Port of Seattle Regular Commission Meeting

# Port of Seattle Commission — Regular Meeting

**July 14, 2026 · Commission Chambers + Microsoft Teams**

*Present: Sam Cho (presiding), Fred Felleman, Toshiko Hasegawa, Hamdi Mohamed. Commission President Ryan Calkins excused. Staff: Stephen Metruck (Executive Director), Michelle Hart (Commission Clerk), Erica Chung (Commission Strategic Advisor), Eric Johnson (Aviation Real Estate & Portfolio Manager), Aaron Gora (Capital Program Leader), Chris Wimsatt (CFO), Michael Tong (Director of Corporate Budget), Wendy Reeder (Managing Director, Aviation), Sarah Cox (Director, Aviation Environment & Sustainability).*

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**Sam Cho** [0:29]
This is Commission Secretary Sam Cho convening the regular meeting of July 14th, 2026. The time is now 10:30 a.m. We’re meeting in person at the Port of Seattle headquarters building commission chambers and virtually on Microsoft Teams. All commissioners are present and are currently gathered in the executive session room, awaiting the opening of the public meeting. We’ll now recess into executive session to discuss one item regarding potential litigation and legal risks, per RCW 42.30.110(1)(i), for approximately 60 minutes. We’ll reconvene into public session at 12 p.m. Thank you. We are in recess.

**Sam Cho** [1:13]
This is Commission Secretary Sam Cho reconvening the regular meeting of July 14th, 2026. The time is now 12:09 p.m. We’re meeting in person at the Port of Seattle headquarters building commission chambers and virtually on Microsoft Teams. Commission President Ryan Calkins is excused from attendance today. Clerk Hart, please call the roll.

**Michelle Hart** [1:29]
Commissioners in attendance — beginning with Commissioner Cho.

**Sam Cho** — Present.
**Michelle Hart** — Thank you. Commissioner Felleman.
**Fred Felleman** — Present.
**Michelle Hart** — Thank you. Commissioner Hasegawa.
**Toshiko Hasegawa** — Present.
**Michelle Hart** — Thank you. And Commissioner Mohamed. Thank you very much. We do have a quorum established.

**Sam Cho** [1:50]
Excellent. A few housekeeping items before we begin. For everyone in the room, please turn your cell phones to silent. For anyone participating on Microsoft Teams, please mute your speakers when not actively speaking or presenting, and keep your cameras off unless you are a commissioner or a member of staff participating virtually or actively addressing the commission. Members of the public addressing the commission may turn on their cameras when their name is called to speak, and will turn them back off at the conclusion of their remarks.

Please address your request to speak through the chair and wait to speak until you have been recognized. All votes today will be taken by roll call or by general consent so it is clear for anyone participating virtually how the votes are cast. Commissioners will say “aye” or “nay” when their names are called.

We are meeting on the ancestral lands and waters of the Coast Salish people, with whom we share a commitment to steward these natural resources for future generations. This meeting is being digitally recorded and may be viewed or heard at any time on the Port’s website, and may be rebroadcast by King County Television. Please stand and join us for the Pledge of Allegiance.

*[Pledge of Allegiance]*

**Sam Cho** [3:27]
First item of business is approval of the agenda. As a reminder, if a commissioner wishes to make a general comment for or against a consent agenda item, it is not necessary to pull the item — a commissioner may offer general supporting or opposing comments later in the meeting. However, if a commissioner wants to ask questions of staff or have a dialogue on a consent agenda item, it is appropriate now to request the item be pulled for separate discussion. Are there any items to be pulled, or any motions to arrange the orders of the day? Seeing none, the question is on approval of the agenda. Is there a motion to approve the agenda as presented?

**Commissioner** — So moved, Mr. Chair.
**Commissioner** — Second.

**Sam Cho** [4:08]
The motion has been made and seconded. Is there any objection to approval of the agenda as presented? Hearing none, the agenda is approved as presented.

There are no special orders of the day, so we’ll move to the Executive Director’s report. Executive Director Metruck, you have the floor.

**Stephen Metruck** [4:30]
Thank you, Mr. Chair. Good afternoon, commissioners, and welcome to the start of the third quarter of 2026.

Since our last meeting, we celebrated the 250th anniversary — the semiquincentennial — of our nation’s independence. While it was a holiday for the nation, many Port employees and our partners worked through the Fourth of July period to maintain safe, secure, and reliable operations at our gateways. That is especially important during an exceptionally busy time, and I want to thank and recognize our workers for their professionalism and dedication.

We also successfully concluded the FIFA World Cup six-game run in Seattle, even though the U.S. did not win its last game. This was one of the most complex operational efforts in our organization’s recent memory, and it provided non-stop opportunities to gather with partners and community. I know commissioners were out in the community every day, and I enjoyed your social posts and hearing how the region rallied together with thousands of visitors.

