.8 million represent a slight decrease from the FY 2009/10 budgeted amount. Receipts from fees, permits, concessions, and oil royalties are projected to be $1.8 million less than budgeted for the current fiscal year. The Clean Trucks Program is projected to be $27.3 million less than the FY 2009/10 Adopted Budget as the program nears completion. The Port s Revenue Budget also includes $17.6 million from non-operating revenues such as Each year the Port makes payments to other City departments for a variety of services, including work performed by the Fire, City Attorney, Public Works, Recreation and Parks, and other Departments. Total expenses for next year are anticipated to be approximately $38.9 million. The Adopted Budget also includes $37.3 million for professional services, a decrease of $2.7 million from the FY 2009/10 Adopted Budget. Other expenses include approximately $4 million for marketing and public relations and $7.4 million for the materials and supplies required for operational administration and the maintenance and upkeep of Port facilities. In addition, the FY 2010/11 Adopted Budget includes $7.7 million for continued implementation of the Clean Trucks Program and $3 million for other Clean Air Action Plan initiatives. 4

8 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget MARKETING With customer retention and attraction among the top priorities for FY 2010/11, approximately $4 million has been allocated for marketing and public relations with an additional $5 million for customer incentives. The Adopted Budget also includes a Marketing Director that together with the Port of Los Angeles Marketing team, will focus its efforts to strategically market the Port of Los Angeles advantage, strengthen relationships with our customer base, gain market intelligence, promote the Port and increase market share by securing new customers and/or business segments. CAPITAL IMPROVEMENT PROGRAM The Adopted Budget includes funding of $235.6 million for the Port s CIP, a 30.8 percent reduction from the previous year. The CIP was sized taking into consideration the debt capacity of the Harbor Department as it seeks to maintain sufficient levels in compliance with its Financial Policy. In summary, the Adopted Capital Improvement Budget includes funding for: TraPac and China Shipping Terminal development projects; Improvements to the World Cruise Center; San Pedro and Wilmington waterfront projects; Security Improvements including the final phase of the Port Police Headquarters construction; Transportation and Infrastructure improvements; and Environmental enhancements. TERMINAL DEVELOPMENT PROJECTS More than 34 percent of the CIP or $97 million is dedicated to enhancing existing terminals. This is in line with the Port s emphasis on capital projects that increase operational efficiencies and revenue capture. The Adopted Budget includes approximately $40 million for the continued development of Berths , the TraPac Container Terminal, and $32.9 million for the development of Berths at the China Shipping Container Terminal. An additional $13 million will go to improving the existing Berth World Cruise terminal. Components of the TraPac expansion project to be funded in FY 2010/11 include $25.9 million for construction of wharf improvements and approximately $12 million for the installation of Alternative Maritime Power (AMP ), which provides ships the ability to run on electric power while in port. Other aspects of the project to be undertaken next year include continued design of the backland, administration building, and near-dock rail yard. The China Shipping expansion project will increase terminal capacity to accommodate throughput of containerized cargo through terminal efficiencies and doubling the facility footprint to 142 acres of backland and 2,500 feet of wharves. 5

