Port of Tacoma $20,090,000* Limited Tax General Obligation Refunding Bonds, 2017 (Taxable)

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. federal incometaxpurposes.See“TAXMATTERS”herein. In theopinionofK&LGatesLLP,BondCounsel,interestonBondsisnotexcludablefromgrossincomefor BOOK-ENTRY ONLY * Preliminary,subjecttochange. Dated: ______,2017 decision. must readtheentireOfficial Statementtoobtaininformationessentialthe making ofaninformedinvestment This coverpagecontainscertain informationforquickreferenceonly.Itisnot a summaryofthisissue.Investors be madebyFastAutomatedSecuritiesTransferthrough DTCinNewYork,onoraboutSeptember6,2017.* Seattle, Washington,BondCounselandDisclosure tothePort.ItisexpectedthatdeliveryofBondswill The Bondsareofferedwhen,asandifissued,subject toreceiptoftheapprovinglegalopinionK&LGates LLP, County, theStateofWashington,oranypolitical subdivision thereofotherthanthePort. such principalandinterest.TheBondsdonotconstituteadebtorindebtedness oftheCityTacoma,Pierce of thePortareirrevocablypledgedforannuallevy andcollectionofsuchtaxesforthepromptpayment amounts sufficienttopaysuchprincipalandinterestas thesameshallbecomedue.Thefullfaith,creditandresources district subjecttotaxationwithinandasapartofthe tax levypermittedtothePortwithoutavoteofelectorsin interest ontheBondsarepaidfromothersources,itwill makeannualleviesoftaxesuponallthepropertyinPort Port hascovenantedirrevocablyforsolongasanyoftheBondsareoutstandingthat,unlessprincipal ofand adoptedbythe PortonJuly20,2017.TheBondsarelimitedtaxgeneralobligationsofthePort. No. 2017-05-PT The PortisissuingtheBondspursuanttoTitle53ofRevisedCodeWashington,andResolution and theIndirectParticipantsasmorefullydescribedherein. DTC, anddisbursementsofsuchpaymentstotheBeneficialOwnersareresponsibilityDirectParticipants to DTCorsuchnominee.DisbursementsofpaymentsDTC’sDirectParticipantsaretheresponsibility of nominee istheregisteredownerofBonds,paymentsprincipalandinterestonBondswillbemade directly will notreceivecertificatesrepresentingtheirinterestsintheBonds,exceptasdescribedherein.Solong DTC orits be madeinbookentryform,denominationsof$5,000andintegralmultiplesthereofwithinamaturity.Purchasers York (“DTC”).DTCwillactassecuritiesdepositoryfortheBonds.Purchasesofbeneficialinterestsin Bonds will Co.,asnomineeofTheDepositoryTrustCompany,NewYork, Bonds willberegisteredinthenameofCede & of theStateWashington,currentlyU.S.BankNationalAssociation,isregistrarforBonds.Whenissued, the The Bondsaresubjecttooptionalredemptionpriortheirscheduledmaturities,asdescribedherein.fiscal agent Interest ontheBondsfromtheirdateofdeliveryispayableeachJune1andDecember1,commencing 1,2018. debt servicesavingsand(ii)paycostsofissuingtheBondsnotpaidfromotherlegallyavailablefunds Port. portionsofcurrentlyoutstanding PortLimitedTaxGeneralObligationBondstoachieve to(i) refinance (the “Bonds”) The PortofTacoma(the“Port”)isissuingitsLimitedTaxGeneralObligationRefundingBonds,2017(Taxable) Dated: DateofDelivery NEW ISSUE SALE DATEANDTIME—AUGUST24,2017,8:00A.M.PACIFIC

PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 16, 2017

Limited TaxGeneralObligationRefunding Bonds, 2017(Taxable) $20,090,000* Maturity Dates:December1,asshownoninsidecover

See “OTHERMATTERS—Ratings”herein

RATINGS: Moody’s:Aa2 S&P: AA

Port of Tacoma $20,090,000* Limited Tax General Obligation Refunding Bonds, 2017 (Taxable)

Due Principal Interest ** (December 1)* Amount* Rate Yield CUSIP No. 2018 $ 555,000 % % 2019 730,000 2020 740,000 2021 755,000 2022 775,000 2023 795,000 2024 815,000 2025 840,000 2026 865,000 2027 895,000 2028 925,000 2029 960,000 2030 995,000 2031 1,030,000 2032 1,070,000 2033 1,110,000 2034 1,155,000 2035 1,195,000 2036 1,245,000 2037 1,295,000 2038 1,345,000

* Preliminary, subject to change. ** CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (“CGS”) is managed on behalf of the American Bankers Association by S&P Global Marketing Intelligence. Copyright© 2017 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the Port, the Financial Advisor, or their agents or counsel assumes responsibility for the accuracy of such numbers.

No dealer, broker, sales representative or other person has been authorized by the Port to give any information or to make any representations with respect to the Bonds, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Port. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale.

The information set forth herein has been obtained by the Port from Port records and from other sources that are believed by the Port to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Bonds shall, under any circumstances, create any implication that there has been no change in the affairs of the Port since the date hereof.

This Official Statement is not to be construed as a contract or agreement between the Port and purchasers or owners of any of the Bonds.

Neither the Port’s independent auditors nor any other independent accountants have compiled, examined, or performed any additional procedures with respect to the financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the financial information.

The initial public offering yields set forth on the inside cover page hereof may be changed from time to time by the purchasers of the Bonds. The purchasers may offer and sell the Bonds to certain dealers, unit investment trusts or money market funds at yields higher than the public offering yields stated on the inside cover page hereof.

IN CONNECTION WITH THIS OFFERING, THE PURCHASERS OF THE BONDS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

Certain statements contained in this Official Statement, including the appendices, reflect not historical facts but forecasts and “forward looking statements.” No assurance can be given that the future results discussed herein will be achieved, and actual results may differ materially from the forecasts described herein. In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “forecast” and “believe” and similar expressions are intended to identify forward looking statements. All projections, forecasts, assumptions and other forward looking statements are expressly qualified in their entirety by the cautionary statements set forth in this Official Statement. All forward-looking statements inherently are subject to a variety of risks and uncertainties that could cause actual results or performance to differ materially from those that have been forecast, estimated or projected. Such risks and uncertainties include, among others, changes in regional, domestic and international political, social and economic conditions, federal, state and local statutory and regulatory initiatives, litigation, population changes, financial conditions of tenants and/or other users of Port facilities, technological change and various other events, conditions and circumstances, many of which are beyond the control of the Port.

The Port has “deemed final” this Preliminary Official Statement as of its date, except for the omission of information as to offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, maturity dates, delivery dates, and other terms of the Bonds dependent on such matters.

-i-

Port of Tacoma P.O. Box 1837 Tacoma, Washington 98401 Phone: (253) 383-5841 www.portoftacoma.com*

Port Commission Term Expires Connie Bacon, President ...... December 31, 2017 Richard P. Marzano, Vice President ...... December 31, 2017 Don Meyer, Secretary ...... December 31, 2017 Don Johnson, Commissioner ...... December 31, 2019 Clare Petrich, Commissioner ...... December 31, 2019

Executive Leadership Team John Wolfe ...... Chief Executive Officer Don Esterbrook ...... Deputy Chief Executive Officer, Commercial Kurt Beckett ...... Deputy Chief Executive Officer, Operations Erin Galeno, CPA ...... Chief Financial and Administrative Officer Tong Zhu ...... Chief Commercial Officer, Container Bari Bookout ...... Chief Commercial Officer, Non-Container Dakota Chamberlain, PE ...... Chief Facilities Development Officer Jean West ...... Chief Human Resources Officer Dustin Stoker ...... Chief Operations Officer

Bond Counsel and Disclosure Counsel

K&L Gates LLP Seattle, Washington

Financial Advisor

Public Financial Management, Inc. Seattle, Washington

Registrar

U.S. Bank National Association Seattle, Washington

* The Port’s website is not part of this Official Statement, and investors should not rely on information presented in the Port’s website in determining whether to purchase the Bonds. This inactive textual reference to the Port’s website and any other websites named in this Official Statement are not hyperlinks and are not incorporated to this Official Statement by reference. -ii- TABLE OF CONTENTS

Page Page OFFICIAL NOTICE OF SALE ...... iv PORT OF TACOMA FINANCIAL RESULTS INTRODUCTION ...... 1 AND CAPITAL IMPROVEMENT The Port ...... 1 PROGRAM ...... 33 Purpose of the Bonds ...... 1 Port Financial Budget and Year-to-Date Description of the Bonds ...... 2 Results ...... 33 Overview of Security and Sources of Capital Improvement Plan ...... 34 Payment for the Bonds ...... 2 PORT INFORMATION ...... 35 Continuing Disclosure ...... 2 Financial Report Awards ...... 35 Miscellaneous ...... 2 Budgeting Policies ...... 35 SOURCES AND USES OF BOND PROCEEDS ...... 3 Basis of Accounting ...... 35 Sources and Uses of Funds ...... 3 Auditing of Port Records ...... 36 Use of Proceeds ...... 3 Authorized Investments ...... 36 Refunding Plan ...... 4 Risk Management ...... 37 Port Security ...... 37 DESCRIPTION OF THE BONDS ...... 5 Labor Relations ...... 37 General ...... 5 Pension System and Deferred Compensation ...... 37 Optional Redemption ...... 5 Other Post-Employment Benefits ...... 40 Mandatory Redemption of Term Bonds ...... 5 Partial Redemption; Notice of Redemption; MATTERS RELATING TO THE Cessation of Interest ...... 6 ENVIRONMENT ...... 41 Environmental Liability ...... 41 Purchase of Bonds ...... 6 Habitat Mitigation...... 42 Defeasance ...... 6 Allocation of Seaport Alliance SECURITY AND SOURCES OF PAYMENT Environmental Costs ...... 42 FOR THE BONDS ...... 7 Property Tax Pledge ...... 7 INITIATIVES AND REFERENDA ...... 42 Statutory Taxing Authority ...... 7 State Initiatives and Referenda ...... 42 Tax Levy ...... 7 Future Initiatives and Referenda ...... 4 3 Debt Payment Record ...... 8 DEMOGRAPHIC AND ECONOMIC INFORMATION ...... 43 TAX LEVY RATES AND PROCEDURES ...... 9 Assessed Valuation Determinations ...... 9 TAX MATTERS ...... 43 Tax Collection Procedures ...... 10 Certain Income Tax Consequences...... 43 Tax Collection Records ...... 10 ERISA Considerations ...... 44 Principal Taxpayers ...... 11 Qualified Tax-Exempt Obligations ...... 45 DEBT INFORMATION ...... 11 OTHER MATTERS ...... 45 Port District General Obligation Debt Legal Opinion ...... 45 Limitation ...... 11 Litigation ...... 45 Direct and Estimated Overlapping Debt ...... 13 Enforceability ...... 45 Bonded Debt Ratios ...... 13 Continuing Disclosure Undertaking ...... 46 Ratings ...... 46 THE PORT ...... 14 Financial Advisor ...... 46 General ...... 14 Independent Auditors ...... 46 Port Facilities and Services ...... 14 Official Statement ...... 46 Governance and Management ...... 15

THE NORTHWEST SEAPORT ALLIANCE ...... 18 Appendix A — Audited Financial Statements General ...... 18 for the Year Ending Legal Framework ...... 19 December 31, 2016 Funding ...... 20 Appendix B — Copy of Resolution Licensed Properties ...... 21 Appendix C — Demographic and Economic Containerized Cargo ...... 24 Information International Trade ...... 28 Appendix D — Form of Bond Counsel Opinion Seaport Alliance Operating Budget ...... 28 Appendix E — DTC and Its Book-Entry Only Capital Budget and Plan of Finance ...... 30 System Strategic Business Plan ...... 32 Appendix F — Form of Continuing Disclosure Dispute Resolution ...... 33 Certificate Dissolution of the Seaport Alliance ...... 33

-iii-

OFFICIAL NOTICE OF SALE

PORT OF TACOMA

$20,090,000* Limited Tax General Obligation Refunding Bonds, 2017 (Taxable)

ELECTRONIC BIDS for purchase of the Port of Tacoma’s (the “Port”) Limited Tax General Obligation Refunding Bonds, 2017 (Taxable) (the “Bonds”) will be received as follows:

Bid Date: Thursday, August 24, 2017

Bid Time: 8:00 a.m., Pacific Time

Electronic Bids: PARITY Bidding System

The Bonds will be sold on an all-or-none basis. Bids must be submitted electronically as described herein. Each bidder (and not the Port or Public Financial Management, Inc.) is responsible for the timely delivery of its bid. The official time will be determined by the Port and not by any bidder or Qualified Electronic Bid Provider (defined below).

Modification; Cancellation; Postponement. Bidders are advised that the Port may modify the terms of this Official Notice of Sale prior to the time for receipt of bids. Any such modifications will be placed on PARITY® prior to the time scheduled for sale. In addition, the Port may cancel or postpone the date and time for the receipt of bids for the Bonds at any time prior to the opening of the bids. Notice of such cancellation or postponement will be communicated by the Port through PARITY® as soon as practicable. If a postponement occurs, bids will be received at the time and in the manner set forth above on any date, as the Port will determine. Notice of the new sale date, if any, will be given through PARITY® not less than twenty-four hours prior to the time bids are to be received. As an accommodation to bidders, telephonic or email notice of the postponement of the sale date and of the new sale date will be given to any bidder requesting such notice from Peter Shellenberger, Public Financial Management, Inc., telephone: 415-982-5544 or [email protected]. Failure of any bidder to receive such telephonic, email or PARITY® notice will not affect the legality of the sale.

Description of the Bonds

Bond Details. The Bonds will be dated the date of their initial delivery, will be issued in denominations of $5,000 or any integral multiple thereof within a single maturity and will bear interest at such rate or rates as the Port shall fix at the time of sale, payable semiannually on each June 1 and December 1, commencing on June 1, 2018, to their maturity or earlier redemption. Principal will be payable on the dates and in the amounts shown below, except as may be adjusted as described herein.

Maturities. Bidders shall designate whether the Bonds shall be retired on December 1 of each year as serial bonds maturing in such year of as amortization installments of term bonds as provided for below.

* Preliminary, subject to change.

-iv- Due Principal December 1 Amount* 2018 $ 555,000 2019 730,000 2020 740,000 2021 755,000 2022 775,000 2023 795,000 2024 815,000 2025 840,000 2026 865,000 2027 895,000 2028 925,000 2029 960,000 2030 995,000 2031 1,030,000 2032 1,070,000 2033 1,110,000 2034 1,155,000 2035 1,195,000 2036 1,245,000 2037 1,295,000 2038 1,345,000

Adjustment of Principal Amounts and Bid Price

The Port reserves the right to increase or decrease the aggregate par amount of the Bonds following the opening of the bids, such that the Port will receive sufficient proceeds to complete the refunding. The amount of such adjustment will depend upon the interest rates, reoffering yields and underwriting spread contained in the initial bid from the winning bidder, but in no case will the total par amount of the Bonds exceed $21,585,000. The price bid by the successful bidder will be adjusted by the Port to reflect an increase or decrease in the principal amount and maturity schedule for the Bonds, taking into account the interest rates, reoffering yields and underwriting spread contained in the initial bid. The apparent successful bidder will be provided with any adjustments, in writing, by 12:00 noon, Pacific Time, on the date of sale. The Port will not be responsible in the event and to the extent that any adjustment affects the net compensation to be realized by the successful bidder.

Term Bonds

Bidders have the option to designate part or all of the Bonds maturing on or after December 1, 2028 as term bonds subject to mandatory redemption at par, in the years and in the amounts set forth in the serial maturity schedule for the Bonds. Any term bonds so designated must consist of the total principal payments for two or more consecutive years and mature on the latest of such years. If no term bonds are designated, the Bonds will mature in the amounts and on the dates set forth in each of the serial maturity schedules set forth above subject to any adjustments as provided herein.

* Preliminary, subject to change.

-v- Redemption and Purchase Provisions

Optional Redemption. The Bonds maturing on or before December 1, 2027, are not subject to redemption prior to maturity. The Bonds maturing on or after December 1, 2028, are subject to redemption at the option of the Port, in whole or in part (and if in part, with maturities to be selected by the Port) on any date on and after December 1, 2027 at a price of par plus accrued interest, if any, to the date of redemption.

Mandatory Redemption. If term bonds are designated, such term bonds will be subject to mandatory redemption as described under the heading “Term Bonds,” above.

Right to Purchase Reserved. The Port has reserved the right to purchase Bonds offered to the Port at any time, at any price. In such event, the principal amount of any term bonds so purchased shall be credited against the mandatory redemption of such Bonds as set forth in the Official Statement.

Purpose

Depending on market conditions, proceeds of the Bonds will be used to pay the cost of refunding or defeasing all or a portion of the Port’s outstanding Limited Tax General Obligation Bonds, Series 2008B (AMT), and to costs of issuance of the Bonds not paid from other legally available Port funds.

Security

The Bonds are limited tax general obligations of the Port. In Resolution No. 2017-05-PT, adopted on July 20, 2017 (the “Bond Resolution”), the Port has covenanted that it will budget and make annual levies of ad valorem taxes upon all the taxable property within the Port district subject to taxation within and as a part of the tax levy permitted to be levied by the Port without a vote of the electors, in amounts sufficient (together with other money legally available therefore), to pay the principal of and interest on the Bonds as the same shall become due. The full faith, credit and resources of the Port are irrevocably pledged for the annual levy and collection of such taxes and for the prompt payment of such principal and interest. The Bonds do not constitute a debt or indebtedness of the State of Washington or any political subdivision thereof other than the Port.

Book-Entry Only

The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Bonds. Individual purchases will be made in book-entry form only, and purchasers will not receive physical certificates representing their interests in the Bonds purchased. See the Preliminary Official Statement for the Bonds.

Interest Rates and Bidding Detail

Bidders are invited to submit bids for the purchase of the Bonds fixing the interest rate or rates that the Bonds will bear. Interest rates bid shall be in multiples of 1/100 of one percent. No more than one rate of interest may be fixed for any one maturity. Bids must be at least 100% of the par value of the 2017 Bonds. Each individual maturity must be reoffered at a yield that will produce at least a price of 100 percent of the principal amount of that maturity.

Additional Detail. For the purpose of comparing bids only, the interest rates bid being controlling, each bid shall state the true interest cost of the bid determined in the manner hereinafter stated. The true interest cost to the Port will be the rate that, when used to discount to the date of the Bonds all future payments of principal and interest (using semiannual compounding and a 30/360 day basis), produces an amount equal to the bid amount, without regard to the interest accrued to the date of delivery of the Bonds. If there are two or more equal bids and those bids are the best bids received, the Designated Port Representative (as defined in the Bond Resolution) will determine, by lot, which bid will be accepted.

Bidders are requested to provide a list of any syndicate members with their bids or within 24 hours of submitting their bids.

-vi-

Modification of Par Amount Before Bid Opening. Bidders are advised that the Port may modify the total par amount of the Bonds and/or the amounts of individual maturities prior to or following the bidding if the Port so decides (see “Adjustment of Principal Amounts and Bid Price” herein).

Electronic Bids. Bids for the Bonds must be submitted electronically via PARITY® (the “Qualified Electronic Bid Provider”) only. Notice is hereby given that electronic bids will be received via PARITY® until 8:00 a.m., Pacific Time for the Bonds, on August 24, 2017, but no bid will be received after the time for receiving bids specified in this paragraph. For further information about PARITY®, potential bidders may contact PARITY® at (212) 849-5021.

Each bidder submitting an electronic bid agrees to the following terms and conditions:

(i) If any provision in this Official Notice of Sale with respect to the Bonds conflicts with information or terms provided or required by the Qualified Electronic Bid Provider, this Official Notice of Sale, including any amendments issued through the PARITY®, shall control.

(ii) Each bidder shall be solely responsible for making necessary arrangements to access the Qualified Electronic Bid Provider for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Official Notice of Sale.

(iii) The Port shall not have any duty or obligation to provide or assure access to the Qualified Electronic Bid Provider to any bidder, and the Port shall not be responsible for proper operation of, or have any liability for, any delays, interruptions or damages caused by use of the Qualified Electronic Bid Provider or any incomplete, inaccurate or untimely bid submitted by any bidder through the Qualified Electronic Bid Provider.

(iv) The Port is using the Qualified Electronic Bid Provider as a communication mechanism, and not as the Port’s agent, to conduct the electronic bidding for the Bonds. The Qualified Electronic Bid Provider is acting as an independent contractor, and is not acting for or on behalf of the Port.

(v) The Port is not responsible for ensuring or verifying bidder compliance with any Qualified Electronic Bid Provider procedures.

(vi) The Port may regard the electronic transmission of a bid through the Qualified Electronic Bid Provider (including information regarding the purchase price for the Bonds and interest rates for any maturity of the Bonds) as though the information were submitted on the official bid form and executed on the bidder’s behalf by a duly authorized signatory.

(vii) If the bidder’s bid is accepted by the Port, this Official Notice of Sale and the information that is transmitted electronically through the Qualified Electronic Bid Provider shall form a contract, and the bidder shall be bound by the terms of such contract.

(viii) Information provided by the Qualified Electronic Bid Provider to bidders shall form no part of any bid or of any contract between the successful bidder and the Port unless that information is included in this Official Notice of Sale provided by the Port.

All bids received with respect to the Bonds will be considered by the Designated Port Representative on the day bids are received. If the Port accepts a bid, it will be awarded to the successful bidder and its terms will be approved by the Designated Port Representative.

Selection of the Winning Bid

The award of the Bonds and subsequent sale of the Bonds is subject to the Port complying with certain parameters set forth in the Bond Resolution of the Port, including a minimum savings target. The apparent winning bid for the Bonds will be determined by approximately 10:00 a.m. Pacific Time on the date of sale. The Bonds will be sold to

-vii- the bidder submitting a bid in conformance with this Official Notice of Sale that produces the lowest true interest cost to the Port, within the savings target set forth in the Bond Resolution. The true interest cost will be calculated as set forth in “Interest Rates and Bidding Detail,” above. The successful bidder for the Bonds will be bound to purchase the Bonds in the principal amount, at such price, and with such interest rates as are specified in its bid, unless there is an adjustment in the principal amounts of the Bonds, in which case the successful bidder shall be bound to purchase the Bonds in the adjusted principal amounts at the revised bid amount, as described above under the heading “Adjustment of Principal Amounts and Bid Price.”

The Port reserves the right to reject any or all bids and to waive any irregularity in any bid and, if all bids for an offering are rejected, that bond offering may be readvertised for sale. Any bid presented after the time specified for the receipt of bids will not be received, and any bid not accompanied by the required good faith deposit at the time of opening that bid will not be read or considered.

Bid Deposit

All bids shall be without condition and accompanied by a good faith deposit in the amount of $200,000. The good faith deposit shall be by federal funds wire transfer or a financial surety bond. If a wire transfer is used, the successful bidder for the Bonds is required to deliver a good faith deposit in the amount(s) specified above by federal funds wire transfer to the Port by no later than 90 minutes following the successful bidder’s receipt of the verbal award. Wiring instructions will be provided to the successful bidder(s) for the Bonds at the time of the verbal award. If a financial surety bond is used, it must be from an insurance company licensed to issue such a bond in the State of Washington and preapproved by the Port. Such bond must be submitted to the Port’s Financial Advisor prior to the opening of the bids. The financial surety bond must identify each bidder whose deposit is guaranteed by such financial surety bond. If the Bonds are awarded to a bidder using a financial surety bond, then that successful bidder is required to submit its deposit to the Port in the form of a wire transfer as instructed by the Port not later than 3:00 p.m., Pacific Time, on the next business day following the award. If such deposit is not received by that time, the financial surety bond may be drawn upon by the Port to satisfy the deposit requirement. Each good faith deposit in a form other than a financial surety bond shall be returned promptly if the bid is not accepted. The good faith deposit of the successful bidder will be retained by the Port as security for the performance of such bid, and will be applied to the purchase price of the Bonds on the delivery of such Bonds to the successful bidder. Pending delivery of the Bonds, the good faith deposit may be invested for the sole benefit of the Port. If the Bonds are ready for delivery and the successful bidder fails to complete the purchase of such Bonds within 50 days following the acceptance of its bid, the good faith deposit will be forfeited to the Port, and, in that event, the Port may accept the next best bid or call for additional proposals.

Bond Insurance

The Port has not applied for bond insurance for the Bonds. The delivery of the Bonds shall not be conditioned upon the issuance of any such insurance. The Port will not pay any costs associated with supplementing the Official Statement, nor will the Port enter into any additional agreements with respect to the provision of any such bond insurance purchased by the purchaser submitting the winning bid. The Official Statement may not include disclosure of any insurance purchased by the successful bidder, although the Port and its financial advisor will cooperate with the successful bidder to provide an addendum relating to insurance upon successful delivery of the Bonds. Failure of the insurance provider to issue its policy shall not justify failure or refusal by the successful bidder to accept delivery of or pay for any of the Bonds.

Delivery

The Port will deliver the Bonds on the date of closing. Settlement shall be in federal funds available in Tacoma, Washington, on the date of delivery. Closing and delivery of the Bonds is expected to be on September 6, 2017, but the date may be adjusted by mutual agreement.

The Bonds will be delivered to The U.S. Bank National Association, Seattle, Washington, on behalf of The Depository Trust Company in New York, New York (“DTC”) by Fast Automated Securities Transfer in immediately available federal funds of the purchase price, less the amount of the good faith deposit. Within

-viii- forty-eight (48) hours of having its bid accepted, the successful bidder shall provide to the Port such information as Bond Counsel to the Port deems necessary to determine the yield on the Bonds for purposes of Section 148 of the Internal Revenue Code of 1986, as amended. The Bonds are book-entry only in accordance with the letter of representations from the Port to DTC. As of the date of the award of the Bonds, the successful bidder must either participate in DTC or clear through or maintain a custodial relationship with an entity that participates in DTC. The Port will furnish to the successful bidder one transcript of proceedings, in the form of a USB drive. Additional transcripts will be furnished at the successful bidder’s expense.

The approving legal opinion of K&L Gates LLP, Seattle, Washington, Bond Counsel, will be provided to the successful bidder at the time of the delivery of the Bonds. Bond counsel’s opinion will express no opinion concerning the accuracy, completeness or sufficiency of the Official Statement, or other offering material relating to the Bonds. Nor will there be an opinion of Bond Counsel expressed relating to the undertaking of the Port to provide ongoing disclosure pursuant to Securities and Exchange Commission Rule 15c2-12. A no-litigation certificate will be included in the closing documents relating to the issuance of the Bonds.

Ongoing Disclosure Undertaking

In order to assist bidders in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), the Port has undertaken, as specified in the Bond Resolution, to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the final Official Statement.

CUSIP Numbers

It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on the Bonds nor any error with respect thereto will constitute cause for a failure or refusal by the successful bidder thereof to accept delivery of and pay for the Bonds in accordance with the terms of this Official Notice of Sale. All expenses in relation to the printing of the CUSIP numbers on the Bonds will be paid by the Port, but the charge of the CUSIP Bureau shall be paid by the successful bidder.

Official Statement and Other Information

A copy of the Port’s Preliminary Official Statement (with the Official Notice of Sale), dated August 16, 2017, and further information regarding the details of the Bonds may be obtained upon request to the Port of Tacoma, Chief Financial and Administrative Officer, P.O. Box 1837, Tacoma, WA 98401 (telephone: 253-428-8661), or the Port’s financial advisor, Public Financial Management, Inc., 1200 5th Ave., Seattle, WA 98101 (Phone: 415-982-5544).

The Preliminary Official Statement is in a form deemed final by the Port for the purpose of Securities and Exchange Commission Rule 15c2-12(b)(1), but is subject to revision, amendment and completion in a final Official Statement, which the Port will deliver, at the expense of the Port, to the successful bidder not later than seven business days after the Port’s acceptance of the successful bidder’s bid. The Port will deliver no more than 50 copies of the final Official Statement to the successful bidder. Additional copies will be provided at the successful bidder’s expense.

By submitting the successful proposal, the successful bidder’s designated senior representative agrees to file, or cause to be filed, within one business day following the receipt from the Port, the final Official Statement with Municipal Securities Rulemaking Board in an electronic format as prescribed by the Municipal Securities Rulemaking Board.

At the time of the delivery of the Bonds, one or more officials of the Port will furnish a certificate stating that to the best of his or her knowledge and belief at the time of the acceptance of the bid for and at the time of delivery of the Bonds, the Official Statement and information furnished by the Port supplemental thereto did not and do not contain any untrue statements of material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading in any material respect.

-ix- The Port will advise the managing purchaser, by written notice, of any “developments that impact the accuracy and completeness of the key representatives” (within the meaning of Rule 15c2-12) contained in the final Official Statement, which may occur during the period commencing on the date of the acceptance by the Port of the successful proposal and ending on the 90th day next following that date of acceptance, unless the final Official Statement has been filed with each municipal securities information repository, in which event such period will end on the 25th day.

DATED at Tacoma, Washington, this 16th day of August, 2017.

/s/ Erin Galeno Erin Galeno, CPA Chief Financial and Administrative Officer Port of Tacoma

-x-

OFFICIAL STATEMENT

PORT OF TACOMA

$20,090,000* Limited Tax General Obligation Refunding Bonds, 2017 (Taxable)

INTRODUCTION

The purpose of this Official Statement, which includes the cover page, inside cover page, table of contents and appendices, is to provide information concerning the issuance by the Port of Tacoma (the “Port”) of $20,090,000* aggregate principal amount of its Limited Tax General Obligation Refunding Bonds, 2017 (Taxable) (the “Bonds”). The fiscal agent of the State of Washington, currently U.S. Bank National Association, has been appointed as the fiscal agent and registrar (the “Registrar”) for the Bonds.

The Port is issuing the Bonds pursuant to Title 53 and Chapter 39.46 of the Revised Code of Washington and pursuant to Resolution No. 2017-05-PT, adopted by the Port Commission on July 20, 2017 (the “Resolution”). Capitalized terms used in this Official Statement but not defined have the meanings set forth in the Resolution, a copy of which is included in this Official Statement as Appendix B.

The Port is a municipal corporation of the State of Washington (the “State”). The Port was organized on November 5, 1918. The Port owns and operates various maritime and industrial and commercial properties. The Port and the Port of Seattle formed the Northwest Seaport Alliance (the “Seaport Alliance”) in 2015 to manage jointly the Managing Members’ (as defined herein, see “THE NORTHWEST SEAPORT ALLIANCE”) marine cargo terminals, as well as certain industrial properties, which represents a significant portion of the Port’s business activities. See “THE NORTHWEST SEAPORT ALLIANCE.”

Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

The Port

The Port is located in Tacoma, in the western part of the state of Washington (the “State”). The Port owns approximately 2,650 acres of property on the tideflats of Puget Sound’s Commencement Bay that are used for shipping terminal activity, warehouse distribution and manufacturing. The Port’s boundaries are coterminous with the boundaries of Pierce County (the “County”), which has a population of approximately 844,000. The Port is governed by its five member elected Commission. The Port is comprised of the Port’s portion of the Seaport Alliance and the Port’s industrial and commercial real estate, grain terminal and non-maritime intermodal (primarily rail) assets. The Port has licensed most of its marine cargo and related properties to the Seaport Alliance, a port development authority (a “PDA”) formed jointly in 2015 with the Port of Seattle to manage the Managing Members’ marine cargo terminals. See “THE NORTHWEST SEAPORT ALLIANCE,” “THE PORT,” and “THE PORT — Port Facilities and Services” and Audited Financial Statements in Appendix A.

Purpose of the Bonds

The proceeds of the Bonds will be used to (i) refund certain outstanding limited tax general obligation bonds of the Port for debt service savings, and (ii) pay any costs of issuance not paid from other legally available funds of the Port. See “SOURCES AND USES OF BOND PROCEEDS.”

* Preliminary, subject to change.

Description of the Bonds

The Bonds are dated and will bear interest from their date of delivery. The Bonds will be issued in fully registered form, registered in the name of Cede & Co., as registered owner and nominee of DTC. Individual purchases of the Bonds may be made in book-entry form only. See “DESCRIPTION OF THE BONDS.”

Overview of Security and Sources of Payment for the Bonds

The Bonds are limited tax general obligations of the Port. The Port has covenanted irrevocably for so long as any of the Bonds are outstanding that, unless the principal of and interest on the Bonds are paid from other sources, it will make annual levies of taxes upon all of the property in the Port district subject to taxation within and as a part of the tax levy permitted to Port districts without a vote of the electors in amounts sufficient to pay such principal and interest as the same shall become due. The full faith, credit and resources of the Port are irrevocably pledged for the annual levy and collection of such taxes and for the prompt payment of such principal and interest. The Bonds do not constitute a debt or indebtedness of the City of Tacoma, Pierce County, the State of Washington, or any political subdivision thereof other than the Port. See “DEBT INFORMATION.”

The Port’s 2016 tax levy totaled $15,013,389, most of which was used for debt service on the Port’s outstanding limited tax general obligation bonds. The Port’s 2017 tax levy is budgeted at $16,659,514. After refunding the Refunded Bonds, the Port will have an estimated $158,796,000 aggregate principal amount of limited tax general obligation bonds outstanding. See “DEBT INFORMATION.” The Port may also use the proceeds of the tax levy for operating expenses and capital projects but not for debt service on any of the Port’s revenue bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Statutory Taxing Authority.”

Continuing Disclosure

The Port has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data and to give notices of certain events in order to assist the purchasers of the Bonds in complying with the Securities and Exchange Commission Rule 15c2-12(b)(5). See “OTHER MATTERS — Continuing Disclosure Undertaking” and “Appendix F — Form of Continuing Disclosure Certificate.”

Miscellaneous

Brief descriptions of the Bonds, the Port and certain statutes, agreements, reports and other instruments are included in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references to the statutes, agreements, reports or other instruments described herein are qualified in their entirety by reference to each such document, statute, report or other instrument. The information herein is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Port since the date of this Official Statement.

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-2- SOURCES AND USES OF BOND PROCEEDS

Sources and Uses of Funds

The proceeds of the Bonds are expected to be applied, together with other funds, as follows:

Table 1

Sources Bonds Principal Amount $

Port Contribution(1) Total Sources $

Uses Refunding Amount(2) $ Costs of Issuance(3) Total Uses $ ______(1) Which may include, but is not limited to, accrued interest on Refunded Bonds paid from available cash of the Port. (2) To be applied to redeem the Refunded Bonds as described below. (3) Represents costs of issuing the Bonds, including legal fees, rating agency fees, escrow fees, verification agent fees, and fees of the Financial Advisor.

Use of Proceeds

The Bonds are being issued by the Port to (i) refund all or a portion of the Port’s outstanding Limited Tax General Obligation Refunding Bonds, Series 2008B (AMT) (the “Refunding Candidates,” identified under the heading “— Refunding Plan” below, and as selected on the day of pricing, the “Refunded Bonds”), and (ii) pay any costs of issuing the Bonds not paid from other legally available funds of the Port.

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-3- Refunding Plan

Depending on market conditions on the day of pricing, the Port may determine to refund all or a portion of the following Refunding Candidates for aggregate debt service savings.

Table 2 Refunding Candidates

Limited Tax General Obligation Refunding Bonds, Series 2008B (AMT)* (the “Refunding Candidates”) Expected Maturity Date Interest Principal Redemption Redemption CUSIP (December 1) Rate Amount Date Price Number 2018 4.750% $ 565,000 06/01/2018 100% 735422LR6 2019 4.750 595,000 06/01/2018 100 735422LS4 2020 4.750 625,000 06/01/2018 100 735422LT2 2021 4.750 650,000 06/01/2018 100 735422LU9 2022 4.750 685,000 06/01/2018 100 735422LV7 2023 4.750 715,000 06/01/2018 100 735422LW5 2024 4.750 750,000 06/01/2018 100 735422LX3 2025 4.750 785,000 06/01/2018 100 735422LY1 2026 4.750 825,000 06/01/2018 100 735422LZ8 2027 4.750 860,000 06/01/2018 100 735422MA2 2028 4.750 905,000 06/01/2018 100 735422MB0 2029 4.750 945,000 06/01/2018 100 735422MC8 2033** 4.750 4,250,000 06/01/2018 100 735422MD6 2038** 4.875 6,565,000 06/01/2018 100 735422ME4

TOTAL $ 19,720,000

* The Refunding Candidates maturing on and after December 1, 2018 are callable at any time on and after June 1, 2018, in whole or in part on any date, with maturities to be selected by the Port, at a redemption price equal to 100% of the principal amount thereof, plus interest accrued to the date fixed for redemption. ** Term Bonds Source: The Port.

Refunding of the Refunded Bonds. If the Port determines to proceed with the refunding of all or a portion of the Refunding Candidates, the Port will purchase certain direct non-callable United States Government Obligations (“Acquired Obligations”) from the net proceeds of the Bonds. These Acquired Obligations will be deposited in the custody of U.S. Bank National Association, Seattle, Washington (the ”Escrow Agent”). The maturing principal of the Acquired Obligations purchased with proceeds of the Bonds, interest earned thereon, and necessary cash balance, if any, will provide payment of interest and principal on the Refunded Bonds when due up and including the call date, and on such date the redemption price of the Refunded Bonds. The Acquired Obligations, interest earned thereon, and necessary cash balance, if any, will irrevocably be pledged to and held in trust for the benefit of the owners of the Refunded Bonds by the Escrow Agent, pursuant to an escrow deposit agreement to be executed by the Port and the Escrow Agent. Likewise, the maturing principal of the Acquired Obligations purchased with proceeds of the Bonds, interest earned thereon, and necessary cash balance, if any, will provide payment of interest and principal on the Refunded Bonds when due up to and including the call date, and on such date the redemption price of the Refunded Bonds.