For the Port specifically, we experienced significant activity increases that multiply into activity at local businesses across the region. During the tournament, SEA saw three new entries into the top 10 busiest days at the airport, with over 75,000 screened passengers on each of those days. More than 225 Port employees and community volunteers supported tournament operations, delivering a safe, efficient, and welcoming experience while maintaining the high level of service our customers expect. The collaboration across aviation, maritime, public safety, external relations, and our operational teams — integrating with regional, national, and international stakeholders — showcased the Port’s ability to execute a global event while strengthening our reputation as a world-class gateway. The experience, partnerships, and operational knowledge gained will continue to provide lasting value as we prepare for future major events.

Turning to the waterfront: although the FIFA watch party on Pier 62 is packed up and the barge is gone, the waterfront is still buzzing, with cruise operations now 50% through the season. Next week brings even more visitors as we prepare for Seafair. The Port will once again host and welcome visiting military vessels at Pier 66. This year we will host the U.S. Navy’s USS Cincinnati and the U.S. Coast Guard cutter Stratton. Canadian vessels won’t participate this year due to operational commitments, but we still expect a strong showing from our Navy and Coast Guard partners. The annual Parade of Ships is scheduled for July 21st and will feature both visiting vessels and several local Navy and Coast Guard assets. The Coast Guard search-and-rescue demonstration will also return, which continues to be one of the most popular attractions during Fleet Week — and I didn’t add that just because I was a member of the Coast Guard. Public ship tours take place July 22nd and 23rd at Pier 66. As always, security protocols will be in place, and visitors will need to meet federal identification requirements before boarding.

On the aviation front, a major piece of our preparations for the future is our airport master plan. Last week, the Sustainable Airport Master Plan environmental review team reached an important milestone, completing its fifth public hearing, including a special meeting with commissioners to hear community comment. Port staff also facilitated a virtual meeting, eight city council briefings, and continues to brief regional and community groups. These events provide meaningful opportunities for residents to learn about the draft environmental impact statement, ask questions, and submit formal comments. I appreciate the outstanding work of the aviation, environment and sustainability, external relations, legal, and aviation teams, whose preparation and professionalism help ensure a transparent, responsive, and productive public engagement process. We remain committed to an open and transparent environmental review process as we consider community feedback and continue advancing this planning effort.

I also participated in the ribbon-cutting for a new building at the Port — the new Port Construction Services facility. This represents a significant investment in our frontline workforce and long-term operational capability. The facility provides modern workspaces, expanded logistics capacity, enhanced employee amenities, and improved site infrastructure that will better support field operations for years to come. If you had seen the old facilities, you know how much better these are for our employees. This project reflects years of planning and strong collaboration across multiple Port teams, including important support for maritime maintenance.

As we build on these accomplishments, we remain focused on maintaining the Port’s long-term financial strength through disciplined budgeting and thoughtful management of operating expenses. I’ll speak more on this when I introduce the 2027 budget briefing later today.

Turning to today’s meeting: on our consent agenda we have collective bargaining agreements negotiated by our labor relations team, approval of a bond resolution we briefed you on last meeting, authorization for environmental consulting services, and an amendment to a previously approved feasibility study and cleanup effort. For our action agenda, we request additional funds to complete the new United Airlines lounge, and we’ll brief you on our 2027 budgeting process. That concludes my remarks. Thank you.

**Sam Cho** [10:44]
Thank you, Executive Director Metruck. It’s been a busy couple of weeks for you. We’re now on to committee reports. Erica Chung, Commission Strategic Advisor, will provide the report.

**Erica Chung** [10:59]
Good afternoon, Secretary Cho, commissioners, Executive Director Metruck. I have one short committee report today. On June 30th, Commissioners Cho and Mohamed convened the Aviation Committee meeting, where they received two updates: the SEA ground transportation program mid-year update, including the SEA Moves pilot program, and the taxi program. That concludes my report.

**Sam Cho** [11:22]
Great. Are there any follow-up questions regarding the report? Seeing none, we’ll continue to the public comment portion of our meeting. The Port Commission welcomes public comment as an important part of the public process. Comments are received and considered by the commission in its deliberations. Clerk, please display the QR code to our public comment rules of procedure. It is essential that these rules are followed; copies are available at the door.

With that, since we only have three, I’ll call the speakers. Let me get the timer up. Our first public speaker is Alex Zimmerman. Alex, please repeat your name for the record and your topic, and then I’ll start the timer.

**Alex Zimmerman** [12:43]
My name is Alex Zimmerman. I’m speaking about agenda item 11, your budget. This is very important to me. Your budget per year is approximately $2 billion. My question is simple: the people who sit here have zero experience with the businesses they represent. Nobody here has experience with business. This administration doesn’t care, because it never delivers for people. Right now this is stealing money from us. This budget can be cut by 20%, no question. They bring this money to people — Sound Transit is a classic example. They steal from us. King County Housing Authority, for example, spends money for people who don’t have documents —

**Sam Cho** [14:01]
Alex, your comments need to be about the Port, not other topics.

**Alex Zimmerman** [14:06]
Don’t interrupt me. I’m speaking exactly about what I’m thinking about the budget. I’ll give you an example — 20,000 homeless people, and most Americans never had a right to this. It’s like a mafia operation. This is very important. We have a King County public health crisis right now —

**Sam Cho** [14:30]
Alex, this is your second warning. Your comments need to be about the Port of Seattle.

**Alex Zimmerman** [14:39]
Everybody can be sick. All Port people. This is very interesting, because it never happened before. We’re in a new American revolution. We need to clean this chamber of these bandits. Thank you very much.