9 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget Funding for the China Shipping project is focused primarily on Phase II construction. This includes $15 million for construction of the Berth 102 wharf, in addition to $7.4 million to install AMP at this site. Approximately $8.1 million is budgeted to develop 18 acres of an overall 35- acre backland development component of this project, and $1.1 million is dedicated to improvements to an access bridge at Berth 102. Phase III elements to be designed next year include the Berth crane maintenance building, Berth 100 south extension and the temporary relocation of the Catalina Express facility. The Adopted CIP Budget also includes approximately $13 million in funding for improvements to the Berth World Cruise Center. The overall project includes installation of AMP and general improvements to the interior and exterior of the site, including installation of lighting, fendering, signage, solar panels and video and sound system. Another $937 thousand is budgeted for completion of an Environmental Impact Report for the redevelopment of the American Presidents Line (American Eagle) terminal on Pier 300. This project would modernize this existing terminal and allow it to operate more efficiently. At the same time the development would result in another state-of-the-art green terminal development at the Port. Other major terminal projects to be undertaken include the audit and preliminary retrofit design of a number of marine oil terminal wharves, pursuant to the requirements of the State Lands Marine Oil Terminal Engineering Maintenance Standards. WATERFRONT DEVELOPMENT PROJECTS The CIP Budget for FY 2010/11 includes funding for the continued development of the San Pedro and Wilmington Waterfront projects. The San Pedro Waterfront Project, when completed, will transform over 400 acres of Port property through enhanced recreational opportunities, improved visitor access and development that stimulates the economies of the waterfront communities. Specific improvements to the San Pedro Waterfront project to be undertaken in FY 2010/11 include $54.5 million for continued construction of Phase II of the Cabrillo Marina project. This phase includes the development of a major marina immediately opposite the existing Cabrillo Marina. Project elements include floating docks with boat slips, boater restrooms and shower facilities, public restrooms, visitor and boater parking, and other operational requisites, such as hoists and a launching facility, and aesthetic and structural support elements. Construction on the Southern Pacific Slip enhancement project is budgeted at $1.7 million for next fiscal year. The overall project consists of the design and construction of surface improvements to enhance pedestrian and vehicular access and safety, and a major work of public art. Design will also continue on the San Pedro Waterfront Downtown Harbor project. The Wilmington Waterfront Project will develop approximately 58 acres with recreational and commercial components, including a waterfront promenade, retail space, observation tower and development of a buffer along Harry S. Bridges Boulevard. Wilmington Waterfront project elements to be undertaken next fiscal year include continued construction, in the amount of $22.4 million, on the Harry Bridges Buffer. This project has been designed to provide an audio and visual barrier between the community of Wilmington and the commercial activity generated by adjacent maritime facilities. Total project elements include passive (nonregulated) recreational use landscaping and play areas, restrooms, and fountains. Other features of the buffer include densely planted trees and hills, berms, and retaining walls. 6

10 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget TRANSPORTATION and INFRASTRUCTURE PROJECTS The Adopted Budget for FY 2010/11 includes approximately $25 million for surface transportation projects to facilitate goods movement to and from the Port on major and connecting arteries and $24.6 million for the Channel Deepening project, which will enhance marine commerce. Funding for surface transportation improvements include construction on the Harry S. Bridges Boulevard project and development of an advanced transportation management information system. The Adopted Budget also includes funding for the design of the South Wilmington Grade Separation, I-110/SR 147 Connector Improvement, C-Street and John S. Gibson Access to the I-110, and Berth 200 Rail Yard projects. In addition, approximately $500 thousand is dedicated to the preparation of an Environmental Impact Report for the proposed Southern California International Gateway (SCIG) project. Upon completion, the SCIG will facilitate the efficient movement of cargo to and from the Port. In addition to its commercial benefits, the project will expand cargo movement by rail, which has associated environmental benefits over cargo routed along surface streets or highways. Approximately $25 million is budgeted for the Port s Channel Deepening Program, which will improve navigational commerce through the deepening of the Main Channel and turning basins to -53 MLLW (Mean Lower Low Water), and provide for the beneficial re-use of dredged material at other sites throughout the Port. PORT SECURITY The FY 2010/11 Adopted Budget reflects the Port s commitment to protecting one of the nation s most vital economic hubs. Port security projects budgeted for next year include construction and improvement of facilities as well as development and implementation of new technological systems and devices to augment surveillance capabilities. Approximately $9.5 million is budgeted for completion of one of the last major phases of the new Port Police Headquarters. This project will substantially increase accommodations for the staff, fleet and auxiliary equipment necessary to police and protect Port land, water, and facilities as well as that of neighboring businesses, residents, and communities. Improvements also include installation of stateof-the-art surveillance and emergency operations centers at the new Port Police headquarters and elsewhere in the Port. This includes approximately $1.8 million budgeted for installation of a Port-wide fiber optic network, $4 million for improvements to the Port Police tactical radio communications system, $2 million for a computer aided dispatch and records management system, and $1 million for the Port Police integrated command and control system. In addition, the Adopted Budget includes $1.4 million for the development of a Port Police substation in Wilmington to expand the Port s tactical command and response capabilities. Other funding includes $800 thousand for security enhancements at the Port s main administration building on Palos Verdes Street. ENVIRONMENTAL INITIATIVES The FY 2010/11 Adopted Budget includes funding for a variety of landmark environmental programs and initiatives. These include the Port s CAAP and its sub-elements including the Clean Trucks, Vessel Speed Reduction, and Technology Advancement Programs, all of which are targeted at improving air quality. The Port has also embarked upon another landmark initiative, the WRAP, which seeks to address water quality by targeting water and land-borne sources of pollution. 7