Because all payments of principal of and interest on the Refunded Bonds will be provided for when the Bonds are issued, such refunded bonds will cease to be entitled to any lien, benefit or security of the resolution authorizing their issuance except the right to receive payment from the Bond Registrar.

Causey Demgen & Moore P.C. will verify the accuracy of the mathematical computations concerning the adequacy of the funds to be placed in the escrow account to pay on the call date, pursuant to the call for redemption, the principal of and interest on the Refunded Bonds. The verification will also confirm the mathematical computations

-4- supporting the conclusion of Bond Counsel that the Bonds are not “arbitrage bonds” as defined by Section 148 of the Internal Revenue Code of 1986, as amended (the “Code”).

DESCRIPTION OF THE BONDS

General

The Bonds will bear interest at the rates and will mature, subject to prior redemption, in the amounts and on the dates set forth on the inside cover page of this Official Statement. Interest on the Bonds from the date of their initial delivery will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Interest on the Bonds is payable semiannually on June 1 and December 1 of each year, commencing June 1, 2018.

Book-Entry Only Form. The Bonds are being issued in fully registered form in denominations of $5,000 and integral multiples thereof within a maturity and when issued will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York (“DTC”). DTC is to act as securities depository for the Bonds. Individual purchases may be made only in book-entry form. Purchasers will not receive certificates representing their interest in the Bonds. Except as provided in the Resolution, so long as Cede & Co. (or such other name as may be requested by an authorized representative of DTC) is the registered owner of the Bonds, as nominee of DTC, references herein to “Owners,” “Bondholders” or “Registered Owners” mean Cede & Co. and not the Beneficial Owners of the Bonds. In this Official Statement, the term “Beneficial Owner” means the person for whom its DTC Participant acquires an interest in the Bonds.

So long as Cede & Co. is the registered owner of the Bonds, the principal of and interest on the Bonds will be payable by wire transfer to Cede & Co. (or such other name as may be requested by an authorized representative of DTC), as nominee for DTC which, in turn, is to remit such amounts to the Direct Participants for subsequent disbursement to the Beneficial Owners. See “DTC AND ITS BOOK-ENTRY ONLY SYSTEM” in Appendix E.

Optional Redemption

The Bonds maturing on or after December 1, 2028, are subject to redemption at the option of the Port on or after December 1, 2027, as a whole or in part on any date, with the maturities to be selected by the Port (and within a maturity in accordance with the operational procedures of DTC then in effect or, if the Bonds are no longer held in book-entry-only form, by lot or in such other random manner determined by the Registrar, as provided in the Resolution), at a redemption price equal to 100 percent of the principal amount thereof, plus interest accrued to the date fixed for redemption.

[Mandatory Redemption of Term Bonds

Unless previously redeemed pursuant to the foregoing optional redemption provisions, the Bonds stated to mature on December 1, 20__ (the “Term Bonds”) are subject to mandatory redemption at a redemption price equal to 100 percent of the principal amount thereof, plus interest accrued to the date fixed for redemption, on December 1 of the following years and in the following principal amounts:

Bonds Maturing December 1, 20__

Year (December 1) Principal Amount

* Final Maturity.

-5- If the Port redeems a portion of the Term Bonds under the optional redemption provisions described above or purchases or defeases a portion of the Term Bonds, the Term Bonds so redeemed, purchased for cancellation, or defeased (irrespective of their actual redemption or purchase prices) will be credited at the principal amount thereof against one or more scheduled mandatory redemption amounts for the Term Bonds as directed by the Designated Port Representative.]

Partial Redemption; Notice of Redemption; Cessation of Interest

The Resolution provides that for so long as the Bonds are held in book-entry form, the selection for redemption of Bonds within a maturity shall be made in accordance with the operational arrangements of DTC then in effect. See “DTC AND ITS BOOK-ENTRY ONLY SYSTEM” in Appendix E. Otherwise, Bonds within a maturity to be redeemed are to be selected randomly (in such reasonable manner determined by the Registrar) in increments of $5,000.

The Resolution also provides that official notice of redemption (which redemption, in the case of optional redemption, may be conditional), shall be given by the Registrar on behalf of the Port by mailing a copy of an official redemption notice by first-class mail at least 20 days and not more than 60 days prior to the date fixed for redemption, to the Registered Owner of the Bonds or portions of Bonds to be redeemed at the last address shown on the Bond Register. With respect to Bonds registered in the name of Cede & Co., notice is to be sent to DTC exclusively, as provided in the operational procedures of DTC referred to in the Letter of Representations from the Port to DTC. The Resolution provides that official notice of redemption having been given, the Bonds or portions of Bonds to be redeemed will, on the date fixed for redemption (provided, in the case of a conditional redemption notice, that sufficient funds are on deposit with the Registrar and any other conditions being satisfied), become due and payable at the redemption price therein specified, and from and after such date such Bonds or portions of Bonds will cease to bear interest. As provided in the Resolution, upon surrender of such Bonds for redemption in accordance with said notice, such Bonds shall be paid by the Registrar at the redemption price. Installments of interest due on or prior to a mandatory redemption date shall be payable as provided in the Resolution for payment of interest. Additional redemption notices are to be given to securities repositories as provided in the Resolution.

Purchase of Bonds

The Port has reserved the right to purchase any of the Bonds offered to the Port at any price deemed reasonable by the Port.

Defeasance

In the event that money and/or noncallable Government Obligations maturing or having guaranteed redemption prices at the option of the owner at such time or times and bearing interest to be earned thereon in amounts (together with such money, if any) sufficient to redeem and retire part or all of any Bonds in accordance with their terms, are irrevocably set aside in a special account and pledged to effect such redemption and retirement, then no further payments need be made into the Bond Fund (as defined herein) or any account therein for the payment of the principal of, premium, if any, and interest on the Bonds so provided for. See “SECURITY AND SOURCES OF PAYMENT FOR THE Bonds — Property Tax Pledge.” Such Bonds shall then cease to be entitled to any lien, benefit or security of the Resolution, except the right to receive the funds so set aside and pledged and notices of early redemption, if any, and such Bonds shall no longer be deemed to be Outstanding under the Resolution, or under any resolution authorizing the issuance of bonds or other indebtedness of the Port.

As currently defined in chapter 39.53 of the Revised Code of Washington (“RCW”), “Government Obligations” means (a) direct obligations of or obligations, the principal and interest on which are unconditionally guaranteed by the United States of America and bank certificates of deposit secured by such obligations; (b) bonds, debentures, notes, participation certificates or other obligations issued by the Banks for Cooperatives, the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Export-import Bank of the United States, federal land banks or the Federal National Mortgage Association; (c) public housing bonds and project notes fully secured by contracts with the United States; and (d) obligations of financial institutions insured by the Federal Deposit Insurance Corporation or the federal savings and insurance loan association, to the extent insured or guaranteed as permitted under any other provision of State law.

-6- The definition of “Government Obligations” in the Resolution incorporates any future statutory revision.

If the Port defeases any Bonds, such Bonds may be deemed to be retired and “reissued” for federal income tax purposes as a result of the defeasance. In such event, the owner of a Bond would recognize a gain or loss on the Bond at the time of defeasance. See “TAX MATTERS.”

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

Property Tax Pledge

The Bonds are limited tax general obligations of the Port. In the Resolution, the Port has covenanted irrevocably for so long as any of the Bonds are outstanding that, unless the principal of and interest on the Bonds are paid from other sources, it will make annual levies of taxes upon all of the property in the Port subject to taxation within and as a part of the tax levy permitted to Port districts without a vote of the electors in amounts sufficient to pay such principal and interest as the same shall become due. The full faith, credit and resources of the Port are irrevocably pledged for the annual levy and collection of such taxes and for the prompt payment of such principal and interest.

The Resolution continues the Port of Tacoma, Washington, General Obligation Bond Redemption Fund (the “Bond Fund”) to be used for the purpose of paying the principal of and interest on the Bonds when due.

If moneys on deposit in the Bond Fund from other sources are sufficient, the Port is not required to deposit tax moneys to make payments on the Bonds. The Bonds do not constitute a debt or an indebtedness of the City of Tacoma, Pierce County, the State of Washington or any political subdivision thereof other than the Port.

Statutory Taxing Authority

The Port has statutory authority to levy property taxes for general purposes of the Port, including the establishment of a capital improvement fund for future capital improvements and the repayment of voted and non-voted general obligation bonds of the Port (the “Tax Levy”‘) to finance certain industrial development activities (the “Industrial Development Levy”), and to fund special projects (the “Dredging Levy”).

Tax Levy

Pursuant to its statutory authority, the Port may impose the Tax Levy to fund general purposes of the Port and to pay debt service on its general obligation bonds, and may be used to fund maintenance and operation expenses. The Tax Levy is subject to the 101 percent levy limitation discussed below, except when general obligation bonds have been approved by the voters.

The Commission determines the actual amount of the Port’s Tax Levy each year as part of the Port’s budgeting process, which includes a funding plan for the Port’s capital improvement program. The Port’s Tax Levy for collection in 2017 is expected to produce tax revenues of approximately $16,659,514, based on a budgeted millage rate of $0.18365 per $1,000 of assessed value.

The Tax Levy Allocable for General Purposes. For general purposes, such as operating expenses and capital improvements, the Tax Levy may equal an amount not to exceed $0.45 per $1,000 of assessed valuation of taxable property within the Port and constitutes an important source of funding for the Port’s capital projects.

The Tax Levy Allocable for General Obligation Bond Debt Service. For debt service payments on general obligation bonds, the Tax Levy is not limited to $0.45 per $1,000 of assessed valuation and may be increased to produce funds equal to the principal and interest payments on such general obligation bonds. If other funds legally available for the payment of such debt service are sufficient, the Port is not required to impose the Tax Levy for payment of such debt service.

The Industrial Development Levy. For improvements within industrial development districts created by a port district, an additional $0.45 per $1,000 assessed value of taxable property within the port district (the “Industrial

-7- Development Levy”) may be levied for up to 12 years. To levy the Industrial Development Levy after the first six years for the next six years, the port would be required to publish notice of intent to impose such a levy not later than June 1 of the first year of the levy. If at least eight percent of voters who voted in the last gubernatorial election protest the levy within a 90-day period, a special election must be held and a majority of the voters of the port district voting on the levy must approve the levy. The Washington State Legislature, in the 2015 legislative session, provided an additional multi-year levy option for port districts’ industrial development levy (RCW 53.36.160). Port districts, if they meet certain criteria, may levy the industrial development levy for up to three multi-year levy periods. Each multi-year levy period may exceed 20 years from the date of the first levy in that period. First and second year levy periods do not have to be consecutive, and first and second year levy periods may not overlap. The aggregate revenue that may be collected during each of the first and second year levy period may not exceed the sum of: (i) $2.70/$1000 of assessed value multiplied by the assessed valuation for taxes collected in the base year; plus (ii) the difference between (A) the maximum allowable amount that could have been collected under RCW 84.55.010 for the first six years of the collection period and (B) the amount calculated in (i). If a port district elects to use multi-year levy periods, the second multi-year levy period is subject to the potential election requirement described above. The Port has not imposed an Industrial Development Levy.

The Dredging Levy. For dredging, canal construction, leveling or filling, upon approval of the majority of voters within a port district, an additional $0.45 per $1,000 assessed value of taxable property may be levied. The Dredging Levy is not subject to the 101 percent limitation. The Port has not imposed a Dredging Levy.

Statutory Tax Limitations. Although port districts are exempt from constitutional levy limitations, their levies are limited by statute to $0.45 per thousand dollars of assessed value for general port purposes, including the establishment of a capital improvement fund for future capital improvements. For debt service payments on general obligation bonds, the Tax Levy is not limited to $0.45 per $1,000 of assessed valuation and may be increased to produce funds equal to the principal and interest payments on such general obligation bonds.

Property taxes also are subject to a limitation on the aggregate dollar amount to be collected. This aggregate dollar amount limitation applies to the general levy (up to $0.45 per $1,000) as well as the levy for the payment of debt service on general obligation bonds. The dollar amount of annual property tax levies to be collected may not exceed the following described “levy limit”. Pursuant to chapter 84.55 RCW, the Port’s tax levy must be set so the regular property taxes payable in the following year do not exceed the “limit factor” multiplied by the amount of regular property taxes lawfully levied for the Port in the highest of the three most recent years in which taxes were levied plus an additional dollar amount calculated by multiplying the increase in assessed value in the Port resulting from new construction and any increase in the assessed value of state assessed property by the regular property tax levy rate of the Port for the preceding year. The “limit factor” is the lesser of 101 percent and inflation, or if inflation is less than one percent, the Port may nonetheless levy the full 101 percent based on a finding of substantial need by the Commission and approval by a majority of the Commission. The new limit factor is effective only for taxes collected the following year.

RCW 84.55.092 provides for setting the property tax levy amount at the level that would be allowed if the property tax levy for taxes due in prior years beginning in 1986 had been set at the full amount allowed under chapter 84.55 RCW. This allows certain taxing districts, such as the Port, to “bank” levy capacity, taxing at a lower rate while reserving the right to tax at the maximum rate allowed by law. As of January 1, 2017, the Port has approximately $7.4 million of “banked” levy capacity.

Debt Payment Record

The Port has promptly met all debt service payments on outstanding obligations.

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-8- TAX LEVY RATES AND PROCEDURES

Assessed Valuation Determinations

The Pierce County Assessor (the “Assessor”) determines the value of all real and personal property throughout the County that is subject to ad valorem taxation, with the exception of certain public service properties, such as utility and transportation properties, for which values are determined by the State Department of Revenue. The Assessor is an elected official whose duties and methods of determining value are prescribed and controlled by statute and by detailed regulations promulgated by the State Department of Revenue.

For tax purposes, the assessed value of property is 100 percent of the property’s actual value. All real property is subject to revaluation at least every four years, although since 1995 the Assessor’s policy has been to revalue residential property every year. Personal property (generally only personal property used in the operation of a business) is listed by the Assessor on a roll at its currently assessed value (based in part upon reports provided by the property owners), and the roll is filed in the Assessor’s office. Not all property is subject to taxation. Washington statutes provide annual exemptions for property owned by numerous types of nonprofit entities and for farm and historical properties and provide exemptions or deferrals for certain retired or disabled persons whose incomes are below specified limits. In addition, certain improvements to real property are not taxed during the first three years after completion of the improvements. By October 15 of each year, the Assessor is required to file its annual revaluation report with the State Department of Revenue and by November is required to provide its assessed valuation report to each taxing district, including the Port. The Assessor’s determinations are subject to revision by the County Board of Appeals and Equalization and, if appealed, are subject to further revision by the State Board of Tax Appeals.

Table 3 shows the assessed valuation for taxable property within the Port district for purposes of the Tax Levy and the maximum and actual Tax Levies in years 2013 through 2017.

Table 3 Recent Tax Levy Activity (1)

Tax Port District Maximum Total Actual Total Tax Year Assessed Valuation Levy (2) Tax Levy (3) Levy Rate (4) 2017 $90,713,390,689 $24,392,636 $16,659,514 $0.1841 2016 81,750,009,927 23,908,810 15,013,389 0.1837 2015 77,353,617,531 23,625,471 14,217,240 0.1838 2014 71,417,153,388 23,121,298 13,115,760 0.1836 2013 69,124,565,890 22,363,370 12,665,791 0.1832

(1) The amounts shown under “Port District Assessed Valuation” and “Maximum Levy” are the amounts shown in the County’s Preliminary Certification of Assessed Valuation, delivered to the Port in September of each year. (2) Maximum dollar amount shown in the County’s Preliminary Certification of Assessed Valuation delivered to the Port as the maximum amount that would be permitted to be collected within the statutory levy limitation. (3) Tax Levy allocable for general purposes plus the Tax Levy allocable for limited tax general obligation bonds. Budgeted Tax Levy, before any adjustments. (4) Per $1,000 of assessed valuation. Budgeted rate is $0.18365 per $1,000 of assessed valuation. Sources: Pierce County Assessor’s Office and the Port.

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-9- Tax Collection Procedures

The Commission levies property taxes in specific amounts, and the rates for all taxes levied for all taxing districts in the County are determined, calculated and fixed by the Assessor, based upon the assessed valuation of the taxable property within the various taxing districts in the County. The Assessor extends the tax levied within each taxing district upon a tax roll, which contains the total amounts of taxes levied and to be collected, and assigns a tax account number to each tax lot. The tax roll is delivered to the County Treasurer, who is responsible for the billing and collection of taxes due for each account. Tax bills are required to be sent in February. All taxes are due and payable on April 30 of each tax year, but if the amount due from a taxpayer exceeds $50, one-half may be paid by April 30 and the balance no later than October 31 of that year. A penalty of three percent is assessed for taxes delinquent as of June 1 and a penalty of eight percent is assessed for taxes delinquent as of December 1. Interest, at a rate of 12 percent per annum, computed monthly on the full tax amount, is also assessed on delinquent tax bills.

The method of giving notice of payment of taxes due, accounting for the money collected, dividing the taxes collected among the various taxing districts and giving notice of delinquency and collection procedures are all determined by detailed statutes. The County’s lien for personal property taxes that have been levied by the Commission prior to filing of federal tax liens is prior to such federal tax liens. In all other respects, and subject to the possible “Homestead Exemption”, the lien for property taxes is prior to all other liens or encumbrances of any kind on real or personal property subject to taxation. By law, the County may commence foreclosure of a tax lien on real property after three years have passed since the first delinquency, but may not sell property eligible for deferral of taxes.

The State’s courts have not decided whether the Homestead Law (Chapter 6.13 RCW) may give the occupying homeowner a right to retain the first $125,000 of proceeds (effective July 22, 2007) of the forced sale of the family residence or other “homestead” property for delinquent general property taxes. (See Algona vs. Sharp, 30 Wn. App. 837, P.2d 627 (1982), holding the homestead right superior to the improvement district assessment). The United States Bankruptcy Court for the Western District of Washington has held that the Homestead Exemption applies to the lien for property taxes, while the State Attorney General has taken the position that it does not.

Tax Collection Records

Table 4 shows the Port’s Tax Levy for 2012 through 2016 and the percentages of the tax collected.

Table 4 Tax Collection Record 2012-2016

Amount % of Levy Amount of Collected % Collected Collected as of Collected as of Year Levy(1) in Year Due in Year Due 12/31/2016 12/31/2016 2016 $15,013,389 $14,677,975 98.03% $14,677,975 98.03% 2015 14,217,240 13,885,373 97.80 14,108,764 99.37 2014 13,115,760 12,740,081 97.38 13,037,107 99.65 2013 12,665,791 12,229,414 97.06 12,591,791 99.94 2012 13,719,043 13,217,773 96.67 13,668,296 99.97 ______(1) The amount of the actual Tax Levy varies from the budgeted amount because of adjustments in assessed values and levy rates made by the County. Sources: Pierce County Treasurer’s Office and the Port.

-10- Principal Taxpayers

The following table lists the principal taxpayers in the County and the assessed valuation of their real property in the 2017 tax year.

Table 5 Principal Taxpayers in Pierce County 2017 Tax Year

Total Assessed Percentage of the Valuation County’s Assessed Taxpayer (in thousands) Valuation The Boeing Company $513,976 0.57% Puget Sound Energy/Gas 455,468 0.50 Tacoma Mall Partnership 265,238 0.29 U.S. Oil & Refining Co. 233,478 0.26 Rocktenn CP LLC 182,707 0.20 Toray Composites America Inc. 149,978 0.17 Northwest Building LLC 138,346 0.15 Fred Meyer Stores Inc. 128,743 0.14 Costco Wholesale Corp. 124,025 0.14 Comcast Cable Communications Management LLC 114,566 0.13 Total $ 2,306,526 2.55% ______Note: Totals may not foot due to rounding. Source: Pierce County Assessor’s Office.

DEBT INFORMATION

Port District General Obligation Debt Limitation

Under Washington law, the Port may incur general obligation indebtedness payable from ad valorem property taxes in an amount not exceeding one-fourth of one percent of the value of the taxable property in the Port district without a vote of the electors. With the assent of three-fifths of the electors voting thereon, subject to a validation requirement, the Port may incur additional general obligation indebtedness, provided the total indebtedness of the Port at any time does not exceed three-fourths of one percent of the value of the taxable property in the Port district. The limit on incurring indebtedness does not apply to obligations payable from revenues (special funds) or assessments.

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-11- Table 6 reflects the estimated 2017 debt limit for the Port, taking into account the planned issuance of the Bonds.

Table 6 Estimated Debt Limit As of December 31, 2016

Total Assessed Valuation (2017)(1) $ 90,491,814,980 Debt Limit, nonvoted debt, including limited tax general obligation bonds (.25% of Value of Taxable Property) 226,229,537 Less: Outstanding Limited Tax General Obligation Bonds (including capital leases) (158,966,000)(2) Remaining Capacity Limited Tax General Obligation Debt $ 67,263,537

Debt Limit, Total, voted and nonvoted debt, General Obligation Debt (.75% of Value of Taxable Property) $ 678,688,612 Less: Total, nonvoted debt, Limited Tax General Obligation Bonds (158,966,000)(2) Less: Total, voted debt, Unlimited Tax General Obligation Bonds (0) Remaining Capacity: Total General Obligation Debt $ 519,722,612

(1) Based on final values received from Pierce County in January 2017. (2) Includes all currently outstanding LTGO debt. The Port anticipates refunding a portion of these bonds with proceeds of the Bonds, subject to market conditions. See “SOURCES AND USES OF BOND PROCEEDS — Refunding Plan.” Source: The Port.

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-12- Direct and Estimated Overlapping Debt

Table 7 shows direct and estimated overlapping debt within the Port district, prior to the issuance of the Bonds. The Port anticipates refunding a portion of its direct debt with proceeds of the Bonds, subject to market conditions.

Table 7 Overlapping General Obligation Debt As of December 31, 2016

Percentage

Applicable to Amount Applicable Jurisdiction Net Debt Outstanding(1) the Port(2) to the Port Direct Debt: Port of Tacoma $ 158,966,000 100% $ 158,966,000 Overlapping Debt: Pierce County 145,363,000 100 145,363,000 City of Tacoma 199,861,000 100 199,861,000 Metro Park Districts 155,900,000 100 155,900,000 Pierce County School 1,648,357,879 100 1,648,357,879 Districts Total Overlapping Debt 2,149,481,879 100% 2,149,481,879 Total Direct and Overlapping $2,308,447,879 $2,308,447,879 Debt

(1) Information on the other jurisdictions was obtained from those agencies. (2) Each of the tax jurisdictions are within the geographical boundaries of the Port, therefore 100% of the net outstanding debt of those is applicable to the Port. Source: The Port.

Bonded Debt Ratios

Table 8 shows various ratios of indebtedness to population and assessed valuation for property in the Port district.

Table 8 Bonded Debt Ratios As of December 31, 2016

Total Assessed Valuation (for 2017 taxes)(1) $ 90,491,814,980 Estimated Population (2016)(2) 844,000 Port Limited Tax General Obligation Debt $ 158,966,000 Total Port Limited Tax General Obligation Debt and Estimated Overlapping Debt $ 2,308,447,879 Port Debt to Assessed Valuation 0.18% Per Capita Port Debt $ 188 Per Capita Assessed Valuation $ 107,218 Port and Estimated Overlapping Debt to Assessed Valuation 2.55% Per Capita Port Debt and Estimated Overlapping Debt $ 2,735

(1) Source: Pierce County Assessor’s Office. (2) Source: State of Washington Office of Financial Management. Source: The Port.

-13-

Table 9 Limited Tax General Obligation Bond Debt Service

Outstanding LTGO Bonds(1) The Bonds Total Total Total Years Principal Interest Debt Service Principal Interest Debt Service Debt Service 2017(2) $5,252,000 $6,597,566 $11,849,566 2018 3,511,000 6,386,127 9,897,127 2019 3,982,000 6,254,213 10,236,213 2020 4,056,000 6,180,565 10,236,565 2021 6,453,000 6,099,412 12,552,412 2022 6,665,000 5,894,720 12,559,720 2023 6,856,000 5,698,738 12,554,738 2024 7,088,000 5,463,381 12,551,381 2025 7,333,000 5,212,876 12,545,876 2026 7,540,000 4,947,531 12,487,531 2027 7,840,000 4,639,744 12,479,744 2028 8,245,000 4,249,894 12,494,894 2029 8,650,000 3,839,906 12,489,906 2030 9,080,000 3,409,769 12,489,769 2031 9,525,000 2,958,244 12,483,244 2032 10,000,000 2,484,581 12,484,581 2033 10,500,000 1,987,294 12,487,294 2034 6,695,000 1,513,044 8,208,044 2035 6,980,000 1,234,831 8,214,831 2036 7,265,000 944,694 8,209,694 2037 7,570,000 642,631 8,212,631 2038 7,880,000 327,800 8,207,800 TOTAL(3) $158,966,000 $86,967,561 $245,933,561

(1) Includes all currently outstanding LTGO debt. The Port anticipates refunding a portion of these bonds with proceeds of the Bonds, subject to market conditions. See “SOURCES AND USES OF BOND PROCEEDS — Refunding Plan.” (2) Includes interest paid on June 1, 2017. (3) Totals may not foot due to rounding. Source: The Port.

THE PORT

General

The Port is a municipal corporation of the State, created in 1918 under provisions of Title 53 RCW. The Port’s geographic boundaries are coextensive with the boundaries of the County. The County collects taxes on behalf of the Port, but the Port is independent from the County in all other respects.

Under State law, port districts are authorized to construct, acquire, maintain and operate systems of piers, wharves, warehouses, elevators, bunkers, oil tanks and cold storage plants, together with rail, water and terminal facilities. Creation of industrial development districts and ownership and operation of airport terminal facilities are within the scope and power of port districts. The Port and the Port of Seattle (but not all port districts) have authority to create a PDA. Port districts have authority to engage in economic development and promote tourism. The Port actively pursues economic development, but has not pursued the authority to operate an airport. Port districts also have the powers of eminent domain and ad valorem taxation upon the real and personal property within the port district.

Port Facilities and Services

The Port’s facilities are located on approximately 2,650 acres of property on the tideflats of Puget Sound’s Commencement Bay. The Port owns a combination of marine cargo and related facilities, and commercial and industrial real estate. The Port has licensed most of the marine cargo properties, including container shipping terminals and related facilities, to the Seaport Alliance. See “THE NORTHWEST SEAPORT ALLIANCE.” The

-14- Port has retained management of its commercial and industrial real estate properties, grain facility, and non-marine intermodal infrastructure not licensed to the Seaport Alliance.

Cargo that passes through the Seaport Alliance properties includes containers; automobiles; breakbulk cargo; logs, heavy lift cargo and project cargoes. These cargoes move through properties owned by the Port but licensed to the Seaport Alliance. Some of these facilities are operated by the Seaport Alliance and most are operated by the tenant.

Major Waterways. The Port’s principal facilities are situated on Commencement Bay, located along the southern portion of Puget Sound. See Figure 2 in “THE NORTHWEST SEAPORT ALLIANCE,” below.

Blair Waterway. The Blair Waterway is the Port’s primary waterway. The Blair Waterway has been dredged to a uniform depth of minus 51 feet mean lower low water (“MLLW”), sufficiently deep to handle the New Panamax (ultra large) container ships currently in service between Asia and the West Coast. Currently, the Blair Waterway accommodates container, breakbulk, auto, and bulk cargo.

Sitcum Waterway. The Sitcum Waterway has terminals on the full length of both sides of the waterway. The Sitcum is used for container, auto, and breakbulk cargo. The Sitcum Waterway has a depth of minus 51 feet MLLW. While the depth of the Sitcum waterway could support New Panamax vessels, the width of those size ships would restrict movement along that waterway.

Port Business Lines Not in the Seaport Alliance. Port businesses now licensed to the Seaport Alliance accounted for 74% of the Port’s revenue in 2016 (representing the Port’s 50% share of the net operating income of the Seaport Alliance). These are discussed in the Seaport Alliance section below. The Port’s business activities not managed by the Seaport Alliance accounted for approximately 26% of 2016 revenue and include industrial and commercial real estate properties, non-marine intermodal, and a bulk grain terminal.

Port Industrial and Commercial Real Estate. Port real estate accounted for approximately 21% of the Port’s Operating Revenue in 2016. The Port’s real estate portfolio includes numerous warehouses and industrial buildings, a five story office building, and bare land leases. The commercial real estate properties managed by the Port include over 750 acres of bare and developed land, and approximately 3 million square footage of warehouse, office, manufacturing, and processing facilities.

Port Intermodal. Non-container intermodal revenue accounted for approximately 1% of the Port’s Operating Revenue in 2016. Non-container revenue is from box and tank car volumes that utilize the Port’s intermodal infrastructure.

Port Bulk. Bulk revenue accounted for approximately 3% of the Port’s Operating Revenue in 2016. Bulk revenue is from a long term lease of the Port’s grain elevator.

Governance and Management

The five member Commission is the governing body of the Port. Its members are elected by County citizens through countywide elections for staggered four year terms. The Commission generally holds public meetings on the third Thursday of each month. The Commission approves the yearly budget for the Port, approves all long-term leases, sales and purchases of land, policies of the Port, long-range development plans, Port financing and all construction contracts and disbursements of more than $300,000. The Commission also acts on behalf of the Port in its capacity as a Managing Member of the Seaport Alliance. See “THE NORTHWEST SEAPORT ALLIANCE.”

The Commission is responsible for selection of the Chief Executive Officer, who is responsible for hiring and managing the Port’s staff. The Managing Members are responsible for selection the Seaport Alliance Chief Executive Officer who is responsible for hiring Seaport Alliance staff. At this time, the CEO is the same for both organizations, but the Port of Tacoma is required by the Seaport Alliance Charter to hire a separate CEO by August 2020.

-15- The following is a summary of resumes of members of the Commission:

Connie Bacon, President. Connie Bacon was first elected to the Port Commission in 1997. She serves on the board of directors for the Asia Pacific Cultural Center, Fuzhou Advisory Committee, Water Partners Committee, Public Access Committee and the Washington Economic Development Commission. She also co-chairs the Urban Waters project and serves as Vice Chair of the Port’s Audit Committee. A member of the Transportation Club of Tacoma and Tacoma Propeller Club, she is a senior fellow of the American Leadership Forum and member of the advisory board to the Port of Tacoma Endowed Chair at the University of Washington Tacoma. Bacon is a former Executive Director of the World Trade Center Tacoma and served eight years as special assistant to former Washington Gov. Booth Gardner. She is a graduate of Syracuse University and earned a master’s degree from The Evergreen State College.

Richard Marzano, Vice President. Richard Marzano was first elected to the Port Commission in 1995. A Tacoma longshore worker for more than 36 years, Marzano served as President of the International Longshore and Warehouse Union Local 23 for six years. Marzano is the co-chair of the State Route 167 Completion Coalition and serves on the Washington Public Ports Association's Board of Trustees, Puget Sound Regional Council's Executive Board, Pierce County Sheriff’s Office Executive Advisory Board and the Valley Cities Association Board. He has served on Washington Public Ports Association’s six-member executive committee. He is a former member of the Freight Mobility Strategic Investment Board, appointed by former Washington Governors Gary Locke and Chris Gregoire. Marzano is also a member of the Tacoma Propeller Club, Transportation Club of Tacoma, and a former board member of the Foss Waterway Development Authority and St. Leo's Hospitality Kitchen.

Don Meyer, Secretary. Don Meyer was first elected to the Port Commission in 2010. He is the former Executive Director of the Foss Waterway Development Authority and a former Deputy Executive Director of the Port. Meyer currently serves on the Pierce County Regional Council, Public Access Committee, South King County Transportation Board and Tacoma Waterfront Association. He is a member of the Alaska State Chamber of Commerce, the Fife/Milton/Edgewood Area Chamber of Commerce and the Transportation Club of Tacoma. He served on former Gov. Christine Gregoire’s Connecting Washington Task Force on transportation issues, is a member of Tacoma Rotary #8 and owns a small business in Pierce County. Born and raised on a South Dakota farm, Meyer holds a bachelor’s degree in business from Pacific Lutheran University and a master’s degree in business administration from the University of South Dakota.

Don Johnson, Commissioner. Don Johnson was first elected to the Port Commission in 2007. He is the former Vice President and General Manager of Simpson Tacoma Kraft, a leading Tacoma pulp and paper producer. Johnson serves on the boards of the Puget Sound Regional Council’s Transportation Board, Goodwill, Goodwill Industries Foundation and Goodwill’s Finance Committee, and he is the immediate past chair of the MultiCare Health Care Foundation. He also serves as chair of the Port’s Audit Committee. He is a previous chair of the Tacoma-Pierce County Chamber Board and continues to serves as a member of this board. He also is the former chair of the University of Washington Business School Advisory Board, the United Way of Pierce County Board and the United Way’s Annual Campaign. He chaired the search committee for the CEO of the Tacoma-Pierce County Chamber and is a member of the Transportation Club of Tacoma and Tacoma Propeller Club. Johnson holds a bachelor’s degree in mechanical engineering from the University of Washington.

Clare Petrich, Commissioner. Clare Petrich was first elected to the Port Commission in 1995. She is a small business owner with strong ties to Tacoma’s maritime heritage. She is co-founder and chair of the Commencement Bay Maritime Fest, and she is deeply involved in maritime heritage research. Petrich serves on the Joint Municipal Action Committee, the Local Emergency Planning Committee, Pacific Northwest Waterways Association, the Youth Marine Foundation, the Flood Control Zone District Committee, the Washington Council on International Trade and the Tacoma-Pierce County Economic Development Board. She is a past President of the Puget Sound Regional Council’s Economic Development District Board and continues to serve on this board. She is also a past President and Secretary for the Trade Development Alliance of Greater Seattle. Petrich is a graduate of Manhattanville College in New York and received her master’s degree from the University of Virginia.

-16- The following is a summary of resumes of the Port’s Chief Executive Officer and the Executive Leadership Team that manages both the Port of Tacoma and the Seaport Alliance:

John Wolfe, Chief Executive Officer. John Wolfe was named the Port's Chief Executive Officer in June 2010, and Chief Executive Officer of the Seaport Alliance in August 2015. He sets the organization’s vision and strategy, and oversees a staff of about 250. Before being named CEO, Wolfe had served as the Deputy Executive Director of the Port since June 2005. Prior to joining the Port, he served for two years as the Executive Director of the Port of Olympia, and before that as Olympia's Director of Operations and Marine Terminal General Manager. Wolfe also spent 10 years with Maersk Sealand/APM Terminals in Tacoma, most recently as the Terminal's Operations Manager. A native of Puyallup, Washington, Wolfe earned a bachelor's degree in business administration from Pacific Lutheran University.

Don Esterbrook, Deputy CEO, Commercial. Before joining the Seaport Alliance, Esterbrook spent three years as the Port’s chief operating officer and deputy CEO, where he oversaw the Port’s operations, maintenance, security, labor relations and asset management. Esterbrook’s past experience also includes 16 years with Orient Overseas Container Line, most recently as regional sales director for nine western states. He is on the board for the Tacoma Waterfront Association. Esterbrook holds a bachelor’s degree in business administration, with a computer science minor, from Pacific Lutheran University.

Kurt Beckett, Deputy CEO, Operations. Prior to joining the Seaport Alliance, Beckett served two years as deputy CEO of the Port of Seattle with management duties including capital development, police, public affairs and the office of social responsibility. He joined the Port of Seattle in November 2007 as the external affairs director and in 2010 was promoted to chief of staff. Prior to joining the Port of Seattle, Beckett served as chief of staff for Sen. Maria Cantwell from 2004 to 2007, and as her deputy chief of staff from 2001 to 2004. From 1991 to 2000, he worked for Rep. Norm Dicks, including serving as district director for all 6th District operations. Beckett has a master of business administration and bachelor’s degree in political science from the University of Washington.

Erin Galeno, CPA, Chief Financial and Administrative Officer. Since December 2009, Erin Galeno has served as the Chief Financial Officer and more recently as the Chief Financial and Administrative Officer for the Port, and the Chief Financial and Administrative Officer for the Seaport Alliance since August 2015. Her role includes oversight for the organization’s accounting, treasury, financial planning, contracting, purchasing, information technology, records management and business process improvement functions. Prior to her role at the Port, she spent 23 years with Weyerhaeuser Company serving in several roles across the company. These roles included leading the company’s Internal Audit function, Finance Lead for a major system implementation, and as the Controller for the Corporate Support functions. Galeno holds a bachelor’s degree in accounting, with an economics minor, from the University of Puget Sound and is a graduate of Seattle University’s Executive Leadership Program. She is a licensed CPA.

Tong Zhu, Chief Commercial Officer, Container. Tong Zhu leads the real estate, domestic and international container business teams, and manages the domestic and international business development teams. Zhu most recently served as the chief commercial officer at the Port since 2010. She joined the Port in 2007. As chief commercial officer, she managed the activities of the Port’s diversified business portfolio, including container, non‐container (breakbulk and roll-on/roll-off), intermodal and real estate. She also oversaw the marketing, research and customer outreach activities of the Port’s business development teams. Before joining the Port, Zhu managed international relations at the Port of Seattle and directed the State of Washington’s greater China trade development programs. Zhu has a bachelor’s degree in business administration from the University of Washington.

Bari Bookout, Chief Commercial Officer, Non-Container. Bari Bookout leads the non-container and commercial strategy teams. Bookout has more than 25 years of experience in the international shipping industry. Prior to joining the Seaport Alliance, Bookout served as the director of commercial strategy for the Port of Seattle’s seaport. In this strategic role, she focused on increasing container business through the Port of Seattle. Her team was responsible for the development of key container customer segments and strategic analysis. Prior to the Port of Seattle, Bookout spent 18 years on the ocean carrier side of the business, including 15 years with APL, Ltd., in a variety of sales and marketing positions. She is a member of the Seattle Freight Advisory Board. Bookout has a bachelor’s degree in commerce and business administration from the University of Alabama.