**Sam Cho** [14:53]
Our next public speaker is — please forgive me if I get this wrong — Bennett Hazelton. Sorry about that.

**Bennett Hazelton** [15:20]
My name is Bennett Hazelton, private citizen from Bellevue.

**Sam Cho** — Your topic today, Bennett?
**Bennett Hazelton** — The chairs again at SEA.
**Sam Cho** — Thank you. Please begin.

**Bennett Hazelton** [15:32]
I was the guy who came in a couple of months ago with a picture of the marble, angular, no-back-support chairs at international arrivals, saying these chairs are so visibly uncomfortable that people are making viral Reddit posts about them around the world. Ninety-nine percent of the airport is awesome; the chairs at international arrivals are not. I said, why don’t you have a room with the spare vinyl and metal chairs that are standard everywhere else in the airport — maybe just make a couple of calls and have people bring some down to international arrivals. My remarks were very politely received.

I was down there a couple of days ago. Still no regular chairs. So — I’m not 100% sure this is allowed — I took about six of my own white lawn chairs from home, carried them down, set them up in international arrivals, and sat back and watched, without steering anybody to them.

In this picture, people’s faces are blacked out, but when people saw these, they filled up first. What are people not using in this picture? The big marble chairs without back support. So again, I’d just like to see somebody making a note on a piece of paper — you can fake it, I can’t tell from here — and maybe make a call and try bringing some chairs down there. In the short term, you could fill some of the empty space between the marble chairs with standard chairs. If the standard ones consistently fill up first, maybe the long-term plan is to move the marble chairs elsewhere to make room for more standard ones.

They are very artistically pretty. I think chairs would be functional; art belongs on the wall. You could move them somewhere else in the airport and make them another exhibit — you could say these used to be the chairs at international arrivals, people kept posting them on Reddit because they looked so uncomfortable, so now they’re on display over here. Thank you.

**Sam Cho** [17:36]
Thank you, Bennett. Our next public speaker is JC Harris. Good afternoon, JC. Please repeat your name and your topic, and then I’ll start the timer.

**JC Harris** [17:46]
Good afternoon. My name is JC Harris. I’m here on behalf of seatacnoise.info today. I did not expect to be here, but I’m suggesting that you extend the SAMP public comment period another 30 days.

My group was initially a bit skeptical of this. Our lens is that we’ve been at this ten years — and frankly, could it have a longer name next time? You should. But the SAMP is essentially a redo from 2018–2019.

However, you may appreciate that management in all of the fence-line cities has less than 48 months of experience. And I don’t just mean the city managers — I mean the planning directors, the people assigned to the Part 150 program.

This is a bit awkward for them. Imagine being an absolute expert as the commander of a battleship, and then being assigned on day one to a submarine. Airports are like nothing else in planning and infrastructure. It would be unthinkable to bring somebody in on day one and assign them this kind of material. It makes people feel bad about themselves, how different it is from the zoning work they’re complete experts in. It takes a long time to get up to speed.

The Port has done its job. People have struggled to understand the basic concept of how you get so much more throughput on the same footprint. It’s hard to overstate — they correlate expansion with 17 million cubic yards of fill dirt. That’s been their experience. It’s taken a long time to get them to understand that you can make this great an expansion without building something.

I think we’re getting to that point, just in the last 10 days. Thirty days, I don’t think, would cut into your schedule. I thank you for allowing me to go a little over time, but I’m starting to see people really come together on this, and I think it would improve the quality of the comments you get by an order of magnitude. Thank you for your time.

**Sam Cho** [20:36]
Thank you, JC. I believe that concludes our sign-ups. Is there anyone else present on the Teams call or in the room who didn’t sign up but wishes to address the commission? If so, please state and spell your name and the agenda item or topic. Seeing none, I’ll ask the clerk to give a synopsis of any written comments received.

**Michelle Hart** [21:11]
Thank you, Commissioner. We have not received any written comments for today’s meeting.

**Sam Cho** [21:16]
Thank you. Hearing no further testimony, we’ll move on. Our next order of business is the consent agenda. Items on the consent agenda are considered routine and will be adopted by one motion; items removed will be considered separately immediately after. Is there a motion to approve the consent agenda covering items 8A through 8G?

**Commissioner** — So moved, Mr. Chair.
**Commissioner** — Second.

**Sam Cho** [21:42]
The motion was made and seconded. Commissioners, please say “aye” or “nay” when your name is called.

**Michelle Hart** — Commissioner Felleman. **Fred Felleman** — Aye. Commissioner Hasegawa. **Toshiko Hasegawa** — Aye. Commissioner Mohamed. **Hamdi Mohamed** — Aye. Commissioner Cho. **Sam Cho** — Aye. Four ayes, zero nays.

**Sam Cho** [22:00]
The consent agenda passes. We have one new business item today. Clerk, please read the item into the record, and Executive Director Metruck will introduce it.