11 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget Other environmental initiatives include a Climate Action Plan, which involves working independently and collaboratively with other national and international ports to help forestall and mitigate deleterious effects to the global climate. The CAAP is in its fourth year of implementation and is ahead of schedule with respect to the goals set forth in the initial five-year plan. In progress is an amended version of the CAAP which will seek to further strengthen the goals of the initial plan. The Port s CTP is a key element of the CAAP and targets major sources of air emissions, primarily through the replacement of older, polluting trucks. Budgeted is $7.7 million, including $4.2 million in incentives. Another $3 million is budgeted for incentives under the Vessel Speed Reduction and Technology Advancement Programs. The Port anticipates spending $1.4 million on water quality projects and initiatives, which includes WRAP and regulatory compliance efforts and biological resources management. Funds will be used towards the development and implementation of a strategic land-use control measure compliance plan and for working with tenants to meet regulatory standards of the Clean Water Act, the Port and other agencies. Sediment control and on-water control measures are also among the goals and milestones for FY 2010/11. Approximately $400 thousand has been budgeted towards Climate Action Plan initiatives, including voluntary tenant water conservation and recycling programs, and evaluating new technologies that reduce carbon dioxide levels. Another $150 thousand is budgeted for international collaboration with other ports on Climate Action Plan and other environmental issues and initiatives. The Adopted Budget also includes $2 million for environmental remediation expenditures for capital and other projects and $3.2 million for the China Shipping expansion community mitigation fund. *For incentives ECONOMIC DEVELOPMENT The Port of Los Angeles is a major job-generator and a driving force of the region s economy. As such, the Port s CIP, for example, will create approximately 3,830 jobs during the next fiscal year, while the Operational Budget is expected to support 885 jobs. The Adopted Budget also includes $175 thousand for Port Tech Los Angeles, a maritime technologies development center that will identify emerging technologies and contribute to incubating new businesses from those technologies that will be applicable in the marine clean technologies environment. These businesses in turn will create new green collar jobs in the region. Beyond the resources identified in the FY 2010/11 Adopted Budget, the Port will seek alternative sources of revenue by pursuing both public and private grants for construction, environmental, economic development, transportation, and security initiatives. Approximately $2 million in new Diesel Emissions Recovery Act (DERA) grant funding has been secured for terminal flex-grid shore side power and emerging technologies projects. In an effort to expand the use of alternate sources of funding, the Port has applied for 8

12 Port of Los Angeles (Harbor Department, City of Los Angeles) Fiscal Year 2010/11 Adopted Budget additional grant money for a diverse range of projects. Close to $20 million in State grant applications are currently in the pipeline for such projects as the South Wilmington separation project and heavy duty zero emission trucks. Once secured, these projects will contribute towards the creation of additional jobs. WORKFORCE DEVELOPMENT and COMMUNICATION In light of City and Harbor Department budget cuts and staff departures due to the ERIP, the Port will lose a significant number of employees with years of collective City and Port knowledge. As such, the Port must seek ways to utilize resources in the most efficient and effective manner possible. The Adopted Budget includes $1.6 million for employee development programs including training, tuition reimbursement and other assistance to ensure a smooth transition and transfer of knowledge and skills as employees retire. Additionally, focus will also be placed on improving both internal and external communications, and maintaining the level of community support garnered for the Waterfront project, and other Port projects, programs, and initiatives. Strategic positions are funded in the Adopted Budget, including a Community Relations Advocate to provide full-time focus on community relations. Additionally, external relations advocacy services are funded to supplement communications and government affairs. The Port will also harness the benefits of web-based communications capabilities to facilitate internal and external communications; $400 thousand has been budgeted for this effort. In summary, the Port is the leading U.S. gateway for international trade and a pioneer in the development of green terminal facilities and clean cargo moving operations. Through its capital projects and initiatives, the Port will undoubtedly continue to play a significant role in the nation s eventual economic recovery, while expanding and managing the Port in environmentally responsible ways. The FY 2010/11 Adopted Budget provides the Port with the resources to maintain its position as the No. 1 cargo gateway to North America within a struggling economy. It also reflects the Port s commitment and investment in the development of its workforce which is crucial to the future success of the Port in implementing and delivering the funded projects, programs, and initiatives for its customers, tenants, community, and stakeholders. 9

