Preliminary “DRAFT” 2019 Projected Year End Highlights September 9, 2019 Melinda Smithson, Dir Finance & Admin and Department Staff Melinda

Agenda 2019 Projected Year End Property Tax Levy Next Steps Assumptions Pertaining to Projections by Line of Business Revenue Projections (1st Draft) Expense Projections (“preliminary” still in process) Property Tax Levy Next Steps Melinda 11/3/2019

2019 Budget vs Projected Revenue Melinda 11/3/2019

Marine Terminal - Revenues Cargo volume lower than budgeted Budgeted 14 vessels and 84.0 million board feet YE Projections are 8 vessels and 43.3 million board feet Reasons for decreases: * Tariffs on Logs Affected YE Volume & Revenues Tanker days less than budgeted Budgeted 60 tanker days YE Projections are 35 tanker days * Vessels going to dry dock in Asia more frequently resulting in less maintenance work on Terminal 1 * Alaska oil production up - result is less out of service days Projected revenues are $1.5 million under budget Karen 11/3/2019

Marine Terminal - Expenses $1 million T3 dredging delayed till 2020 Permit obtained, but too late for in-water work Slightly under budget across other line items Operating Surplus* estimated at $1.5 million Which is $.5 million under budget * Before depreciation and allocations 11/3/2019

Marine Trades Area (MTA) Revenues Expenses Boat Yard revenue higher than anticipated Increase in general boat yard activity New wash down facility revenues not budgeted Projected to be $75k higher Slightly under budget across most line items Projected to be $20k lower Karen Operating Surplus* around $170k 11/3/2019

Log Yard - Revenues Multiple factors resulting in decreased revenues: Domestic mill closures Tariff uncertainty for export logs Tenant reduced Port log yard presence Oregon blowdown reduced domestic barging Barging ceased to LaConner 3% CPI increase in rates as of Jan 1, 2019 was rolled back Sept 1, 2019 to reduce significant impact of tariff increases & timber market conditions Revenues projected to be $1 million which is under budget by $1.2 million Karen 11/3/2019

Log Yard Expenses Supplies, supplemental FM labor and other expenses are under budget due to a decrease in overall activity. Expenses may be under budget by $.5 million Likely to break even or have a small deficit instead of $700k Operating Surplus* 11/3/2019

Operating Deficit* around $300k Airport Aeronautical Revenues Expenses New lease with medical transport company Projected to be $30k higher $250k tree removal project was delayed because trees are growing slower than the model Increased salaries due to maintaining higher level of staffing and community relations outreach Operating Deficit* around $300k 11/3/2019

Airport Rental Property Revenues Expenses One lease terminated early which was partially offset by a new lease and a short carryover of another lease Projected to be $35k under Broker fee not incurred, continued to use staff to market the 1010-1050 building while negotiating with potential tenants Other line items over and under Operating Surplus* around $700k Which is $150k better than budget 11/3/2019

Operating Surplus* around $1.3 million Marinas Revenues Expenses Higher activity related to increased recreational fishing opportunities Projected to be $75k higher Essentially on track with budget Operating Surplus* around $1.3 million 11/3/2019

Maintenance Departments Both Mech Shop and Facilities Maintenance are essentially on track with budget 11/3/2019

Likely to be under budget Administration Salaries under budget due to staff transitions Outside services under budget because several consulting projects were postponed (strategic plan, grant writing, job analysis) $150k contingency was not used Likely to be under budget in expenses by $300k to $500k 11/3/2019

Likely to be over budget Business Development Over budget in outside services because of pursuing opportunities in thermally modified hemlock CLT (cross laminated timber) Increased activity in community and public relations Likely to be over budget in expenses by $200k 11/3/2019

2019 Projected Operating Revenues   2019 Projected Over (Under) Budget % Comments 2019 Budget Marine Terminal $ 2,348,692 $(1,509,734) (39%) Cargo volume was budgeted at 84.0 million board feet based on 14 vessels while 2019 YE projections are for 43.3 million board feet based on 8 vessels. Decrease due in part to trade tariffs. Tanker days were budgeted at 60 days while projected YE is 35 days. 3,858,426 Marine Trades Area $ 554,702 $ 76,162 16% Boat Yard revenue slightly higher than anticipated 478,540 Log Yard $ 945,861 $(1,238,275) (57%) Lower due to domestic mill closures (barge volume) and reduced export log handling - mainly due to trade tariffs imposed on logs originating from the U.S. 2,184,136 Airport $ 369,371 $ 28,184 8% Airport revenues projected to be over budget due to a new structure lease with a medical emergency transport provider. 341,187 Airport Rental Properties $ 1,140,633 $ (33,703) (3%) Slightly under budget due to lease ending early offset by lease held over on a month to month basis 1,174,336 Marinas $ 2,977,109 $ 76,351 3% Moorage revenues projected to be above budget primarily due to favorable recreational fishing opportunities. 2,900,758 Rental Properties $ 111,996 $ (7,000) (6%) Slightly under budget due to lease cancellation 118,996 Total Op Revenues $ 8,448,364 $(2,608,015) (24%) Lower due to volume reductions at the Marine Terminal and Log Yard. 11,056,379 All Operating Expenses likely to be under budget ~ $2 million Op Surplus* likely to be ~ $300k to $500k * Before depreciation 11/3/2019

Non-Operating Activity $2 million additional revenue from environmental insurance settlement 11/3/2019

Property Tax Levy History YEAR INCREASE 2008 1% 2009 Banked 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 Banked Capacity = $60,516 Melinda 2020 Budget: Property Tax Levy 1% or Banked? 11/3/2019

Next Steps Questions? Guidance for staff? Revised Budget Calendar Operating Surplus Target Property Tax Levy Revised Budget Calendar September 18 – Date changed from September 17 2019 Operating Projections Revenues & Expenses; Introduce 2020 Operating Budget Assumptions; Tax Levy Proposal Melinda 11/3/2019