**Michelle Hart** [22:12]
This is agenda item 10A: authorization for the Executive Director to increase the post-IAF airline realignment project budget by $3,752,000 to execute a tenant reimbursement agreement with United Airlines for $15,500,000 to support construction of the Concourse B United Airlines lounge, and to authorize the remaining project budget of $17,352,000, for a total estimated project cost of $158,252,000.

**Stephen Metruck** [22:43]
Commissioners, this project relocates airline operations from Concourse A to Concourse B to accommodate international flights at Concourse A gates. It also includes office space renovations and ticket counter reconfiguration at both concourses. Today’s request completes the final phase of the airline realignment program by authorizing construction of United’s replacement lounge on Concourse B, in the former American Express Centurion Lounge space, and providing the remaining budget needed to finish the overall project. The new lounge fulfills the Port’s commitment under the Signatory Lease and Operating Agreement to provide a like-for-like replacement while supporting United’s successful relocation. The requested increase reflects construction market escalation and final design development, while also providing contingency to bring the broader project to substantial completion. Presenters are Eric Johnson, Aviation Real Estate and Portfolio Manager, and Aaron Gora, Capital Program Leader. Eric, to begin.

**Eric Johnson** [23:50]
Good afternoon, Executive Director Metruck and members of the commission. I’m Eric Johnson, Senior Real Estate Portfolio Manager responsible for the United Airlines account here in Seattle. With me is Aaron Gora, Capital Program Leader for the tenant program. Today’s item is a three-part request: first, a project budget increase; second, authorization to execute a tenant reimbursement agreement (TRA) with United; and lastly, full authorization of the remaining project budget.

Some background and justification. As part of Signatory Lease and Operating Agreement No. 4, the Port provided notice and entered into a joint signature letter for the relocation of United’s preferentially leased gates and operational support space. That relocation was done under the post-IAF airline realignment project and was completed in November of 2025, aligning with the Port’s strategic vision for airline offerings and passenger experience. As required under SLOA 4, the Port is obligated to replace United’s exclusively leased space under a like-for-like condition. The United lounge project is the last component of this multi-year effort. United has now completed design for the like-for-like replacement lounge on Concourse B, and with approval to execute the TRA, United will start construction. Upon execution of the TRA and substantial completion, the Port’s obligation to provide the like-for-like replacement will be complete. I’ll pass it to Aaron for the project details.

**Aaron Gora** [26:02]
Good afternoon, everybody. United’s lounge will be a brand-new two-story buildout providing approximately 7,000 square feet of new leasable space. On the left is the current condition — the vacated space on Concourse B where the old Centurion Lounge used to be before it relocated to the central terminal. On the right is the rendering of the completed lounge, which will boast new viewpoints from both the concourse and mezzanine. United’s brand standards have changed significantly since their original Concourse A buildout. This new lounge will include a full-size kitchen, family rooms, and other essential amenities that support both our lounge strategy at SEA and United’s current brand standards. United also aims to complete a few betterments outside the like-for-like replacement to elevate the lounge experience — the addition of Terzo decorative wall paneling and further ceiling art. The lounge is anticipated to reach substantial completion in December 2027.

Before the cost details: the enabling airline realignment project and the ensuing Concourse B lounge project share one project budget despite having discrete scopes. The airline realignment project has received several commission authorizations since initiation in 2021. As part of those actions, the Port communicated the start of United’s design and informed the commission we would return with future authorization requests to complete that portion and request execution of the TRA. This is that follow-on action.

Today’s first request is to increase the total project budget by $3,752,000. Of that, $500,000 is needed to complete the enabling airline realignment project and replenish Port-controlled contingency — attributed to mitigation of regulated materials and accelerating the project to keep critical-path items. The remaining $3,252,000 is for the Concourse B lounge project, driven primarily by cost escalation associated with construction market conditions and reconciling the design and construction budgets from when the project originally started in 2021.

In 2021, the original lounge budget was estimated at $8 million; today we estimate approximately $21 million to complete the buildout. Of the original $18 million, we’ve only been authorized for $4.4 million so far, so our follow-on ask is authorization of the remaining project funds. Of the approximately $21 million total for the Concourse B lounge, $15.5 million will be set aside for the TRA we’re requesting to execute with United. The remaining $5.7 million comprises Port-controlled contingency, design cost to date, PM and CM soft costs, and other supplemental project costs.

If the commission approves today, the combined total project value increases from approximately $154.5 million to $158.2 million. All in, we request that the budget be increased by $3,752,000, that we execute a TRA with United for $15.5 million, and that we authorize the remaining project budget of a little over $13.3 million — bringing the total estimated project cost to approximately $158.2 million. With that, Eric and I are happy to take any questions.

**Sam Cho** [30:50]
Thank you. Are there any questions from commissioners?

**Toshiko Hasegawa** [30:55]
Quickly — does this project budget also include the second lounge that will go on the A Concourse? Isn’t there a second lounge on A that’s not Delta’s, but more of a SEA club lounge or whatever?

**Aaron Gora** [31:08]
That one is currently out for RFP and is being handled by our airport dining and retail team, so this project budget does not include any capital funds associated with it.