13 Harbor Department, City of Los Angeles Fiscal Year 2010/11 Annual Budget (Adopted) HARBOR REVENUE FUND REPORT RECEIPTS AND CASH Actual Adopted Budget Estimate Adopted Budget FY 2008/09 FY 2009/10 FY 2009/10 Description FY 2010/11 $ 415,200,975 $ 326,496,148 $ 363,727,388 Unrestricted Funds Available $ 351,893,470 96,839,492 37,122,334 37,122,334 Restricted Funds-Emergency 37,219, ,175, ,188, ,818,188 Other Restricted Funds (1) 129,540, ,015, ,311, ,940,522 Total Restricted Funds 166,759, ,216, ,807, ,667,910 Total Cash Available 518,653, ,222, ,184, ,881,884 Operating Receipts (2) 373,354,124 23,718,269 40,820,660 21,139,676 Non-Operating Receipts 17,578,442 $ 1,083,157,056 $ 1,132,812,022 $ 943,689,470 Total Receipts & Cash $ 909,585,784 APPROPRIATIONS Actual Adopted Budget Estimate Adopted Budget FY 2008/09 FY 2009/10 FY 2009/10 Description FY 2010/11 $ 99,349,940 $ 100,552,913 $ 96,057,464 Salaries and Benefits $ 108,210,270 3,676,291 4,125,621 4,008,718 Marketing & Public Relations 3,912, , , ,717 Travel Expenses 886,463 31,940,176 39,970,849 33,278,987 Outside Services 37,277,171 8,120,728 7,027,260 7,363,105 Materials & Supplies 7,410,604 36,413,497 32,392,180 39,560,557 City Services 38,928,031 (7,709,197) (7,165,819) (7,121,369) Allocations to Capital (7,000,000) 81,716,703 82,577,908 41,930,506 Other Operating Expenses (3) 31,651, ,142, ,408, ,824,685 Total Operating Expenses 221,276,567 46,516,905 41,662,317 37,742,117 Non-Operating Expenses (4) 37,362, ,659, ,070, ,566,802 Total Expense 258,638,806 9,381,103 21,225,467 19,025,366 Capitalized & Allocated Expenditures 18,200, ,999 2,465, ,000 Land & Property Acquisition - 9,612,524 12,664,369 10,706,456 Equipment 12,451, ,736, ,497, ,537,466 Construction & Capital Improvement 235,622, ,091, ,852, ,574,288 Total Capital Budget 266,275, ,750, ,922, ,141,090 Total Operating & Capital 524,914,333 59,738,878 27,610,795 22,895,162 Balance Sheet Transactions (5) 26,367, (200,000,000) New Debt Issuance (20,000,000) 542,489, ,533, ,036,252 Total Regular Budget 531,281,505-35,056,346 - Future Commitments 33,571, ,489, ,590, ,036,252 Total Adjusted Budget 564,853, ,940, ,186, ,759,748 Restricted Cash 131,342,607 Unappropriated Balance/Balance Carried 363,727, ,035, ,893,470 Forward (6) 213,390,133 $ 1,083,157,056 $ 1,132,812,022 $ 943,689,470 Total Harbor Department Budget $ 909,585,784 (1) Includes Construction Fund, securities lending collateral, China Shipping Settlement Funds, and Community Mitigation Fund - Trapac. (2) Includes $2.6 million in Clean Truck Program Fees. (3) Includes Clean Truck Program ($7.7M), and Clean Air Action Plan Incentives ($3M), Litigation ($5.2M), Utilities($4.9M), Insurance ($3.7M), Telephone ($2.0M), Property Rental/License User Fee ($1M), Equipment Rental- Maintenance and Equipment Rental ($0.7M), Memberships & Subscriptions ($0.6M), and Taxes & Assessments ($0.7M). (4) Includes interest expense, CP liquidity provider fees, debt issuance costs, bond counsel fees and debt related advisory fees. (5) Includes the net amount related to Non-Revenue Receipts such as Investment Income from Intermodal Container Transfer Facility (ICTF) and $38.5 million in Federal and State grant receipts for safety, security and water-quality Capital-related projects, Bond Principal Reduction (Principal payments on bonds), Cash Payments on Benefits, Cash Deferrals, and Provisions & Accruals. (6) Includes $199 million in Strategic Operating Funds as required by the Port's Financial Policy. 10