-17- Dakota Chamberlain, PE, Chief Facilities Development Officer. Dakota Chamberlain is the Port’s Chief Facilities Development Officer. He served as Director of Engineering from June 2011 to October 2013. Before joining the Port in 2011, Chamberlain served as Director of Seaport Management at the Port of Seattle for 15 years where he oversaw a large capital development program. Chamberlain oversees the planning, engineering and environmental programs. He holds a bachelor’s degree in civil engineering from the University of Hawaii and is a registered professional engineer in the states of Colorado and Washington.

Jean West, Chief Human Resources Officer. Jean West served as the Human Resources Director at the Port from 2004-2006. She re-joined the Port on February 1, 2012, as the Chief Human Resources Officer. West served as the Assistant Human Resources Director at the City of Bellevue and her experience includes labor relations, strategic planning and executive, leadership and workforce development, policy development and administration. West holds a bachelor’s degree in business administration from the University of Washington.

Dustin Stoker, Chief Operations Officer. Dustin Stoker oversees all port operations, from waterway management and road and rail functions to breakbulk and terminal operations. Stoker’s team is charged with establishing the Seaport Alliance’s Operations Service Center to provide best in class service delivery and customer care. Before joining the Port, Stoker served as director of Deltaport at Port Metro Vancouver, B.C., with Terminal Systems, Inc. Stoker holds a bachelor’s degree in business administration with a concentration in management from the University of Washington.

THE NORTHWEST SEAPORT ALLIANCE

General

On August 4, 2015, the Port and the Port of Seattle jointly formed the Seaport Alliance to manage the two ports’ maritime terminals (excluding grain and cruise terminals) and certain industrial properties. For a description of the properties that the two ports have licensed to the Seaport Alliance, see “Licensed Properties” below.

Formation of Seaport Alliance. The Port faces significant competition for container shipping business in a dynamic environment that has recently included additional shipping alliances, larger ships entering the market, impacts of volatile economies, and a lack of national coordination for shipping and intermodal investments. In an effort to improve its competitive position, the Port formed an alliance with the Port of Seattle under the formal name “The Northwest Seaport Alliance.” The purpose of the Seaport Alliance is to coordinate customer relationships (including shipping lines, beneficial cargo owners, and importer/exporters), improve capacity utilization between the two ports, eliminate pricing competition between the two ports by creating one of the largest national gateways, and rationalize strategic capital investments. The Seaport Alliance is designed to unify management and operation of both ports’ “Marine Cargo” (defined to mean waterborne goods other than grain) businesses in response to the competitive factors described below.

Competitive Factors. Because of their strategic location, the ports in Puget Sound comprise one of the major gateways on the West Coast for Pacific Rim containerized cargo. The other major port areas on the West Coast are Los Angeles, Long Beach and Oakland, California; and Vancouver and Prince Rupert, British Columbia. All of these ports compete for central and eastern North American import and export cargo.

The Seaport Alliance’s competition for cargo (cargo imported to or exported from the Pacific Northwest) comes from the ports in British Columbia, Canada; California; and Mexico. For the five-year period starting 12/31/2011 and ending December 31, 2016, the Seaport Alliance has experienced growth of containerized cargo at an average annual rate of 0.7%, while West Coast total containerized cargo averaged 2.0% annual growth. The largest increase in average annual growth has occurred in Prince Rupert, which grew 12.4%. The Seaport Alliance’s share of West Coast container traffic in 2016 was 14.3%, compared to 15.2% in 2011. The Seaport Alliance is aware that steamship lines have begun all-water routes to the East Coast via the Suez Canal, and may increase all water routes to the East Coast via the widened Panama Canal. These new routes may have a negative impact on the Seaport Alliance’s intermodal container traffic. Over the next five years, the Seaport Alliance expects its share of West Coast international container traffic to be steady, while volumes are expected to grow at approximately 2% per year.

-18- Legal Framework

Port Development Authority. The Seaport Alliance was formed as a PDA, with an effective date of August 4, 2015 (the “Effective Date”), pursuant to a provision in Title 53 RCW that grants ports that meet certain criteria the authority to create a separate PDA, similar to public development authorities created by Washington cities and counties. As formed, the Seaport Alliance is to continue for an indefinite term until dissolution. As approved, the charter for the Seaport Alliance (the “Charter”) may be amended only by mutual agreement of both ports as the Seaport Alliance’s Managing Members. See “— Governance and Management.”

The State Legislature granted ports that meet certain criteria the authority to create a PDA for the management of maritime activities and to allow ports to act cooperatively and use financial resources strategically, while remaining separate entities and complying with federal regulations. Pursuant to the PDA statute, if a PDA is created jointly by more than one port district, the PDA must be managed by each port district as a member, in accordance with the terms of the statute and the Charter. Any port district that creates a PDA must oversee the affairs, operations, and funds of the PDA to correct any deficiency, and ensure that the purposes of each program undertaken are reasonably accomplished. The statute permits a PDA, in managing maritime activities of a port district or districts, to own and sell real and personal property; to enter into contracts, to sue and be sued; to loan and borrow funds; to issue bonds, notes, and other evidences of indebtedness; to transfer funds, real or personal property, property interests, or services; and to perform community services related to maritime activities managed by the PDA. The statute allows, but the Charter prohibits, the Seaport Alliance to issue bonds, borrow funds, or enter into other debt instruments. By statute, port development authorities do not have the power of eminent domain or the power to levy taxes or special assessments. In transferring real property to a PDA, the port district or districts creating the PDA must impose appropriate deed restrictions necessary to ensure the continued use of the property for the public purpose for which the property is transferred.

Key Seaport Alliance Documents. The Seaport Alliance foundational documents include (1) Federal Maritime Commission (“FMC”) Agreement No. 201228, which defines the federally-approved boundaries of the Seaport Alliance. The FMC will exercise oversight over the Seaport Alliance, including approval of any amendments to the founding documents; (2) Seaport Alliance Interlocal Agreement, entered into on October 14, 2014, that serves as the framework for the creation of the Seaport Alliance. Formation of the Seaport Alliance was approved by the FMC and by the two port commissions; (3) Charter, establishing the ownership and management structure, including the separate existence of the Seaport Alliance from the Managing Members, providing for valuation of each Managing Member’s membership interests, authorization of improvements, and other operating terms; (4) Authorizing Resolutions, adopted by each Managing Member on August 4, 2015, to establish the PDA and approve the Charter, pursuant to the terms of the FMC Agreement and Interlocal Agreement creating the Seaport Alliance (Port of Seattle resolution no. 3711 and Port resolution no. 2015-03); (5) Property Licenses Agreements, whereby each Managing Member designates the Seaport Alliance as manager and agent, authorizing the Seaport Alliance to negotiate lease and other use agreements, and fulfill the Managing Member’s landlord and owner obligations; and (6) Interlocal Agreements for Support Services and for Staffing, which describe service level expectations and allocating the rates and charges for administrative, operational, maintenance and facilities development services.

Governance and Management. The Seaport Alliance is governed by its Managing Members, with each Managing Member acting pursuant to the Charter through its elected commissioners. The Managing Members appoint a Chief Executive Officer who is responsible for hiring staff and entering into service agreements with the Managing Members as needed. Staff is comprised of certain Port and former Port of Seattle employees assigned either in full or in part to work in roles in the Seaport Alliance. In addition, both Managing Members may provide services through service agreements with a portion of staff time allocated to and paid by the Seaport Alliance. The Port and the Seaport Alliance are developing a transition plan that may result in staff being transferred from the Port into the Seaport Alliance. Staff transferred to the Seaport Alliance will continue to provide services to the Port through service agreements. The transition plan may last up to five years.

Management Structure. The Managing Members appointed John Wolfe, who also serves as the Port’s Chief Executive Officer, as the Seaport Alliance Chief Executive Officer. Mr. Wolfe may hold those two positions for up to five years. John Wolfe and his eight-member executive team direct and manage Seaport Alliance and Port employees in conducting Seaport Alliance operations, and work with Port of Seattle staff through service level agreements. See “THE PORT — Governance and Management.”

-19- Membership Interests. The Managing Members made an initial contribution of certain cargo terminals to the Seaport Alliance through license agreements. Under these agreements, the Seaport Alliance was charged with managing the properties as agent on behalf of the Managing Members. The initial contribution of each Managing Member to the Seaport Alliance was 50 percent (based on the value of the contributed facilities using cash flow forecasts for each parcel that went to the Seaport Alliance) with a revaluation scheduled to occur at the end of 2017 and from time to time upon the removal or addition of Licensed Properties. A change in the valuation of the cash flow forecasts could result in a change in Membership Interests. Changes in Membership Interest do not affect a Managing Member’s voting rights under the Charter, as votes are not weighted by or otherwise determined by Membership Interest.

Financial Framework. Post-Formation Improvements; Capital Investments. By vote, the Managing Members of the Seaport Alliance may authorize and instruct the Seaport Alliance to acquire or construct improvements to terminals, other improvements and infrastructure such as cranes and other fixtures on Licensed Properties as necessary to support Seaport Alliance operations (“Post-Formation Improvements”). Post-Formation Improvements, including the redevelopment of Husky Terminal, will be recorded as Seaport Alliance assets. The Managing Members may consider requests for future capital contributions to the Seaport Alliance, the approval of which requires an affirmative vote by each Managing Member. Seaport Alliance improvements are to be funded through Port of Seattle and Port contributions, which require the approval of each Managing Member.

Revenue and Cash Distribution. The Seaport Alliance distributes cash to each Managing Member no less than quarterly, based on each Managing Member’s percentage of total shares.

Recognition of Managing Member’s Bond Obligations. The Charter recognizes that each Managing Member’s respective share of revenues received by the Seaport Alliance with respect to the Licensed Properties have been or may be pledged in connection with the Managing Member’s revenue bond obligations. Under the Charter, the Managing Members instruct the CEO to manage the Seaport Alliance in a prudent and reasonable manner in support of the Managing Members’ respective revenue bond covenants.

Revenues on Dissolution. The Charter provides that should the Seaport Alliance be dissolved, management and all post dissolution revenues of properties owned by the Port will revert to the Port, as will any improvements on those properties; the Charter provides for calculation of payments between the Managing Members which may result in a net payment to one of the Managing Members.

Funding

Each Managing Member provided an initial contribution for Working Capital of $25.5 million for a total of $51 million. This is liquidity in addition to the reserves and liquidity cash position of the Port and Port of Seattle. Working capital cannot be redirected to Capital Construction (as defined in the Charter).

Future needs will be evaluated during the annual budget process or if the Working Capital reserve declines below a target minimum established by the Managing Members. Managing Members each must vote affirmatively to approve additional Working Capital contributions.

Each Managing Member provided an initial Capital Construction contribution of $13.5 million (totaling $27 million), equal to the capital improvement plan cash flow needs for 2016, as presented in the Seaport Alliance 2016 budget. Through separate funding actions for (i) the completion of Pier 4 construction, (ii) the purchase of six additional cranes at husky, and (iii) the approval of the funding for the 2018 Capital Improvement Plan; the Port of Seattle and the Port of Tacoma have authorized additional contributions of $167,209,500 each (totaling $334,419,000). With the Working Capital contribution referenced above, each port has thus authorized a total contribution of $206,209,500.

Additional Working Capital and Capital Construction contributions may be approved by the Managing Members. Such requested contributions will be reviewed as part of the budget process or when major projects are authorized by the Commission. Contributions may also be made at the request of the CEO – and the CEO must make a request if working capital drops below the minimum target.

-20- Accounting. The Seaport Alliance, and/or the Managing Members on behalf of the Seaport Alliance, will collect revenues from and pay expenses associated with Licensed Properties. The Managing Members will use joint venture accounting to reflect the impacts of the Seaport Alliance. Each Managing Member will recognize its equity in the joint venture – net income (or loss) share plus contributions less distributions. The Charter requires the Seaport Alliance financial statements to be audited annually.

Cash Flow. Each Managing Member is reimbursed for operating and capital cash flows spent on behalf of the Seaport Alliance on a monthly basis. Distributable Cash (excluding customer security deposits held) defined by the Charter as the amount equivalent to cash flow provided from operations is distributed to Managing Members at least quarterly. Additional cash distributions to the Port and the Port of Seattle such as non-operating cash can be approved by a vote of the Managing Members.

Licensed Properties

The Managing Members have licensed container terminals and certain businesses and industrial properties to the Seaport Alliance for operation and management, including capital improvements. Ownership of the Licensed Properties (as defined in the Charter) remains with the Managing Members.

The Port of Seattle licensed to the Seaport Alliance its four international container terminals, nine industrial properties that support domestic container trade or non-containerized trade, and two on-dock intermodal yards, all of which are located in and around Elliott Bay. The Port licensed properties to the Seaport Alliance consisting of six container terminals (four engaged in international trade and two in domestic trade), four intermodal yards (serving domestic and international trade), eight properties that accommodate non-containerized cargo (such as autos, breakbulk, and logs) and supporting industrial properties, and the Port’s break bulk business, all of which is located in and around Commencement Bay in the South Puget Sound. Use of non-licensed properties by the Seaport Alliance may result in additional payments to the Port.

[Remainder of page intentionally blank]

-21- Figure 1

Source: Seaport Alliance.

-22- Figure 2

Source: Seaport Alliance.

-23- Containerized Cargo

Container Trade through the Seaport Alliance. Through the Seaport Alliance, the Port and the Port of Seattle lease containerized cargo facilities to terminal operators. The terminal operators provide service to carriers and indirectly to the cargo owners (shippers). Carriers are the steamship lines that transport containers. Shippers regularly contract with a number of carriers, and larger shippers also may direct traffic to one or more ports and terminal facilities. The ability of a terminal operator to attract and efficiently move cargo is important to the success and value of a container facility. Neither the Port nor the Seaport Alliance is a participant in the agreements between and among shippers, carriers and the terminal operators, and thus neither have any control over these agreements.

There is significant competition for container traffic among North American ports. Success depends largely on the size of the local market and the cost and efficiency of a port and inland transportation systems. Due to the relatively small population in the Pacific Northwest, most cargo that passes through Seaport Alliance facilities either comes from or is destined for other regions. As such, the Seaport Alliance ports are considered discretionary ports. Discretionary cargo can be shifted to other ports generally based on the cost efficiency and reliability of moving cargo from its point of origin to its final destination; these routing decisions are made by shippers and carriers. Therefore, the Seaport Alliance competes with other ports on the West Coast (including the United States, Canada and Mexico) and on the Gulf and East Coasts. The cost, efficiency and quality of competitive ports and the intermodal connections serving them may change and are beyond the control of the Seaport Alliance or the Port. Neither the Seaport Alliance nor the Managing Members directly contract with container carriers or determine the rates that carriers pay to call at the Seaport Alliance facilities.

According to statistics from the American Association of Port Authorities, in 2016, the Seaport Alliance ranked fifth in volume (measured in “TEUs” or twenty-foot equivalent units) among North American ports behind Los Angeles, Long Beach, Port of New York and New Jersey, and Savannah, Georgia. Vancouver, Canada ranked seventh. Since 2011, North American TEUs increased an average of 2% annually while Seaport Alliance growth averaged approximately 1% per year. Between 2011 and 2016, all major container ports (those in excess of one million TEUs) in Canada, Mexico and the U.S. experienced double digit growth with the exception of the Seaport Alliance (4%), Oakland (1%), and Montreal (6%). The opening of the larger Panama Canal has created a significant increase in all-water services bringing cargo to the East Coast. Additionally, Vancouver and Prince Rupert, Canada are making significant investments to increase their terminal and intermodal capacities. These actions may impact United States West Coast market share over time.

The following table summarizes total container traffic through the Seaport Alliance’s North Harbor and South Harbor for 2012 through 2016 (and for the period January through May 2016 and 2017), including international containers (all of which are handled through Seaport Alliance facilities) and domestic containers (some of which are transported by barge to and from private terminals). The following cargo volumes represent the volumes for the Licensed Properties.

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-24- Table 10 Volumes for Container Terminals Now Licensed to the Seaport Alliance 2012 – 2016 (in thousands)

International Containers Domestic Total Imports Exports Containers Containers Empty Total Intl. Year Full TEUs Full TEUs TEUs TEUs TEUs TEUs 2016 1,392 984 483 2,859 757 3,616 2015 1,308 872 581 2,760 769 3,529 2014 1,217 908 432 2,557 837 3,394 2013(1) 1,239 984 413 2,635 821 3,456 2012(1) 1,340 975 464 2,778 786 3,564

Year-to-Date Comparison January – May 2016 and 2017 (in thousands)

Domestic Total International Containers Containers Containers

Imports Exports Empty Total Intl. Year Full TEUs Full TEUs TEUs TEUs TEUs TEUs 2017 578 403 242 1,224 280 1,503 2016 521 382 179 1,082 304 1,386 ______Note: Totals might not equal the sum of component parts due to rounding. (1) During the fourth quarter of 2014, an adjustment was made by the Port of Seattle to certain prior-year (2005-2013) container TEU information to reflect a reporting discrepancy of non-Port of Seattle containers. The revised 2012-2013 data are included above. Source: Seaport Alliance.

Forecast. The historical and forecasted activity for the Seaport Alliance is shown in the table below.

Table 11 Seaport Alliance Cargo Activity and Forecast (in thousands)

Actual Forecast 2013 2014 2015 2016 2017 2018 2019 2020 2021

Container TEUs International 2,635 2,557 2,761 2,859 2,791 2,874 2,960 3,049 3,141 Domestic 821 870 769 757 680 666 653 655 658 Total TEUs 3,456 3,427 3,530 3,616 3,471 3,540 3,613 3,704 3,799 (annual growth) -1% 3% 2% -4% 2% 2% 3% 3% Intermodal Lifts (1) 486 516 532 576 542 557 571 588 604 (annual growth) 6% 3% 8% -6% 3% 3% 3% 3% Breakbulk Metric Tons 250 253 234 181 187 187 203 221 241 (annual growth) 1% -8% -23% 3% 0% 9% 9% 9% Vehicle Units 160 176 183 166 171 162 164 166 167 (annual growth) 10% 4% -9% 3% -5% 1% 1% 1% ______Note: Totals might not equal the sum of component parts due to rounding. (1) Intermodal lifts reported and forecast for South Harbor only. Source: Seaport Alliance.

-25-

Licensed North Harbor/South Harbor Container Properties and Terminal Lease Agreements. The following ten container terminals are Licensed Properties: four container terminals (Terminal 5, Terminal 18, Terminal 30 and Terminal 46) owned by the Port of Seattle, and six container terminals (Husky Terminal (encompasses Terminal 3 and Terminal 4), Washington United Terminal, West Sitcum Terminal (APM), Olympic Container Terminal (“OCT;” encompasses part of Terminal 7C and all of Terminal 7D), Pierce County Terminal, and TOTE), owned by the Port.

Most of the ten container terminals are leased to terminal operators on a long-term basis. Terminal 5 has a short-term lease with a non-container company; and the leases for the APM and OCT terminals expire in 2017. Even long-term leases are subject to amendments and modifications that may impact Seaport Alliance revenue (and therefore Port revenue) and are negotiated from time to time to reflect the fluctuating businesses of the ports and tenants. The following table identifies the port owner, primary lessee, terminal area and lease expiration date for the container terminals licensed to the Seaport Alliance.

Table 12 Container Facility Leases

Tacoma West Container Sitcum Terminal Terminal Terminal Terminal Terminal (AKA (formerly 5 18 30 46 APM) Husky OCT) PCT WUT TOTE

Port of Port of Port of Port of Port of Port of Port of Port of Port of Port of Port Owner Seattle Seattle Seattle Seattle Tacoma Tacoma Tacoma Tacoma Tacoma Tacoma

SSA Terminals, SSA Washington Tote Terminals International Ports Evergreen Primary Foss LLC and Terminals APM United Maritime Investment Transportation America Marine Lessee Maritime SSA (Seattle), Terminals Terminals Alaska Limited Services (ITS) Washington Corporation Containers, LLC(4) (WUT) (TOTE) Inc.(2)(3)

Terminal 185 acres(1) 196 acres 70 acres 88 acres 135 acres 93 acres 54 acres 141 acres 123 acres 48 acres Area(6) Lease Month-to- 2017 2039 2039 2025 2017(7) 2046 2024 2028 2034 Expiration month(8) ______(1) Foss Maritime leased approximately 50 of the 185 acres at Terminal 5. See discussion regarding the termination of Eagle Marine Services below. (2) The original lease named SSA Terminals, LLC and Stevedoring Services of America, Inc. as Lessees. Subsequent Lessee name changes from Stevedoring Services of America, Inc. to SSA Marine, Inc., and then to SSA Containers, Inc. were solely changes in identity and not in ownership or control. SSA Terminals is a wholly-owned subsidiary of SSA Containers, Inc. SSA Terminals, Inc. can be sole signer with consent from the Port of Seattle. (3) SSA Terminals, Inc. can be sole signer with consent from the Port of Seattle. (4) SSA Terminals (Seattle), LLC is a joint venture among SSA Seattle, LLC, China Shipping Terminals (USA), LLC, and Matson Seattle LLC. (5) TIL’s largest customer is Mediterranean Shipping Company (MSC). (6) Terminal Area for South Harbor terminals does not include any intermodal yard area. (7) SSA Terminals is pursuing a long term lease with the Seaport Alliance to replace APM Terminals at the West Sitcum terminal. APM has given notice that it will vacate the West Sitcum terminal in September 2017. (8) As of this official statement, the Seaport Alliance is in negotiations with replacement tenant. On June 30, 2017, Ports America Group signed a month-to-month lease for this terminal. The Seaport Alliance is pursuing a long term lease.

Note: Corporate ownership information provided in the footnotes above is based on information from the container terminal tenants and has not been independently verified. Source: Port of Seattle; the Port; Seaport Alliance.

The Seaport Alliance receives rent paid under Port and Port of Seattle container terminal leases. Under the current Port of Seattle lease structure, tenants pay a per-acre rate derived from a Minimum Annual Guarantee (“MAG”) of container volumes (regardless of size of container) through the facility, plus an additional per container charge for any volumes in excess of the MAG. Under the current Port lease structure, tenants pay per acre rent and pay

-26- volume-based fees for equipment and for use of intermodal facilities; the intermodal yards require a MAG. Generally, terminal lease rates have periodic adjustments based on inflation or market value.

On April 7, 2016, the Seaport Alliance amended the lease at Husky Terminal and the lease was extended until 2046. The tenant will pay a per-acre rate and pay MAG fees for crane and intermodal yard usage. The Seaport Alliance is to provide additional capital improvements to accommodate larger container ships and to improve operating efficiencies.

In the normal course of business, the Seaport Alliance and the Managing Members engage in ongoing dialogue with marine terminal tenants regarding enhancing the efficient use of the leased facilities. This level of ongoing management of facilities may result in changes to the use of various terminals as prescribed by the underlying leases with related impacts on revenues and expenses.

Effective July 31, 2014, the Port of Seattle terminated its lease agreement with Eagle Marine Services at Terminal 5, the Port of Seattle’s second largest container terminal. The facilities at Terminal 5 cannot accommodate the larger ships now in use in global shipping, and the Port of Seattle agreed to terminate the lease while it begins preliminary planning, initial design and permitting for improvements. A portion of Eagle Marine container traffic has moved to Terminal 18, and the Seaport Alliance is to receive $9 million per year through 2023 from this arrangement. Under a lease termination agreement with APL (the owner of Eagle Marine), the Seaport Alliance anticipates receiving from APL certain payments if actual volumes are below the specified guaranteed minimum. For the lease year 2016, APL owes the Seaport Alliance $3.7 million for volume shortfalls. The Seaport Alliance is currently in negotiations with APL and its parent company (CMA CGM) for potential future marine terminal agreements and those shortfalls are a part of the overall discussion. In the interim, the Seaport Alliance is pursuing temporary uses at Terminal 5, continuing design and permitting efforts for redevelopment and seeking a long-term tenant for the redeveloped facility.

The lease at Terminal 18 contains a Most Favored Nations (“MFN”) provision that requires the Port of Seattle to maintain equitable rates comparable to the Port of Seattle’s Terminal 5 container facility. Lease rates for an international container terminal tenant could affect lease revenue at Terminal 18. Because the lease at Terminal 18 contains a MFN provision, if the Terminal 5 facility is offered to another international container terminal tenant such that the resulting rent structure is more or less than the rent on a per billable acre basis paid at Terminal 18, the Terminal 18 lessee has the right to (a) adjust its rent to that offered to the container terminal tenant at Terminal 5; or (b) may opt out of a rent adjustment under its MFN right. In this event, the Terminal 18 lessee is to have no further MFN rights. The Terminal 18 lessee’s MFN right is currently scheduled to expire on January 31, 2025.

The OCT lease expired June 30, 2017. The terminal would require significant upgrades to support the cranes necessary to accommodate larger ships. Its proximity to Husky Terminal and the North Intermodal Yard means it could serve as an expansion area for Husky Terminal operations. At this time, there are no plans to make the improvements at OCT required to support larger cranes. The Seaport Alliance has a month-to-month lease with Ports America Group for the terminal, and the Seaport Alliance is pursuing a long-term lease for portions or all of the terminal.

West Sitcum (AKA APM Terminals) serves the domestic shipping market, primarily Alaska cargo. This market is served by Matson, which uses smaller ships, and the terminal has the facilities necessary to support the Alaska trade. Additionally, the warehouse and distribution centers required to service Alaska are located in the Tacoma area. Support of the Alaska business relies on the local infrastructure in the South Harbor, which infrastructure may not be readily available elsewhere. Matson has chosen SSA Terminals to replace APM as the Stevedoor at West Sitcum. The Seaport Alliance is negotiating with SSA Terminals for a long term lease at West Sitcum.

Other Licensed Properties and Business. In addition to the container terminals, certain other facilities are licensed to the Seaport Alliance. These facilities include industrial properties owned by the Port of Seattle that support domestic container trade or non-containerized trade, and the following properties owned by the Port: four intermodal yards (one domestic and three international), eight properties that accommodate non‐containerized cargo (autos, breakbulk, logs etc.) and supporting industrial properties. The break bulk business is licensed to the Seaport Alliance.

-27- Marine Cargo Activities. The Charter also reflects the Managing Members’ commitment to a unified approach to Marine Cargo activities. Marine Cargo activities for the Licensed Properties are exclusively handled by the Seaport Alliance. The Managing Members may continue Marine Cargo activities for other existing port businesses; for new Marine Cargo opportunities, however, the Seaport Alliance has right of first refusal.

Railroads. In June 2013, the Port entered into a twenty-year agreement with Tacoma Municipal Belt Line (“Tacoma Rail”) to provide efficient, low cost rail service to the Port’s four intermodal facilities that are licensed to the Seaport Alliance. The agreement emphasizes performance and established six key performance metrics. Additionally, the agreement established two joint committees to oversee both strategic and tactical issues. The agreement encourages continued growth and the sharing of resources to support the desired growth. Tacoma Rail does not operate in the Port of Seattle.

The Seaport Alliance is also served by BNSF and Union Pacific. These are two of the largest railroads in the United States. The railroads provide a wide range of services, including the movement of international and domestic containers across the United States as well as auto, breakbulk and liquid and dry bulk commodities. The Seaport Alliance works closely with the railroads to ensure competitive transit times for cargo to and from the Seaport Alliance gateway.

International Trade

Production in Asia and consumer demand in the United States largely determines the level of imports to the Port. Exports shipped through the Port are influenced by overseas demand for United States goods and are strongly influenced by currency valuation.

Seaport Alliance Operating Budget

The Seaport Alliance operating budget revenue is based on cargo volume forecasts, existing terminal and property leases and contractual and tariff-generated revenue. Operating budget expenses are projected based on historical information, as well as levels of expenditures required to support the increases in revenue. From this information, Seaport Alliance staff prepare a budget that supports both the strategic priorities and financial goals of the Seaport Alliance.

Business budgets are projections of revenues earned and expenses incurred in the operation of a particular business line. In addition, the Seaport Alliance expects to receive funds from other sources including user fees, and investment earnings.

Although capital project spending is planned within the capital budget, capital projects will impact operating budgets for future years through new sources of revenues, and increased operating expenses and depreciation costs.

Budget Process. The Seaport Alliance budget is a guideline used by management to direct strategic and tactical operations. More projects and spending are budgeted than may actually occur. This approach ensures that the Seaport Alliance’s financial goals are still met if business conditions support the full budgeted spending. The Seaport Alliance operates on a calendar year budget cycle that must integrate the budget schedule needs of both Managing Members.

The annual budget development begins in August and continues through November. The process begins with the development of strategic objectives and initiatives, which are reviewed by the Managing Members and the Chief Executive Officer. The Managing Members and Chief Executive Officer communicate any strategy changes or policy concerns and gather additional input.

Cargo forecasts, available at the beginning of September, are used to develop the variable portion of the operating budget. During a study session, the Managing Members are presented with a draft budget.

In November, a public hearing is held by each Managing Member to allow for public comment, and to adopt the statutory budget and approve the property tax levy for the budget year. The Seaport Alliance’s operating income is split evenly between the Managing Members and is shown as revenue to the Managing Members. After the

-28- Managing Member’s Commission approves and adopts its statutory budget, it is submitted, with the related Managing Member resolutions, to the respective County Councils and Assessor Treasurer offices.

Audited 2016 financial results, and unaudited first half 2017 financial results are included in the table below, as well as the 2017 first half budget and the 2017 full year budgeted operating income. First half operating income of $54.4 million was $9.6 million higher than the first half budget. The increase in first half operating income is due to lower expenses believed to be due to timing of spending and some permanent headcount related savings due to delays in hiring. Some of the delayed spending will be incurred in future years

Table 13 Seaport Alliance 2016 Actual & 2017 Budget and First Half (H1) Results (in thousands)

2016 Full Year 2017 Full Year 2017 H1 2017 H1 Actuals Budget Budget Actual Operating Revenue $195,170 $189,371 $93,659 $95,170 Total Operating Expenses before Depreciation 79,732 94,291 47,764 39,796 Depreciation 532 2,527 1,192 1,031 Total Operating Expenses 80,364 96,818 48,956 40,827 Operating Income $114,906 $92,552 $44,703 $54,343 ______Source: The Port.

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-29- Table 14 Seaport Alliance Statements of Revenues, Expenses and Changes in Net Position (in thousands) 2016 2017 Actuals Budget Beginning Net Position $0 $131,137

Operating Revenue $195,170 $189,371 Total Operating Expenses including depreciation (80,264) (96,818) Net Operating Revenue over Expenses (Income from 114,906 92,552 Operations)

Non Operating Revenues (Expenses) Interest Income 755 528 Other non-operating expense, net 7,507 344 Total non-operating expenses, net 8,262 862

Net Distributable Revenue (Net Income) 123,168 93,415

Capital Contribution Working Capital 51,000 0 Capital Construction 72,933 87,832 Cash Distribution to Home Ports (shown below) (115,964) (87,148) Net Capital Contribution 7,969 684

Increase in Net Position 131,137 94,099

Ending Net Position 131,137 225,236

Uses of Cash per Seaport Alliance Charter Net Distributable Revenue (Net Income) 123,168 93,415 Add Depreciation 532 2,527 Less Interest Income (755) (528) Less capital Grants 0 (275) Adjustment for Timing of Cash Distribution (6,981) (7,991) (2) Distributed cash(1) 115,964 87,148

______(1) Per Charter Section 5.3 and Charter definition 1.1(p) (2) Estimated due to timing of cash after monthly financial close Source: Seaport Alliance.

Capital Budget and Plan of Finance

Capital Budget Planning Process. The Port and the Port of Seattle work cooperatively with the Seaport Alliance to develop a capital budget for approval by each Managing Member. A capital budget and plan of finance will be provided each year as part of the budget process.

The Seaport Alliance is responsible for capital investments including renewal and replacement projects and new development. Such capital investments will be treated as tenant improvements owned by the Seaport Alliance. If the Seaport Alliance dissolves, the Managing Member in which the underlying assets reside takes ownership of improvements. See “— Dissolution of the Seaport Alliance.”

-30- Major Capital investments must be approved by the Managing Members. Funding will be provided by joint contributions from the Managing Members; cash flow from operations will be distributed to Managing Members and not retained by the Seaport Alliance. Each Managing Member must approve its capital contributions.

Capital Improvement Plan. The Seaport Alliance develops a multi-year Capital Improvement Program (the “CIP”) in conjunction with its annual operating budget. The CIP includes project cash flows for both projects that have already received authorization and for certain projects that are expected to be authorized. Such projects are generally designed to increase the capacity, extend the life, or improve the safety or efficiency of Seaport Alliance-managed property and equipment.

The five-year Capital Improvement Plan (CIP) identifies all projects planned or underway. The CIP provides a mechanism to track and manage project budgets and cash flows for five years into the future. Table 15 shows planned spending on capitalized projects for the five-year time frame. Projects are associated with a program that fall under one of the businesses or under a category called “Infrastructure.”

Although funds for a project are included in the CIP, the project is not automatically authorized to proceed. Each project is reviewed and approved individually by the Managing Members and must have the necessary permitting before proceeding.

To achieve its goals, the Seaport Alliance continues to invest in revenue-generating capital projects that support its businesses. Although each Managing Member is responsible for its general infrastructure, the Seaport Alliance may also invest in infrastructure projects that support the Seaport Alliance’s maritime business, as well as increasing rail and road transit of cargo between Managing Members. Often, these infrastructure projects are expensed versus capitalized due to accounting requirements.

In addition, environmental projects are planned for meeting or maintaining regulatory requirements, including the development of mitigation and remediation projects. Projects may be expensed or capitalized according to accounting rules.

Summary of Major Projects. The five-year capital budget for 2017-2021, affirmed in November 2016, focuses on the following strategic and maintenance projects:

Strategic investments:

 Design of major terminal improvements at Terminal 5 in preparation for redevelopment  Construction of a new wharf at Terminal 4  Rehabilitation of the Terminal 46 dock  Upgrade to Terminal 46 utilities and electrical  Purchase eight super post-Panamax container cranes for Terminal 4  T-18 stormwater utility upgrade

Maintenance Investments:

 Pile cap repairs  Purchase four replacement straddle carriers for the South Harbor general central peninsula  Maintenance and rehabilitation of Port assets

The Seaport Alliance has a strong commitment to the protection and improvement of the environment. Examples of this commitment include the Clean Truck Program, the Northwest Ports Clean Air Strategy, and significant investment in stormwater improvements.

Strategic development efforts focus on serving existing customers, attracting new customers and building a diverse, dynamic and resilient business base.

-31- Table 15 Planned Capitalized Project Spending

Seaport Alliance Capital Improvement Plan 2017 – 2021(1) (in millions)

2017 2017-2021 CIP (as of 2017 budget) $87.8 $218.4 Additional Husky Wharf equipment approved in April 2017 52.0 52.0(2) Seaport Alliance Capital Projects $139.8 $270.4(3) ______Note: Totals may not add due to rounding. (1) Excludes financing costs. (2) Additional $52 million authorized on June 6, 2017 for additional cranes. SEE “— Funding.” (3) Does not include $13.3 million in capital spending scheduled to be spent in 2016 but moved into 2017 due to project timing. Source: Seaport Alliance.

Strategic Business Plan

The Seaport Alliance has created and intends to periodically update its Strategic Business Plan as it responds to the rapidly changing market conditions in the shipping industry. The Strategic Business plan is used to identify the business opportunities that the Seaport Alliance is pursuing, and the desired outcome from its actions. The current plan focuses on three key goals: (1) Service Delivery Excellence, (2) Gateway Growth and Optimization, and (3) Gateway Business Environment. The overarching goal of the Strategic Business Plan is to ensure the financial stability and sustainability of the Seaport Alliance.

One aspect of the Strategic Business Plan is the creation of two strategic terminals, one located in the North Harbor, the other in the South Harbor. Some key features of a strategic terminal include:

 Capacity to handle two 14,000+ TEU ships at the same time (Berth Length of 2,800 feet or more)  Capacity to handle 750,000 annual intermodal lifts  100 or more container yard acres  28,000 feet of intermodal railroad track  55 foot water berth depth  Gate capacity of at least eight in-gates and four out-gates

The Managing Members have approved the improvement to Husky Terminal 4 wharf required to provide the berth length required for a strategic terminal, the purchase of eight super post Panamax cranes, and funds for an improved gate complex and associated backlands. The Husky terminal has approximately 90 acres of land and 51 foot berth depth. The North Intermodal yard next to Husky currently has capacity of approximately 400,000 intermodal lifts. Additional investments may be required to increase the berth depth and increase capacity in the intermodal yard when cargo volumes and or ship size require such investments.

Terminal 5 is considered an important facility to accommodate large container vessels in the North Harbor. The managing members have approved the design of the crane rail, dock and power upgrades, and berth deepening needed to satisfy the features of a strategic terminal. In October 2016, the Port of Seattle issued its final environmental impact statement (“EIS”) for the Terminal 5 redevelopment project. The costs for constructing the crane rail, dock and power upgrades, and for deepening the berth are not included in the current CIP.

The Seaport Alliance is actively pursuing a container customer to sign a long term lease at Terminal 5. Additional investments in uplands improvements may be required, the costs of which are beyond the scope of the current project design approved by the managing members.

-32- Dispute Resolution

The Charter provides for good faith discussion followed by mediation in the event of a dispute between the members; certain matters (relating to the Licenses and distributions upon dissolution) are subject to binding arbitration. The Seaport Alliance and the member ports have waived any right to seek recourse in court for any dispute regarding the Seaport Alliance, the Charter, or the transactions or other documents contemplated by the Charter (a “Dispute”), and agree that the dispute resolution procedures under the Charter are to be the exclusive remedies available for resolution of such Disputes.