**Toshiko Hasegawa** — Okay, so it’s separate.
**Aaron Gora** — Correct.
**Toshiko Hasegawa** — Good to know. Thank you.

**Sam Cho** [31:22]
Hearing no further questions, is there a motion and a second to approve item 10A?

**Commissioner** — So moved. **Commissioner** — Second.

**Sam Cho** — Sorry, I should have asked. Commissioner Felleman, did you have any questions on this?
**Fred Felleman** — I do not.
**Sam Cho** [31:38]
Thank you. The motion was made and seconded. Is there any discussion or debate on this item? Seeing none, Clerk Hart, please call the roll.

**Michelle Hart** — Commissioner Felleman. **Fred Felleman** — Aye. Commissioner Hasegawa. **Toshiko Hasegawa** — Aye. Commissioner Mohamed. **Hamdi Mohamed** — Aye. Commissioner Cho. **Sam Cho** — Aye. Four ayes, zero nays.

**Sam Cho** [32:02]
The motion passes. Thank you. We are now at presentations and staff reports. Clerk Hart, please read the next item into the record; Executive Director Metruck will introduce it.

**Michelle Hart** [32:15]
This is agenda item 11A: 2027 budget development briefing.

**Stephen Metruck** [32:22]
Commissioners, today marks the beginning of our 2027 budget development process. We do so in an environment shaped by significant economic and fiscal uncertainty — and it’s not just for us. Economic growth is expected to be moderate, although we continue to see demand in port-related industries. Several of our business lines are leveling off and maturing. Inflationary pressures remain, particularly related to energy — those who didn’t know about the Strait of Hormuz know a lot about it now. Federal infrastructure funding is winding down, and evolving trade and geopolitical dynamics continue to create uncertainty for ports and other public infrastructure agencies.

In this environment, our responsibility is clear: continue delivering on our mission, exercise disciplined financial stewardship, and balance today’s operational needs with tomorrow’s capital investments. To achieve our mission, the Port needs to continually make long-term investments that strengthen our regional economy, create opportunity, and serve the public for generations. Accordingly, we are directing a conservative approach for the 2027 budget, working to align expense growth closely with revenue growth and preserve the financial capacity to deliver on the Port’s long-term goals.

This may sound like the glass is half empty, so I want to say that our aviation and maritime business lines remain strong and the Port remains in a strong financial position. But we must be intentional about how we allocate resources so we can bend the curve on the growth of our expenses. This means for 2027 that we will exercise restraint in adding new positions, carefully manage our non-payroll expenses, balance the needs of our capital program with the realities of our operating budget, and continually evaluate where every dollar delivers the greatest value. With that context, I’ll turn it over to the budget team — Chris Wimsatt, our Chief Financial Officer, and Michael Tong, Director of Corporate Budget.

**Chris Wimsatt** [34:51]
Thank you, Executive Director Metruck. Good afternoon, members of the commission. We’ve already covered the environmental scan in detail, so I’ll talk about the key indicators we’re watching as context for the 2027 budget, our principles, strategies, budget approach, and key dates.

We see continued economic and political uncertainty. The effects of trade, immigration, and policy actions are among several factors forming headwinds. Inflation is the key word on our minds as we think about rising energy costs and their persistent effect.

That said, I don’t only have one setting — there’s been some positive news in recent macroeconomic factors. National inflation cooled through June, per data we received yesterday: national CPI is now 3.5%, down from 3.8% the prior month, and local CPI is down to 4.5% from 4.9% year-over-year the prior month. Those are still elevated figures, significantly above Federal Reserve targets, and will still influence the direction of interest rates, but it’s a better story than we were looking at two weeks ago. In addition, we’ve started to see convergence with national unemployment levels locally, due to robust employment growth in the region. One slight concern I’d mentioned last time was that some tech-sector retrenchment hadn’t shown up in the data, so we had perhaps more downside than upside in employment. That hasn’t materialized — more smoke than fire. The largest growth sectors in the latest print were manufacturing (largest by percent), leisure and hospitality, and professional and business services (highest in absolute terms). The big losses have come in financial activities, down 2.7% over the last 12 months; government employment is down about 1%; and construction employment is down about 2%.

Looking at our fiscal health indicators: the two charts at the top show days cash on hand and our cash conversion cycle. Both are shown in green, sending a positive signal. Days cash on hand signifies we have sufficient liquidity — we just wrapped up discussions with bond rating agencies last week for our 2026 bond issuance, and they had positive things to say about our cash on hand. Our cash conversion cycle measures the time to convert a receivable into cash; our goal is 45 days or less, and we consistently hover around 30 days, which is great.

Where we see challenging data is in further compression of our margins. Our operating cash flow margin — net operating income divided by total revenue — continues to be well below pre-pandemic levels and is materially lower today than 12 months ago. Our free cash flow margin, which involves all sources of revenue and all cash that leaves the door, including debt service, is also materially below where it was 12 months ago. That provides the context as we plan for 2027.