14 Harbor Department, City of Los Angeles Fiscal Year 2010/11 Annual Budget (Adopted) COMPARATIVE STATEMENT OF OPERATIONS Adopted Adopted Budget Budget FY 2009/10 FY 2010/11 Operating Revenues Shipping Services $ 311,139,447 $ 320,458,905 Rentals 46,584,755 45,846,836 Royalties and Fees 4,133,761 2,359,526 Clean Truck Fees 30,000,000 2,655,000 Other Operating 2,326,050 2,033,857 Total Operating Revenues 394,184, ,354,124 Operating Expenses Salaries & Benefits 100,552, ,210,270 Marketing and Public Relations 4,125,621 3,912,559 Travel 927, ,463 Outside Services 39,970,849 37,277,171 Materials & Supplies 7,027,260 7,410,604 City Services 32,392,180 38,928,031 Allocations to Capital (7,165,819) (7,000,000) Other Operating Expenses* 82,577,908 31,651,469 Total Operating Expenses 260,408, ,276,567 Income from Operations before Depreciation 133,775, ,077,557 Depreciation (89,852,359) (89,045,519) Income from Operations 43,923,309 63,032,038 Non-Operating Revenues 40,820,660 17,578,442 Non-Operating Expenses (41,662,317) (37,362,239) Net Income $ 43,081,652 $ 43,248,241 * For FY 2010/11, includes $7.7M for the Clean Truck Program and $3M in Clean Air Action Plan incentives 11

15 Harbor Department, City of Los Angeles Fiscal Year Annual Budget (Adopted) Report of Revenues (3-Digit) 5/11/2010 Report #201 Actuals Adopted Est. Expenses Budget FY FY FY FY Dockage 6,234,123 6,411,224 5,909,943 5,699, Wharfage 295,286, ,841, ,376, ,350, Storage 75,735 99, Demurrage 226, , , , Pilotage 7,682,959 6,563,774 7,205,144 6,624, Assignment Charges 18,719,545 12,593,271 8,368,417 11,582, Cranes 1,120,051 1,508, , Shipping Services 329,345, ,139, ,989, ,458, Land Rentals 38,875,127 43,394,800 42,910,550 42,515, Wharf & Shed 1,205,129 1,258,789 1,129,134 1,116, Building Rentals 490, , , , Warehouse Rentals 1,796,778 1,443,820 1,698,780 1,698, Rentals 42,367,584 46,584,755 46,276,337 45,846, Fees, Concession, & Royalties 27,843,383 33,953,590 26,471,680 4,904, Oil Royalties 144, , , , Royalties & Fees 27,987,489 34,133,761 26,582,080 5,014, Other Operating Revenue 2,521,434 2,326,050 2,033,861 2,033, Other Operating Revenues 2,521,434 2,326,050 2,033,861 2,033,857 Total Operating Revenues 402,222, ,184, ,881, ,354, Interest Income-Cash Equiv. 17,657,983 10,053,794 14,819,651 6,110, Interest Income 17,657,983 10,053,794 14,819,651 6,110, Interest Income - Notes 1,076,607 30, , , Interest Income - Notes 1,076,607 30, , , Interest Income - Bonds 89, , ,000 1,129, Interest Income - Bonds 89, , ,000 1,129, Investment Income 2,980,412 4,000,000 3,500,000 2,500, Investment Income 2,980,412 4,000,000 3,500,000 2,500, Non-Operating Revenue 1,904,866 26,228, ,185 6,817, Non-Operating Revenues 1,904,866 26,228, ,185 6,817, Other Non-Operating Revenue 8, , , , Other Non-Operating Revenues 8, , , ,000 Total Non-Operating Revenues 23,718,269 40,820,660 21,139,676 17,578,442 Report 201 Total 425,940, ,004, ,021, ,932,566 12