Dissolution of the Seaport Alliance

Except as described below, no Managing Member may take any action to dissolve, terminate, or liquidate the Seaport Alliance. No Managing Member may require re-valuation, apportionment, appraisal or partition of the Seaport Alliance or any of its assets, or to file a bill for an accounting, except as specifically provided in the Charter. Each Managing Member, to the fullest extent permitted by applicable law, has waived any rights to take any such actions under applicable law, including any right to petition a court for judicial dissolution.

Under the Charter, the Seaport Alliance shall be dissolved if the following occur: (i) a determination by both member ports to dissolve the Seaport Alliance; (ii) only after the Initial Period, a vote by a Managing Member that the Seaport Alliance be dissolved, upon the declaration by a Managing Member that there is a deadlocked Dispute following discussion and mediation as required under the Charter dispute resolution procedures; (iii) during or after the Initial Period, a dissolution is called by a Managing Member upon a Bond Income Calculation Dissolution Event described under the heading “Financial Framework -- Recognition of Managing Member’s Bond Obligations;” and (iv) any dissolution required by operation of law. Dissolution of the Seaport Alliance is to be effective as of the day on which the event occurs giving rise to the dissolution, but the Seaport Alliance shall not terminate until there has been a winding up of the Seaport Alliance’s business and affairs, and the Seaport Alliance’s assets have been distributed as provided in the Charter.

Distribution on Dissolution. The Charter provides that should the Seaport Alliance be dissolved, management and all post-dissolution revenues of properties owned by the Port will revert to the Port as will any improvements on those properties. In the event of dissolution of the Seaport Alliance, and as part of the wind down process, the Chief Executive Officer is required to present a full account of the Licensed Properties, Post-Formation Improvements, Seaport Alliance-Owned Personal Property (as such terms are defined in the Charter), and liabilities of the Seaport Alliance to the member ports. The member ports are to direct the Chief Executive Officer to hire an independent third-party consultant to calculate the values for each Licensed Property and Post-Formation Improvement using the formulas described in the Charter, which are to determine the credits and debits due to the member ports upon dissolution. All credit and debit allocations may, however, be revised by vote of the member ports. The calculation of payments between the ports may result in a net payment to one of the two ports.

PORT OF TACOMA FINANCIAL RESULTS AND CAPITAL IMPROVEMENT PROGRAM

Port Financial Budget and Year-to-Date Results

The Port prepares its annual budget as prescribed by state law. See “PORT INFORMATION—Budgeting Policies.” Below is the full year budget and the first-quarter budget and actuals, which includes the Port’s 50% share of distributed net income from the Seaport Alliance. The Seaport Alliance remits revenue income at least quarterly to the Port. State law requires that all funds be deposited with the Treasurer of the Port within 24 hours of collection.

Unaudited first half 2017 financial results for the Port are included in the table below as well as 2017 full year and first half budget and 2016 full actual budgeted operating income. First half 2017 operating income of $16.7 million was $6.5 million higher than the first half 2017 budget. The increase in first half operating income is primarily due to higher-then-budgeted revenue contributions from the Seaport Alliance of $4.7 million partially offset by lower real estate revenue of $0.6 million due to lower rental income of land for auto parking. Reduced expenses of $2.5 million, primarily due to lower maintenance and environmental expenses, also contributed to the increase in first half operating income compared to the first half budget. The $2.5 million reduction in operating expenses is believed to be due to timing of spending. The Port expects those delayed expenses to be incurred in 2017.

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Table 16 Port of Tacoma 2016 Actuals and 2017 Budget and First Half (H1) Operating Income Results (in thousands)

2017 Full Year 2017 H1 2017 H1 2016 Actuals Budget Budget Actual Operating Revenue $85,129 $68,438 $33,965 $3,052 Total Operating Expenses 12,656 19,068 9,245 6,790 before Depreciation Depreciation 30,300 28,989 14,635 14,597 Total Operating Expenses 42,956 48,058 23,880 21,386 Operating Income $42,173 $20,380 $10,085 $16,666 ______Source: The Port.

Capital Improvement Plan

The Port maintains a practice of investing in new or expanded facilities upon a customer commitment. In November 2016, the Port Commission affirmed a comprehensive five-year $159 million planned Capital Improvement Plan (“CIP”) as shown in Table 17 (which excludes Port contributions to Seaport Alliance improvements). Additionally, the Port is responsible for funding 50% of the Seaport Alliance’s CIP, equating to a Port share of $161 million to be funded through 2021 for Seaport Alliance projects. The CIP focuses on infrastructure and increasing the efficiency and capacity of intermodal facilities and emphasizes strategic land development for future business opportunities, rail and road improvements and fostering industrial and economic development.

Table 17 Planned CIP Projects 2017 – 2021 (in millions)

Port CIP Projects Waterway Improvements $ 28 Rail Infrastructure 23 Unspecified 5 year contingency 17 Environmental 23 Land 42 Technology 7 Road & Other 19 Subtotal $159

Seaport Alliance CIP Projects (Port’s 50%) Husky Wharf & Improvements 88 CIP Budget 73 Subtotal $161 Total $320

Source: The Port.

Historically, the Port funds its CIP with a combination of internally generated funds (net income), cash reserves, and the issuance of general obligation and revenue bonds. For the five-year period 2017 through 2021, the Port plans to use internally generated funds (net income), and cash reserves to fund the Port and Seaport Alliance CIPs as described in Table 17. See “SOURCES AND USES OF BOND PROCEEDS — Use of Proceeds.”

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In addition to Port and Seaport Alliance capital expenditures on property owned by the Port and Port of Seattle, improvements to road and rail infrastructure owned by other entities may be required if cargo volumes increase significantly. The funds necessary to improve the road and rail infrastructure are anticipated to come from multiple sources, including federal, state, and local governments, and from private entities such as the railroads. The Port and/or the Seaport Alliance may be asked to contribute funds to support investments in infrastructure not owned by the Port. For example, the Port Commission has indicated that the Port will donate approximately $30 million to the state for the completion of Washington State Route 167. The port is considering donating Port-owned land valued between $3.5 million and $4 million and potentially donate land improvements of between $3 million and $4 million to the State for Route 167. The difference between the $30 million and the land donation will be paid in cash. Currently proposed legislation being considered by the Legislature would require the Port’s cash contribution to start in 2021 and would be spread out over four biennium’s. This cost is not reflected in either the Port’s operating budget or capital budget as details have not been finalized. The Port and the Seaport Alliance may be required to contribute to other infrastructure projects in the future if those improvements are to be completed.

PORT INFORMATION

Financial Report Awards

In December 2016, the Government Finance Officers Association (“GFOA”) awarded to the Port the Certificate of Achievement for Excellence in Financial Reporting for the Port’s 2015 Comprehensive Annual Financial Report. In July 2017, the Port earned the GFOA’s Distinguished Budget Presentation Award for its 2017 Budget. The Port has received these awards for more than ten years straight.

Budgeting Policies

State law prescribes procedures for the preparation of annual budgets by the Port. Final budgets must be adopted and filed in December for the following calendar year. In September of each year, a proposed budget is prepared by each department and submitted to the Chief Financial and Administrative Officer. The proposed budget is reviewed by the Chief Executive Officer and submitted to the Commission for adoption. After adoption, the budget is filed with the County for the purpose of specifying the amounts to be raised by taxation. The budget includes the Tax Levy, which must be certified to the County Council in December of each year.

Basis of Accounting

The financial statements of the Port have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to government units, and the Port is accounted for as a proprietary fund. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The Port has chosen to follow accounting standards applicable to private sector entities when those standards do not conflict with applicable GASB standards. The Port is accounted for on a flow of economic resources measurement focus.

The accounting records of the Port are maintained in accordance with methods prescribed by the State Auditor under the authority of Chapter 43.09, Revised Code of Washington. The Port also follows the Uniform System of Accounts for Port Districts in the State of Washington.

The Port uses the full-accrual basis of accounting where revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of the related cash flows.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements. Significant estimates also affect the reported amounts of revenues and expenses during the reporting period. Significant estimates made by the Port include depreciation and environmental liabilities. Actual results could differ from those estimates.

-35- The State Auditor has prescribed a uniform system of accounting to be used by port districts within the State. The system is similar to that of a commercial enterprise. Separate funds are maintained for specific projects in accordance with bond covenants, tax levies and commitments for grants. Revenues and expenses are accounted for on the accrual basis. Accounting functions are computerized, providing detailed cargo inventory status for customer information and billing. Revenues and expenses are allocated to individual profit centers to evaluate profitability by individual pier, lease terminals and property management areas. Monthly financial reports are prepared for management.

Auditing of Port Records

The State Auditor is required to examine the affairs of port districts, and the Port has exercised the option of being audited by external independent CPA firms annually. The financial statements of the Port are audited by the independent certified public accounting firm of RSM US LLP, Tacoma, Washington. The audited financial statements of the Port for the fiscal year ended December 31, 2016 are attached as Appendix A and are published on the Port’s website.

The State Auditor’s examination must include, among other things, the financial condition and results of operations of the Port, whether the laws and constitution of the State are being complied with, and the methods and accuracy of the accounts and reports of the Port. Reports of the Auditor’s examinations are required to be filed in the Office of the State Auditor and in the finance and administration department of the Port.

Authorized Investments

The Port currently acts as its own treasurer as authorized under State law.

Chapter 39.59 RCW limits the investment of public funds by local governments to the following authorized instruments: (i) bonds of the State or any local government in the State, (ii) general obligation bonds of any other state or local government thereof which have at the time of investment one of the three highest credit ratings of a nationally recognized rating agency, (iii) registered warrants of a local government in the same county as the local government making the investment, (iv) obligations of the U.S. government, its agencies and wholly owned corporations, or obligations issued or guaranteed by supranational institutions, provided, that at the time of investment, the United States government must be the largest shareholder of such institution, (v) obligations of the Federal Home Loan Bank, Fannie Mae and other government-sponsored enterprises, (vi) bankers’ acceptances, (vii) commercial paper, subject to state investment board policies, and (viii) corporate notes, subject to state investment board policies.

As of December 31, 2016, the Port’s investments, at market, totaled $250,863,000, and were allocated as follows: certificates of deposit, $3,328,000, Washington State Local Government Investment Pool (described below), $79,055,000; and government securities, $168,480,000.

Local Government Investment Pool. The State’s Local Government Investment Pool (“LGIP”) was authorized by the Legislature in 1986 and is managed by the Office of the State Treasurer. The more than 530 local governments that participate in the LGIP are allowed 100 percent liquidity on a daily basis. As of May 31, 2017, the LGIP had a balance of approximately $15.5 billion. Although not regulated by the SEC, the LGIP is invested in a manner generally consistent with the SEC guidelines for Rule 2a-7 money market funds; for example, currently it has a maximum weighted average maturity (“WAM”) of 60 days and a maximum weighted average life of 120 days. The maximum final maturity is 397 days except for floating-rate and variable-rate securities and securities that are used for repurchase agreements. The WAM of the LGIP generally ranges from 30 to 60 days. Typical investment holdings of the LGIP are repurchase agreements, U.S. Treasury bills and notes, U.S. agency discount notes, coupons, floating- and variable-rate notes, reverse repurchase agreements and bank deposits. The benchmarks utilized for the LGIP are the Government and Agency money market net and gross yields reported by iMoneyNet. The net yield is utilized for external comparisons while the gross yield is used internally to assess portfolio manager performance. For a full description of the LGIP and its interest structure, visit the State Treasurer’s website at http://tre.wa.gov/LGIP (which website is not incorporated into this official statement by reference).

-36- Risk Management

The Port is exposed to various risks of loss related to torts; damage to, theft of and destruction of assets or cargo; natural disasters; and employee injuries. To mitigate its exposure, the Port purchases a variety of insurance policies, with limits of $151 million for general liability, and limits of $500 million for property (with sub-limits of $75 million for earthquake/flood damage and $100 million for business interruption losses). With the exception of losses that may arise from employee injuries, earthquakes or floods, no deductible exceeds $500,000.

The Port began a self-insurance program for worker’s compensation in 1986. As of December 31, 2016, the estimated self-insurance liability for workers’ compensation was $237,893, a portion of which is expected to be paid in 2017. This liability represents the estimated future medical and indemnity claim costs for injuries sustained prior to January 1, 2017. The Port carries excess workers’ compensation insurance that covers losses greater than $1,250,000 for each accident.

Port Security

Safety and security are top priorities at the Port, which works with public and private partners to plan and coordinate security measures. Port security officers monitor facilities, rail and road systems 24 hours a day, seven days a week. They respond to calls and have authority to access all marine terminals and cargo at the Port. Port security officers also operate round-the-clock camera surveillance, explosives detectors and other technologies to protect Port facilities, operations and employees.

Port Security staffs critical positions that protect all Port personnel and properties. Security presence has been a part of the Port since the early 1920s. Security has approximately 60 departmental staff that consists of management, administrative personnel and two represented workforces: ILWU Local 28 Port of Tacoma Patrol and ILWU Local 28 Terminal Security.

Local 28 Port of Tacoma Patrol is an armed proprietary security force charged with the safety, security and protection of Port personnel, its stakeholders and property, in accordance with federal, state and local laws and regulations. The Port’s security department coordinates its work with other government agencies, including the U.S. Coast Guard, U.S. Customs and Border Protection, Tacoma Police Department, Fife Police Department, Tacoma Fire Department, Pierce County Sheriff, Pierce County Department of Emergency Management, Puyallup Nation Police and other state and local law enforcement agencies.

Local 28 Terminal Security is an unarmed force that provides security only at the West Sitcum terminal under an agreement with the Port.

Labor Relations

The Port employs approximately 220 regular employees who perform management, maintenance, security and custodial services. The Port’s clerical, maintenance and security staffs are represented by two union locals, ILWU Local 22 and Local 28. The Local 22 contract expires March 31, 2018, and the Local 28 contract expired March 31, 2016. Local 28 continues to work under the existing contract while negotiations continue.

Longshore cargo handlers are covered by contracts negotiated between the Pacific Maritime Association (“PMA”) and the ILWU, which will expire on June 30, 2019. PMA and ILWU workers voted in July 2017 to approve a three- year contract extension through June 30, 2022. The PMA represents steamship companies and terminal operators responsible for the majority of cargo entering and leaving West Coast ports. The ILWU represents crane operators, clerks and dockworkers responsible for loading, unloading and processing cargo received by the Managing Members.

Pension System and Deferred Compensation

Public Employees’ Retirement System (“PERS”). Substantially all of the Port’s full-time and qualifying part- time employees participate in PERS. PERS is a statewide local government retirement system administered by the

-37- Washington State Department of Retirement Systems (“DRS”), under cost-sharing, multiple-employer defined benefit and defined contribution retirement plans.

The PERS system includes three plans. Participants who joined the system by September 30, 1977, are PERS Plan 1 members. Those joining thereafter are enrolled in PERS Plan 2 or Plan 3, based on an election made by the employee. PERS Plans 1 and 2 are defined benefit plans; PERS Plan 3 is a combination defined benefit and defined contribution plan.

PERS Plan 1 members are eligible for retirement at any age after 30 years of service, at age 60 with five years of service, or at age 55 with 25 years of service. The annual pension is two percent of the average final compensation (“AFC”) multiplied by years of service, capped at 60 percent. The AFC is the average of the member’s 24 consecutive highest-paid service credit months. PERS Plan 2 members may retire at age 65 with five years of service. Participants age 55 or older with at least 20 years of service are eligible for early retirement with reduced benefits. The annual pension is two percent of AFC multiplied by years of service, and is subject to annual cost-of-living adjustments tied to inflation and capped at three percent annually. PERS Plan 3 members are eligible to retire at age 65 with at least 10 years of service (or with five years, if at least 12 of those months were earned after age 44). Participants age 55 or older with at least 10 years of service are eligible for early retirement with reduced benefits from the defined benefit portion of the plan. Plan 3 provides a defined benefit allowance similar to PERS Plan 2, calculated as one percent of AFC multiplied by years of service. Plan 3 members also receive distributions of their defined contribution amounts and the full investment return on those contributions.

For additional information on each of the above plans, please see the Washington State Department of Retirement Systems’ Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 (“2016 DRS CAFR”), which is available from DRS and on its website: www.drs.wa.gov. (which website is not incorporated by reference into this Official Statement).

Plan Funding; Contribution Rates and Amounts. DRS retirement plans are funded by a combination of funding sources: (1) contributions from the State; (2) contributions from employers (including the State as employer and other local government employers); (3) contributions from employees; and (4) investment returns.

Under State statute, contribution rates for PERS are adopted by the Pension Funding Council (“PFC”) in even- numbered years for the next ensuing State biennium. No later than the end of July in even-numbered years, the PFC adopts contribution rates, which are subject to revision by the Legislature. All employers are required to contribute at the level established by State law. The methods used to determine the contribution requirements are established under State statute in accordance with chapters 41.40 and 41.45 RCW.

The following tables outline the contribution rates of employees and employers under PERS as of the dates noted below, expressed as a percentage of covered payroll. Contributions by both employees and employers are based on gross wages.

Table 18 PERS Contribution Rates (as in effect since July 1, 2017)

PERS Plan 1 PERS Plan 2 PERS Plan 3 Employer (1) 12.70% 12.70% 12.70% Employee 6.00% 7.38% Variable (5% to 15%)(2) (1) Includes a 0.18% administration fee. (2) Employees participating in Plan 3 do not contribute to the defined benefit portions of the plan. Each employee selects a contribution level to the defined contribution portion of the plans from among six options ranging from 5% to 15%, that may not be changed unless the employee changes employers.

Source: Department of Retirement Systems.

-38- The Port contributed $2.678 million to PERS in the fiscal year ended December 31, 2016, representing 9.21 percent of covered payroll. See Note 8 of the 2016 Audited Financial Statements in APPENDIX A.

The Port’s contribution represents its full current liability under the system. Contribution rates for employees and employers may increase in the coming years, including possible increases to meet any unfunded pension benefit obligations. OSA has projected increased contribution rates for the 2017-19 biennium.

Plan Funding Status and Unfunded Actuarial Accrued Liability. Retirement funds are invested by the Washington State Investment Board (“WSIB”), a 15-member board created by the Legislature in 1981. Generally, assets for one plan may not be used to fund benefits for another plan. However, PERS Plans 2 and 3 are accounted for in a single Plan 2/3 pension trust fund and may legally be used to pay the defined benefits of any PERS Plan 2/3 member. In addition, the contribution rate of all employers in PERS Plan 2/3 includes a component determined by the OSA every two years for the sole purpose of amortizing the PERS Plan 1 unfunded actuarial accrued liability (“UAAL”) within a rolling 10-year period. The Legislature has established certain maximum contribution rates that became effective in 2015 and remain in effect until the actuarial value of assets in PERS Plan 1 equals the actuarial accrued liability. Despite the implementation of GASB 67/68 (as further discussed below), contribution rates for the DRS plans are determined based on the Actuarially Required Contributions (“ARC”) and each Plan’s funded status based on UAAL. The most recent actuarial valuation has a valuation date of June 30, 2015; the next actuarial valuation (with a valuation date of June 30, 2016) is expected to be released at the end of August 2017. The funded status of those plans in which the Port participates presented in the most recent actuarial valuation is as follows: Table 19 Schedules of Funding Progress (as of June 30, 2015) (in millions) PERS 1 PERS 2/3 Actuarial Value of Assets (“AVA”) $ 7,315 $ 28,292 Actuarial Accrued Liability (“AAL”) 12,553 32,008 Unfunded Actuarial Accrued Liability (“UAAL”) 5,239 3,715 Funded Ratio 58% 88%

Source: Office of the State Actuary, Actuarial Valuation. OSA uses a funded status measure that compares the Actuarial Value of Assets (“AVA”) to the Projected Unit Credit (“PUC”) liabilities. The PUC cost method projects future benefits under the plan, using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. The Actuarial Value of Assets (“AVA”) is calculated using a methodology that smoothes the effect of short-term volatility in the Market Value of Assets (“MVA”) by deferring a portion of annual investment gains or losses over a period of up to eight years. This method is consistent with governmental accounting standards.

OSA uses the Entry Age Normal Cost (“EANC”) method for all plans for purposes of calculating each plan’s funded status. OSA uses the Aggregate Cost method for calculating AAL for Plans 2/3 for other purposes. The EANC method projects future benefits under the plan, using salary growth and other assumptions and applies the service that has been earned as of the valuation date to determine accrued liabilities. Additional assumptions used by OSA include: 3.0 percent total economic inflation; 3.75 percent salary inflation; investment rate of return of 7.50 percent; and changes in relative salary values attributed to growth in active group size for PERS 2/3 of 0.95 percent.

Change in Accounting Standards; GASB 67/68 Implementation. In 2012, the Governmental Accounting Standards Board (“GASB”) approved Statements 67 and 68 (“GASB 67” and “GASB 68”) that modified the accounting and financial reporting of pensions by pension plans (GASB 67) and by state and local government employers (GASB 68). GASB 71 (regarding the deferred outflows of resources for governments whose current year pension contributions are reported subsequent to the measurement date) subsequently amended GASB 68. GASB 67 affects the financial reporting requirements for the pension systems and does not change the funding

-39- requirements for members, employers or the State. Under GASB 67, pension plans are required to report Total Pension Liability (“TPL”) and Net Pension Liability (“NPL”) instead of the previously required UAAL. GASB 67 requires multi-employer plans to provide a schedule in the notes to the financial statements that displays the proportionate share of contributions per employer, to be used in determining the proportionate share of the NPL that the employer recognizes on its financial statements under GASB 68. GASB 68 requires employers to report any NPL, including a proportionate share of the multiple-employer plans to which they contribute, as a liability in their Statement of Net Position.

Among the changes in the new GASB standards are that lower discount rates are required to be used for underfunded plans in certain cases and the difference between expected and actual investment returns each year will be recognized over a closed five-year smoothing period. The State Department of Retirement Systems has determined each participating employers’ proportionate share of the plan liability and OSA has determined each plan’s accounting valuation. These changes in accounting standards affect accounting for pensions only and do not change the pension contribution rates or the rate-setting process, which are based on the OSA’s calculation of UAAL and funding status related to the Market Value of Assets in the plans, and on statutory requirements for certain assumptions.

The DRS 2016 CAFR (for the fiscal year ended June 30, 2016) was prepared in accordance with GASB 67. The table below shows, for each Plan in which the Port participates: funding status (equal to Plan Fiduciary Net Position as a percentage of TPL), NPL and the proportion of NPL allocated to the District (in dollars and percentage of NPL). TPL was determined by the actuarial valuation as of June 30, 2015, with the results rolled forward to June 30, 2015, assuming 3.0 percent total economic inflation, 3.75 percent salary inflation (plus growth by promotions and longevity) and a 7.50 percent investment rate of return. Table 20 Schedule of Net Pension Liability (as of June 30, 2016) (in millions) PERS 1 PERS 2/3 Total Pension Liability (TPL) $ 12,496.9 $ 35,517.5 Fiduciary Net Position (Net Position) 7,126.4 30,482.6 Net Pension Liability (NPL) 5,370.5 5,034.9 Funded Ratio(1) 57.03 % 85.82%

Share of NPL Allocated to Port 0.00156%(2) 0.23954%(2)

(1) Net Position as a percentage of TPL. (2) In addition, the share of Plan 1 UAAL allocated to Port is equal to 0.188621%. Source: DRS 2016 CAFR; DRS Participating Employer Financial Information for the Fiscal Year ended June 30, 2016. The Port implemented GASB 68 for the fiscal year 2015 financial reporting. The Port provided calculations in its 2016 financial statements. See Notes 1 and 8 of the 2016 Audited Financial Statements in Appendix A.

Deferred Compensation. The Port also offers its employees a deferred compensation plan created in accordance with Section 457 of Internal Revenue Code of 1986 (the “Code”). The plan permits employees to defer a portion of their salaries until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. The Port has no liability with respect to its Section 457 plan.

Other Post-Employment Benefits

The Port provides health care benefits for eligible retired employees through two plans: the Post-Employment Defined Benefit Plan (the “DB Plan”) that was established in 1975 and the Post-Employment Defined Contribution Plan (the “DC Plan”) that was established in 2007.

-40- Post-Employment Defined Benefit Plan. In 2007 the Port established the DC Plan and closed the DB Plan to new employees. The Port is the sole administrator and fiduciary of the Post-Employment Health Care Benefits Trust Fund. As of December 31, 2016, the DB Plan had investments of $94,000 in money market funds, and $5.413 million in fixed income securities. The Port has no current unfunded actuarial accrued liability with respect to the DB Plan. As of December 31, 2016, the DB Plan was funded at a ratio of 152.6% of the actuarial accrued liability.

The Plan provides major medical coverage, subject to a deductible. The Port is the fiduciary of this plan and the trust is held by a bank. The DB Plan is a single-employer cost-sharing defined benefit plan. The Port will fund the DB Plan as necessary to enable the DB Plan to pay vested accrued benefits to participants as they become due and payable.

The Port’s annual other post-employment benefit (OPEB) cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of the authoritative guidance. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The contribution policy of the plan is established by the commission.

Post-Employment Defined Contribution Plan. Effective April 1, 2013, the DC Plan was closed to employees not covered by collective bargaining agreements hired on or after April 1, 2013. The DC Plan was initially adopted in May 2007. Employees hired after May 1, 2007, were eligible for the DC Plan, subject to a 5-year vesting period. The DC Plan requires the Port to contribute $217 and $214 per month in 2016 and 2015, respectively, to the Voluntary Employees’ Beneficiary Association accounts of eligible employees. The Port contributed $377,000 and $411,000 to eligible employee Voluntary Employees’ Beneficiary Association accounts in 2016 and 2015, respectively.

MATTERS RELATING TO THE ENVIRONMENT

The Port environmental remediation policy requires accrual of pollution remediation obligation amounts when: (a) one of the following specific obligating events is met, and (b) the liability amount can be reasonably estimated. Obligating events include: imminent endangerment to the public; permit violation; the Port was named as party responsible for sharing costs; the Port was named in a lawsuit to compel participation in pollution remediation; or the Port has commenced or is legally obligated to commence pollution remediation. Potential cost recoveries, such as insurance proceeds, if any, are evaluated separately from the Port’s pollution remediation obligation. Costs incurred for pollution remediation obligations are typically recorded as non-operating environmental expenses unless the expenditures relate to the Port’s principal ongoing operations, in which case they are recorded as operating expenses. Costs incurred for pollution remediation obligations can be capitalized if they meet specific criteria.

Environmental Liability

Future expenditures for estimable environmental remediation obligations using the expected cash flow technique were $16.2 million as of December 31, 2016. These are expenditures that will be expensed against future revenues. This liability is included in other long-term liabilities on the Port’s statements of net position. Recoveries of environmental remediation costs from other parties are recorded as a reduction of the related costs using the expected cash flow technique.

As of December 31, 2016, the estimated cost of the environmental remediation projects expected to be capitalized in future periods is approximately $13.3 million, in addition to the $16.2 million expense liability.

The Port may have environmental remediation obligations which are currently un-estimable. These include, but are not limited to, cleanup costs associated with the former properties used by Arkema Inc., PQ, Todd Shipbuilding, and other properties. The Port will recognize these liabilities as they become estimable.

-41- Habitat Mitigation

The Port has created approximately 111 acres of habitat and associated buffers over the past 25 years to mitigate for habitat lost to terminal and other business development. The Port is responsible for ensuring that the mitigation sites meet established performance standards. At this time, there are no significant issues with existing mitigation sites. The Port recently completed the development of the Upper Clear Creek Mitigation Site, which the Port will monitor to ensure that it meets the required performance standards.

Allocation of Seaport Alliance Environmental Costs

The Charter allocates environmental costs between the Seaport Alliance and the Managing Members as follows. Remediation costs that are associated with contamination on Licensed Properties that occurred before the effective date of the Seaport Alliance remains the responsibility of the Managing Member owner, provided that any remediation costs necessary to support Seaport Alliance operations shall be the responsibility of the Seaport Alliance. For any Post-Formation Improvement not owned by either Managing Member prior to the effective date, remediation costs shall be the responsibility of the Seaport Alliance. All cost allocations may be revised on a project-specific basis by a vote of the Managing Members.

INITIATIVES AND REFERENDA

State Initiatives and Referenda

Under the State Constitution, the voters of the State have the ability to initiate legislation and to modify existing laws through the powers of initiative and referendum. An initiative measure is submitted to the voters (if an initiative to the people) or to the Washington State Legislature (if an initiative to the Legislature) if the Secretary of State certifies the receipt of a petition signed by at least eight percent of the number of voters registered and voting for the office of governor at the preceding regular gubernatorial election. Certified initiatives to the people are placed on the ballot for the next statewide general election.

Certified initiatives to the Legislature are submitted to the Legislature at its regular session each January. Once an initiative to the Legislature has been submitted, the Legislature must take one of the following three actions: (a) adopt the initiative as proposed, in which case the initiative becomes law without a vote of the people; (b) reject or refuse to act on the proposed initiative, in which case the initiative must be placed on the ballot at the next State general election; or (c) approve an amended version of the proposed initiative, in which case both the amended version and the original initiative must be placed on the next State general election ballot.

A bill passed by the Legislature is referred to the people for final approval or rejection if the Secretary of State certifies the receipt of a petition signed by at least four percent of the number of voters registered and voting for the office of governor at the preceding regular gubernatorial election. Certain actions of the Legislature necessary for the immediate preservation of the public peace, health or safety and the support of State government or its existing institutions are exempt from the referendum process.

Proposed initiatives to the people must be filed within 10 months prior to the next state general election, and the petition signatures must be filed not less than four months before such general election. Proposed initiatives to the Legislature must be filed within 10 months prior to the next regular session of the Legislature, and the petition signatures must be filed not less than 10 days before such regular session of the Legislature. A referendum measure may be filed any time after the Governor has signed the act that the sponsor wants referred to the ballot. Petition signatures must be filed within 90 days after the final adjournment of the legislative session at which the act was passed.

An initiative or referendum approved by a majority of voters may not be amended or repealed by the Legislature within a period of two years following enactment, except by a vote of two-thirds of all the members elected to each house of the Legislature. After two years, the law is subject to amendment or repeal by the Legislature in the same manner as other laws.

-42- Future Initiatives and Referenda

In recent years there has been an increase in the number of initiatives and referenda filed in Washington, including state initiatives targeting local jurisdictions. The Port cannot predict whether any filed initiative will affect local governments, including the Port, whether any filed initiatives will receive the requisite signatures to be certified to the ballot, and whether such initiatives will be approved by the voters and, if challenged, upheld by the courts.

DEMOGRAPHIC AND ECONOMIC INFORMATION

Certain demographic and economic information regarding the area within the boundaries of the Port is set forth in Appendix C herein.

TAX MATTERS

Certain Income Tax Consequences

The following discussion describes aspects of the principal U.S. federal tax treatment of U.S. persons that are beneficial owners (“Owners”) of Bonds. This summary is based on the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), published revenue rulings, administrative and judicial decisions, and existing and proposed Treasury regulations (all as of the date hereof and all of which are subject to change, possibly with retroactive effect).

This summary discusses only Bonds held as capital assets within the meaning of Section 1221 of the Code. It does not discuss all of the tax consequences that may be relevant to an Owner in light of its particular circumstances or to Owners subject to special rules, such as certain financial institutions, insurance companies, tax-exempt organizations, foreign taxpayers, taxpayers who may be subject to the alternative minimum tax or personal holding company provisions of the Code, dealers in securities or foreign currencies, Owners holding the Bonds as part of a hedging transaction, “straddle,” conversion transaction, or other integrated transaction, or Owners whose functional currency (as defined in Section 985 of the Code) is not the U.S. dollar. Except as stated herein, this summary describes no federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of, the Bonds. ACCORDINGLY, INVESTORS WHO ARE OR MAY BE DESCRIBED IN THIS PARAGRAPH SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO SUCH INVESTORS, AS WELL AS TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

In General. Interest derived from a Bond by an Owner is subject to U.S. federal income taxation. In addition, a Bond held by an individual who, at the time of death, is a U.S. person is subject to U.S. federal estate tax.

Payments of Interest. Interest, including additional amounts of cash and interest, if any, paid on the Bonds will generally be taxable to Owners as ordinary interest income at the time it accrues or is received, in accordance with the Owner’s method of accounting for U.S. federal income tax purposes. Owners who are cash-method taxpayers will be required to include interest in income upon receipt of such interest income; whereas Owners who are accrual-method taxpayers will be required to include interest as it accrues, without regard to when interest payments are actually received.

Disposition or Retirement. Upon the sale, exchange or other disposition of a Bond, or upon the retirement of a Bond (including by redemption), an Owner will recognize capital gain or loss equal to the difference, if any, between the amount realized upon the disposition or retirement (reduced by any amounts attributable to accrued but unpaid interest, which will be taxable as such) and the Owner’s adjusted tax basis in the Bond. Any such gain or loss will be United States source gain or loss for foreign tax credit purposes. Under the Resolution, certain of the Bonds are subject to optional redemption. See “DESCRIPTION OF THE BONDS—Optional Redemption.” The Bonds are subject to defeasance at any time prior to their stated maturities. If the Port defeases any Bonds, such Bonds may be deemed to be retired and “reissued” for federal income tax purposes as a result of the defeasance. In such event, the Owner of a Bond could recognize a gain or loss on the Bond at the time of defeasance.

-43- Unearned Income Medicare Contribution. A 3.8 percent Medicare tax on certain net investment income earned by individuals, estates, and trusts applies for taxable years beginning after December 31, 2012. For these purposes, net investment income generally includes an Owner’s interest income from a Bond (including accrued original issue discount, if any, on a Bond and market discount) and gain realized on the sale, retirement or other disposition of a Bond. In the case of an individual, the tax will be imposed on the lesser of (i) the Owner’s net investment income for the year, or (ii) the amount by which the Owner’s modified adjusted gross income (i.e., adjusted gross income reduced by certain exclusions applicable to U.S. citizens or residents living abroad) exceeds $250,000 (if the Owner is married and filing jointly or a surviving spouse), $125,000 (if married filing separately) or $200,000 (if the Owner is unmarried or in any other case). In the case of an estate or trust, the tax will be imposed on the lesser of (i) undistributed net investment income, or (ii) the excess of adjusted gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins.

Information Reporting and Backup Withholding. Payments of interest on Bonds held of record by U.S. persons other than corporations and other exempt Owners must be reported to the IRS. Such information will be filed each year with the IRS on Form 1099, which will reflect the name, address, and taxpayer identification number of the Owner. A copy of Form 1099 will be sent to each Owner of a Bond for federal income tax reporting purposes.

Interest paid to an Owner of a Bond ordinarily will not be subject to withholding of federal income tax if such Owner is a U.S. person. Backup withholding of federal income tax at a rate of 28 percent may apply, however, to payments made in respect of the Bonds, as well as payments of proceeds from the sale of Bonds, to Owners who are not “exempt recipients” and who fail to provide certain identifying information. This withholding generally applies if the Owner of a Bond (who is not an exempt recipient) (i) fails to furnish such Owner’s social security number or other taxpayer identification number (“TIN”), (ii) furnishes an incorrect TIN, (iii) fails to properly report interest, dividends or other “reportable payments” as defined in the Code, or (iv) under certain circumstances, fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is correct and that such Owner is not subject to backup withholding. Individuals generally are not exempt recipients, whereas corporations and certain other entities generally are exempt recipients. To prevent backup withholding, each prospective Owner will be requested to complete an appropriate form.

Any amounts withheld under the backup withholding rules from a payment to a person would be allowed as a refund or a credit against such person’s U.S. federal income tax, provided that the required information is furnished to the IRS. Furthermore, certain penalties may be imposed by the IRS on an Owner who is required to supply information but who does not do so in the proper manner.

The federal tax discussion set forth above is included for general information only and may not be applicable depending upon an owner’s particular situation. Investors should consult their own tax advisors concerning the tax implications of holding and disposing of the Bonds under applicable state or local laws. Foreign investors should also consult their own tax advisors regarding the tax consequences unique to investors who are not U.S. persons.

ERISA Considerations

The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), imposes certain requirements on employee benefit plans subject to Title I of ERISA (“ERISA Plans”), and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA’s general fiduciary requirements under Title I, Part 4 of ERISA, including, but not limited to, the requirements of investment prudence and diversification and the requirement that an ERISA Plan’s investments be made in accordance with the documents governing the Plan.

Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to Title I of ERISA but are subject to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, “Plans”)) and certain persons (referred to as “parties in interest” or “disqualified persons” (each a “Party in Interest”)) having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction. A Party in Interest who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code.

-44- The fiduciary of a Plan that proposes to purchase and hold any Bonds should consider, among other things, whether such purchase and holding may involve (i) the direct or indirect extension of credit to a Party in Interest, (ii) the sale or exchange of any property between a Plan and a Party in Interest and (iii) the transfer to, or use by or for the benefit of, a Party in Interest, of any Plan assets within the meaning of 29 CFR Sec. 2510.3-102 as modified by ERISA Section 3(42). Depending on the identity of the Plan fiduciary making the decision to acquire or hold Bonds on behalf of a Plan and other factors, U.S. Department of Labor Prohibited Transaction Class Exemption (“PTCE”) 75-1 (relating to certain broker-dealer transactions), PTCE 84-14 (relating to transactions effected by “qualified professional asset managers”), PTCE 90-1 (relating to investments by insurance company pooled separate accounts), PTCE 91-38 (relating to investments by bank collective investment funds), PTCE 95-60 (relating to investments by an insurance company general account), or PTCE 96-23 (relating to transactions directed by certain “in-house asset managers”) (collectively, the “Class Exemptions”) could provide an exemption from the prohibited transaction provisions of ERISA and Section 4975 of the Code. In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code generally provide for a statutory exemption from the prohibitions of Section 406(a) of ERISA and Section 4975 of the Code for certain transactions between Plans and persons who are Parties in interest solely by reason of providing services to such Plans or that are affiliated with such service providers, provided generally that such persons are not fiduciaries (or affiliates of such fiduciaries) with respect to the “plan assets” of any Plan involved in the transaction and that certain other conditions are satisfied.