Which takes us to the guiding principles that went out in a message from Executive Director Metruck earlier this year. The idea is to realign expense growth with revenue growth. The first goal is to align expense growth with forecasted revenue growth through a modified zero-based budget approach that accounts for contractual increases we don’t have meaningful control over, while further examining all discretionary spend plans to make sure every dollar we plan to spend represents the highest and best use in a resource-constrained environment. We want to set operating expense growth caps tied to forecasted revenue growth, knowing that growth differs across our businesses, so some caps can differ in small ways. All structural cost increases above the target need operational, regulatory, and revenue justification — any addition of new structural expense is an extraordinary situation requiring extraordinary justification.

The 2027 budget strategies: review and prioritize operational needs to limit the rate of expense growth. The goal is not to cut, but to reduce the rate of growth and bend the cost curve so we can restore and begin building capital capacity. Review the need to fill all vacant positions, and as positions become vacant, examine whether there’s an opportunity to reallocate them to a higher purpose. Limit the growth of new FTE positions to roles that support revenue growth, economic development, efficiency measures, or safety and compliance. Assess the affordability of capital plans given increased inflation and revenue risks and the pressure on capital capacity we’ve experienced over the last several years. And overall, strengthen our focus on sustainability, adaptability, and resiliency in spending and business plans. With that, I’ll turn it over to Michael Tong.

**Michael Tong** [41:38]
Thank you, Chris. Good afternoon. Next slide, please.

**Fred Felleman** [41:41]
Excuse me — I have my hand raised.

**Sam Cho** — Go ahead, Commissioner Felleman.

**Fred Felleman** [41:49]
Thank you. We’ve had a record cruise season year after year. The Seaport Alliance basically has fixed long-term leases, and we had the settlement with T-30, which was a boost, and the airport achieves record numbers. So help me understand where the revenue shortfalls are coming from.

**Chris Wimsatt** [42:15]
We have seen persistent revenue growth year over year. The real issue is that the rate of growth in expenses has outpaced the rate of revenue growth, and that has led to the erosion of capital capacity. While cruise is certainly a growth story on the maritime side, it’s one of few growth stories there, and at the airport we’ve seen muted, weak non-airline revenue growth — non-airline revenue hasn’t kept pace with passenger traffic over the last 12 months. But the real crux is that expense growth has outpaced revenue growth — not that revenue isn’t growing — and that’s primarily driven by FTEs. FTEs are the largest structural cost driver we have. Since 2019, we’ve added about 20% to our FTE count, and there hasn’t necessarily been a 20% increase to inflation-adjusted revenue to account for that.

**Fred Felleman** — Thank you for the clarity.

**Michael Tong** [43:27]
Let’s move to the next slide. Here are some key budget issues and considerations for the 2027 process. We expect very moderate passenger growth at SEA based on the initial estimate, and, as Chris mentioned, inflation remains well above the long-term average and the 2% Fed long-term target. For the COLA and pay-for-performance increases, we do expect some increase for both represented and non-represented employees, which I’ll go over in the next couple of slides. We also expect a significant health cost increase and some construction increase.

There are also a number of unbudgeted or under-budgeted items from the 2026 budget that we have to add to 2027. For example, the organizational continuity and resilience program — we have spending this year and will have more next year, but we did not add it to the budget when we finished the 2026 budget. Similarly, for the sub-King County/Port committee fund, we have new contracts we expect to execute later this year that increase the overall budget for next year — but those are still within the five-year authorization you approved, which is $14 million, so it’s just a timing issue. We’ll also reveal all the vacant positions as well as some commission priorities and committee programs.

As Chris mentioned, we’re implementing the modified zero-based budgeting approach based on direction from our Executive Director, and we review all expense items by category. On the table side, we review all backfill and vacant positions, especially those vacant more than 12 months. We look at all outside services — the focus is also on construction increases for some outside contracts — and then TBCD and promotional expenses, equipment and supplies, and travel and employee training.

Based on those items, we ask departments to prioritize them as critical, necessary, or desirable, and to review the level of services — whether an item can be eliminated, reduced, maintained, or needs to be increased.

Our process: finance and budget provided templates including all the requisitions a department has, as well as budget items based on the 2026 budget in April. Departments review those based on priorities and level of services; we review the files we get back, do some follow-up, summarize the information, and use it to look at each division or central services. We use that for department budget target setting. For central services, we send those budget targets based on the department review files we received, making some adjustments — removing all one-time items, adjusting budget transfers and media approvals, and other items identified in the modified zero-based process — and sent it out last Friday. The other operating divisions use a similar approach; timing is a little different, but we’ve all adopted the modified zero-based budgeting.

Here’s the proposed 2027 budget target and a few of the charges we want to make sure you’re aware of. For aviation, EDD, and central services, the budget target is set at 4.5%; maritime is at 5%, mainly because they expect slightly higher revenue growth and utility costs will be double-digit next year. For non-represented employees, we expect a 2% COLA increase and 1.76% for pay-for-performance. For benefit costs, especially medical, we expect a significant increase. The other thing I mentioned is the large increase in some contractual costs — for example, jail costs and coffee, and some ICT software contracts, most of which are based on contractual increases — and the unbudgeted or under-budgeted items I mentioned earlier.