16 Harbor Department, City of Los Angeles Fiscal Year Annual Budget (Adopted) Report of Expenses (3-Digit) 5/11/2010 Report #202 Actuals Adopted Est. Expenses Budget FY FY FY FY Salaries - Regular 58,444,130 60,782,097 57,577,454 61,252, Salaries - Overtime 5,700,939 5,015,147 4,710,991 5,038, Employee Benefits 33,510,463 32,911,815 32,077,637 40,101, Paid Employee Benefits 1,694,408 1,843,854 1,691,382 1,818, Salaries and Benefits 99,349, ,552,913 96,057, ,210, Advertising & Public Relations 2,977,766 3,375,458 3,258,555 3,253, Domestic Trade Rep. 75,287 63,000 63,000 75, Foreign Trade Rep. 623, , , , Marketing & Public Relations 3,676,291 4,125,621 4,008,718 3,912, Domestic Travel 349, , , , Foreign Travel 215, , , , Local Travel 75, ,200 96, , Credit Card Charges -6, Travel Expenses 634, , , , Maintenance Services 3,235,666 7,019,201 6,618,708 8,418, Office Equipment Maint Services 2,610,979 2,516,983 2,510,913 2,646, Misc Professional Services 20,128,244 22,840,960 17,944,693 21,356, Data Processing Services 1,038,507 2,405,653 2,388,468 1,738, Financial Services 4,908,279 5,556,118 4,296,032 3,117, Construction Services 18, , , Outside Services 31,940,176 39,970,849 33,278,987 37,277, Maintenance & Other Supplies 4,704,203 3,382,430 3,753,507 4,076, Admin. & Oper. Supplies 3,416,525 3,644,830 3,609,598 3,334, Materials & Supplies 8,120,728 7,027,260 7,363,105 7,410, City Services 36,413,497 32,392,180 39,560,557 38,928, City Services 36,413,497 32,392,180 39,560,557 38,928, Allocations -7,709,197-7,165,819-7,121,369-7,000, Allocations -7,709,197-7,165,819-7,121,369-7,000, Equipment Rental - Maint 757, , , , Equipment Rental - Non-Maint 70, ,000 80, , Memberships & Subscriptions 687, , , , Insurance 2,913,114 3,627,000 3,037,500 3,672, Telephone 2,102,054 1,889,515 1,886,333 1,975, Utilities 4,175,676 4,545,633 4,284,930 4,909, Claims & Settlements 14,943,367 10,706,700 5,506,700 6,500, Taxes, Assessments, & Fees 341, , , , Provision for Bad Debts Other Operating Expense 55,725,435 59,855,991 25,698,935 12,550, Other Operating Expenses 81,716,703 82,577,908 41,930,506 31,651,469 Total Operating and Admin Expenses 254,142, ,408, ,824, ,276, Depreciation Expense 83,412,559 89,852,359 89,852,360 89,045, Depreciation 83,412,559 89,852,359 89,852,360 89,045, Int. Expense - Notes 128, , ,956 86, Int. Expense - Notes 128, , ,956 86, Int. Expense - Bonds 36,849,592 35,878,644 35,611,548 34,211, Int. Expense - Comm. Paper Int. Expense - Bonds 36,849,592 35,878,644 35,611,548 34,211, Non-Operating Expense Non-Operating Expenses Other Non-Operating Expense 9,538,493 5,675,717 2,022,613 3,064, Other Non-Operating Expenses 9,538,493 5,675,717 2,022,613 3,064,263 Total Non-Operating Expenses 46,516,905 41,662,317 37,742,117 37,362,239 Report 202 Total 384,071, ,923, ,419, ,684,325 13