By its acceptance of a Bond, each purchaser will be deemed to have represented and warranted that either (i) no “plan assets” of any Plan have been used to purchase such Bond, or (ii) Bond the purchase and holding of such Bond either do not constitute or result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code, or are exempt from the prohibited transaction restrictions of ERISA and Section 4975 of the Code pursuant to a statutory exemption or an administrative class exemption.

Each Plan fiduciary (and each fiduciary for a governmental or church plan subject to the rules similar to those imposed on Plans under ERISA) should consult with its legal advisor concerning an investment in any of the Bonds.

Qualified Tax-Exempt Obligations

The Bonds are not “qualified tax-exempt obligations” within the meaning of Section 265(b)(3)(B) of the Code.

OTHER MATTERS

Legal Opinion

The Bonds will be issued with the approving legal opinions of K&L Gates LLP, Bond Counsel, Seattle, Washington. See Appendix D for the form of such opinion.

Litigation

As of the date of this Official Statement, there is no litigation pending, or to the knowledge of the Port, threatened, challenging the authority of the Port to issue the Bonds or seeking to enjoin issuance of the Bonds.

The Port is a defendant in various legal actions and claims that arise during the normal course of business, some of which are covered by insurance. Although certain lawsuits and claims are significant in amount, the final dispositions are not determinable and, in the opinion of Port management, the final outcome of these matters, taken individually or in the aggregate, will not have a material adverse effect on the financial position of the Port. In most cases, the Port has provided reserves for these matters that, in the opinion of Port management, are adequate.

Enforceability

The provisions of the Bonds and the Resolution constitute contracts between the Port and the owner or owners of the Bonds, and such provisions are enforceable by the registered owner or owners in a court of competent jurisdiction in the State by mandamus or other appropriate remedy, subject to judicial discretion and the valid exercise of sovereign police power of the State and may be limited by laws affecting the rights of creditors.

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Continuing Disclosure Undertaking

The Port is covenanting for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information (the “Annual Disclosure Report”) by not later than nine months following the end of the Port’s fiscal year (which currently would be September 30, 2018, for the report for the 2017 fiscal year), and to provide notices of the occurrence of certain enumerated events. The Annual Disclosure Report and notices of listed events are to be filed with the Municipal Securities Rulemaking Board. The specific nature of the information to be contained in the Annual Disclosure Report and in notices of listed events is set forth in Appendix F. These covenants are made by the Port to assist the purchaser of the Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The Port has previously entered into undertakings to provide annual information and notice of the occurrence of certain events with respect to bonds or other obligations of the Port. The Port believes that in the past five years it has complied in all material respects with its outstanding undertakings under the Rule.

Ratings

The Bonds have been assigned ratings of “Aa2” by Moody’s Investors Service (“Moody’s”) and “AA” by S&P Global Inc. (“S&P”). Certain information was supplied by the Port to Moody’s and S&P to be considered in evaluating the Bonds. Such ratings express only the view of the Moody’s and/or S&P and is not a recommendation to buy, sell or hold the Bonds. The ratings reflect only the views of the rating agencies, and an explanation of the significance of these ratings may be obtained from Moody’s and/or S&P. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by Moody’s and/or S&P, if, in their judgment, circumstances so warrant. Any downward revision or withdrawal of these ratings may have an adverse effect on the market price of the Bonds.

Financial Advisor

The Port has retained Public Financial Management, Inc., Seattle, Washington, as Financial Advisor to provide recommendations and other financial guidance to the Port with respect to the preparation of the Bonds for sale. The Financial Advisor has not audited, authenticated, or otherwise verified the information set forth in this Official Statement with respect to appropriateness, accuracy, or completeness of disclosure of such information, and no guaranty, warranty, or other representation is made by the Financial Advisor respecting accuracy and completeness of information or any other matters related to such information.

Independent Auditors

The audited financial statements of the Port for the years ended December 31, 2016 and 2015 included in Appendix A to this Official Statement have been audited by RSM US LLP of Tacoma, Washington (“RSM”), independent auditors, as stated in their report appearing therein. RSM has consented to the use of their report for purposes of this Official Statement.

Official Statement

At the time of delivery of the Bonds, one or more officials of the Port will furnish a certificate stating that to the best of his or her knowledge, this Official Statement, other than information about DTC (provided by DTC), as of its date and as of the date of delivery of the Bonds does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein, in light of the circumstances in which they were made, not misleading.

The preparation, execution and distribution of this Official Statement have been authorized by the Port. PORT OF TACOMA

Erin Galeno, CPA Chief Financial and Administrative Officer

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APPENDIX A

AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31, 2016

[THIS PAGE INTENTIONALLY LEFT BLANK] December 31, 2016 ANNUAL FINANCIAL REPORT 2016 Port of Tacoma Annual Financial Report Operating Income (dollars in millions) Contents $50 Port of Tacoma Leadership ...... 3 $42.2 Management’s Discussion and Analysis ...... 4 $39.3 $38 Financial Statements $28.2 Statements of Net Position – Enterprise Fund ...... 8 $25 $26.3 $21.6 Statements of Revenues, Expenses and Changes in Net Position – Enterprise Fund ...... 9

Statements of Cash Flows – Enterprise Fund...... 9 $13

Statements of Net Position – Post-Employment Health Care Benefits Trust Fund ...... 10

Statements of Changes in Net Position – Post-Employment Health Care Benefits Trust Fund ...... 10 $0 2016 2015 2014 2013 2012 Notes to Financial Statements ...... 11

Required Supplementary Information Change in Net Position Schedule of Port of Tacoma’s Share of Net Pension Asset/Liability (NPA/NPL) ...... 29 (dollars in millions) $40 Post-Employment Heath Care Trust Fund Funded Status of Plan ...... 30 $34.1 Post-Employment Heath Care Trust Fund Schedule of Employer Contributions ...... 30 Independent Auditor’s Report ...... 31 $30 Information for Bondholders ...... 32 $22.7 $20 $19.9

2016 Financial Highlights (dollars in thousands)

$10 Revenues $85,129 $5.1 Increase in Net Position 34,099

Working Capital 228,057 $0.1 $0 Land, Facilities and Equipment, net 910,672 2016 2015 2014 2013 2012 Net Long-term Debt 675,481 Net Position $537,304 Debt Service Coverage Ratio 13.8 (senior lien)* * See Information for Bondholders, page 32

2 | 2016 Financial Report Port of Tacoma Leadership The five members of the Port of Tacoma Commission are elected by Pierce County The commission sets policy, authorizes major expenditures, reviews all spending and voters and serve as our governing body. appoints the chief executive officer. The commission’s regular public meetings are streamed live on the Web and archived for later viewing. Find meeting dates, agendas and memos at www.portoftacoma.com/commission.

Connie Bacon Don Johnson Richard Marzano Don Meyer Clare Petrich John Wolfe Connie Bacon was elected to the Elected to the commission in 2007, A Tacoma longshore worker Don Meyer is the former executive A commissioner since 1995, Clare Chief Executive Officer commission in 1997. Don Johnson is the former vice for more than 36 years, Dick director of the Foss Waterway Petrich is a small business owner John Wolfe was named the Port’s She serves as advisor to the Asia president and general manager of Marzano served as president of Development Authority and a with strong ties to Tacoma’s chief executive officer in June 2010. Pacific Cultural Center and Fuzhou Simpson Tacoma Kraft, a leading the International Longshore and former deputy executive director of maritime heritage. She is co-founder He sets the organization’s vision Committee and is co-founder of Tacoma pulp and paper producer. Warehouse Union Local 23 for six the Port of Tacoma. He was elected of the Commencement Bay and strategy, and oversees a staff of Water Partners Tacoma. Bacon Johnson serves on the boards of years. He was first elected to the to the commission in 2010. Maritime Fest, an advisor to Tacoma about 250. commission in 1995. Community Boat Building and also serves on the Urban Waters the Puget Sound Regional Council’s Meyer currently serves on the Pierce Before being named CEO, Wolfe Board and the Port of Tacoma Audit Transportation Policy Board and Marzano is the co-chair of the State County Regional Council, South deeply involved in maritime heritage research. had served as the deputy executive Committee. Goodwill’s Finance Committee. Route 167 Completion Coalition King County Transportation Board, director of the Port since June 2005. A member of the Transportation He chairs the Goodwill Board and and serves on the Washington Tacoma Waterfront Association Petrich serves on the Joint is the past chair of the MultiCare Public Ports Association’s Board and Tacoma-Pierce County Municipal Action Committee, Pacific Prior to joining the Port of Tacoma, Club of Tacoma and Tacoma he served for two years as the Propeller Club, she is a senior Health Care Foundation. He also of Trustees, Puget Sound Regional Economic Development Board. He Northwest Waterways Association, serves as chair of the Port of Council’s Executive Board, Pierce is a member of the Alaska State the Youth Marine Foundation, executive director of the Port fellow of the American Leadership of Olympia, and before that as Forum and member of the advisory Tacoma Audit Committee. County Sheriff’s Office Executive Chamber of Commerce, the Fife/ the Flood Control Zone District Advisory Board and the Valley Cities Milton/Edgewood Area Chamber of Committee and the Washington Olympia’s director of operations and board to the Port of Tacoma He is a previous chair of the marine terminal general manager. Endowed Chair at the University Tacoma-Pierce County Chamber Association Board. He has served Commerce and the Transportation Council on International Trade. She of Washington Tacoma. She is an Board. He is also the former chair on WPPA’s six-member executive Club of Tacoma. was recently elected to the boards Wolfe also spent 10 years with emeritus member of the Northwest of the University of Washington committee. He served on former Gov. Christine of Sister Cities International and the Maersk Sealand/APM Terminals Sinfonietta Board of Directors. Business School Advisory Board, He is a former member of the Gregoire’s Connecting Washington Washington State Trust for Historic in Tacoma, most recently as the Preservation. terminal’s operations manager. Bacon is a former executive director the United Way of Pierce County Freight Mobility Strategic Investment Task Force on transportation issues, of the World Trade Center Tacoma Board and the United Way’s annual Board, appointed by former is a member of Tacoma Rotary #8 She is a past president of the Puget A native of Puyallup, Washington, and served eight years as special campaign. He chaired the search Washington Govs. Gary Locke and owns a small business in Pierce Sound Regional Council’s Economic Wolfe earned a bachelor’s degree in assistant to former Washington Gov. committee for the CEO of the and Christine Gregoire. Marzano County. Development District Board and business administration from Pacific Booth Gardner. She is a graduate Tacoma-Pierce County Chamber and is also a member of the Tacoma Born and raised on a South Dakota continues to serve on this board. Lutheran University in 1987. of Syracuse University and earned a is a member of the Transportation Propeller Club and Transportation farm, Meyer holds a bachelor’s She is also board secretary for the master’s degree from The Evergreen Club of Tacoma and Tacoma Club of Tacoma, and a former board degree in business from Pacific Trade Development Alliance of State College. Propeller Club. member of the Foss Waterway Lutheran University and a master’s Greater Seattle. Petrich graduated Johnson holds a bachelor’s degree Development Authority and St. Leo’s degree in business administration from Manhattanville College in New in mechanical engineering from the Hospitality Kitchen. from the University of South Dakota. York and received her master’s University of Washington. degree from the University of Virginia. 2016 Financial Report | 3 Management’s Discussion and Analysis Years ended December 31, 2016 and 2015

INTRODUCTION Formation of The Northwest Seaport Alliance The NWSA Charter recognizes that each home port’s respective share of The ports of Seattle and Tacoma (home ports) joined forces in August, revenues received by the NWSA with respect to the Licensed Properties The Port of Tacoma’s (the Port) Management Discussion and Analysis 2015 to unify management of marine cargo facilities and business to have been or may be pledged in connection with the home port’s bond (MD&A) of financial activities and performance introduces the Port’s strengthen the Puget Sound gateway and attract more marine cargo and obligations. Under the Charter, the Managing Members instruct the Chief 2016 and 2015 financial statements, which include the Enterprise Fund jobs to the region by creating The Northwest Seaport Alliance (NWSA). Executive Officer (CEO) to manage the PDA in a prudent and reasonable as well as the Post-Employment Health Care Benefits Trust Fund. Port The NWSA is a special purpose governmental entity established as a Port manner in support of the home ports’ respective bond covenants. The management prepared this MD&A and readers should consider it in Development Authority (PDA), similar to Public Development Authorities home ports shall keep the CEO and the NWSA management informed conjunction with the financial statements and the notes thereto. formed by cities and counties. The PDA is governed by the two ports as of their respective bond obligations, and each shall notify the other The Enterprise Fund accounts for all activities and operations of the Port equal members (each a Managing Member and collectively, Managing home port of any proposed change to such home port’s governing bond except for the activities included within the Post-Employment Health Members) with each port acting through its elected commissioners. As resolutions as soon as practicable before adoption. The Charter does not Care Benefits Trust Fund. approved, the charter for the NWSA (Charter) may be amended only by modify or alter the obligations of each home port with respect to its own mutual agreement of the Managing Members. Each port will remain bond obligations. The NWSA does not assume any obligations to the The notes are essential to a full understanding of the data contained a separate legal entity, independently governed by its own elected home ports’ bond holders. in the financial statements. This report also presents certain required commissioners. With respect to bonds of each home port that were outstanding at supplementary information regarding capital assets and long-term debt the time of the formation of the NWSA, the Managing Members shall activity, including commitments made for capital expenditures. Membership Interests The home ports made an initial contribution of certain cargo terminals establish and maintain a requirement for the NWSA to calculate and and related marine cargo business activities to the NWSA through license establish a minimum level of net income from the NWSA equal to the OVERVIEW OF THE FINANCIAL STATEMENTS agreements (Licensed Properties). Under these agreements, the NWSA amount required for the home ports to meet their bond rate covenants in effect at the time of formation of the NWSA (Bond Income Calculation). The financial section of this annual report consists of three parts: MD&A, was charged with managing the properties as an agent on behalf of the The Managing Members shall require the Bond Income Calculation the basic financial statements and the notes to the financial statements. Managing Members. The initial contribution of each home port to the to be reviewed annually as part of the NWSA budget process and the The financial statements include: the statements of net position, the NWSA was 50 percent (based on the value of the contributed facilities Managing Members may adjust the Bond Income Calculation so long as statements of revenues, expenses and changes in net position, and the using cash flow forecasts for each parcel that went to the NWSA) with it does not cause any home port to fail to comply with its rate covenant statements of cash flows of the Enterprise Fund. The report also includes a revaluation review at the end of 2017. The revaluation review is to in effect at the time of formation of the NWSA. The NWSA may not the following two basic financial statements for the Post-Employment determine if material changes in cash flows from the Licensed Properties take any action that reasonably would reduce NWSA income below the Health Care Benefits Trust Fund: statements of net position and have occurred since the initial valuation. A change in the valuation of minimum level established by the Bond Income Calculation unless each statements of changes in net position. the cash flow forecasts of these facilities could result in a change in Managing Member separately votes to approve that action. Such a vote Membership Interests. The Managing Members shall approve any change The statements of net position and the statements of revenues, by each Managing Member must occur even if the action is within the expenses and changes in net position illustrate whether the Port’s in Membership Interest by vote, to include provision for addressing CEO’s delegated authority. The Bond Income Calculation is subject to financial position has improved as a result of the year’s activities. The any change to distributions and allocations as a result of the change in adjustment, including reductions from payment or refunding of bonds statements of net position present information on all of the Port’s assets Membership Interest. Changes in Membership Interest do not affect a outstanding at the time of the formation of the NWSA. and liabilities, with the difference between the two reported as net Managing Member’s voting rights under the Charter, as votes are not Initial Funding position. Over time, increases or decreases in net position may serve as weighted by or otherwise determined by Membership Interest. Each home port provided an initial contribution for working capital of an indicator of whether the financial position of the Port is improving or Financial Framework $25.5 million, for a total initial funding of $51 million. Working capital deteriorating. The statements of revenues, expenses and changes in net The NWSA intends to support the credit profiles of both home ports, cannot be redirected to fund capital construction as defined in the position show how the Port’s net position changed during the year. These and its financial framework will preserve both ports’ commitment to Charter. changes are reported in the period in which the underlying event occurs, financial strength and fiscal stewardship. The NWSA distributes cash to regardless of the timing of related cash flows. each home port based on cash flow from operations, calculated pursuant Future funding needs will be evaluated during the annual budget process or if the working capital reserve should decline below a target minimum The Port adopted joint venture accounting in 2016 due to the formation to Generally Accepted Accounting Principles. Cash distributions are to be established by the Managing Members. Managing Members each must of The Northwest Seaport Alliance and the Port’s 50 percent investment made no less than quarterly based on each home port’s percentage of vote affirmatively to approve additional working capital contributions. in the joint venture. Additional information is presented in the following total shares. paragraphs, in Note 1, Summary of Accounting Policies and in Note 17. The NWSA is responsible for capital investments including renewal and Each home port provided an initial capital construction contribution of $13.5 million (totaling $27 million), equal to the budgeted capital Fund financial statements: A fund is a grouping of related accounts replacement projects and new development. Such capital investments, improvement plan cash flow needs for 2016. The Port of Tacoma and the that is used to maintain control over resources that have been or post-formation assets, will be treated as tenant improvements owned Port of Seattle also provided $8.9 million and $7.9 million, respectively segregated for specific activities or objectives. The Port uses two funds, by the NWSA. The Ports of Seattle and Tacoma work cooperatively with in noncash construction in process for capital projects that started in the an enterprise fund, which is a type of proprietary fund that reports the NWSA to develop an annual capital budget for approval by each home ports and will be completed by NWSA. business type activities, and the Post-Employment Health Care Benefits Managing Member. Funding will be provided by joint contributions Trust Fund. from the home ports; cash flow from operations will be distributed Further information on the formation and operations of the NWSA can to the home ports and not retained by the NWSA for funding capital be found in Note 1, Summary of Significant Accounting Policies and Note investments. Each Managing Member must approve its capital 17, Joint Venture. contributions. 4 | 2016 Financial Report FINANCIAL POSITION SUMMARY — ENTERPRISE FUND The statements of net position present the financial position of the Enterprise Fund of the Port. The statements include all of the Port’s assets and liabilities of the Enterprise Fund. Net position serves as an indicator of the Port’s financial position. The Port’s current assets consist primarily of cash, investments and accounts receivable. A summarized comparison of the Port’s Enterprise Fund assets, liabilities and net position at the close of calendar year-end follows (dollars in thousands): * Net Position for 2014 has been adjusted to reflect the adoption of GASB 68.

Statements of Net Position (dollars in thousands): 2016 2015 2014* (Restated) Current assets $204,255 $238,301 $220,235 Capital assets, net 936,265 956,323 966,813 Long-term investments 90,826 9,429 9,230 Investment in Joint Venture 66,077 ------Other assets 43,229 45,891 45,586 Total assets $1,340,652 $1,249,944 $1,241,864

Deferred outflows of resources $75,651 $87,764 $88,470

Current liabilities $67,024 $114,938 $111,270 Long-term debt, net 675,481 563,710 578,031 Other long-term liabilities 135,943 152,815 150,968 Total liabilities $878,448 $831,463 $840,269

Deferred inflows of resources $551 $3,040 $6,697

Net investment in capital assets $306,879 $302,092 $299,404 Restricted – bond reserves 13,077 9,429 9,230 Unrestricted 217,348 191,684 174,734 Total net position $537,304 $503,205 $483,368 *Net Position for 2014 has been adjusted to reflect the adoption of GASB 68.

The Port’s total net position increased by $34.1 million and 6.7 percent In 2015, the net investment in capital assets increased by $2.7 million over the prior year to $537.3 million at December 31, 2016. Of this due primarily to a net decrease in outstanding debt of approximately amount, $306.9 million is the net investment in capital assets, $13.1 $13.2 million and a $10.5 million decrease in net capital assets million is restricted for bond reserves and $217.3 million is unrestricted attributable to asset impairments at Pier 24/25 and on property on the and can be used to finance operating activities. Hylebos Peninsula of $5.3 million and normal depreciation. The Port’s net investment in capital assets represents infrastructure and Restricted components of net assets at December 31, 2016, 2015, and capital assets for Port terminal and real estate facilities. In 2016, the net 2014, of $13.1, $9.4 and $9.2 million, respectively, are required reserves investment in capital assets increased by $4.8 million due primarily to for the 2016 and 2005 revenue bonds held in restricted investments. a net decrease in outstanding debt (net of unspent proceeds from the The change in net position is an indicator of whether the overall fiscal 2016 Revenue Bonds series 2016B) of $20.0 million and a $24.8 million condition of the Enterprise Fund has improved or worsened during the decrease in net capital assets attributable to normal depreciation. year. The following summary compares operating results for 2016, 2015 The Port’s total net position increased by $19.8 million and 4.1 percent and 2014. over the prior year to $503.2 million at December 31, 2015. Of this amount, $302.1 million is the net investment in capital assets, $9.4 million is restricted for bond reserves and $191.7 million is unrestricted and can be used to finance operating activities.

2016 Financial Report | 5 Statements of Revenues, Expenses and Changes in Net Position (dollars in thousands) 2015 Revenues, Expenses and Operating Income Port revenue in 2015 of $143.9 million increased by $9.6 million and 2016 2015 2014* (Restated) 7.1 percent over 2014 on strong container and non-container cargo Operating income: volume increases. The Port handled 2.1 million TEUs (20-foot equivalent Operating revenues $23,545 $143,987 $134,322 units) in 2015 a 4.2 percent increase over the prior year. The container business revenue increased by $6.3 million and 6.4 percent over the Joint Venture income 61,584 ------prior year primarily due to higher import container volume that increased Total $85,129 $143,897 $134,322 equipment and intermodal revenue. The strong import volume overcame Operating expenses 42,956 104,611 112,716 decreases in domestic container traffic, principally shipments to the state of Alaska due to low oil prices affecting Alaska’s economy and Total operating income $42,173 $39,286 $21,606 containerized exports down 6.7 percent, blamed in part on a strong U.S. dollar that makes American exports more expensive and the economic Non-operating revenues (expenses): slowdown in China. Ad valorem tax revenues 14,972 14,198 13,083 The non-containerized cargo business consists of the Port’s breakbulk, Interest on general obligation bonds (7,609) (8,759) (9,000) auto and log businesses. Non-container revenue increased $3.0 million Net ad valorem tax revenues 7,363 5,439 4,083 and 15.1 percent over the prior year. Auto imports increased 4.3 percent over the prior year and revenue increased $4.0 million and 53.6 percent Interest income $2,271 $2,293 $2,704 driven by increased storage revenue. Offsetting the increases in auto Net increase in the fair value of investments 47 72 2,505 revenue, the Port’s breakbulk revenue was down $0.6 million and the Interest expense (20,011) (17,712) (20,908) Port’s log export volume was down $0.4 million compared to the prior year, primarily due to weaker demand in China. Other non-operating expense, net (3,601) (10,861) (7,131) The Port’s industrial and commercial properties and facilities complement the Container and Non-Container businesses. Real estate revenue Total non-operating expenses, net (13,931) (20,769) (18,747) increased by $0.2 million and 1.1 percent above the prior year, as Increase in net position before demand for commercial property was flat. 28,242 18,517 2,859 capital contributions The 2015 operating expense of $104.6 million was $8.1 million and 7.2 percent below the prior year primarily due to a decrease in Capital contributions 5,857 1,320 2,271 environmental expenses of $9.8 million compared to the prior year that included remediation obligations for terminal development projects Increase in net position $34,099 $19,837 $5,130 on the General Central peninsula and on the Blair peninsula of $12.9 million. Revenue related operating and maintenance expenses to support Net position, beginning of year, as previously reported 503,205 483,368 499,837 the 6.3 percent growth in revenue increased by $0.9 million. Adjustment for adoption of GASB 68 (see Notes 1 and 8) ------(21,599) As a result of the above, the 2016 operating income of $42.2 million increased by $2.9 million and 7.3 percent from 2015; 2015 operating Beginning of year, restated 503,205 483,368 478,238 income of $39.3 million increased by $17.7 million and 81.8 percent from 2014. Net position, end of year $537,304 $503,205 $483,368 Non-operating expenses: The 2016 net non-operating expense of $13.9 million was $6.9 million and 32.9 percent below the prior year. *Net Position for 2014 has been adjusted to reflect the adoption of GASB 68. Ad valorem tax revenue increased by $0.8 million compared to the prior year. The tax revenue increase paired with lower interest rates on GO 2016 Revenues, Expenses and Operating Income expense activity. Comparable analysis of revenues and expenses will be debt due to bond refundings increased net ad valorem tax revenue by The Port’s statements of net position has changed in 2016 to reflect the provided in future years, when prior year information is available. $1.9 million. formation of the NWSA and Joint Venture (JV) accounting. The most Port of Tacoma operating income for 2016 of $42.2 million increased significant change is on the statements of revenues, expenses and Interest income in 2016 was flat at $2.3 million. Interest expense of $2.9 million over the previous year. The increase was driven by receipt of $20.0 million increased $2.3 million primarily due to the issuance changes in net position which now reflect the recognition of joint venture a $1.5 million lease termination payment and $1.3 million from a new income related to 50 percent of NWSA’s net income, which is consistent of revenue bonds, par value $103.6 million to fund expansion and lease for a warehouse and distribution center. Environmental expenses redevelopment of Pier 4. Further information can be found in Note 5. with the terms of the licensing agreements. This change in presentation were down $2.6 million over the prior year that included remediation results in lower total revenues and total operating expenses than under costs related to contamination on the General Central Peninsula. Other non-operating expense in 2016 was $3.6 million compared with the prior year presentation. The Port’s real estate and other revenues Ownership of the licensed facilities remains with the Port, not with the $10.9 million in the prior year. not licensed to the NWSA will continue to be reported as operating NWSA, and the depreciation for these assets is recorded in operating Current year costs include: a reduction in value of asset held for sale of revenue. Year over year comparisons of operating revenues and operating expenses. The depreciation recorded by Port for assets licensed to NWSA $3.4 million, and contribution to rail improvements of $1.5 million, offset expenses for 2016 are not available, therefore the following discussion for the year ended December 31, 2016 was $23.6 million. by reversal of container customer incentives of $1.2 million. will be limited to significant operating activity and non-operating 6 | 2016 Financial Report The 2015 net non-operating expense of $20.8 million was $2.0 million DEBT ADMINISTRATION and 10.8 percent above the prior year. Ad valorem tax revenue increased Standard Description: Moody’s by $1.1 million compared to the prior year which also increased the net Long-term debt: At December 31, 2016, the Port’s long-term debt, & Poor’s including current portion, outstanding totaled $690.3 million. Of this ad valorem tax revenue after interest expense on general obligation General Obligation (Senior Lien) Aa3 AA- bonds by $1.4 million. amount, general obligation bonds outstanding were $182.6 million and Revenue Bonds (Senior Lien) Aa3 AA- Net interest expense in 2015 of $15.3 million was down $0.4 million revenue bonds outstanding were $507.7 million. At December 31, 2015, the Port’s long-term debt, including current portion, outstanding totaled Revenue Bonds (Subordinate) A1 A+ from the prior year. Interest income was down $2.8 million primarily due $577.6 million. Of this amount, general obligation bonds outstanding to non-cash fair value adjustments on investments of $2.4 million, Post-Employment Health Care Benefits Trust Fund: The Post- were $185.4 million and revenue bonds outstanding were $392.2 million. offset by a decrease in interest expense of $3.2 million primarily due to Employment Health Care Benefits Trust Fund (the Trust) accounts for the the refunding of bonds at lower interest rates in 2014, as described in The Port utilizes interest rate payment agreements (derivatives) to assets of the employee benefit plan held by the Port in a trustee capacity. Note 5. manage interest rate risk. The swap agreements synthetically fix A summarized comparison of the assets, liabilities and net position of Other non-operating expense in 2015 was $10.9 million compared or “lock-in” interest rates on variable-rate revenue bond debt by the Trust as of December 31, 2016, 2015, and 2014, and changes in net with $7.1 million in the prior year. The 2015 costs include: impairment providing cash flows that are intended to offset the variable-rate bond position for the years ended December 31, 2016, 2015, and 2014 (in of assets at Pier 24/25 and on the Hylebos Peninsula of $5.3 million, payments, leaving the Port with the fixed payment identified in each thousands), are as follows: environmental remediation obligations of $1.7 million, contributions to swap agreement. The Port does not hold or issue derivative financial instruments for trading purposes. These instruments are designated other agencies for infrastructure improvements on the Port of Tacoma 2016 2015 2014 road interchange and Port of Tacoma road of $1.3 million and $0.8 as cash-flow hedges on the trade date and are recognized on the million, respectively, and election expense of $0.6 million. statements of net position at fair value. Total assets $5,507 $5,891 $6,333 Capital grant contributions: Capital grant contributions of $5.9 million In 2016, the Port partially refunded the 2006 and the 2008A GO bonds Total liabilities ------in 2016 consisted of $3.1 million for rail infrastructure expansion, $2.2 to achieve interest expense savings. Additionally, the Port refunded the Total net position $5,507 $5,891 $6,333 outstanding balances of the 2006 senior lien revenue bonds to achieve million for remediation of the former Arkema manufacturing plant parcel, Total additions $65 $48 $61 and $0.6 million for terminal security projects. savings, and at the same time issued new revenue bonds to fund the construction of Pier 4 and the purchase of four container cranes. The Total deductions (449) (490) (221) Capital grant contributions of $1.3 million in 2015 consisted of $0.6 GO refunding bonds par value $136.6 million, resulted in a 20.2 percent Decrease in net million for rail infrastructure expansion, $0.5 million for cyber security $(384) $(442) $(160) savings ($25.8 million net present value savings) on the par amount of position and other security enhancements and environmental remediation refunded debt, while the revenue refunding bonds par value $36,500,000 Net position – projects of $0.1 million. 5,891 6,333 6,493 resulted in a 19.6 percent savings ($8.8 million net present value beginning of year Capital assets: The Port’s investment in capital assets, net of savings) on the par amount of refunded debt. The new revenue bond Net position – $5,507 $5,891 $6,333 depreciation, for its business activities as of December 31, 2016, issue par value $103.6 million was issued at a premium, totaling $133.7 end of year amounted to $936.3 million. This investment in capital assets includes million at a total interest cost of 3.64 percent. land, buildings, improvements, machinery and equipment, and Additionally, in 2016 the Port terminated at no cost the interest rate REQUEST FOR INFORMATION construction in process. The Port’s investment in capital assets, net payment agreement (swap) with Morgan Stanley to reduce interest costs of depreciation, for its business activities as of December 31, 2015, on Port variable rate debt. The swap had a notional amount of $57.1 The Port of Tacoma designed this financial report to provide our citizens, amounted to $956.3 million. See Note 3 for additional information. million at a rate of 3.795 percent. Cancelling the swap resulted in the customers, investors and creditors with an overview of the Port’s Major capital additions in 2016 are presented in the table below (dollars Port having an additional $57.9 million of unhedged variable rate long finances. If you have questions or need additional information please in thousands): term debt. Total swaps outstanding at December 31, 2016 has been visit our website at www.portoftacoma.com or contact: Chief Financial reduced by $57.1 million to $239.9 million. Officer, P.O. Box 1837, 1 Sitcum Way, Tacoma, Washington, 98401-1837, Telephone 253.383.5841, Fax 253.597.7573. Description: In December 2015, the Port changed the mode on the 2014A Rail improvements – North Leads $7,488 subordinate lien variable-rate bonds from taxable to tax exempt by Property acquisition 7,301 executing a new Continuing Covenant Agreement with the lender that Facility and building improvements 2,491 reduced the non-hedged fee portion paid by the Port to a lower fee. At Habitat development 2,054 the time of the mode change, the lender extended the direct purchase Machinery and equipment 1,304 agreement until October 1, 2018. The change in mode did not require a Total $20,638 refunding of any of the bonds or the issuance of a new CUSIP and no cash was exchanged. The interest rate portion of the direct purchase agreement (70 percent of one month LIBOR) in the bank document and Port resolution were unchanged. Additional information on the Port’s long-term debt activity may be found in Note 5 of this report and in the supplementary section “Information for Bondholders.” The Port requests bond ratings prior to issuing debt. Moody’s and Standard & Poor’s rated the Port’s debt as follows:

2016 Financial Report | 7 Enterprise Fund Statements of Net Position Enterprise Fund Statements of Net Position

Years ended December 31, 2016 and 2015 (dollars in thousands) Years ended December 31, 2016 and 2015 (dollars in thousands)

ASSETS LIABILITIES AND NET POSITION

2016 2015 2016 2015 CURRENT ASSETS CURRENT LIABILITIES Cash $3,560 $3,193 Accounts payable and accrued liabilities $12,682 $11,996 Investments, at fair value 160,037 216,105 Payroll and taxes payable 3,972 5,271 Trade accounts receivable, net of allowance for doubtful Accrued interest 1,973 1,741 726 9,973 accounts Related party payables – Joint Venture 8,555 --- Grants receivable 216 78 Commercial paper 25,000 82,000 Taxes receivable 453 492 Current portion of long-term debt 14,842 13,930 Related party receivables - managing members 30,854 --- Total current liabilities 67,024 114,938 Prepayments and other current assets 8,409 8,460 NON-CURRENT LIABILITIES Total current assets $204,255 $238,301 Long-term debt: NON-CURRENT ASSETS General obligation bonds 177,362 180,310 Long-term investments: Revenue bonds 498,119 383,400 Restricted Investments at fair value $77,749 $ --- Net long-term debt 675,481 563,710 Restricted Bond reserves at fair value 13,077 9,429 OTHER LONG-TERM LIABILITIES Long-term investments $90,826 $9,429 Interest rate payment agreement 63,621 80,212 CAPITAL ASSETS Net pension liability 22,270 18,368 Land $563,699 $543,203 Other 50,052 54,235 Buildings 101,351 102,618 Other long-term liabilities 135,943 152,815 Improvements 640,118 639,290 Total non-current liabilities 811,424 716,525 Machinery and equipment 115,030 114,587 Total liabilities $878,448 $831,463 Construction in process 25,593 39,414 DEFERRED OUTFLOWS OF RESOURCES Total cost $1,445,791 $1,439,112 Pension deferred inflow $551 $3,040 Less accumulated depreciation 509,526 482,789 NET POSITION Net property and equipment $936,265 $956,323 Net investment in capital assets $306,879 $302,092 Investment in Joint Venture 66,077 --- Restricted – bond reserves 13,077 9,429 Assets held for sale 7,840 11,200 Unrestricted 217,348 191,684 Other assets 35,389 34,691 Total net position $537,304 $503,205 Total non-current assets 1,136,397 1,011,643 Total assets $1,340,652 $1,249,944 See notes to financial statements. DEFERRED OUTFLOWS OF RESOURCES Accumulated decrease in fair value of hedging derivatives $63,621 $80,212 Pension deferred outflow 3,842 2,143 Advance refunding deferred losses 8,188 5,409 Total deferred outflows of resources $75,651 $87,764

8 | 2016 Financial Report Enterprise Fund Statements of Revenues, Enterprise Fund Statements of Cash Flows

Expenses and Changes in Net Position Years ended December 31, 2016 and 2015 (dollars in thousands) Years ended December 31, 2016 and 2015 (dollars in thousands) 2016 2015 2016 2015 OPERATING REVENUES CASH FLOWS FROM OPERATING ACTIVITIES Property rentals $23,545 $102,428 Cash received from customers $33,091 $144,125 Terminal services --- 41,469 Cash paid to suppliers for goods and services (8,127) (26,454) Joint Venture income 61,584 --- Cash paid to employees (6,522) (41,913) Total operating revenues 85,129 143,897 Cash paid to related party – Joint Venture (20,414) --- OPERATING EXPENSES Cash received (paid) for non-operating income, (expense) 366 (2,893) Operations 3,939 34,067 Net cash (used in) provided by operating activities (1,606) 72,865 Maintenance 4,120 14,860 CASH FLOWS FROM CAPITAL AND Administration 2,428 14,909 RELATED FINANCING ACTIVITIES Security 381 3,870 Proceeds from sale of property, plant and equipment 54 3,343 Environmental 1,788 5,385 Borrowings on commercial paper 436,000 410,000 Repayments on commercial paper (493,000) (410,000) Total before depreciation 12,656 73,091 Principal payments on general obligation and revenue bonds (14,368) (13,235) Depreciation 30,300 31,520 and other debt Total operating expenses 42,956 104,611 Proceeds from bond issues 123,749 --- Operating income 42,173 39,286 Proceeds from refunding bond issues 205,972 --- NON-OPERATING REVENUES (EXPENSES) Payments on refunded bonds (205,972) --- Ad valorem tax revenue 14,972 14,198 Acquisition and construction of capital assets (22,768) (34,541) Interest on general obligation bonds (7,609) (8,759) Interest paid on general obligation and revenue bonds (27,942) (27,067) and other debt Net ad valorem tax revenues 7,363 5,439 Cash received from federal and state grants 5,721 2,056 Interest income 2,271 2,293 Cash received from property taxes for general obligation bonds 15,011 14,282 Net increase in the fair value of investments 47 72 Net cash provided by (used in) capital and related 22,457 (55,162) Interest expense (20,011) (17,712) financing activities Other non-operating expenses, net (3,601) (10,861) CASH FLOWS FROM INVESTING ACTIVITIES Total non-operating expenses, net (13,931) (20,769) Purchases of investments (219,348) (136,948) Proceeds from sales and maturities of investment securities Increase in net position, before capital contributons 28,242 18,517 194,120 119,375 Cash used to fund investment in NWSA Capital contributions 5,857 1,320 (45,015) --- Cash distributions received from Joint Venture Increase in net position 34,099 19,837 47,542 --- NET POSITION Interest received on investments 2,217 2,223 Beginning of year 503,205 483,368 Net cash used in investing activities (20,484) (15,350) End of year $537,304 $503,205 Net increase in cash 367 2,353 CASH Beginning of year 3,193 840 End of year $3,560 $3,193 See notes to financial statements.