In terms of controlling costs, some strategies we’ve been deploying: on the payroll side, we review all overtime costs and, as Chris mentioned, all vacant positions, and ask departments to repurpose any vacant position or function where possible. On the non-payroll side, we review expiring contracts for potential savings and all discretionary spending for budget savings, and we try to limit all new FTE requests as much as possible.

For new budget requests, anything above the baseline budget — which is very conservative — we send out the department budget target and ask departments to follow it. Anything beyond that requires departments to submit a new budget request form, due by the end of this month, July 31st. That will be part of the executive department budget review in mid-August, after which we’ll look at it comprehensively and holistically across all new budget requests and make decisions. Again, any new budget request, function, or expense above the initial department target will be considered extraordinary and requires extraordinary justification — that’s the message we sent to departments.

Here’s a quick budget overview. Both our Executive Director and Chris covered the environmental scan; we’re in budget preparation now. Baseline budget entry will be done by the end of this month, followed by internal department review, division review, and review with the Executive Director and ELT. After that, I’ll provide the proposed budget and a budget study session in late September and early October, and then we’ll go through the final budget process to file the statutory budget and finish the final budget document.

Here’s a bit more detail on some key dates — I won’t go over each, but we started the conversation with the resources-conscious and tax-levy scenario analysis back in March, followed by a number of budget discussions and follow-ups, including today’s budget development briefing. We’ll go through budget preparation and review with the Executive Director in September and October, then get back to you for the central services budget and portwide initial budget in September (the 22nd), followed by the operating division operating and capital budget briefings, and then introduction and adoption of the budget in November. With that, we’ll be happy to answer any questions.

**Sam Cho** [53:13]
Thank you, Michael, and thank you, Chris. I’ll open it up to questions or comments from commissioners. Commissioner Felleman, any questions?

**Fred Felleman** [53:30]
Yes, thank you. I was interested in the doubling of the electrical cost in maritime. Is that what you were saying to account for the 5%?

**Chris Wimsatt** [53:43]
I believe it’s about 10% — not double, but double-digit. And to be clear, one thing I want to be careful about is that I don’t want to control the budget target for expenses, because our budget target needs to answer to our revenues, not necessarily to expense pressures. The driver for the 5% in maritime is really based on the revenue forecast and the sustainability of the capital and operating plan at a 5% level ongoing. The fact that it also helps accommodate growth in utility costs is an added bonus.

**Fred Felleman** [54:17]
Okay. I understand electrical rates are only going up, and I’d assume our primary electrical costs come from shore power for cruise, or the airport as well. On the cruise side, are any of those costs passed on to the lessees, or is that something the Port absorbs?

**Chris Wimsatt** [54:50]
Shore power costs are passed along to the cruise lines. The utility numbers in our budget would be based more on our own electrical costs and increased usage of our own facilities, but shore power costs are all passed on to the cruise lines.

**Fred Felleman** — So whatever the market rate is at the time, we pass the bills through at the rate we pay?
**Chris Wimsatt** — Yes.

**Fred Felleman** [55:20]
That’s great. One other thing — it is disappointing, and I know you’ve discussed this before, that one of the great improvements at the airport are the dining and retail facilities. Anybody would agree they’re among the best you can encounter, but they’re not being utilized to the level we were counting on. It’s been explained somewhat as a reflection of the economic health of the broader region. I’m wondering how much we can specifically do some additional promotion, especially for the evening flights — the mornings and evenings are the busiest times, but for the evening flights, maybe promote getting there early and benefiting. Similarly with our art program, I’m concerned people are just rushing to the gate and not smelling the roses along the way. To the degree this is a challenge, I hope we can make sure people know about the facilities we offer, because they really are wonderful.

**Wendy Reeder** [56:25]
Commissioner Felleman, thank you. Wendy Reeder, Managing Director at the airport. We can take a look at doing some marketing — I think that makes a lot of sense. I’ve also talked to our dining and retail team about making sure we’re doing surveys to ensure we’re reaching the market passengers are looking for, since what people want changes. We’re also doing surveys regarding the lounges — they’re a huge positive for airports now, but do they take away from what dining and retail are doing? That’s something we need to look at as well. More to come, but I certainly appreciate your comments.

**Fred Felleman** — Thank you. We could be competing with ourselves. I appreciate that.

**Sam Cho** [57:12]
Commissioner Mohamed.

**Hamdi Mohamed** [57:19]
Thank you. Thanks for the presentation — it’s really helpful. I understand the guidance for FTEs in order to manage the budget. What I was wondering is whether there’s some guidance or oversight around consultant contracts provided to departments. In some cases, consultant costs can be significantly higher than an FTE, and some consultant contracts run for a number of years or are consistently renewed, so you have one firm you’re seeing over and over. It might even be cheaper — or save cost for the organization — to bring on an FTE versus a consultant’s contract that’s consistently renewed. Is there guidance or some oversight measures being put in place regarding that?

**Stephen Metruck** [58:13]
Commissioner, I’d be glad to start, and let Chris chime in. That’s part of the process of doing that cost analysis. As you pointed out, sometimes you may pay more for a consultancy in the short term, but it doesn’t add to your FTE count over a longer period — you have to do that calculation just as you said. So in the process of evaluating the mixture of the workforce we have — FTE versus consultant — we should be able to, in that zero-based (not completely, but zero-inspired) approach, measure that and see if it makes sense. Going forward, that’s a good thing to really look at, both the short-term and longer-term impacts.