17 Harbor Department City of Los Angeles Fiscal Year 2010/11 Annual Budget Capital Projects Report Terminals B World Cruise Center $ 11,436,008 B Development (China Shipping) $ 30,906,193 B Development (TraPac) $ 37,913,529 B Development (YTI) $ 1,360,575 B. 258 Development (Al Larson) $ 432,292 B Development (APL) $ 1,171,876 B Development (Maersk) $ 915,059 Marine Oil Terminal Engineering Maintenance Standards (MOTEMS) $ 2,771,566 Miscellaneous Terminal Improvements $ 1,204,343 Transportation Projects TOTAL TERMINAL IMPROVEMENTS $ 88,111,441 Security Projects TOTAL TRANSPORTATION PROJECTS $ 23,826,547 Community TOTAL SECURITY PROJECTS $ 23,687,661 Los Angeles Waterfront $ 78,116,412 Environmental Enhancements $ 500,016 Channel Deepening Program Maritime Services TOTAL COMMUNITY PROJECTS $ 78,616,428 TOTAL CHANNEL DEEPENING PROGRAM $ 24,399,366 Harbor Department Facilities $ 1,212,081 Miscellaneous Projects $ 653,548 Port-wide Capital Contingency Projects $ 21,403,972 TOTAL MARITIME SERVICES $ 23,269,601 TOTAL CAPITAL IMPROVEMENT PROGRAM BUDGET (Less Salaries) $ 261,911,044 Labor Cost $ 16,711,785 TOTAL CAPITAL IMPROVEMENT PROGRAM BUDGET (With Labor) $ 278,622,829 *Less Slippage (15%) $ (43,000,000) ADJUSTED CAPITAL IMPROVEMENT PROGRAM BUDGET $ 235,622,829 *Slippage due to delays in entitlements, permits, and construction historically range from 10% to 25%. FY is estimated at 15%. 14

18 Harbor Department City of Los Angeles Fiscal Year 2010/11 Annual Budget Capital Projects Report Terminals B World Cruise Center $ 11,436,008 The existing World Cruise Center at Berth will see the installation of a 6.6KV AMP; general improvements to the interior/exterior of the terminal including lighting, interior and exterior painting, signage, sound and video system, and traffic flow; and completion of the 1 megawatt solar panel installation. B Development (China Shipping) $ 30,906,193 The Berth (China Shipping) development will develop 1,300' of wharf with AMP, 59 acres of backland, one bridge and two buildings. Construction will continue on 925' of wharf, 18 of the 35 acre backland, access bridge No. 2 and AMP. Design continues on the buildings, remainder of the backland area and south wharf extension. B Development (TraPac) $ 37,913,529 Construction will continue on the wharf improvements at Berth (TraPac) which includes the installation of AMP at B & , 705' of new wharf, and upgrade of approximately 1,022' of existing wharf. Design of the backland, administration building and ICTF continues in FY B Development (YTI) $ 1,360,575 Construction will continue on the HVAC system in the administration building and installation of AMP retrofit at Berth (YTI). B. 258 Development (Al Larson) $ 432,292 The Al Larson Boat Shop Environmental Impact Report continues this fiscal year and completion of the Berth 258 road realignment. B Development (APL) $ 1,171,876 The relocation of Substation No. 2 at the Berth site will start this year. Design of a 41 acre backland and 1,200' of wharf at Berth 306 (APL) will continue. B Development (Maersk) $ 915,059 The electrical modification for the high mast lighting at Berth (Maersk) will begin this fiscal year. Motems $ 2,771,566 The audits and preliminary retrofit design of a number of wharves within the Port will continue this fiscal year. The berths affected are , 163, 164, , , and Work is mandatory in order to comply with State Lands Marine Oil Terminal Engineering Maintenance Standards (MOTEMS). Miscellaneous Terminal Improvements $ 1,204,343 Under wharf slope repairs at various locations throughout the Port and electrical service entrance retrofit at Berth 163 will start construction this fiscal year along with the emergency generator fuel tank replacement at the Badger Avenue Bridge. TOTAL TERMINAL PROJECTS $ 88,111,441 15