2016 Financial Report | 9 Enterprise Fund Statements of Cash Flows (Continued) Post-Employment Health Care Benefits Trust Fund

Years ended December 31, 2016 and 2015 (dollars in thousands) Statements of Net Position Years ended December 31, 2016 and 2015 (dollars in thousands) 2016 2015 2016 2015 RECONCILIATION OF OPERATING INCOME TO NET CASH ASSETS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Cash $94 $265 Operating income $42,173 $39,286 Investments, at fair value 5,413 5,626 ADJUSTMENTS TO RECONCILE OPERATING INCOME TO NET Total assets CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: $ 5,507 $5,891 Depreciation 30,300 31,520 PLAN LIABILITIES Net position held in trust for other post-retirement Cash (paid) received for non-operating income (expense) 366 (2,893) $5,507 $5,891 benefits and other purposes Cash distributions received from related party – Joint Venture (47,542) --- Loss on disposal of facilities (140) --- See notes to financial statements. (Decrease) increase in environmental reserves (3,813) 4,779 CHANGES IN ASSETS AND LIABILITIES: Increase in related-party receivable – Joint Venture (20,414) --- Post-Employment Health Care Benefits Trust Fund Decrease in accounts receivable 9,247 533 Statements of Changes in Net Position Increase in other deferred assets (698) (305) Years ended December 31, 2016 and 2015 (dollars in thousands) Decrease in prepayments 52 397 Increase in investment in Joint Venture (14,042) --- 2016 2015 Decrease in accounts payable and accrued liabilities 4,861 1,968 ADDITIONS Decrease in payroll and taxes payable 2,583 3,399 Employer contributions $ --- $ --- Increase in long-term liabilities (350) (998) Net decrease in fair value of investments (9) (34) Increase in net deferred pension inflows/outflows (4,189) (4,821) Interest 74 82 Total adjustments and changes (43,779) 33,579 Total additions 65 48 Net cash provided by (used in) operating activities $(1,606) $72,865 DEDUCTIONS NON-CASH INVESTING AND FINANCING ACTIVITIES: Benefit payments 435 475 Capital asset additions and other purchases financed with $178 $595 Administrative expenses 14 15 accounts payable Total deductions 449 490 Capital construction payable to related party - Joint Venture 8,555 --- Change in net position (384) (442) Distributions receivable from related party - Joint Venture 10,440 --- NET POSITION HELD IN TRUST FOR OTHER POST RETIRE- Increase in fair value of investments 47 72 MENT BENEFITS AND OTHER PURPOSES See notes to financial statements. Beginning of year 5,891 6,333 End of year $5,507 $5,891 See notes to financial statements.

10 | 2016 Financial Report Notes to Financial Statements service agreements with the Managing Members as needed. Staff during the reporting period. Significant estimates made by the Port is comprised of certain Port of Tacoma and former Port of Seattle include depreciation and environmental liabilities. Actual results could employees assigned either in full or in part to work in roles in the NWSA. differ from those estimates. NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In addition, both Managing Members may provide services through Significant Risks and Uncertainties shared service agreements with a portion of staff time allocated to and Reporting Entity The Port is subject to certain business risks that could have a material paid by the NWSA. The Port of Tacoma (the Port) is a municipal corporation of the State impact on future operations and financial performance. These risks of Washington created in 1918 under provisions of the Revised Code Effective January 1, 2016, the accounting for revenues and expenses include economic conditions, collective bargaining disputes, federal, of Washington (RCW) 53.04.010 et seq. The Port has geographic associated with Licensed Properties became the responsibility of the state and local government regulations, and changes in law. boundaries coextensive with Pierce County, Washington, and is situated NWSA and the activity will be accounted for as a joint venture by the on Commencement Bay in Puget Sound. home ports. Additional information about the formation of NWSA is The formation of the NWSA is intended to eliminate pricing competition between the home ports by creating a unified gateway, to allow The Port is independent from Pierce County government and is presented in the MD&A and Note 17, Joint Venture. for coordination of customer relationships, to improve capacity administered by a five-member Board of Commissioners elected The Port reports the following funds: the Enterprise Fund accounts for utilization between the home ports, and to rationalize strategic capital by Pierce County voters. The Commission delegates administrative all activities and operations of the Port except for the activities included investments. The formation of the NWSA may or may not successfully authority to a Chief Executive Officer and administrative staff to with the Post-Employment Health Care Benefits Trust Fund. address these risks, and may create new risks including the risks conduct operations of the Port. The County levies and collects taxes Nature of Business associated with undertaking a new joint venture with an outside entity, on behalf of the Port. Pierce County provides no funding to the Port. The Enterprise Fund is used to account for the general operations of the the risk associated with the operating and financial performance of Additionally, Pierce County does not hold title to any of the Port’s Port as more fully described below. additional facilities, and exposure to the financial strength of the Port of assets, nor does it have any right to the Port’s surpluses. Seattle to make future capital expenditures. In August 2015, the ports of Seattle and Tacoma formed the NWSA, a The Port is authorized by Washington law to provide and charge special purpose governmental entity established as a Port Development rentals, tariffs and other fees for docks, wharves and similar harbor Under the NWSA Interlocal Agreement and the Charter, the Port has Authority (PDA) under provisions of the Revised Code of Washington facilities, including associated storage and traffic handling facilities, agreed to work cooperatively with the Port of Seattle, and accordingly (RCW) 53.04.010 et seq. similar to Public Development Authorities for waterborne commerce. The Port may also provide freight and has agreed not to act unilaterally with respect to certain matters. formed by cities and counties. Each Port Commission is a Managing passenger terminals and transfer and storage facilities for other modes Decisions that could have a material effect on the Port, including new Member of the NWSA. The NWSA financial activity began effective of transportation, including air, rail and motor vehicles. The Port may business agreements and leases or amendment to existing agreements January 1, 2016. acquire and improve lands for sale or lease for industrial or commercial and leases and future capital contributions to the NWSA, must be purposes and may create industrial development districts. approved by each Managing Member and, accordingly, the Port will The State Legislature granted qualifying ports the authority to create The Post-Employment Health Care Benefits Trust Fund accounts for need to reach agreement with the Port of Seattle on these matters prior a PDA for the management of maritime activities and to allow ports to executing any changes. to act cooperatively and use financial resources strategically, while the assets of the employee benefit plan held by the Port in its trustee remaining separate entities and complying with federal regulations. capacity (see Note 9). The Charter requires that the NWSA maintain the Bond Income Pursuant to the PDA statute, if a PDA is created jointly by more than Measurement Focus Basis of Accounting Calculation and not to take any action that would reasonably reduce one port district, the PDA must be managed by each port district as a and Presentation its income below this minimum net operating income level unless each Managing Member votes separately to approve that action. This member, in accordance with the terms of the statute and the Charter. The financial statements of the Port have been prepared in conformity minimum net operating level is established based on the amount Any port district that creates a PDA must oversee the affairs, operations, with accounting principles generally accepted in the United States of required at formation of the NWSA for the home ports to meet their and funds of the PDA to correct any deficiency, and ensure that the America, as applied to government units, and the Port is accounted then current bond rate covenants, and may not always reflect the purposes of each program undertaken are reasonably accomplished. for as a proprietary fund. The Governmental Accounting Standards amount required to meet bond rate covenants on a going-forward The statute permits a PDA, in managing maritime activities of a port Board (GASB) is the accepted standard-setting body for establishing basis. district or districts, to own and sell real and personal property; to governmental accounting and financial reporting principles. The Port is enter into contracts; to sue and be sued; to loan and borrow funds; to accounted for on a flow of economic resources measurement focus and If net income before depreciation of the NWSA is not sufficient for issue bonds, notes, and other evidences of indebtedness; to transfer the full-accrual basis of accounting where revenues are recognized when either port to be in compliance with a rate covenant (as described funds, real or personal property, property interests, or services; and to earned and expenses are recognized when incurred, regardless of the in each home port’s governing bond resolutions in effect as of the perform community services related to maritime activities managed timing of the related cash flows. Effective Date), then: (i) upon that home port’s request, the NWSA shall by the PDA. As discussed below, the statute allows, but the Charter hire an independent third party consultant to perform analysis and The accounting records of the Port are maintained in accordance with prohibits, the NWSA to issue bonds, borrow funds, or enter into make recommendations for actions needed to achieve bond covenant methods prescribed by the State Auditor under the authority of Chapter other debt instruments. By statute, PDAs do not have the power of compliance; (ii) if the consultant recommends an action that the NWSA 43.09, Revised Code of Washington. The Port also follows the Uniform eminent domain or the power to levy taxes or special assessments. In is unwilling, unable or refuses to undertake, either Managing Member System of Accounts for Port Districts in the State of Washington. transferring real property to a PDA, the port district or districts creating can require dissolution of the NWSA following the dispute resolution the PDA must impose appropriate deed restrictions necessary to ensure Use of Estimates process even if within the “Initial Period” (as defined in the Charter, the continued use of the property for the public purpose for which the The preparation of financial statements in conformity with accounting “the expiration of 20 years following the NWSA’s formation”); and property is transferred. principles generally accepted in the United States of America requires (iii) the NWSA shall have at least four months to respond, act and or The NWSA is governed by its Managing Members, with each management to make estimates and assumptions that affect the dissolve following its receipt of the consultant’s recommended action, Managing Member acting pursuant to the Charter through its elected reported amounts of assets and liabilities, and disclosure of contingent unless a shorter time is required by the applicable bond covenants. commissioners. The Managing Members appoint a Chief Executive assets and liabilities, at the date of the financial statements. Significant Officer (CEO) who is responsible for hiring staff and entering into estimates also affect the reported amounts of revenues and expenses 2016 Financial Report | 11 The NWSA selected as its Chief Executive Officer, the Chief Executive Prepayments and Other Current Assets Net investments in capital assets consists of the following at December Officer of the Port of Tacoma, who may serve in those dual roles for up Maintenance supply inventories of $4,755,000 and $4,858,000 at 31, (dollars in the thousands): to five years. It is possible that the dual role may pose a real or perceived December 31, 2016 and 2015, respectively, are included in prepayments conflict of interest. and other current assets and are valued at net realizable value, which 2016 2015 Net investment in capital assets $936,265 $956,323 Cash approximates cost using the weighted-average method. Revenue bond proceeds Cash represents cash and demand deposits. The Port maintains its cash Capital Assets and Depreciation 77,749 --- in bank deposit accounts, which are covered by the Public Deposit Capital assets are recorded at cost. Donated assets are recorded at restricted for construction Protection Commission of the State of Washington. acquisition value on the date donated. Less: Trade Accounts Receivable The Port’s policy is to capitalize all asset additions greater than $20,000 Net bond premium 44,714 461 Trade accounts receivable are carried at original invoice amount less and with an estimated life of more than three years. Depreciation is Long-term debt, including 637,421 571,770 an estimate made for doubtful accounts based on a review of all computed on the straight-line method. The following lives are used: current portion outstanding amounts. Management determines the allowance for Commercial paper 25,000 82,000 doubtful accounts by identifying delinquent accounts and by using Years historical experience applied to an aging of accounts. Trade accounts Buildings and improvements 10-75 Invested in capital assets, receivable are written off when deemed uncollectible. Recoveries of Machinery and equipment 5-20 net of related debt, end $306,879 $302,092 receivables previously written off are recorded when received. The of year allowance for doubtful accounts at December 31, 2016 and 2015 was Preliminary costs incurred for proposed projects are deferred pending $172,000 and $189,000, respectively. construction of the facility. As projects are constructed, the project The restricted component of net position was $13,077,000 and Investments costs are transferred to the appropriate capital asset account; charges $9,429,000 at December 31, 2016 and 2015, respectively, and consisted Investments, unrestricted and restricted, are stated at fair value which that relate to abandoned projects are expensed when the project is primarily of bond reserves, as required per certain bond agreements. is the price that would be received in an orderly transaction between abandoned. The unrestricted component of net position is the net amount of the market participants at the measurement date. The Port also has Capitalized Interest assets and deferred outflows of resources, less liabilities and deferred investments in the State Local Government Investment Pool (LGIP). The The Port follows the policy of capitalizing interest as a component of the inflows of resources that are not included in the determination of net LGIP is similar to a money market fund recognized by the Securities cost of capital assets constructed for projects greater than $300,000 that investment in capital assets or the restricted components of net position. and Exchange Commission. The LGIP invests in U.S. Agency Securities, are not funded by grant revenues. Interest incurred on funds used during Repurchase Agreements, U.S. Treasury Securities, Interest Bearing Bank Retentions Payable construction is capitalized as part of the cost of construction. This process Deposits, and Certificates of Deposits. The investments are limited to The Port enters into construction contracts that may include retention is intended to remove the cost of financing construction activity from high-quality obligations with limited maximum and average maturities. provisions such that a certain percentage of the contract amount is held the statements of revenues, expenses and changes in net position and to The pool is valued at amortized cost. Interest income on investments for payment until completion of the contract and acceptance by the treat such cost in the same manner as construction labor and material is recognized in non-operating revenues as earned. Changes in the fair Port. The Port’s policy is to pay the retention due only after completion costs by taking the monthly average of construction in process balance value of investments are recognized on the statements of revenues, and acceptance have occurred. Retentions payable totaled $482,000 times the average interest rate of the outstanding long-term borrowing. expenses and changes in net position. The Port’s general policy is to not and $177,000 at December 31, 2016 and 2015, respectively. Retentions hold more than 20 percent of its holdings in any one investment. See During 2016, total interest incurred, excluding interest on general payable are included in accounts payable and accrued liabilities on the Note 2 for further information. obligation bonds was $20,097,000, of which $20,011,000 was charged accompanying statements of net position. to non-operating expense and $86,000 was capitalized. During 2015, Investment in Joint Venture total interest incurred, excluding interest on general obligation bonds Federal and State Grants The Port adopted joint venture accounting beginning January 1, 2016 to was $18,309,000, of which $17,712,000 was charged to non-operating The Port may receive federal and state grants as reimbursement for account for its 50 percent share in the NWSA. The Port’s investments and expense and $597,000 was capitalized. construction of facilities and other capital projects. These grants are the Port’s 50 percent share of NWSA net income and cash distributions included in capital contributions on the accompanying statements of will be presented on the statements of net positon as investment in joint Net Position revenues, expenses and changes in net position. venture. The Port’s 50 percent of the NWSA’s net income and losses are Net position consists of net investment in capital assets, restricted and unrestricted net position. Net investment in capital assets consists Commercial Paper and Current Portion of presented on the statements of revenues, expenses and changes in net Long-term Debt position as joint venture income. Additional information about the NWSA of capital assets, net of accumulated depreciation, reduced by the Commercial paper includes borrowings with original maturities of less is presented in the MD&A and Note 17, Joint Venture. outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Deferred outflow of than one year and current portion of long-term debt is the portion of Bond Reserves – Restricted resources and deferred inflows of resources that are attributable to the long-term debt payable within 12 months (see Notes 4 and 5). Required bond reserves and unspent bond proceeds, if any, that are acquisition, construction or improvement of those assets or related debts Interest Rate Payment Agreements not available for current expenses when constraints placed on their should be included in this component of net position. This calculation The Port accounts for derivative instruments, including certain derivative use are legally enforceable due to: 1) externally imposed requirements excludes unspent debt proceeds, if any. instruments embedded in other contracts (collectively referred to as by creditors; 2) laws or regulations of other governments; and The Port’s net position is reported as restricted when there are limitations derivatives) on the statements of net position at fair value. The payment 3) constitutional provisions or enabling legislation are included in this imposed on its use either through the enabling legislation adopted by instruments were designated as highly effective cash flow hedges at category. the Port or through external restrictions imposed by creditors, grantors, December 31, 2016 and 2015 (see Note 5). laws or regulations of other governments. 12 | 2016 Financial Report Refunds of Debt Pensions Reclassifications Proceeds from bond defeasance are deposited in an irrevocable trust, The Port participates in the Washington Department of Retirement Certain reclassifications have been made to prior year amounts to with an escrow agent to service the debt on the refunded bonds. Systems (the Plan), cost-sharing, multiple-employer defined benefit public conform to the current presentation. These reclassifications have no Accordingly, the defeased bonds are not recorded on the Port’s financial employee retirement plans. This Plan covers substantially all of the Port’s effect on previously reported changes in net assets. statements. The difference between the reacquisition price and the full-time and qualifying part-time employees. The Port’s contribution rates Recent Accounting Pronouncements carrying amount of defeased debt results in either a gain or loss that is are determined by the Plan each year and are based on covered payroll In June 2015, GASB issued Statement No. 73, Accounting and Financial amortized over the life of the new debt or old debt, whichever is shorter of the qualifying participants. Reporting for Pensions and Related Assets That Are Not within the (see Note 5). The net pension liability, deferred outflows of resources and deferred Scope of GASB Statement 68, and Amendments to Certain Provisions Employee Benefits inflows of resources related to pensions, and pension expense, of GASB Statements 67 and 68. The objective of this statement is to The Port accrues unpaid vacation and sick leave benefit amounts as information about the fiduciary net position of the Washington State improve the usefulness of information about pensions included in the earned and payable upon termination. These benefits are accrued at Department of Retirement Systems Plan (PERS) and additions to/ general purpose external financial reports of state and local governments current rates of compensation. Accrued vacation and sick leave included deductions from PERS’s fiduciary net position have been determined on for making decisions and assessing accountability. The provisions in in payroll and taxes payable amounted to $1,008,000 and $725,000, the same basis as they are reported by PERS. For this purpose, benefit Statement 73 are effective for fiscal years beginning after June 15, 2016. respectively, at December 31, 2016, and $1,265,000 and $858,000, payments (including refunds of employee contributions) are recognized Port is currently evaluating the effect of the adoption of this standard on respectively, at December 31, 2015. Vacation and sick leave paid in when due and payable in accordance with the benefit terms. Investments its financial statements and related disclosures. are reported at fair value (see Note 8). 2016 was $1,046,000 and $700,000, respectively, and $1,187,000 and In June 2015, GASB issued Statement No. 74, Financial Reporting for $830,000, respectively, in 2015. The estimated total amount of vacation Environmental Remediation Costs Post-employment Benefit Plans Other Than Pension Plans. The objective and sick leave expected to be paid in 2017 is $1,077,000 and $721,000, The Port environmental remediation policy requires accrual of pollution of this statement is to improve the usefulness of information about respectively. remediation obligation amounts when: (a) one of the following post-employment benefits other than pensions (other post-employment The Port provides health care benefits for eligible employees through specific obligating events is met and (b) the amount can be reasonably benefits or OPEB) included in the general purpose external financial the voluntary employees’ beneficiary association (VEBA) which estimated. Obligating events include: imminent endangerment to the reports of state and local governmental OPEB plans for making decisions is a tax-exempt health and welfare trust and through the health public; permit violation; Port named as party responsible for sharing and assessing accountability. The provisions in Statement 74 are effective reimbursement arrangement (HRA) plans. Employees hired after May costs; Port named in a lawsuit to compel participation in pollution for fiscal years beginning after June 15, 2016. Port is currently evaluating 1, 2007 are eligible for the plans, subject to a 5-year vesting period. remediation; or commenced or legally obligated to commence pollution the effect of the adoption of this standard on its financial statements and Effective April 1, 2013, the plans were closed to employees not covered remediation. Potential cost recoveries such as insurance proceeds, if related disclosures. by collective bargaining agreements hired on or after April 1, 2013.The any, are evaluated separately from the Port’s pollution remediation In June 2015, GASB issued Statement No. 75, Accounting and Financial plans require the Port to contribute $217 and $214 per month in 2016 obligation. Costs incurred for pollution remediation obligations are Reporting for Post-employment Benefits Other Than Pensions. The and 2015, respectively, to the VEBA accounts of eligible employees. The typically recorded as non-operating environmental expenses unless statement establishes standards for state and local government employer Port contributed $377,000 and $411,000 to eligible employee VEBA the expenditures relate to the Port’s principal ongoing operations, in recognition, measurement and presentation of information about post- accounts in 2016 and 2015, respectively. which case they are recorded as operating expenses. Costs incurred employment benefits other than pensions (OPEB). The provisions in The Port offers its employees a deferred compensation plan created in for pollution remediation obligations can be capitalized if they meet Statement 75 are effective for fiscal years beginning after June 15, 2017. accordance with Internal Revenue Code Section 457. The plan, available specific criteria. Capitalization criteria include: preparation of property Port is currently evaluating the effect of the adoption of this standard on to all Port employees, permits them to defer a portion of their salary in anticipation of a sale; preparation of property for use if the property its financial statements and related disclosures. until future years. In accordance with GASB authoritative guidance, was acquired with known or suspected pollution that was expected to be remediated; performance of pollution remediation that restores a In December 2015, GASB issued Statement No. 79, Certain External accounting and reporting for Internal Revenue Code Section 457 deferred Investment Pools and Pool Participants. This statement addresses compensation plans, employee assets are not reflected in the Port’s pollution-caused decline in service utility that was recognized as an asset impairment; or acquisition of property, plant and equipment that have a accounting and financial reporting for certain external investment financial statements. This plan is fully funded and held in an external pools and pool participants. Specifically, it establishes criteria for an trust. future alternative use not associated with pollution remediation efforts. See Note 12 for additional details. external investment pool to qualify for making the election to measure The Port established a profit sharing plan for non-represented employees all of its investments at amortized cost for financial reporting purposes. in accordance with Internal Revenue Code Section 401. The plan provides Operating and Non-operating Revenues and Expenses The requirements of this statement are effective for reporting periods for an annual contribution to each eligible employee’s 401 account Property rental revenues are charges for use of the Port’s facilities and beginning after June 15, 2015, except for certain provisions on portfolio based on the Port meeting financial targets. The minimum contribution of are reported as operating revenue. Joint Venture income is the Port’s quality, custodial credit risk, and shadow pricing. Those provisions are $100 or a maximum contribution of 4 percent of total salaries of eligible proportionate share of the NWSA net income earned on licensed home effective for reporting periods beginning after December 15, 2015. The employees may be made annually to the 401 accounts. In addition to the port assets and is reported as operating revenue. Ad valorem tax levy Port adopted this standard and included the prescribed disclosures in employer contribution, eligible employees may defer a portion of their revenues and other revenues generated from non-operating sources are Note 2 Deposits and Investments. salary until future years. The Port did not contribute to the plan in 2016 classified as non-operating. In March 2016, GASB issued Statement No. 82, Pension Issues—an and 2015. This plan is fully funded and held in an external trust. Operating expenses are costs primarily related to property rental amendment of GASB Statements No. 67, No. 68, and No. 73. This The Port also provides post-employment health care benefits for retired activities. Interest expense and other expenses incurred not related to Statement addresses issues regarding (1) the presentation of payroll- employees through a fully funded trust. This post-employment defined the operations of the Port’s terminal and property rental activities are related measures in required supplementary information, (2) the selection benefit plan provides medical coverage to eligible retired employees ages classified as non-operating. of assumptions and the treatment of deviations from the guidance in an 60 to 70 (see Note 9).

2016 Financial Report | 13 Actuarial Standard of Practice for financial reporting purposes, and (3) investments with anticipated cash flow requirements using the specific- Investments and restricted investments for revenue bond reserves for the classification of payments made by employers to satisfy employee identification method. the Enterprise Fund on the statements of financial position at December (plan member) contribution requirements. The requirements of this Credit Risk: Credit risk is the risk that an issuer of an investment 31 are as follows: statement are effective for reporting periods beginning after June 15, will not fulfill its obligation to the holder of the investment. This is 2016, except for the requirements of paragraph 7 are effective for that measured by the assignment of a rating by a nationally recognized 2016 2015 employer in the first reporting period in which the measurement date statistical rating organization. The Washington State Local Government Investments $237,786 $216,105 of the pension liability is on or after June 15, 2017. Earlier application Investment Pool is an unrated 2a-7 like pool, as defined by the is encouraged. The adoption of this guidance did not have a material Government Accounting Standards Board. Bond Reserves 13,077 9,429 impact on the net position and changes in net position. Total deposits and Custodial Credit Risk: Custodial credit risk is the risk that, in the $250,863 $225,534 investments In November 2016, GASB issued Statement No. 83, Certain Asset event of the failure of the counterparty, the Port will not be able to Retirement Obligations. This statement addresses accounting and recover the value of its investments or collateral securities that are in financial reporting for certain asset retirement obligations and the possession of the outside party. To minimize this risk, the Port’s establishes criteria for determining the timing and pattern of recognition policy requires that all security transactions are settled “delivery versus of a liability and a corresponding deferred outflow of resources for asset payment.” This means that payment is made simultaneously with retirement obligations. The requirements of this statement are effective the receipt of the security. These securities are delivered to the Port’s for reporting periods beginning after June 15, 2018. The Port is currently safekeeping bank. With the exception of the Washington State Local evaluating the effect of the adoption of this standard on its financial Government Investment Pool (LGIP), the Port’s investment securities are statements and related disclosures. registered, or held by Port of Tacoma or its agent in the Port of Tacoma’s In January 2017, GASB issued Statement No. 84, Fiduciary Activities. name. The certificate of deposits are covered by the Public Deposit The objective of this statement is to improve guidance regarding the Protection Commission (PDPC) of the State of Washington. The PDPC identification of fiduciary activities for accounting and financial reporting is a statutory authority under Chapter 39.58 RCW. The PDPC approves purposes and how those activities should be reported and this statement which banks and thrifts can hold state and local government deposits establishes criteria for identifying fiduciary activities of all state and and monitors collateral pledged to secure uninsured public deposits. local governments. The requirements of this statement are effective This secures public treasurers’ deposits when they exceed the amount for reporting periods beginning after December 15, 2018. The Port is insured by the FDIC by requiring banks and thrifts to pledge securities currently evaluating the effect of the adoption of this standard on its as collateral. financial statements and related disclosures. The LGIP manages a portfolio of securities that meet the maturity, quality, diversification and liquidity requirements set forth by the NOTE 2 – DEPOSITS AND INVESTMENTS GASB for external investment pools that elect to measure, for financial reporting purposes, investments at amortized cost. The funds are limited Discretionary Deposits to high quality obligations with regulated maximum and average The Port’s cash and cash equivalents of $3.6 million and $3.2 million maturities to minimize both market and credit risk. as of December 31, 2016 and 2015, respectively, were deposited in qualified depositories as required by state statute. Deposits in excess of During 2016, the Port adopted the requirements of GASB 79 related to federal depository insurance coverage are covered by the Public Deposit LGIP investments. The LGIP transacts with its participants at a stable Protection Commission of the State of Washington (PDPC). The PDPC net asset value per share of $1.00, the same method used for reporting. is a statutory authority under chapter 39.58 RCW. Currently, all public LGIP participants may contribute and withdraw funds on a daily depositories with the state fully collateralize uninsured public deposits at basis. Participants must inform the Office of the State Treasurer of any 100 percent. contribution or withdrawal over $1 million dollars no later than 9 a.m. on the same day the transaction is made. Contributions or withdrawals Investments for $1 million dollars or less can be requested at any time prior to 10 State of Washington statutes authorize the Port to invest in direct a.m. on the day of the transaction. However, participants may complete obligations of the U.S. Government, certificates of deposit, bankers’ transactions greater than $1 million dollars when notification is made acceptances, repurchase agreements, commercial paper, certain corporate between 9 a.m. and 10 a.m., at the sole discretion of Office of the notes, supranationals and municipal bonds. These investments must State Treasurer. All participants are required to file with the State be placed with or through qualified public depositories of the State of Treasurer documentation containing the names and titles of the officials Washington. authorized to contribute or withdraw funds. Risks Interest Rate Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Port’s investment guideline is to maximize investment return while preserving liquidity. To the extent possible, the Port will attempt to match its

14 | 2016 Financial Report The tables below identify the type of investments, concentration of investments in any one issuer, and The tables below identify the credit risk of the Port’s Investment portfolio as of December 31, 2016 and 2015 maturities of the Port investment portfolio (excluding investments held by the Post-Employment Health Care (dollars in thousands): Benefits Trust Fund, see Note 10 for investment detail for the Trust) as of December 31, 2016 and 2015 (dollars in thousands): 2016 Moody’s Equivalent Credit Ratings 2016 Maturities (in Years) Investment Type Fair Value A1 Aa3 Aa2 Aa1 Aaa No Rating Percentage Certificate of Investment Type Fair Value Less than 1 1-3 More than 3 of Total $3,328 $ --- $ --- $ --- $ --- $ --- 3,328 Portfolio Deposit Certificate of Deposit $3,328 $3,328 $ --- $ --- 1.3% Federal Agricultural 998 ------998 Federal Agricultural Mortgage 998 --- 998 --- 0.4% Mortgage Corp. Corp. Federal Farm Federal Farm Credit Banks 9,921 2,001 5,990 1,930 4.0% 9,921 ------9,921 --- Credit Banks Federal Home Loan Bank 18,110 1,503 11,618 4,989 7.2% Federal Home Federal Home Loan Mortgage 18,110 ------18,110 --- 20,712 3,004 15,707 2,001 8.3% Loan Bank Corporation Federal Home Federal National Mortgage 42,544 8,532 27,998 6,014 17.0% Loan Mortgage 20,712 ------20,712 --- Association Corporation Financing Corporation 1,019 --- 1,019 --- 0.4% Federal National Municipal Bonds 49,686 1,018 6,896 41,772 19.8% Mortgage 42,544 ------42,544 --- State Local Investment Pool* 79,055 79,055 ------31.5% Association Financing United States Treasury Bonds 25,490 18,526 1,004 5,960 10.1% 1,019 --- 1,019 Corporation Total investments $250,863 $116,967 $71,230 $62,666 100.0% Municipal Bonds 49,686 207 7,629 15,067 20,188 6,595 --- Percentage of total 46.6% 28.4% 25.0% 100.00% State Local portfolio 79,055 ------79,055 Investment Pool* United States 2015 Maturities (in Years) 25,490 ------25,490 --- Treasury Bonds Percentage Investment Type Fair Value Less than 1 1-3 More than 3 of Total Total $250,863 $207 $7,629 $15,067 $20,188 $123,372 $84,400 Portfolio * Investments in Washington State Local Government Investment Pool. The investments in the pool are the Certificate of Deposit $8,334 $8,334 $ --- $ --- 3.7% same as the amortized cost of the pool shares. Federal Agricultural Mortgage 995 --- 995 --- 0.4% Corp. Federal Farm Credit Banks 11,001 15 10,986 --- 4.9% Federal Home Loan Bank 19,380 3,097 15,215 1,068 8.6% Federal Home Loan Mortgage 31,924 1,999 19,560 10,365 14.2% Corporation Federal National Mortgage 21,900 2,014 6,012 13,874 9.7% Association Financing Corporation 1,005 --- 1,005 --- 0.4% Municipal Bonds 39,301 3,064 4,391 31,846 17.4% State Local Investment Pool* 78,467 78,467 ------34.8% United States Treasury Bonds 13,227 2,033 5,039 6,155 5.9% Total investments $225,534 $99,023 $63,203 $63,308 100.0% Percentage of total 43.9% 28.0% 28.1% 100.00% portfolio * Investments in Washington State Local Government Investment Pool. The investments in the pool are the same as the amortized cost of the pool shares.

2016 Financial Report | 15 NOTE 2 – DEPOSITS AND INVESTMENTS (CONTINUED) NOTE 3 – CAPITAL ASSETS The following activity took place in capital assets during 2016 and 2015 (dollars in thousands): 2015 Moody’s Equivalent Credit Ratings Investment Type Fair Value A1 Aa3 Aa2 Aa1 Aaa No Rating 2016 Beginning of Retirements Year Additions Transfers and Other End of Year Certificate of $8,334 $ --- $ --- $ --- $ --- $ --- $8,334 Capital assets not being depreciated: Deposit Land $543,203 $ --- $20,496 $ --- 563,699 Federal 995 ------995 Construction in process 39,414 22,946 (24,152) (12,615) 25,593 Agricultural Total capital assets not being 582,617 22,946 (3,656) (12,615) 589,292 Mortgage Corp. depreciated Federal Farm 11,001 ------11,001 --- Capital assets being depreciated: Credit Banks Buildings 102,618 --- 789 (2,056) 101,351 Federal Home 19,380 ------19,380 --- Improvements 639,290 --- 1,551 (723) 640,118 Loan Bank Machinery and equipment 114,587 --- 1,316 (873) 115,030 Total capital assets being Federal Home 31,924 ------31,924 --- 856,495 --- 3,656 (3,652) 856,499 Loan Mortgage depreciated Corporation Less accumulated depreciation: Buildings (69,738) (3,036) --- 1,977 (70,797) Federal National 21,900 ------21,900 --- Improvements (327,362) (21,008) --- 723 (347,647) Mortgage Association Machinery and equipment (85,689) (6,256) --- 863 (91,082) Total accumulated (482,789) (30,300) --- 3,563 (509,526) Financing 1,005 --- 1,005 depreciation Corporation Net, capital assets being 373,706 (30,300) 3,656 (89) 346,973 Municipal Bonds 39,301 210 5,397 10,554 19,808 3,332 --- depreciated State Local 78,467 ------78,467 Net, capital assets $956,323 $ (7,354) $ --- $(12,704) $936,265 Investment Pool* United States 13,227 ------13,227 --- 2015 Beginning of Retirements Treasury Bonds Year Additions Transfers and Other End of Year Total $225,534 $210 $5,397 $10,554 $19,808 $100,764 $88,801 Capital assets not being depreciated: Land $524,535 $ --- $20,299 $(1,631) $543,203 * Investments in Washington State Local Government Investment Pool. The investments in the pool are the Construction in process 62,061 35,136 (52,867) (4,916) 39,414 same as the amortized cost of the pool shares. Total capital assets not being 586,596 35,136 (32,568) (6,547) 582,617 depreciated Capital assets being depreciated: Buildings 109,315 --- 531 (7,228) 102,618 Improvements 617,977 --- 30,340 (9,027) 639,290 Machinery and equipment 114,183 --- 1,697 (1,293) 114,587 Total capital assets being 841,475 --- 32,568 (17,548) 856,495 depreciated Less accumulated depreciation: Buildings (70,791) (3,193) --- 4,246 (69,738) Improvements (310,709) (21,157) --- 4,504 (327,362) Machinery and equipment (79,758) (7,170) --- 1,239 (85,689) Total accumulated (461,258) (31,520) --- 9,989 (482,789) depreciation Net, capital assets being 380,217 (31,520) 32,568 (7,559) 373,706 depreciated Net, capital assets $966,813 $3,616 $ --- $(14,106) $956,323

16 | 2016 Financial Report NOTE 4 – COMMERCIAL PAPER NOTE 5 – LONG-TERM DEBT The Port is authorized to use Subordinate Lien Revenue Notes (commercial paper) in an amount not to exceed Long-term debt activity during 2016 and 2015 consists of the following (dollars in thousands): $100 million. The Port issues commercial paper to provide interim financing for capital asset projects. The 2016 draws are secured by a bank letter of credit that expires April 2019. Description Earliest Original Last Year of December 31, December The term of the commercial paper ranges from one to 270 days and the interest rate on the amount and Date Year of Issuance Repayments Interest Rate Maturity 2015 31, 2016 outstanding at December 31, 2016 and 2015 was 0.8 percent. of Issue Call Commercial paper activity during 2016 and 2015 was as follows (dollars in thousands): GENERAL OBLIGATION BONDS 12/20/06 4.00-5.50% 2016 2033 $53,970 $ --- $(53,970) $ --- Beginning balance January 1, 2015 $82,000 01/17/08 A 5.00% 2018 2038 104,830 --- (102,175) 2,655 Advances 410,000 Repayments (410,000) 01/17/08 B 4.75-4.875% 2018 2038 20,775 --- (515) 20,260 Ending December 31, 2015 82,000 02/25/16 1.06-2.36% * 2025 --- 26,384 (593) 25,791 Advances 436,000 09/08/16 A 3.00-5.00% 2026 2038 --- 110,260 --- 110,260 Repayments (493,000) $179,575 $136,644 $(157,253) $158,966 Ending December 31, 2016 $25,000 Net premium 5,865 23,648 Less current portion 5,130 5,252 Total long-term general obligation bonds, $180,310 $177,362 net of current portion REVENUE BONDS 12/20/06 4.00-4.45% 2016 2034 $45,185 $ --- $(45,185) $ --- 3/07/08 Variable Rate * 2036 83,595 --- (5,345) 78,250 07/15/09** Variable Rate * 2044 133,000 ------133,000 06/04/14 A 2.50% * 2021 8,525 ------8,525 06/11/14 A Variable Rate * 2035 88,645 --- (2,080) 86,565 10/24/14 B 2.55% 2018 2029 33,245 --- (1,220) 32,025 09/08/16 A 4.00-5.00% 2026 2034 --- 36,535 --- 36,535 09/08/16 B 2.00-5.00% 2026 2043 --- 103,555 --- 103,555 $392,195 $140,090 $(53,830) $478,455 Net premium 5 29,254 Less current portion 8,800 9,590 Total long-term revenue bonds, $383,400 $498,119 net of current portion

2016 Financial Report | 17 NOTE 5 – LONG-TERM DEBT (CONTINUED) In February 2016, the Port issued General Obligation Bonds par value $26,384,000 with interest rates between 1.06 percent and 2.36 percent to refund 2008A General Obligation Bonds par value of $23,850,000. The newly issued General Obligation Bonds were issued at par and, after paying issuance costs of $60,000, the net 2015 proceeds were $26,324,000. The net proceeds from the issuance of the General Obligation Bonds were used Description Earliest to purchase State and Local Government Series securities in the amount of approximately $26,383,000. Those and Date of Original Year of Last Year of December 31, December 31, securities were deposited in an irrevocable trust with an escrow agent to provide debt service payments until Issue Interest Rate Call Maturity 2014 Issuance Repayments 2015 the earliest call dates. The advance refunding met the requirements of an in-substance debt defeasance and GENERAL OBLIGATION BONDS $23,850,000 of the Series 2008A General Obligation Bonds were removed from the Port’s financial statements. 12/20/06 4.00-5.50% 2016 2033 $55,955 $ --- $(1,985) $53,970 As a result of the advance partial refunding of the 2008A General Obligation Bonds, the Port reduced its total 01/17/08 A 5.00% 2018 2038 107,240 --- (2,410) 104,830 debt service requirements by $2,655,000 which accumulates into an economic gain (difference between the 01/17/08 B 4.75-4.875% 2018 2038 21,270 --- (495) 20,775 present value of the debt service payments on the old and new debt) of $2,362,000 over the life of the bonds. 184,465 $ --- $(4,890) 179,575 Net premium 6,266 5,865 In September 2016, the Port issued General Obligation Bonds par value $110,260,000 at a premium with interest rates between 3.00 percent and 5.00 percent to partially refund 2006 and 2008A outstanding limited Less current portion 4,890 5,130 tax General Obligation Bonds par value $127,680,000. After paying issuance costs of $267,000, the net Total long-term general obligation bonds, $185,841 $180,310 proceeds were $133,701,000. The net proceeds from the issuance of the General Obligation Bonds and cash net of current portion contribution from the Port of $1,618,000 were used to purchase State and Local Government Series securities REVENUE BONDS in the amount of approximately $135,314,000. Those securities were deposited in an irrevocable trust with 12/20/06 4.00-4.45% 2016 2034 $45,335 $ --- $(150) $45,185 an escrow agent to provide debt service payments until the earliest call dates. The advance refunding met the 03/07/08 Variable Rate * 2036 88,700 --- (5,105) 83,595 requirements of an in-substance debt defeasance and $127,680,000 of the Series 2006 and 2008A General Obligation Bonds were removed from the Port’s financial statements. 07/15/09** Variable Rate * 2044 133,000 ------133,000 As a result of the advance partial refunding of the 2006 and 2008A General Obligation Bonds, the Port 06/04/14 A 2.50% * 2021 8,525 ------8,525 reduced its total debt service requirements by $34,463,000 which accumulates into an economic gain 06/11/14 A Variable Rate * 2035 90,635 --- (1,990) 88,645 (difference between the present value of the debt service payments on the old and new debt) of $25,849,000 over the life of the bonds. 10/24/14 B 2.55% 2018 2029 34,345 --- (1,100) 33,245 Revenue Bonds $400,540 $ --- $(8,345) $392,195 The revenue bonds are secured by a pledge of the Port’s net operating revenues as defined by bond Net premium (discount) (5) (5) documents. Revenue bond proceeds finance acquisition, expansion, improvement and equipping Port terminal Less current portion 8,345 8,800 and industrial development facilities. The Port has pledged future net operating revenues to repay $670.1 million in bond principal and interest through 2044. During 2016, revenue bond principal and interest paid Total long-term revenue bonds, $392,190 $383,400 and total revenues were $13.8 million and $85.1 million, respectively. The revenue bonds contain coverage net of current portion requirements related to maintaining adequate net revenues to support debt service.