**Hamdi Mohamed** — That’s helpful. Thank you.

**Chris Wimsatt** [59:04]
Certainly. I’d say the nature of the flexibility provided by a consultant contract will naturally make those the first sources of attrition in a constrained environment like this, so they’ll certainly be examined as part of the zero-based process.

**Michael Tong** [59:20]
I’ll add that, because outside services are the largest part of the non-payroll cost, we do itemize all the consulting costs, and we asked departments to review those. In some cases they can be eliminated or reduced; some are one-time or limited-duration support. So we did review those item by item.

**Toshiko Hasegawa** [59:44]
Chris, a quick question. I think I saw in your earlier slides that our net free cash flow margin target is just below 40% — 38%. Is that right?

**Chris Wimsatt** — Yes.
**Toshiko Hasegawa** — And is that an industry benchmark? I’m curious.

**Chris Wimsatt** [1:00:05]
No, that’s not an industry benchmark — that’s based on previous experience. What we did was take a look at the free cash flow margin from 2010 forward, and when we saw the trend line break, we looked at the line of best fit, and it fit around 38%. The idea is that if we can be flexible in those goals, then as we meet a goal we can identify a new one to optimize for capital capacity. 38% is a high number, but it does include cash inflow from the passenger facility charge, for example, which is frequently banked to be used to pay future debt service. It also includes cash flow from the customer facility charge and from investment income, so there are a lot of different sources, which artificially inflates that number because a lot of that cash is held to pay future debt service.

**Toshiko Hasegawa** — Got it. That makes sense. Thank you.

**Sam Cho** [1:01:04]
I think that concludes our business meeting agenda for the day. Are there any closing comments or motions relating to committee referrals from commissioners?

**Toshiko Hasegawa** [1:01:28]
I just wanted to acknowledge that we did a special meeting last week and heard from members of the public. I took copious notes, and we heard about a lot of different themes relating to the Sustainable Airport Master Plan and the SEA process. I was wondering — perhaps it’s not a referral to committee, but there were themes such as a request to explore recurring mitigation to cities, opportunities for lobbying the FAA for certain regulation changes, or taking a look at specific impacts. For example, somebody mentioned South 146th Street. What are staff’s ideas on how we could follow up on some of the things we’ve heard?

**Stephen Metruck** [1:02:33]
I’ll be glad to start, Commissioner. We’ve taken very detailed notes on those comments. Some are particularly related to the comment period, and some are outside it, so we’re looking at all of those. Feel free, Sarah, to join in — but we took notes on those, and those specifically related to the comment period we will address in responding to them.

**Sarah Cox** [1:03:06]
Thank you, Commissioner. Sarah Cox, Director of Aviation Environment and Sustainability. That is one of the goals and purposes of the public comment period — to get feedback to help identify, with respect to the environmental review and the projects, the analysis and understanding of impacts from the SAMP near-term projects, as well as what we’ve heard from the community in the potential development of future programs. For example, on noise, something we’ve been advocating for a long time is changes in federal policy. Just announced in the last two days, the FAA is hosting a committee on potential changes for noise. We were planning to coordinate and communicate back with StART on a community member, as well as the Port itself nominating people to be on that committee. So it’s a multifaceted approach.

**Hamdi Mohamed** [1:04:25]
I wanted to ask a follow-up to Commissioner Hasegawa’s question. When there are questions that are not related to the specific projects coming to your team — when they’re providing SAMP comments but there are comments that have to do with other things, not the specific projects — are we managing that differently?

**Sarah Cox** [1:04:57]
That’s something we’re bringing back internally within the organization. It’s also items we’ve communicated out with our respective forums. There hasn’t been a formal structure associated with that in the past, but a couple of good examples of those programs are the land stewardship program and the tree standards we’ve developed and implemented, which are outside this type of regulatory process, or the sound insulation repair and replacement program. As we continue to hear that feedback, staff on the side are looking at what future programs could look like.

**Hamdi Mohamed** — I see. Thank you.

**Sam Cho** [1:05:49]
Commissioner Felleman, I’ll give you the floor.

**Fred Felleman** [1:05:54]
Thank you. In keeping with the public hearing, we’ve certainly received letters as well as testimony regarding the desire to have the comment period extended. I want to make sure people are aware that we’ve received those requests, and I’m hoping we’ll be getting back to you shortly. I am sympathetic to that. It is a large document to review, but at the same time, we have to continue to make progress. We will get back to you hopefully very soon so you’ll know how to plan your process going forward. Thank you.

**Sam Cho** [1:06:34]
Executive Director Metruck, any closing comments?

**Stephen Metruck** [1:06:39]
No, Commissioner, thank you for hearing about our budget plans going forward in this environment. Thank you for your input.

**Sam Cho** [1:06:49]
Thank you. Hearing no further comments and having no further business, if there is no objection, we are adjourned at 1:15 p.m.

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