19 Transportation Projects Construction will continue on the Harry S. Bridges Blvd. Improvements this fiscal year. Design is moving forward on the South Wilmington Grade Separation, I-110/SR 47 Connector Improvements, John S. Gibson Intersection & NB I-110 Ramp Access Improvements, C Street/I-110 Access Ramp Improvements, and B. 200 Rail Yard. TOTAL TRANSPORTATION PROJECTS $ 23,826,547 Security Projects Construction of the Port Police Headquarters Building, Passenger Complex Perimeter Security, POLA Facility Security Enhancements and the Port Police Interoperable Communication System is scheduled for completion this fiscal year. The POLA Fiber Optic Network Program, Port Police Computer Aided Dispatch and Records Management System, Port Police Tactical Radio Communication Improvements, and Port-wide Loudspeaker and Notification System are scheduled to begin in Fiscal Year Community TOTAL SECURITY PROJECTS $ 23,687,661 Los Angeles Waterfront $ 78,116,412 The Los Angeles Waterfront is envisioned as a catalyst to providing public access along the San Pedro and Wilmington Waterfront and includes specific projects and associated infrastructure improvements. Specific improvements to San Pedro for this fiscal year include the continued construction of Cabrillo Marina Phase II and the start of construction of the Southern Pacific Slip Enhancement. Wilmington Waterfront will see the continued construction of the Harry Bridges Buffer. Design continues on the San Pedro Waterfront Downtown Harbor. Environmental Enhancements $ 500,016 Environmental enhancements include continued work at Inner Cabrillo Beach for water quality improvements, demolition and site restoration at the 249 Cannery Street Steam Plant, and sediment removal at Berth TOTAL COMMUNITY PROJECTS $ 78,616,428 Channel Deepening Program The Channel Deepening Program will deepen the main channel and turning basins to -53' mllw to improve deep draft navigation and maximize the beneficial use of dredged material. Other areas of work include the wharf demolition and landfill at Berth 135, expansion of the Cabrillo Shallow Water Habitat and demolition of existing wharf structures at Berth TOTAL CHANNEL DEEPENING PROGRAM $ 24,399,366 Maritime Services Harbor Department Facilities $ 1,212,081 Harbor Department Facility improvements include the start of construction of a number of projects at Berth 161 including a new paint spray booth, CNG expansion and replacement of the fire system at the Construction and Maintenance Administration Building. Improvements to the Administration Building include new panel/office furniture configuration, backup power generator for Information Systems, 5th floor renovation, and water efficient toilets and urinals in the restrooms. 16

20 Miscellaneous Projects $ 653,548 Projects listed under miscellaneous are not included in any specific program listed above. Some of the projects included are the conley joint improvements at Badger Avenue Bridge, HVAC replacement at the Maritime Museum, Port-wide controlled navigation area signage, fire sprinkler system replacement at Warehouse No. 1, and a number of other projects. Port-wide Capital Contingency Projects $ 21,403,972 This category is for projects which will come up throughout the fiscal year. It includes consultants, services from other city departments and administrative expenses. It also includes funding for deferred maintenance projects for the Construction and Maintenance Division. TOTAL MARITIME SERVICES $ 23,269,601 TOTAL CAPITAL IMPROVEMENT PROGRAM BUDGET (Less Salaries) $ 261,911,044 Labor Cost $ 16,711,785 TOTAL CAPITAL IMPROVEMENT PROGRAM BUDGET (With Labor) $ 278,622,829 *Less Slippage (15%) $ (43,000,000) ADJUSTED CAPITAL IMPROVEMENT PROGRAM BUDGET $ 235,622,829 *Slippage due to delays in entitlements, permits, and construction historically range from 10% to 25%. FY is estimated at 15%. 17

21 Wilmington Waterfront & Transportation Improvements West Basin China Shipping B Cruise Terminal TraPac Berths Improvements Port Police Headquarters Building San Pedro Waterfront & Transportation Improvements Pacific Energy Liquid Bulk Terminal Cabrillo Marina Phase II Main Channel Deepening Project Cabrillo Beach Improvements Capital Improvement Projects 18

22 C Street and I-110 FWY 110 Fwy/47 Fwy/ Harbor Blvd Ramps Interchange Harry Bridges Boulevard South Wilmington Grade Separation Highway/Road Improvement Projects 191

23 425 South Palos Verdes Street, P.O. Box 151, San Pedro, California Tel/TDD: 310-SEA-PORT An Affirmative Action/Equal Opportunity Employer. As a covered entity under Title II of the Americans with Disabilities Act, the City of Los Angeles does not discriminate on the basis of disability and, upon request, will provide reasonable accommodation to ensure equal access to its programs, services, and activities. B Printed on recycled paper _04/10