In September 2016, the Port issued Revenue Bonds (non-AMT) par value $36,535,000 issued at a premium *Currently callable by the Port but intent is to pay off in accordance with stated maturity dates. of $9,041,000 with interest rates between 4 percent and 5 percent. After paying issuance costs of $91,000, **This bond issue was originally issued as 2008B and during 2009 the bonds were reissued to secure a better the net proceeds were $45,455,000. The net proceeds from the issuance of the Revenue Bonds and cash rate. The new bond issue is still referred to as 2008B in all official documents. contribution from the Port of $527,000 were used to purchase State and Local Government Series securities The Port uses ad valorem tax revenues to pay the general obligation bond principal and the related interest. Ad in the amount of approximately $45,981,000. Those securities were deposited in an irrevocable trust with an valorem tax revenues may not be used to pay revenue bond debt. escrow agent to provide debt service payments until the earliest call dates. The advance refunding met the requirements of an in-substance debt defeasance and $45,185,000 of the Series 2006 Revenue Bonds were General Obligation Bonds removed from the Port’s financial statements. Revised Code of Washington (RCW) Chapter 53.36 provides that new issues of non-voted general obligation bond debt cannot be incurred in excess of 0.25 percent of the assessed value of the taxable property in the As a result of the advance partial refunding of the 2006 Revenue Bonds, the Port reduced its total debt service Port district. The Port is able to issue up to $73.1 million of new general obligation bonds at this time. All requirements by $11,599,000 which accumulates into an economic gain (difference between the present value current general obligation bonds are non-voted bond debt. At December 31, 2016, the assessed value of the of the debt service payments on the old and new debt) of $8,837,000 over the life of the bonds. taxable property was $90,491,815,000, which will serve as the basis for the 2017 tax levy. In September 2016, the Port issued Revenue Bonds series 2016B (AMT) par value $103,555,000 issued at a RCW Chapter 53.36 also provides that additional general obligation bond debt can be incurred upon approval premium of $20,471,000. The term is 27 years, and the average coupon rates were between 3.125 percent by the voters of the Port district. and 5.0 percent. The cost of issuance was $258,000 and was paid by the Port and was not paid out of the proceeds. Total proceeds after underwriter’s discount of $344,000 and re-payment of $30,000,000 in The paying agent for bonded debt is: commercial paper was $93,683,000 and will be used to fund expansion and redevelopment of Pier 4 and to U.S. Bank purchase four post-panamax container cranes to support operations at Pier 4. Fiscal Agencies – 7 East101 Barclay Street New York, NY 10286

18 | 2016 Financial Report Interest Rate Payment Agreements (Swaps) The following summarizes the change in fair value of the Port’s pay-fixed, receive variable interest rate The Port entered into five swaps so that it may mitigate interest rate risk associated with the Port’s variable- payment agreements at December 31, 2016 (dollars in thousands): rate debt. The swaps synthetically fix or “lock-in” interest rates on variable revenue bond debt by requiring the Port to pay a fixed interest rate on the nominal value of the swap and receive variable interest rate cash 2016 Changes in Fair Value Fair Value at 12/31/16 flows that are intended to offset the variable-rate bond payments, leaving the Port with the fixed payments SWAP Notional Reference Classification Amount Classification Amount identified in each swap agreement. Amount 2 Deferred outflow $883 Debt $(3,983) $30,000 In December 2016 the Port cancelled, at no cost, the interest rate payment agreement with Morgan Stanley (Swap Reference 1). The swap was effective until December 2036 unless terminated earlier. Cancelling the 3 Deferred outflow 4,351 Debt (20,021) 80,000 swap results in the Port having an additional $57,865,000 of unhedged variable rate long-term debt. Total 4 Deferred outflow 7,511 Debt (34,151) 130,000 swaps outstanding was reduced by $57,096,000 to $239,950,000. The effective interest rate on the unhedged 5 Deferred outflow 1,220 Debt (5,465) 20,000 $57,865,000 will be short term variable rates, which are approximately 0.5 percent and will fluctuate with Total $13,965 $(63,620) $260,000 market changes. The annual interest savings on $57,865,000 at 0.5 percent compared to 3.795 percent is approximately $1,900,000. Variable rate bonds were used to purchase a majority of the land on the Hylebos Note: SWAP reference 1 was terminated in 2016. The following summarizes the change in fair value of Peninsula in the mid 2000’s. This created restrictions on how the property purchased with these bond proceeds the Port’s pay-fixed, receive variable interest rate payment agreements at December 31, 2015 (dollars in can be used. The termination of the swap removes the restriction to allow the land to be used for activities thousands): other than “docks and wharfs”. 2015 Changes in Fair Value Fair Value at 12/31/15 The Port’s existing swap contracts and the outstanding notional amounts at December 31, 2016, are detailed SWAP Notional as follows. No cash was paid from the Port to the counterparty when the swaps were created (dollars in Reference Classification Amount Classification Amount Amount thousands): 1 Deferred outflow $1,524 Debt $(2,627) $70,000 2 Deferred outflow (17) Debt (4,866) 30,000 Original Outstanding SWAP Contract Effective Maturity 3 Deferred outflow 21 Debt (24,372) 80,000 Type Notional Notional Options Terms Reference Start Date Date Date Amount Amount 4 Deferred outflow (76) Debt (41,662) 130,000 Pay-fixed interest Pay 3.320%, receive 5 Deferred outflow (30) Debt (6,685) 20,000 2 $30,000 24,470 None 9/25/08 9/25/08 12/1/36 rate swap 70% of LIBOR (2) Total $1,422 $(80,212) $330,000 Pay-fixed interest Pay 4.155%, receive 3 $80,000 74,710 None 9/20/07 7/28/11 12/1/40 Risks rate swap 70% of LIBOR (2) The Port mitigates swap-related risk by following its Payment Agreement Guidelines. These guidelines are Pay-fixed interest Pay 4.200%, receive published in the Port’s Annual Budget document within its Debt Guidelines. The guidelines manage each of the 4 $130,000 121,940 None 9/20/07 7/26/12 12/1/41 rate swap 70% of LIBOR (2) risks below. Pay-fixed interest Pay 4.229%, receive 5 $20,000 18,830 None 9/20/07 7/25/13 12/1/42 Counterparty or Credit Risk rate swap 70% of LIBOR (2) The Port’s derivative instruments are held by three separate counterparties. By agreement, the Port requires $260,000 $239,950 posting of collateral when the counterparty owes to the Port on the swap termination value (market value). The credit ratings for each of the counterparties are as follows (dollars in thousands): (1) Swap Reference 1 was terminated in 2016. (2) One-month London Interbank Offered Rate. Notional Bank Credit Worthiness Termination SWAP Reference Amount Counterparty Moody’s S&P Value 2 30,000 Goldman Sachs A1 A+ $3,983 The following table reflects the outstanding variable-rate debt that is matched to outstanding swap agreements (dollars in the thousands). 3 80,000 Dexia Baa3 BBB 20,021 Outstanding Principal Outstanding Principal 4 130,000 Dexia Baa3 BBB 34,151 Variable-Rate Debt December 31, 2016 December 31, 2015 5 20,000 Merrill Lynch Baa1 BBB+ 5,466 2008 $78,250 $83,595 Total $260,000 $63,621 2008B 133,000 133,000 Note: SWAP reference 1 was terminated in 2016. 2014A 86,565 88,645 Termination Risk Unhedged debt (57,865) (525) The Port or its counterparties may terminate a derivative instrument if the other party fails to perform under the $239,950 $304,715 terms of the contract. If the swap counterparty’s credit rating deteriorates below A3/A- (Moody’s/Standard & Poor’s), the Port may terminate the swap at market value; however, the Port may, at its option, continue in the swap. The Port requires the posting of collateral and works with financially strong counterparties to help mitigate this risk.

2016 Financial Report | 19 16,340 16,279 16,227 16,179 80,086 87,120 77,130 12,643 136,701 43 8,578 8,349 8,110 7,862 6,547 35,225 27,337 17,723 $8,798 $19,279 $128,572 $477,984 2,595 2,547 9,958 7,242 --- 6,096 5,120 2,642 5,335 5,570 5,820 2,497 $7,770 $2,711 Year Principal Payment Interest Variable Net (1) Rate Swap, Interest Total Total $297,815 $51,597 2017 2018 2019 2020 2021 2022-20262027-20312032-2036 33,2102037-2041 49,825 2042-2047 52,165 11,651 133,000 3,658 amount represents the cash that is due to counterparty based on terms of pay-fixed This (1) amounts for the subsequent years are based on assumption that interest rate The interest rate swap. contract. conditions that existed during 2016 will remain the same over term of derivative April 2014 for a direct purchase of the 2008 entered into a 3-year agreement with bank in Port The is currently April 2017 and the Port agreement expires in The Revenue Bonds. Variable-Rate Subordinate-Lien entered into a 3-year agreement with bank for the Port In May 2012, negotiating a one-year extension. extended agreement was This Revenue bonds. Variable-Rate direct purchase of the 2008B Subordinate-Lien until May 2018. bonds from changed the mode on 2014A subordinate lien variable-rate the Port In December 2015, Agreement with the lender that reduced taxable to tax exempt by executing a new Continuing Covenant the lender extended At the time of mode change, to a lower fee. non-hedged fee portion paid by the Port change in mode did not require a refunding of any The 2018. the direct purchase agreement until October 1, interest rate portion of the The exchanged. of the bonds or issuance a new CUISP and no cash was resolution were direct purchase agreement (70 percent of one month LIBOR) in the bank document and Port unchanged. the bonds will continue to be held If reimbursement agreements are not able to be renewed upon expiration, would be required to pay off the loans over an agreed amortization schedule but the Port by the banks, usually 3 to 5 years. (until new agreements are reached), Variable Rate Bonds Estimated Future Payments Rate Bonds Estimated Future Variable Assuming that the reimbursement agreements and letters of credit are renewed throughout life 2008B the debt service requirements for 2009 revenue bonds with a balance of $133.0 million, of the bonds, Revenue Bonds with a balance of $78.3 million and the 2014A Subordinate Lien Variable-Rate Subordinate-Lien Goldman Sachs and with Dexia, and active swaps Revenue Bonds with a balance of $86.6 million, Variable-Rate are as follows (dollars in thousands): 2016, outstanding as of December 31, Merrill Lynch 24,816 78,457 25,358 23,044 23,042 22,699 Total 103,006 118,059 125,865 $21,562 $21,562 1,701 14,192 31,056 47,759 61,603 13,536 13,759 13,970 14,236 Interest $14,490 $14,490 $226,302 $226,302 $565,908 9,285 9,072 8,463 23,115 64,265 71,950 70,300 64,262 11,822 $7,072 $7,072 $339,606 $339,606 (CONTINUED) 2016 Financial| 2016 Report Year Ending December 31,Year Principal Total 2042-2047 2037-2041 2032-2036 2027-2031 2022-2026 2021 2020 2019 2017 2018 NOTE 5 – LONG-TERM DEBT NOTE

Basis Risk pays a daily interest rate to its bondholders and receives 70 percent of one-month London Interbank Port The rates associated with using In exchange for the fixed swap counterparties. Offered Rate (LIBOR) from its swap rate paid on the bears the risk that it could incur a shortfall between variable the Port the LIBOR index, rate received on the swaps. bonds and the variable Risk Rollover contracts to the term of underlying debt so that it matched the term of its existing swap Port The minimizes its exposure to rollover risk. Risk Currency Foreign dollars. instruments are denominated in U.S. derivative Port’s The Contingencies with Goldman Sachs for the swap & Poor’s) A3/A- (Moody’s/Standard credit rating falls below If the Port’s bears the risk that its the Port for the other swaps, & Poor’s) or below Baa2/BBB (Moody’s/Standard The is prohibited by RCW 39.96 from posting collateral. Port The counterparties may terminate the agreement. 2016. at December 31, & Poor’s) A1/A+ (Moody’s/Standard subordinate lien credit rating is Port’s Debt Service for Fixed Rate Bonds debt service requirements for fixed rate general obligation and revenue bonds outstanding as of December The are as follows (dollars in thousands): 2016, 31, 20 NOTE 6 – RISK MANAGEMENT NOTE 7 – LEASE COMMITMENTS Pension Plan The Port’s full-time and qualifying part-time employees participate in one The Port is exposed to various risks of loss related to torts; damage The Port leases land, office space and other equipment under operating of the statewide local government retirement systems administered by to, theft of, and destruction of assets or cargo; natural disasters; and leases that expire through 2037. Minimum future lease payments under the Washington State Department of Retirement Systems, under cost- employee injuries. To limit its exposure, the Port purchases a variety of non-cancellable operating leases are as follows (dollars in thousands): sharing, multiple-employer public employee defined benefit retirement insurance policies. For general liability, the Port purchases $151 million in plans. coverage, subject to a $500,000 self-insured retention. All risk property Years ending December 31, Port of Tacoma insurance is purchased on a replacement value basis for most properties, Historical trend and other information regarding each plan are 2017 $17 presented in the Washington State Department of Retirement Systems subject to a limit of $500 million and a per occurrence deductible 2018 17 of $150,000. For earthquake/flood and business interruption losses, comprehensive annual financial report. A copy of this report may be 2019 17 obtained at: sub-limits of $75 million and $100 million apply, respectively. Insurance 2020 17 Department of Retirement Systems coverage for earthquake and flood damage is subject to a deductible 2021 17 Communications Unit defined as five percent of the value of the damaged property, with a Thereafter 263 minimum of $100,000. P.O. Box 48380 Total minimum payments required $348 With the exception of losses which may arise from employee injuries, Olympia, WA 98504-8380 earthquakes and/or floods, no deductible exceeds $500,000. The self- Total rent expense for the years ended December 31, 2016 and 2015 was Internet Address: www.drs.wa.gov insured retention for workers’ compensation coverage is $1,250,000. $17,000 and $691,000, respectively. Plan Description and Benefits Insurance coverage for the past three years has been sufficient to cover The Port, as a lessor, leases land and facilities under terms of 1 to 50 PERS was established in 1947, and its retirement benefit provisions are all claim settlements. years. In addition, some properties are rented on a month-to-month contained in chapters 41.34 and 41.40 RCW. PERS is a cost-sharing, The Port is self-insured for its regular medical coverage. The liability for basis. Minimum future rents receivable under non-cancellable operating multiple-employer retirement system composed of three separate unpaid medical claims is included in payroll and taxes payable on the leases and subleases are as follows (dollars in thousands). Leases for pension plans for membership purposes. PERS Plan 1 and PERS Plan 2 accompanying statements of net position and is expected to be paid NWSA licensed properties are reported by NWSA and not included here. are defined benefit plans, and PERS Plan 3 is a defined benefit plan with in 2017. Excess loss coverage has been purchased through an outside a defined contribution component. Years ending December 31, Port of Tacoma provider to limit individual loss to $110,000. Self-insured claim activity PERS members include elected officials; state employees; employees for December 31, 2016 and 2015, is as follows (dollars in thousands): 2017 $11,428 2018 10,209 of the Supreme, Appeals and Superior Courts; employees of the Legislature; employees of district and municipal courts; employees of 2016 2015 2019 9,820 2020 9,379 local governments; and higher education employees not participating in Claims liability, beginning of year $1,316 $1,303 higher education retirement programs (HERPs). Claims reserve 4,019 4,869 2021 9,433 Payments on claims (4,573) (4,856) Thereafter 298,944 PERS is composed of and reported as three separate plans for accounting purposes: Plan 1, Plan 2/3 and Plan 3. Plan 1 accounts for the defined Claims liability, end of year $762 $1,316 Total minimum payments required $349,213 benefits of Plan 1 members. Plan 2/3 accounts for the defined benefits Assets held for rental and leasing purposes as of December 31, 2016, are The Port maintains a self-insurance program for workers’ compensation. of Plan 2 members and the defined benefit portion of benefits for Plan 3 as follows (dollars in thousands): The estimated liability for workers’ compensation is included in payroll members. Plan 3 accounts for the defined contribution portion of benefits and taxes payable on the accompanying statements of net position. At Land $272,769 for Plan 3 members. December 31, 2016, the estimated self-insurance liability for workers’ Although members can only be a member of either Plan 2 or Plan 3, compensation was $238,000 and this amount is expected to be paid in Buildings, improvements and equipment, net 19,119 the defined benefits of Plan 2 and Plan 3 are accounted for in the same 2017. At December 31, 2015, the estimated self-insurance liability for Total, net of accumulated depreciation $291,888 pension trust fund. All assets of Plan 2/3 may legally be used to pay the workers’ compensation was $530,000. The liability for unpaid claims represents the estimated future indemnity, medical, rehabilitation and defined benefits of any of the Plan 2 or Plan 3 members or beneficiaries, legal costs for all open claims. NOTE 8 – PENSION PLANS as the terms of the plans define. Therefore, Plan 2/3 is considered a single plan for accounting purposes. Workers’ compensation claim activity for December 31, 2016 and 2015, In 2015, the Port adopted GASB Statement No. 68, Accounting and are as follows (dollars in thousands): Financial Reporting for Pensions, an amendment of GASB Statement No. 25 As of June 30, 2016, 435 employers and 703 non-employer contributing and GASB Statement No. 71. GASB 71 which amends GASB 68 regarding entities were participating in PERS Plan 1. The plan is closed to new 2016 2015 the deferred outflows of resources for current year pension contributions entrants. PERS 1 members were vested after the completion of five Claims liability, beginning of year $ 530 $330 that are reported subsequent to the measurement date. These new pension years of eligible service. PERS Plan 1 provides retirement, disability and Claims incurred during the year 89 382 statements revise pension accounting and financial reporting requirements death benefits. Retirement benefits are calculated using 2 percent of Changes in estimate for prior (39) 392 for state and local governments and establishes standards for measuring the member’s Average Final Compensation (AFC) times the member’s year claims and recognizing pension liabilities, deferred outflows of resources, deferred years of service. AFC is the average of the member’s 24 consecutive Payments on claims (342) (574) inflows of resources, and expense/expenditures. highest-paid service credit months. Members are eligible for retirement Claims liability, end of year $238 $530 from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of service. 2016 Financial Report | 21 Contributions For the years ended December 31, 2016 and 2015, the Port recognized NOTE 8 – PENSION PLANS (CONTINUED) The required contribution rates, expressed as a percentage of covered pension (benefit)/expense of ($287,000) and $654,000, respectively. payrolls, as of December 31, 2016, were: At December 31, 2016 and 2015, the Port reported deferred outflows PERS Plan 1 retirement benefits are actuarially reduced to reflect the of resources and deferred inflows of resources related to pensions from choice of a survivor benefit. Members retiring from inactive status 2016 PERS Plan 1 PERS Plan 2 PERS Plan 3 the following sources (dollars in thousands): before the age of 65 may also receive actuarially reduced benefits. Other Employer* 11.18% 11.18% 11.18%** benefits include duty and nonduty disability payments, an optional Employee 6.00% 6.12% *** 2016 PERS 1 PERS 2/3 Total Cost-of-Living Adjustment (COLA), and a one-time, duty-related death Sources of Deferred Outflow benefit, if found eligible by the Washington State Department of Labor & The required contribution rates, expressed as a percentage of covered of Resources: Industries. payrolls, as of December 31, 2015, were: Net difference between The PERS Plan 1 member contribution rate is established by statute at 6 2015 PERS Plan 1 PERS Plan 2 PERS Plan 3 projected and actual percent. The employer contribution rate is developed by the Office of the Employer* 11.18% 11.18% 11.18%** earnings on pension plan State Actuary (OSA) and includes an administrative expense component Employee 6.00% 6.12% *** investments $257 $1,475 $1,732 that is currently set at 0.18 percent. * The employer rates include the employer administrative expense fee of Changes in Assumptions --- 125 125 PERS Plan 2 members are vested after completing five years of eligible 0.18% for 2016 and 2015 Differences between expected ** Plan 3 defined benefit portion only service. Plan 3 members are vested in the defined benefit portion of and actual experience --- 642 642 *** Rate selected by PERS 3 members, 5% minimum to 15% maximum their plan after 10 years of service or after five years of service if 12 Changes in proportionate months of that service are earned after age 44. PERS Plan 2/3 provides Both the Port and the employees made the required contributions. The and differences between retirement, disability and death benefits. Retirement benefits for Plan 2 Port’s required contributions for the years ended December 31, are as Port contributions and are calculated using 2 percent of the member’s AFC times the member’s follows (dollars in thousands): proprtionate share of years of service. Retirement defined benefits for Plan 3 are calculated Year PERS Plan 1 PERS Plan 2 PERS Plan 3 Total contributions ------Port contributions subsequent using 1 percent of AFC times the member’s years of service. AFC is the 2016 $8 $2,383 $287 $2,678 to measurement date 584 759 1,343 monthly average of the member’s 60 consecutive highest-paid service 2015 9 1,926 271 2,206 Total $841 $3,001 $3,842 credit months. PERS Plan 2/3 has no cap on years of service credit. 2014 17 1,711 238 1,966 Members are eligible for retirement with a full benefit at 65 with at 2016 PERS 1 PERS 2/3 Total least five years of service credit. Retirement before age 65 is considered Pension liabilities, pension expense, and deferred inflows an early retirement. PERS Plan 2/3 members who have at least 20 years Sources of Deferred Inflow of and outflows of resources and related to pensions Resources: of service credit and are 55 years of age or older are eligible for early Net difference between retirement with a reduced benefit. The benefit is reduced by a factor At December 31, 2016 and 2015, the Port reported a liability of projected and actual earnings that varies according to age for each year before age 65. PERS Plan approximately $22.3 million and $18.4 million, respectively for its on pension plan investments $ --- $ --- $ --- 2/3 retirement benefits are actuarially reduced to reflect the choice of a proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2016 and 2015, the total pension liability Changes in assumptions ------survivor benefit. Other PERS Plan 2/3 benefits include duty and nonduty used to calculate the net pension liability was determined by an actuarial Differences between expected disability payments; a COLA based on the Consumer Price Index, capped valuation as of that date. The Port’s proportion of the net pension and actual experience --- (398) (398) at 3 percent annually; and a one-time, duty-related death benefit, if liability was based on a projection of the Port’s long-term share of Changes in proportion and found eligible by the Washington State Department of Labor & Industries. contributions to the pension plan relative to the projected contributions differences between Port The PERS Plan 2/3 employer and employee contribution rates are of all participating agencies, actuarially determined. At June 30, 2016, contributions and proportionate developed by the OSA to fully fund Plan 2 and the defined benefit the Port’s proportionate share of net pension liability and the change in share of contributions --- (153) (153) portion of Plan 3. The Plan 2/3 employer rates include a component to proportionate share from June 30, 2015, is presented in the following Total $ --- $(551) $(551) address the PERS Plan 1 unfunded actuarial accrued liability and an tables: (dollars in thousands) administrative expense that is currently set at 0.18 percent. Port's proportionate share of the net PERS Plan 3 members are immediately vested in the defined pension liability PERS 1 PERS 2/3 contribution portion of their plan. PERS Plan 3 defined contribution 2016 $10,213 $12,057 benefits are totally dependent on employee contributions and 2015 9,803 8,565 investment earnings on those contributions. PERS Plan 3 members PERS 1 PERS 2/3 choose their contribution rate when joining membership and can Change of Port’s proportionate share change rates only when changing employers. As established by chapter 0.0028% -0.0003% from 2015 to 2016 41.34 RCW, Plan 3 defined contribution rates are set at a minimum of 5 percent and a maximum of 15 percent; members have six rate options to choose from. Employers do not contribute to the defined contribution benefits.

22 | 2016 Financial Report 2015 PERS 1 PERS 2/3 Total As of December 31, 2016, deferred outflows of resources related improvements in each future year throughout their lifetimes. Sources of Deferred Outflow to pensions resulting from Port’s contributions subsequent to the Long-Term Expected Rate of Return of Resources: measurement date was $1.3 million and will be recognized as a The long-term expected rate of return on pension plan investments Net difference between reduction of the net pension liability in the year ended December 31, was determined using a building-block method. The Washington State projected and actual earnings 2017. Other amounts reported as deferred outflows of resources and Investment Board (WSIB) used a best estimate of expected future rates on pension plan investments $ --- $15 $15 deferred inflows of resources related to pensions will be recognized in of return (expected returns, net of pension plan investment expense, Changes in assumptions --- 910 910 pension expense as follows (dollars in thousands): including inflation) to develop each major asset class. Those expected returns make up one component of WSIB’s Capital Market Assumptions Differences between expected Years ending PERS 1 PERS 2/3 Total (CMAs). and actual experience ------December 31: 2017 $(68) $(82) $(150) The CMAs contain three pieces of information for each class of assets Changes in proportionate WSIB currently invests in: and differences between 2018 (68) (65) (133) Port contributions and • Expected annual return 2019 247 1,142 1,389 proprtionate share of • Standard deviation of the annual return contributions ------2020 146 696 842 • Correlations between the annual returns of each asset class with Port contributions subsequent Total $257 $1,691 $1,948 every other asset class to measurement date 523 695 1,218 The WSIB uses the CMAs and their target asset allocation to simulate Years ending PERS 1 PERS 2/3 Total Total $523 $1,620 $2,143 December 31: future investment returns over various time horizons. 2016 $(213) $(705) $(918) The OSA selected a 7.50 percent long-term expected rate of return on 2015 PERS 1 PERS 2/3 Total pension plan investments. In selecting this assumption, OSA reviewed 2017 (213) (705) (918) Sources of Deferred Inflow the historical experience data, considered the historical conditions that of Resources: 2018 (213) (688) (901) produced past annual investment returns, and considered CMAs and simulated expected investment returns the WSIB provided. Net difference between 2019 103 519 622 projected and actual earnings Estimated Rates of Return by Asset Class Total $(536) $(1,579) $(2,115) on pension plan investments $(536) $(2,286) $(2,822) Best estimates of arithmetic real rates of return for each major asset

Changes in assumptions ------Actuarial Assumptions class included in the pension plan’s target asset allocation as of June 30, 2016 and 2015 are summarized in the tables below. Differences between expected The total pension liability (TPL) for each of the plans was determined by and actual experience ------an actuarial valuation as of June 30, 2015 with the results rolled forward 2016 to June 30, 2016. Besides the discount rate, the actuarial assumptions % Long-term expected Changes in proportionate Target used in the valuation are summarized in the Actuarial Section of DRS’ Asset Class real rate of return and differences between allocation Comprehensive Annual Financial Report located on the DRS employer- arithmetic Port contributions and resource GASB webpage. These assumptions reflect the results of OSA’s Fixed income 20% 1.70% proprtionate share of 2007-2012 Experience Study. Tangible Assets 5% 4.40% contributions --- (218) (218) Real Estate 15% 5.80% Additional assumptions for subsequent events and law changes are Global Equity 37% 6.60% Total $(536) $(2,504) $(3,040) current as of the 2015 actuarial valuation report are as follows: Private Equity 23% 9.60% (1) The recognition period for each plan is equal to the average of Inflation Total 100% the expected remaining service lives of all employees provided 3.0 percent total economic inflation; 3.75 percent salary inflation. with pensions through the pension plan, which was determined 2015 at the beginning of the measurement date. Salary Increases % Long-term expected In addition to the base 3.75 percent salary inflation assumption, salaries Target (2) The recognition period is closed, 5-year period for all plans. Asset Class allocation real rate of return are also expected to grow by promotions and longevity. arithmetic Fixed income 20% 1.70% Investment Rate of Return Tangible Assets 5% 4.40% 7.50 percent. Real Estate 15% 5.80% Mortality rates were based on the RP-2000 report’s Combined Healthy Global Equity 37% 6.60% Table and Combined Disabled Table, which the Society of Actuaries Private Equity 23% 9.60% publishes. The OSA applied offsets to the base table and recognized Total 100% future improvements in mortality by projecting the mortality rates using 100 percent Scale BB. Mortality rates are applied on a generational The inflation component used to create the table is 2.20 percent for June basis, meaning members are assumed to receive additional mortality 30, 2016 and 2015, respectively, and represents WSIB’s most recent long- term estimate of broad economic inflation. 2016 Financial Report | 23 NOTE 8 – PENSION PLANS (CONTINUED) NOTE 9 – POST-EMPLOYMENT HEALTH CARE BENEFITS

Discount rate The Port provides major medical coverage for eligible retired employees The discount rate used to measure the total pension liability was 7.50 through the Post-Employment Defined Benefit Plan (DB Plan) that was percent for all plans. To determine that rate, an asset sufficiency test was established in 1975. The Port is the sole administrator and fiduciary of completed to test whether each pension plan’s fiduciary net position was the Post-Employment Health Care Benefits Trust Fund. The Plan’s audited sufficient to make all projected future benefit payments of current plan financial statements for December 31, 2016 may be found on page 10 members. Consistent with current law, the asset sufficiency test included of this report. an assumed 7.70 percent long-term discount rate to determine funding liabilities for calculating future contribution rate requirements. Consistent Summary of Accounting Policies with the long-term expected rate of return, a 7.50 percent future The financial statements are prepared using the accrual basis of investment rate of return on invested assets was assumed for the test. accounting. Medical benefits that are in accordance with the DB Plan are recognized when due and payable. Contributions to the DB Plan are Contributions from plan members and employers are assumed to recognized in the period that the contributions are made. continue being made at contractually required rates (including PERS Plans 2 and 3 employers, whose rates include a component for the PERS Investment Policy Plan 1 liability). Based on those assumptions, the pension plan’s fiduciary As of December 31, 2016 and 2015, the Plan’s investments were net position was projected to be available to make all projected future deposited in qualified depositories as required by state statutes. Those benefit payments of current plan members. Therefore, the long-term statutes authorize the Port to invest in direct obligations of the U.S. expected rate of return of 7.50 percent was used to determine the total Government, certificates of deposit, bankers’ acceptances, repurchase liability. agreements, commercial paper and certain municipal bonds. Investments are valued at fair value. Sensitivity Net Pension Liability to Changes in the Discount Rate Risks The table below presents the net pension liability of employers, Interest Rate Risk: Interest rate risk is the risk that changes in interest calculated using the discount rate of 7.50 percent as well as what rates will adversely affect the fair value of an investment. The Port’s employers’ net pension liability would be if it were calculated using a investment guideline is to maximize investment return while preserving discount rate 1 percentage point lower (6.5 percent) or 1 percentage liquidity. To the extent possible, the Port will attempt to match its point higher (8.5 percent) than the current rate (dollars in thousands): investments with anticipated cash flow requirements using the specific- identification method. Pension 1% Discount 1% Credit Risk: Credit risk is the risk that an issuer of an investment will Trust Decrease Rate Increase not fulfill its obligation to the holder of the investment. This is measured December 31, 2016 by the assignment of a rating by a nationally recognized statistical rating Discount Rate 6.50% 7.50% 8.50% organization. The Washington State Local Government Investment Pool Proportionate share of net is an unrated 2a-7 like pool, as defined by the Government Accounting PERS 1 $12,316 $10,213 $8,404 pension liability Standards Board. Proportionate share of net PERS 2/3 22,198 12,057 (6,276) Custodial Credit Risk: Custodial credit risk is the risk that, in the event pension liability/(asset) of the failure of the counterparty, the Port will not be able to recover the value of its investments or collateral securities that are in the possession December 31, 2015 of the outside party. The deposits are covered by the PDPC of the State Discount Rate 6.50% 7.50% 8.50% of Washington. The PDPC is a statutory authority under Chapter 39.58 Proportionate share of net PERS 1 $11,936 $9,803 $7,970 RCW. The PDPC approves which banks and thrifts can hold state and pension liability local government deposits and monitors collateral pledged to secure Proportionate share of net uninsured public deposits. This secures public treasurers’ deposits when PERS 2/3 25,044 8,565 (4,053) pension liability/(asset) they exceed the amount insured by the FDIC by requiring banks and thrifts to pledge securities as collateral. Detailed information about the pension plan’s fiduciary net position The DB Plan does not limit the amount invested in any one issuer. At is available in the separately issued DRS financial reports. Additional December 31, 2016, 2015, and 2014, the DB Plan had the following actuarial and pension plan information is included in the DRS 2016 investments (dollars in thousands): CAFR, including descriptions of actuarial data, assumptions, methods, and plan provisions relied on for the preparation of GASB 67 and GASB Investment Type 2016 2015 2014 68. Additional details regarding this information is included in OSA’s Money market fund $94 $265 $471 2015 Report on Financial Condition and Economic Experience Study on Fixed income securities 5,413 5,626 5,862 the OSA website. $5,507 $5,891 $6,333 24 | 2016 Financial Report Trust Deposits and Investments The Port’s annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual The Trust’s cash and cash equivalents of $94,000 and $265,000 as of December 31, 2016 and 2015, required contribution of the employer (ARC), an amount actuarially determined in accordance with the respectively, were deposited in qualified depositories as required by state statute. parameters of the authoritative guidance. The ARC represents a level of funding that, if paid on an ongoing The Trust follows the same investment guidelines as the Port investments in Note 2 Deposits and Investments. basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding The tables below identify the type of investments, concentration of investments in any one issuer, and excess) over a period not to exceed 30 years. The contribution policy of the plan is established by the maturities of the Trust portfolio as of December 31, 2016 and 2015 (dollars in thousands): commission. Actuarial Methods and Assumptions 2016 Maturities (in years) Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions Percentage of about the probability of occurrence of events far into the future. Examples include assumptions about future Investment type Fair value Less than 1 1-3 More than 3 Total Portfolio employment, mortality, and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results Federal Home Loan Bank $1,304 $ --- $705 $599 24.1% are compared with past expectations and new estimates are made about the future. Federal Home Loan 802 602 200 --- 14.8% Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as Mortgage Corporation understood by the employer and the plan members) and include the types of benefits provided at the time of Federal National each valuation and the historical pattern of sharing of benefit costs between the employer and plan members 2,252 251 1,063 938 41.6% Mortgage Association to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent United States Treasury Bonds 1,055 753 302 --- 19.5% with the long-term perspective of the calculations. The actuarial present value of accumulated plan benefits is Total investments $5,413 $1,606 $2,270 $1,537 100.0% determined by an independent actuary. Percentage of total As of January 1, 2016, 2015 and 2014, the entry age normal valuation method was used. The actuarial 29.7% 41.9% 28.4% 100.0% portfolio assumptions included a 4 percent investment rate of return (net of investment expenses), which is a blended rate of the expected long-term investment returns on plan assets. The expected long-term investment return 2015 Maturities (in years) on plan assets is developed by netting the investment earnings at the assumed valuation investment return rate to the prior year valuation asset value, expenses, benefit payments and assets expected from future Percentage of Investment type Fair value Less than 1 1-3 More than 3 contributions. The health care cost trend rate assumptions are 7.5 percent graded uniformly to 5 percent over Total Portfolio 5 years for December 31, 2016 and 2015. The health care cost trend rate assumptions are 8.0 percent graded Federal Home Loan Bank $1,256 $252 $403 $601 22.3% uniformly to 5 percent over 6 years for December 31, 2014. The amortization method is on a level basis over 10 years. Federal Home Loan 1,555 755 601 199 27.6% Mortgage Corporation The actuarial value of assets was determined using market value. The actuarial accrued liability is fully funded at December 31, 2016, 2015 and 2014, in an external trust. Federal National 1,763 --- 807 956 31.3% Annual Pension Cost Mortgage Association The following table shows the components of the Port’s annual OPEB cost for the year, the amount actually United States Treasury Bonds 1,052 --- 1,052 --- 18.7% contributed to the plan, and changes in the Port’s OPEB obligation for the years ended December 31, 2016, Total investments $5,626 $1,007 $2,863 $1,756 100.0% 2015 and 2014 (dollars in thousands): Percentage of total 2016 2015 2014 17.9% 50.9% 31.2% 100.0% portfolio Annual required contribution $394 $331 $488

The investments of the Trust are rated AAA by Moody’s equivalent credit rating as of December 31, 2016 and Annual OPEB expense 394 331 488 2015. Claims paid (394) (331) (488) Plan Description End OPEB liability $ --- $ --- $ --- The Plan provides major medical coverage, subject to a deductible, and a maximum benefit limit of $2,000,000 per person. The Port is the fiduciary of this plan and the trust is held by a bank. The DB Plan is a single- employer cost-sharing defined benefit plan. The DB Plan was closed to new employees in 2007. The Port will fund the DB Plan as necessary to enable the DB Plan to pay vested accrued benefits to participants as they become due and payable. Retirees and their spouses are eligible for Port-paid, post-employment medical benefits upon attainment of the age of 60 through the age of 69, provided they have completed a minimum of 15 years of service and are eligible to retire under PERS. Employees retiring before the age of 60 are eligible for Port-paid, post- employment medical for up to 10 years, provided they have completed 20 years of service and are eligible to retire under PERS. 2016 Financial Report | 25 Annual OPEB Cost and Net OPEB Obligation NOTE 10 – PROPERTY TAXES The Port’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC The County Treasurer acts as an agent to collect property taxes levied in the county for all taxing authorities. represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and Taxes are levied annually on January 1, on property values listed as of the prior May 31. The lien date is amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. January 1. Assessed values are established by the County Assessor at 100 percent of fair market value. A revaluation of all property is required every six years. The following table shows the components of the Port’s annual OPEB cost for the year ended December 31, 2016, the amount actually contributed to the plan, and changes in the Port’s net OPEB obligation (dollar Taxes are due in two equal installments on April 30 and October 31. Collections are distributed monthly to the amounts in thousands): Port by the County Treasurer. 2016 2015 2014 The Port is permitted by law to levy up to 45 cents per $1,000 of assessed valuation for general Port purposes. The rate may be adjusted for either of the following reasons: Annual required contribution $394 $331 $488 (a) Washington State law in Revised Code of Washington (RCW) 84.55 limits the growth of regular Interest on net OPEB obligation ------property taxes, but it allows additional amounts for new construction. The Port is allowed to raise Adjustment on annual required contribution ------revenues in excess of the limit if approved by a majority of the voters as provided in RCW 84.55.050. Annual OPEB expense 394 331 488 (b) The Port may voluntarily levy taxes at a lower rate.

