NWSA Transition Update

April 25, 2017

Purpose of Transition

NWSA Charter Section 2.6(d) Separate Existence

The Public Development Authority (PDA) shall do all things necessary to maintain its port development authority existence separate and apart from each Managing Member and any affiliate of any Managing Member, including maintaining its books and records on a current basis separate from that of the Managing Members…and shall segregate the PDA’s assets…

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Background

• Approximately 85% of the homeport of Tacoma gross revenues transitioned to the NWSA.

• Licensed properties included port-operated terminals, breakbulk and auto lines of business.

• Majority of staff from the Port of Tacoma support all or a portion of NWSA related work.

• Less than 20% of the homeport of Seattle gross revenues transitioned to the NWSA.

• SeaTac airport is the fastest growing airport in the nation and a significant focus for homeport staff.

• The majority of revenue transitioned to the NWSA was from long-term leases where the tenant performs the maintenance.

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Transition Priorities

The following transition priorities were established for 2017:1. Determine the organization structure at the completion of

the transition period for the NWSA and homeports.

2. Complete a workspace/HQ needs assessment, followed by a market search for NWSA office space for staff supporting the commercial, operations and support functions.

3. Complete an assessment associated with developing a total rewards program, including an implementation plan.

4. Transition lease administration to the NWSA from the homeports.

5. Support the Port of Tacoma Commission in the search and selection of a CEO for the Port of Tacoma.

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2017 Priorities –Organizations at Post Transition

Two alternatives were considered to achieve the intent of the NWSA charter to become a separate entity:

Alternative 1: Three completely stand alone entities for the NWSA and the two homeports.

Alternative 2 (Recommended): Creation of a separate executive leadership model for the NWSA and the two homeports, which leverages purchasing support services among the three separate entities.

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2017 Priorities –Organizations at Post Transition

Alternative 1: Three completely stand alone organizations:

• Achieves the intent of the NWSA charter• Results in increased staffing and operating costs due to

reduction in synergies:• Estimated increased staffing costs $2 - $3 million annually

• Estimated increased systems costs $4.8 million annually

• Results in increased one-time costs associated with transitioning information technology infrastructure, hardware and software and other facility changes• Estimated one-time costs $16 – $20 million

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NWSAManaging Members

Port of Seattle Commission

Port of Tacoma Commission

CEO CEOCEO

Business & Operations

Public Affairs

Legal/ Support Functions

Alternative 1: Post Transition Organization Overview

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Business & Operations

Public Affairs

Legal/ Support Functions

Business & Operations

Public Affairs

Legal/ Support Functions

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2017 Priorities –Organizations at Post Transition

Alternative 2 (Recommended): Separate Executive Leadership with shared support services:

• Achieves the intent of the NWSA charter• Utilizes support services agreements to ensure clarity of

service expectations and costs• Results in reduced additional staffing costs and

operating costs by leveraging synergies vs alternative 1:• Estimated increased staffing costs $.5 - $1 million annually• Estimated increased systems support $0.1 - $0.5 million

annually• Significantly reduces one-time costs associated with

transitioning information technology infrastructure, hardware and software and facility changes• Estimated one-time costs $1 – $3 million

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2017 Priorities –Organizations at Post Transition Alternative 2 (Recommended): Separate Executive Leadership with shared support services:

Guiding Principles:• Function should reside in the organization that uses

the majority of the service [1]

• Support service has ability to set clear accountability and service levels for ongoing service agreements

• No jobs will be eliminated as part of the transition• Business relationships will be managed to optimize the

performance of the gateway, create role clarity and maximize return on infrastructure investments

[1] Subject to consideration of impact to jurisdictional work

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2017 Priorities –Portfolio ManagementThe Northwest Seaport Alliance (NWSA) vs. Homeports (Seattle/Tacoma) Roles & Responsibilities:

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Guiding Principles:1. Maximize overall performance of the gateway through

efficient management of synergies amongst supply chain partners

2. Optimize return on terminal investments

3. Promote role clarity and organizational efficiencies within the NWSA, as well as between homeports

4. Improve customer experience and satisfaction

2017 Priorities –Portfolio Management

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NWSAFocus: Maritime industry & related cargo support activities

Homeports (Seattle/Tacoma)Focus: Economic development opportunities

Maritime Terminal Operations• Container (International & Domestic)• Breakbulk/ RoRo• Bulk (Grain terminals, Liquid bulk, Aggregates)• Barge• Project cargo• Layberth

Maritime & Cargo Support• Warehouse• Cold storage• Tug operators• Off-dock/Container depot/Chassis storage• Transload • Distribution centers• Trucking facilities & services• Rail facilities & services• Other transportation & logistics uses

• Airport facilities• Air cargo & related services• Air passengers & related

services• Cruise• Marina• Manufacturing• Fishing fleet• Commercial development• Industrial development

Joint Coordination &Management

Customs & Border Protection (CBP)Foreign Trade Zones (FTZs)

U.S. Coast GuardVacant properties

Property Acquisition

NWSAManaging Members

Port of Seattle Commission

Port of Tacoma Commission

CEO CEOCEO

Business & Operations

Public Affairs

Legal/ Support Functions

Alternative 2: Organization at Post Transition

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Business & Operations

Public Affairs

Legal/ Support Functions

Business & Operations

Public Affairs

Legal/ Support Functions

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Commission

CEO

Environmental Stewardship

Public Affairs

Financial & Administrative Management

• Estimated full-time employees still to be determined.

Port of Tacoma Functional Organization –Post Transition

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Executive Administrative

Legal

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Real Estate Management

RemediationHabitat developmentHabitat maintenanceWater Quality

Community engagement

Legislative mattersCommunications

Treasury/Budget/ AccountingHuman ResourcesContractingOther support services

Lease & Property management

Maintenance SecurityEconomic

development

Post Transition Organization – Next Steps

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ActionTargeted

CompletionComments

Hire Port of Tacoma CEO By end of 2017 Filling CEO role is necessary to finalize Port of Tacoma organization

Develop 2018 service agreements

August 2017 Prepare to transition support services to NWSA in 2019

Finalize transition of functional groups

January 2019 Timing facilitates a smooth and effective transition

2017 Priorities –NWSA Headquarters Needs Assessment

The NWSA has created a new regionally focused organization:• Current workspace does not meet the long-term needs

of the NWSA

• Resource retained to perform a workforce needs assessment and develop criteria for future workspace requirements (phase 1)

• Managing Member approval required before performing a market assessment of available workspaces to meet the needs of the NWSA (phase 2)

• June public briefing by consultant to discuss scope of phase 1 work

• Targeting fall 2017 for completion of phase 1

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2017 Priorities - Total Rewards Program

The NWSA adopted the benefits and compensation practices similar to the Port of Tacoma during the transition period:

• Recently issued an RFP to retain a consultant to evaluate and recommend a total rewards program

• Focus will be on non-represented workforce at the NWSA and homeport of Tacoma

• Current schedule completes the assessment and development of an implementation plan by end of 2017

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2017 Priorities – NWSA Lease Administration

Lease administration, customer invoicing and cash application is currently purchased from the homeports:

• Identified a recently implemented system that can meet the NWSA’s requirements

• Transition all North Harbor activities by end of 2017

• Currently evaluating resource needs to support the work

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NWSA Transition – Next Steps

The primary next steps are as follows:

• Complete the phase 1 workspace needs assessment

• Complete RFP and selection of a consultant to facilitate the Total Rewards program development

• Complete the lease administration transition to the NWSA

• Develop detailed transition task list in preparation for transitioning additional services into the NWSA in 2019

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