Special levies approved by the voters are not subject to the above limitations. Annual employer trust contribution ------In 2016 the Port’s regular tax levy was $0.183 per $1,000 on a total assessed valuation of $82,178,126,000, Employer payments for retiree benefits 394 331 488 for a total regular levy amount of $15,013,000. In 2015 the Port’s regular tax levy was $0.183 per $1,000 on a Total contribution 394 331 488 total assessed valuation of $77,383,384,000, for a total regular levy amount of $14,217,000.

Increase in net OPEB obligation $ --- $ --- $ --- NOTE 11 – COMMITMENTS AND OTHER LONG-TERM LIABILITIES Commitments Employer Contributions The Port has entered into contractual agreements for terminal maintenance, infrastructure improvements, The Port’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB environmental projects and professional services. At December 31, 2016, these future commitments are as obligation for the years ended December 31, 2016, 2015 and 2014, are as follows (dollars in thousands): follows (dollars in thousands): Remaining Description Years ending Percentage of Annual Commitments Annual OPEB Cost OPBEB Cost Contributed to Net OPEB Obligation/(Asset) December 31, a Trust Fund Terminal projects $102,852 2016 $394 100% $ --- Environmental 2,512 2015 331 100% --- Other (including professional services) 3,898 2014 488 100% --- $109,262

Schedule of Funding The following schedule summarizes the funding progress at December 31 (dollars in thousands): Included in the commitments above are $598,000 of remaining commitments on contracts issued by the Port of Tacoma as an agent for the NWSA during the transition period. These commitments will be reimbursed by Actuarial UAAL as a the NWSA. Actuarial Accrued Unfunded Percentage of The Port agreed to purchase support services from the NWSA during NWSA’s startup and transition period. Value of Liability (AAL) AAL Funded Covered Covered The support services received by the Port include executive management, commercial management, planning, Assets Entry Age (UAAL) Ratio Payroll Payroll and environmental support services. During the transition period the agreements will be renewed annually. Plan Year (a) (b) (b-a) (a/b) (c) ((b-a) / c) Additional information regarding commitments of the NWSA is presented in Note 17, Joint Venture. 2016 $5,507 $3,609 ---* 152.6% $1,488 $ --- Other Long-term Liabilities 2015 5,891 3,077 ---* 191.5% 1,551 --- Other long-term liabilities consist primarily of environmental liabilities (see Note 12) and other deferred 2014 6,333 3,941 ---* 160.7% 1,925 --- commitments as further discussed below. *There is no unfunded AAL at December 31, 2016, 2015 and 2014, as the value of the plan assets exceeds In 2013, the Port executed a land swap with a joint venture comprised of the Puyallup Tribe (the Tribe) and the AAL. private parties. This agreement was initially approved by the Port commission in 2008. This agreement is deemed essential for the development of the Blair waterway and the continued relationships with the Port’s customers.

26 | 2016 Financial Report The agreement required the Port to transfer 24.4 acres of land to the Tribe, and in exchange, the Tribe will NOTE 13 – CONTINGENCIES cutback and dredge 12.50 acres of the Blair waterway for the Port’s use as a right-of-way. As a part of this agreement, the Port agreed to pay for dredging the channel width from 650 feet to 850 feet at some point in The Port owns land within the boundaries of the Commencement Bay near the Shore Tideflats Superfund Site, the future. The estimated cost of this project is $28.0 million. The $28.0 million is recorded in other long-term for which a Remedial Investigation and a Feasibility Study have been performed by the U.S. Environmental liabilities on the statements of net position at December 31, 2016 and 2015. Protection Agency and the Washington State Department of Ecology, pursuant to the Federal Comprehensive Environmental Response Compensation and Liability Act and the Model Toxics Control Act. Remedial actions The Port accounted for this transaction as a “like-kind” property exchange without commercial substance. The are currently underway or complete at all known sites. The Port will continue to have liability exposure until assets received in this exchange have an indefinite life and, therefore, per GASB 51, Accounting and Financial the cleanup is complete. Reporting for Intangible Assets, will be recorded as intangible assets at cost. Also, since the acquired assets have an indefinite life, they will not be amortized. The Port is named as a defendant in various other lawsuits incidental to carrying out its function. The Port believes its ultimate liability, if any, will not be material to the financial statements. NOTE 12 – ENVIRONMENTAL LIABILITIES NOTE 14 – MAJOR CUSTOMERS The Port monitors remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site During 2016, container and non-container facilities were licensed to the NWSA. Hence, the Port’s operating assessments and cleanups. revenues in 2016 were primarily generated from NWSA joint venture income and from the operating revenue from leases for warehouse, transportation and storage facilities operated by the Port of Tacoma. Joint venture Existing environmental liabilities on property and facilities licensed to NWSA will remain the responsibility of income in 2016 was $61.4 million and 72.4 percent of total revenue. Receivables from the NWSA at December the Port. However environmental liabilities that arise from development of new facilities for NWSA customers 31, 2016 were $30.9 million. Further information on receivables and payables with the NWSA can be found in will be the responsibility of NWSA. Note 17 Joint Venture. Future expenditures for environmental remediation obligations using the expected cash flow technique were Operating revenues for the year ended December 31, 2015, of $143.9 million included $114.9 million, or $16.2 million at December 31, 2016, and $20.0 million at December 31, 2015. This liability is included in other 80 percent of total revenue from ten significant customers, of which three of these customers individually long-term liabilities on the accompanying statements of net position. Recoveries of environmental remediation accounted for 10 percent or more of operating revenues and, in aggregate, 42 percent of operating revenues. costs from other parties are recorded as a reduction of the related costs using the expected cash flow Receivables from those customers totaled $9 million, or 86 percent of total trade receivables. technique. Significant rememediation obligations are discussed in the following paragraphs: In 2016, the Port completed remediation on Pier 4 on the General Central Peninsula which had an obligation NOTE 15 – RELATED-PARTY TRANSACTIONS of $3.1 million in 2016. The initial obligation was set at $ 7.6 million in 2014 following the discovery of The commissioners of the Port, the Chief Executive Officer and the Deputy Executive Officer also serve as contamination during the pre-design stage for the reconfiguration of Pier 4. officers and directors of other private and public agencies. The Revised Code of Washington, Section 53, The Port recorded $5.2 million in 2014 for contamination discovered on a parcel on the Blair Peninsula that authorizes the Port District to cooperate and invest with such agencies, including trade centers, economic entered the pre-design stage for a new terminal. The environmental remediation obligation was $5.4 million development and other municipal entities. The Port supports such agencies in its normal course of business. and $5.7 million at December 31, 2016 and 2015, respectively. The Port commissioners also govern the NWSA. The NWSA is a separate governmental entity established as The Port transferred land to the Tribe in 1988 under the 1988 Puyallup Land Settlement Agreement. The terms a Port Development Authority and is governed by the ports of Tacoma and Seattle as equal members (each of the agreement obligated the Port to remediate the property in the event of future development. In April a “Managing Member” and collectively, “Managing Members”) with each port acting through its elected 2008, the parties entered into a land swap agreement for several of the same parcels for the development of commissioners. The Port CEO also serves as the CEO of the NWSA and will transition out of the Port following marine terminals. The environmental remediation obligation was $6.3 million and $5.0 million at December 31, the hiring of a new CEO in late 2017. Additional information on the formation of NWSA and related party 2016 and 2015, respectively. activities are presented in the MD&A, Note 1 Summary of Significant Accounting Policies and Note 17. Joint The Port owns land within the boundaries of the Commencement Bay near the Shore Tideflats Superfund Venture. Site, for which a Remedial Investigation and Feasibility Study have been performed by the U.S. Environmental Protection Agency and the Washington State Department of Ecology, pursuant to the Federal Comprehensive NOTE 16 – FAIR VALUE MEASUREMENTS Environmental Response Compensation and Liability Act and the Model Toxics Control Act. Remedial actions The Port followed Financial Accounting Standards Board authoritative amended guidance on fair values are currently underway or complete at all known sites. The environmental remediation obligation for the prior to 2015, when the Port adopted GASB Statement No. 72, Fair Value Measurement and Application. The Hylebos waterway superfund site was $1.8 million and $1.7 million at December 31, 2016 and 2015, amended guidance did not materially change the Port’s disclosures for all assets and liabilities that are being respectively. measured and reported on a fair value basis. The guidance requires that assets and liabilities carried at fair At December 31, 2016, the estimated cost of the environmental remediation projects expected to be value will be classified and disclosed in one of the following three categories: capitalized in future periods is approximately $13.3 million. Level 1 – Quoted market prices in active markets for identical assets or liabilities. Level 2 – Observable market based inputs or unobservable inputs that are corroborated by market data. Level 3 – Unobservable inputs that are not corroborated by market data. In determining the appropriate levels, the Port performs a detailed analysis of the assets and liabilities that are subject to the guidance. The Port’s fair value measurements are evaluated by an independent third-party vendor. The third-party vendor uses a variety of methods when pricing these securities that incorporate relevant observable market data to arrive at an estimate of what a buyer in the marketplace would pay for a security under current market conditions. Level 1 inputs are quoted prices in active markets for identical assets assessed at the measurement date. An active market for the asset is a principal market in which transactions 2016 Financial Report | 27 for the asset are open to many and occur with sufficient frequency and volume. Level 2 inputs include quoted Fair Value of Assets and Liabilities as of December 31, 2015 prices for similar assets in active markets, quoted prices for identical or similar assets in markets where there Level 1 Level 2 Total is not sufficient activity, and/or where price quotations vary substantially either over time or among market Investments – Enterprise Fund makers (some brokered markets, for example), or in which little information is released publicly. The Port does Federal Agricultural Mortgage Corp. $ --- $995 $995 not have any Level 3 assets or liabilities at December 31, 2016 and 2015. Federal Farm Credit Bank --- 11,001 11,001 The Port has four swaps (five at December 31, 2015) outstanding so that it may mitigate interest rate risk. The swaps synthetically fix or “lock-in” interest rates on variable revenue bond debt by providing cash flows Federal Home Loan Bank 3,073 16,307 19,380 that are intended to offset the variable-rate bond payments, leaving the Port with the fixed payment identified Federal Home Loan Mortgage Corporation 2,987 28,937 31,924 in each swap agreement. The fair value of the interest rate swap agreement (used for purposes other than Federal National Mortgage Association 8,194 13,706 21,900 trading) are the estimated amounts the Port would pay to terminate the swap agreement at the reporting Financing Corporation --- 1,005 1,005 date, taking into account current interest rates for the swap agreement and the creditworthiness of the swap counterparty and the third-party bond insurer. Housing Urban Development --- 7,197 7,197 Municipal Bonds 2,291 37,010 39,301 The table below presents the balances of assets and liabilities measured at fair value by level within the hierarchy at December 31, 2016 and 2015 (dollars in thousands): United States Treasury Bonds 6,030 --- 6,030 Total Enterprise Fund $22,575 $116,158 $138,733 Fair Value of Assets and Liabilities as of December 31, 2016 Level 1 Level 2 Total Post-Employment Health Care Benefits Trust Fund Investments – Enterprise Fund: Federal Home Loan Bank $852 $401 $1,253 Money Market $952 $ --- $952 Federal Home Loan Mortgage Corporation 1,353 198 1,551 Federal Agricultural Mortgage Corp. --- 995 995 Federal National Mortgage Association 1,522 250 1,772 Federal Farm Credit Bank --- 9,899 9,899 United States Treasury Bonds 1,050 --- 1,050 Federal Home Loan Bank 6,026 12,017 18,043 Total Post-Employment Health Care $4,777 $849 $5,626 Federal Home Loan Mortgage Corporation 2,996 17,665 20,661 Benefits Trust Fund Federal National Mortgage Association 19,938 22,492 42,430 Financing Corporation --- 1,019 1,019 Total Assets $27,352 $117,007 $144,359 Municipal Bonds 12,539 36,589 49,128 Long-term Debt - Interest rate swaps $ --- $80,212 $80,212 United States Treasury Bonds 14,504 10,845 25,349 * Investments in Washington State Local Investment Pool and are valued at the amortized cost of the pool Total Enterprise Fund $56,955 $111,521 $168,476 shares. Post-Employment Health Care Benefits Trust Fund NOTE 17 – JOINT VENTURE Federal Home Loan Bank $700 $601 $1,301 The home ports will share net income and cash distributions from the NWSA on a 50/50 basis. The Port’s Federal Home Loan Mortgage Corporation 800 --- 800 50 percent share of NWSA net income and cash distributions are presented on the statements of net positon Federal National Mortgage Association 2,011 250 2,261 as investment in joint venture. The NWSA joint venture income is recorded monthly and the cash distributions United States Treasury Bonds 1,051 --- 1,051 from the NWSA are generally received in the following month. The investment in joint venture as of December Total Post-Employment Health Care 31, 2016, is presented as follows (dollars in thousands): 4,562 851 5,413 Benefits Trust Fund Description Initial Contribution 2016 Activity 12/31/2016 Total Assets $61,517 $112,372 $173,889 1/1/2016 Working capital $25,500 $ --- $25,500 Long-term Debt - Interest rate swaps $ --- $63,621 $63,621 Capital contruction 13,500 14,570 28,070 Non-cash capital work-in-process 8,906 --- 8,906 Total contributions 47,906 14,570 62,476 Net income from Joint Venture --- 61,584 61,584 Cash distributions --- (57,983) (57,983) End balance $47,906 $18,171 $66,077

28 | 2016 Financial Report Cash distributions from the NWSA are generally received in the following month. The Port’s receivable for cash Enterprise Fund Schedule of Port of Tacoma’s Share distributions earned through December 31, 2016, was $10.4 million and presented on the statements of net position as related party receivable - joint venture. of Net Pension Asset/Liability (NPA/NPL)

The Port and the NWSA have entered into agreements to provide support services to each other during December 31, 2016, 2015 and 2014 (dollars in thousands) NWSA’s start-up and transition period as the NWSA works to setup back office infrastructure and staff 2016 2015 2014 positions. The support services provided by the Port to the NWSA include equipment and facilities maintenance, security, facilities development, finance and accounting, procurement, public affairs, information technology, PERS PLAN 1 risk management, and office infrastructure. The costs for these services provided by the Port to the NWSA are Port’s proportion of NPL 0.190% 0.187% 0.200% based on agreed-upon direct charges and allocations. These support services totaled $28.3 million in 2016. Port’s proportionate share of NPL $10,213 $9,803 $10,081 Support services provided by NWSA to the Port include executive management, commercial management, Port’s covered-employee payroll 67 84 233 planning, and environmental support services. The costs for these services provided by the NWSA to the Port Port’s proportionate share of the net pension are based on agreed-upon direct charges and allocations. These support services totaled $1.1 million in 2016. liability (asset) as a percentage of its covered- 15243.3% 11732.9% 4328.0% The Port invoices the net amount of the support services to the NWSA monthly and payments are typically employee payroll received in the following month. The net amount of support services receivable from the NWSA at December Plan fidiciary net pension position as a 57.03% 59.10% 61.19% 31, 2016, is $20.4 million and is included in related-party receivables – joint venture on the statements of net percentage of the total pension liability position. Contractually required contribution 1,152 954 871 A summarized statement of net position of the NWSA as of December 31, 2016, and its statement of revenues, Contributions in relation to the contractually (1,152) (954) (871) expenses, and changes in net position for the year ended December 31, 2016, are as follows (in thousands): required contribution Contribution deficiency (excess) $ --- $ --- $ --- Total assets $203,719 Port’s covered-employee payroll 67 84 233 Total liabilities 72,582 Contributions as a percentage of covered- 1719% 1141% 374% Total net position $131,137 employee payroll PERS PLAN 2/3 Operating revenues $195,170 Port’s proportion of NPL 0.239% 0.240% 0.248% Operating expenses 80,264 Port’s proportionate share of NPL $12,056 $8,565 $5,017 Non-operating income – net 8,262 Port’s covered-employee payroll 23,892 21,554 21,384 Capital contributions 7,969 Port’s proportionate share of the net pension liability (asset) as a percentage of its covered- 50.5% 39.7% 23.5% Increase in net position $131,137 employee payroll Plan fidiciary net pension position as a 85.82% 89.20% 93.29% percentage of the total pension liability Contractually required contribution $1,483 $1,252 $1,095 Contributions in relation to the contractually (1,483) (1,252) (1,095) required contribution Contribution deficiency (excess) $ --- $ --- $ --- Port’s covered-employee payroll $23,892 $21,554 $21,384 Contributions as a percentage of covered- 6.2% 5.8% 5.1% employee payroll

(1) Information presented prospectivley beginning with 12/31/14 due to implementation of GASB Statement 68.

2016 Financial Report | 29 Post Employment Health Care Trust Fund Funded Status of the Plan (dollars in thousands) UAAL as a Actuarial Actuarial Unfunded Actual Funded Covered Percentage of Value of Accrued AAL Valuation Ratio Payroll Covered Assets Liability (AAL) (UAAL) Date (a/b) (c) Payroll (a) (b) (b-a) ((b-a) / c) 1/1/16 $5,507 $3,609 1,898 152.6% $1,488 --- 1/1/15 5,891 3,077 --- 191.5% 1,551 --- 1/1/14 6,333 3,941 --- 160.7% 1,925 --- 1/1/13 6,493 3,536 --- 183.6% 2,025 --- 1/1/12 6,859 4,348 --- 157.8% 2,323 --- 1/1/11 7,074 4,326 --- 163.5% 2,535 --- 1/1/10 7,353 5,148 --- 142.8% 2,601 --- 1/1/09 7,569 5,252 --- 144.1% 2,902 --- 1/1/08 --- 7,121 7,121 0.0% 3,300 215.8% 1/1/07 --- 6,783 6,783 0.0% 3,180 213.3%

Post Employment Health Care Trust Fund Schedule of Employer Contributions (dollars in thousands)

YEAR ENDED DECEMBER 31 Annual Required Contribution Percentage Contributed 2008 $7,315 99.8% 2009 375 100% 2010 415 100% 2011 298 100% 2012 347 100% 2013 186 100% 2014 488 100% 2015 331 100% 2016 394 100%

30 | 2016 Financial Report Independent Auditor’s Report

The Board of Commissioners Port of Tacoma Tacoma, Washington

Report on the Financial Statements fraud or error. In making those risk assessments, the auditor by the Governmental Accounting Standards Board, who We have audited the accompanying financial statements of considers internal control relevant to the Port’s preparation considers it to be an essential part of financial reporting the Enterprise Fund and the Post-Employment Health Care and fair presentation of the financial statements in order to for placing the basic financial statements in an appropriate Benefits Trust Fund of Port of Tacoma (the Port) as of and design audit procedures that are appropriate in the circum- operational, economic or historical context. We have applied for the years ended December 31, 2016 and 2015, and the stances but not for the purpose of expressing an opinion on certain limited procedures to the required supplementary related notes to the financial statements, which, collectively, the effectiveness of the Port’s internal control. Accordingly, information in accordance with auditing standards generally comprise the Port’s basic financial statements as listed in we express no such opinion. An audit also includes evalu- accepted in the United States of America, which consisted the table of contents. ating the appropriateness of accounting policies used and of inquiries of management about the methods of preparing the reasonableness of significant accounting estimates the information and comparing the information for consis- Management’s Responsibility for the Financial made by management, as well as evaluating the overall tency with management’s responses to our inquiries, Statements presentation of the financial statements. the basic financial statements, and other knowledge we Management is responsible for the preparation and fair obtained during our audit of the basic financial statements. presentation of these financial statements in accordance We believe the audit evidence we have obtained is suffi- We do not express an opinion or provide any assurance with accounting principles generally accepted in the United cient and appropriate to provide a basis for our audit on the information because the limited procedures do not States of America; this includes the design, implementation opinion. provide us with sufficient evidence to express an opinion or and maintenance of internal control relevant to the prepara- provide any assurance. tion and fair presentation of the financial statements that Opinion are free from material misstatement, whether due to fraud In our opinion, the financial statements referred to above or error. present fairly, in all material respects, the respective financial position of the Enterprise Fund and the Post- Auditor’s Responsibility Employment Health Care Benefits Trust Fund of the Port of Tacoma, Washington Our responsibility is to express opinions on these financial Tacoma as of December 31, 2016 and 2015, and the respec- March 24, 2017 statements based on our audits. We conducted our audits in tive changes in financial position and where applicable, accordance with auditing standards generally accepted in cash flows thereof for the years then ended, in accordance the United States of America. Those standards require that with accounting principles generally accepted in the United we plan and perform the audit to obtain reasonable assur- States of America. ance about whether the financial statements are free of material misstatement. Other Matters Required Supplementary Information An audit involves performing procedures to obtain audit Accounting principles generally accepted in the United evidence about the amounts and disclosures in the financial States of America require that the management’s discus- statements. The procedures selected depend on the auditor’s sion and analysis on pages 2-5 be presented to supplement judgment, including the assessment of the risks of material the basic financial statements. Such information, although misstatement of the financial statements, whether due to not a part of the basic financial statements, is required

2016 Financial Report | 31 Information for Bondholders This information is provided as a convenience to bondholders and other institutions to assist them in reviewing historical financial information

COMPARATIVE SCHEDULE OF NET REVENUES AVAILABLE FOR DEBT SERVICE (DOLLARS IN THOUSANDS)

2016 2015 2014 2013 2012 REVENUES Total Operating Revenues $85,129 $143,897 $134,322 $125,342 $124,377 Non-operating Revenues (1), (2), (3), (4) 2,206 2,381 2,775 2,508 3,256 Total Revenues Available for Senior Debt Service 87,335 146,277 137,096 127,850 127,633 EXPENSES Total Operating Expenses, excluding depreciation 12,656 72,577 81,951 68,212 65,863 Non-operating Expenses (5), (6), (7), (8) 98 201 461 121 34 Total Expenses, excluding depreciation 12,755 72,778 82,412 68,333 65,897 Less Levy Available for Capital Improvement (9) 1,641 348 --- 1,497 2,500 Net Expenses 11,114 72,430 82,412 66,836 63,396 Net Revenues Available for Senior Debt Service 76,221 73,847 54,684 61,013 64,237 Debt Service Senior Lien debt 5,531 4,399 7,403 11,770 11,774 DEBT SERVICE COVERAGE (Senior Lien Debt) 13.78 16.79 7.39 5.18 5.46 Net Revenues Available for Senior Debt Service 76,221 73,847 54,684 61,013 64,237 Less Subordinate Lien Rate Stabilization (10) (2,000) (6,000) ------(4,500) Less Senior Lien Debt Service (5,531) (4,399) (7,403) (11,770) (11,774) Net Revenues Available for Subordinate Debt Service 68,690 63,448 47,281 49,243 47,963 Debt Service Subordinate Debt (11) (12) 21,786 22,034 22,125 19,219 15,556 DEBT SERVICE COVERAGE (Subordinate Lien Debt) (11), (12) 3.15 2.88 2.14 2.56 3.08 Net Revenues Available for Senior Debt Service 76,221 73,847 54,684 61,013 64,237 Less Subordinate Lien Rate Stabilization (2,000) (6,000) ------(4,500) Net Revenues Available for fully Diluted Debt Service 74,221 67,847 54,684 61,013 59,737 Debt Service; Senior, Subordinate and lowest lien debt (11), (12), (13) 27,316 26,432 29,529 30,989 27,330 DEBT SERVICE COVERAGE - Fully Diluted (11), (12), (13) 2.72 2.57 1.85 1.97 2.19 NOTE: Above schedule does not include levies for general obligation bond issues outstanding. FOOTNOTES: (1) Excluded from non-operating revenues is interest earned on investment of: General Obligation Bonds $24 $7 $6 $2 $7 Construction funds 154 --- 21 9 --- (2) Excluded from non-operating revenues is capital contribution and other miscellaneous non-operating income 7,111 1,686 2,636 6,815 14,257 (3) Excluded from non-operating revenues is gain(loss) on disposal or impairment of property (3,534) (5,846) (5,030) (1,786) (850) (4) Excluded from non-operating revenues is gain(loss) on market value of investments 47 72 2,505 (5,135) 777 (5) Excluded from non-operating expenses is cost of bond issue, net of discounts, premiums and other debt costs and election expense 124 767 (113) 627 (261) (6) Excluded from non-operating expense is interest expense and interest funded from bond proceeds 18,516 18,087 21,649 23,549 20,544 (7) Excluded from interest expense is capitalized Interest 85 597 654 285 165 (8) Excluded from non-operating expense are contributions to other agencies and other expenses not attributable to operations 1,407 4,813 2,537 7,804 4,822 (9) Washington Port Districts are authorized by statute to levy $0.45 per $1,000 of actual value of taxable property ad valorem tax upon all taxable property within their jurisdiction for operations, maintenance, capital improvements and general Port purposes (10) Amounts withdrawn from the Rate Stabilization Account shall increase Gross Revenue for the period in which they are withdrawn, and amounts deposited in the Rate Stabilization Account shall reduce Gross Revenue for the period during which they are deposited (11) The Port is authorized to issue from time to time an aggregate principal amount not to exceed $100,000,000 under the Port’s Subordinate Lien Commercial Paper Program. Debt service shown in this table for the commercial paper program is based on the actual interest payments only on the amount outstanding under this program during the period of calculation (12) Included payment made to credit and liquidity providers (13) Included the debt service of lowest lien

32 | 2016 Financial Report REVENUE BOND DEBT SERVICE SCHEDULE (DOLLARS IN THOUSANDS)

Bond 2008 Subordinate Refunding 2008 Subordinate 2014A Subordinate Refunding 2014A Senior Refunding 2014B Senior Refunding Swaps Series Original Issue Amount $117,210 Original Issue Amount $133,000 Original Issue Amount $92,635 Original Issue Amount $8,525 Original Issue Amount $34,345 Pmt Principal Interest(1) Total Principal Interest(1) Total Principal Interest(1) Total Pmts(2) Rcpts(3) Net Pmts Principal Interest Total Principal Interest Total Date 2017 5,595 690 6,285 1,219 1,219 2,175 802 2,977 9,834 (1,035) 8,799 213 213 1,250 817 2,067 2018 2,850 641 3,491 1,219 1,219 2,270 782 3,052 9,588 (1,010) 8,578 2,052 213 2,265 2,320 785 3,105 2019 2,960 615 3,575 1,219 1,219 2,375 761 3,136 9,331 (983) 8,348 2,105 162 2,267 2,380 726 3,106 2020 3,080 590 3,670 1,220 1,220 2,490 739 3,229 9,064 (955) 8,109 2,159 109 2,268 2,440 665 3,105 2021 3,205 562 3,767 1,219 1,219 2,615 716 3,331 8,787 (924) 7,863 2,209 55 2,264 2,505 603 3,108 2022 3,330 534 3,864 1,219 1,219 2,745 692 3,437 8,498 (894) 7,604 2,570 539 3,109 2023 3,465 505 3,970 1,219 1,219 2,880 666 3,546 8,198 (862) 7,336 2,635 473 3,108 2024 3,605 474 4,079 1,220 1,220 3,025 640 3,665 7,885 (829) 7,056 2,700 406 3,106 2025 3,750 442 4,192 1,219 1,219 3,175 611 3,786 7,560 (794) 6,766 2,770 337 3,107 2026 3,900 409 4,309 1,219 1,219 3,335 582 3,917 7,222 (759) 6,463 2,840 267 3,107 2027 4,055 375 4,430 1,219 1,219 3,495 551 4,046 6,870 (721) 6,149 2,915 194 3,109 2028 4,215 339 4,554 1,220 1,220 3,670 519 4,189 6,504 (683) 5,821 2,985 120 3,105 2029 4,385 302 4,687 1,219 1,219 5,070 485 5,555 6,123 (642) 5,481 1,715 44 1,759 2030 4,560 263 4,823 1,219 1,219 7,625 438 8,063 5,727 (600) 5,127 2031 4,745 223 4,968 1,219 1,219 8,005 367 8,372 5,315 (556) 4,759 2032 4,935 181 5,116 1,220 1,220 8,395 293 8,688 4,886 (511) 4,375 2033 5,130 138 5,268 1,219 1,219 8,815 215 9,030 4,440 (463) 3,977 2034 5,335 92 5,427 1,219 1,219 9,255 133 9,388 3,976 (414) 3,562 2035 5,150 45 5,195 1,219 1,219 5,150 48 5,198 3,493 (363) 3,130 2036 1,220 1,220 2,990 (310) 2,680 2037 1,219 1,219 2,468 (254) 2,214 2038 1,219 1,219 1,983 (204) 1,779 2039 1,219 1,219 1,480 (152) 1,328 2040 1,220 1,220 956 (98) 858 2041 1,219 1,219 411 (42) 369 2042 1,219 1,219 48 (5) 43 2043 1,219 1,219 2044 133,000 1,220 134,220 Grand $78,250 $7,420 $85,670 $133,000 $34,139 $167,139 $86,565 $10,040 $96,605 $143,640 $(15,063) $128,577 $8,525 $753 $9,278 $32,025 $5,974 $37,999 Total* * Debt outstanding as of the date of the financial report is equal to principal amount shown in the Grand Total line.

(1) Calculated using 70% of the December 2016 1-Month LIBOR (0.432%) plus the Applicable Spread of the specified series. (2) Calculated using a weighted swap determined annually. (3) Calculated using 70% of the December 2016 1-Month LIBOR (0.432%). 2016 Financial Report | 33 REVENUE BOND DEBT SERVICE SCHEDULE (DOLLARS IN THOUSANDS) (CONTINUED)

Bond 2016A Senior Refunding 2016B Senior TOTAL Series Original Issue Amount $36,535 Original Issue Amount $103,555 Net Swap Pmt Date Principal Interest Total Principal Interest Total Principal Interest Total Pmts 2017 1744 1,744 570 5119 5,689 9,590 10,604 8,799 28,993 2018 1744 1,744 580 5108 5,688 10,072 10,491 8,578 29,141 2019 1744 1,744 605 5084 5,689 10,425 10,311 8,348 29,084 2020 1744 1,744 630 5060 5,690 10,799 10,127 8,109 29,036 2021 1744 1,744 655 5035 5,690 11,189 9,934 7,863 28,986 2022 2,090 1744 3,834 685 5002 5,687 11,420 9,730 7,604 28,754 2023 2,200 1639 3,839 720 4968 5,688 11,900 9,471 7,336 28,707 2024 2,285 1551 3,836 755 4932 5,687 12,370 9,224 7,056 28,650 2025 2,400 1437 3,837 795 4894 5,689 12,890 8,941 6,766 28,597 2026 2,500 1341 3,841 835 4855 5,690 13,410 8,672 6,463 28,545 2027 2,625 1216 3,841 875 4813 5,688 13,965 8,368 6,149 28,482 2028 2,760 1085 3,845 920 4769 5,689 14,550 8,052 5,821 28,423 2029 2,895 947 3,842 965 4723 5,688 15,030 7,720 5,481 28,231 2030 3,040 802 3,842 1,015 4,675 5,690 16,240 7,397 5,127 28,764 2031 3,185 650 3,835 1,065 4,624 5,689 17,000 7,083 4,759 28,842 2032 3,350 491 3,841 1,120 4,571 5,691 17,800 6,756 4,375 28,931 2033 3,515 323 3,838 1,175 4,515 5,690 18,635 6,410 3,977 29,022 2034 3,690 148 3,838 1,230 4,456 5,686 19,510 6,048 3,562 29,119 2035 8,015 4,395 12,410 18,315 5,707 3,130 27,151 2036 8,415 3,994 12,409 8,415 5,214 2,680 16,309 2037 8,835 3,573 12,408 8,835 4,792 2,214 15,841 2038 9,275 3,131 12,406 9,275 4,350 1,779 15,405 2039 9,740 2,668 12,408 9,740 3,887 1,328 14,955 2040 10,225 2,181 12,406 10,225 3,401 858 14,484 2041 10,740 1,669 12,409 10,740 2,888 369 13,998 2042 11,275 1,132 12,407 11,275 2,351 43 13,670 2043 11,840 569 12,409 11,840 1,788 0 13,628 2044 133,000 1,220 0 134,220 Grand $36,535 $22,094 $58,629 $103,555 $110,514 $214,069 $478,455 $190,934 $128,577 $797,966 Total*

* Debt outstanding as of the date of the financial report is equal to principal amount shown in the Grand Total line. (1) Calculated using 70% of the December 2016 1-Month LIBOR (0.432%) plus the Applicable Spread of the specified series. (2) Calculated using a weighted swap determined annually. (3) Calculated using 70% of the December 2016 1-Month LIBOR (0.432%). 34 | 2016 Financial Report INFORMATION FOR BOND HOLDERS (CONCLUDED)

TAX COLLECTION INFORMATION (dollars in thousands)

Amount of Tax Levy Tax Collected % Collected 2016 $15,013 $14,718 98.03% 2015 14,217 14,128 99.37% 2014 13,116 13,070 99.65% 2013 12,666 12,658 99.94% 2012 13,719 13,715 99.97%

PORT TAXING DISTRICT ASSESSED VALUATION

2017 $90,713,390,689 2016 81,750,009,927 2015 77,383,384,063 2014 71,547,746,398 2013 69,124,565,890 The 2016 Annual Financial Report was produced by the Port of Tacoma. For information about this PROPERTY TAX LEVY AVAILABLE FOR CAPITAL IMPROVEMENTS (dollars in thousands) edition, contact the Communications Department.

2016 2015 2014 2013 2012 © 2017 Port of Tacoma Total Levy $15,013 $14,217 $13,116 12,666 13,719 Port of Tacoma P.O. Box 1837 Less Designation for 13,332 13,669 13,665 11,280 11,275 Tacoma, WA 98401-1837 G.O. Debt Service Tel: 253-383-5841 Subtotal 1,681 548 (549) 1,386 2,444 Supplements, Email: [email protected] Cancellations, (41) (19) (33) (69) (56) www.portoftacoma.com Refunds-Net Like us on Facebook Levy Available for 1,640 529 - 1,317 2,388 facebook.com/portoftacoma Capital Improvement Follow us on Twitter twitter.com/portoftacoma CURRENT BOND RATINGS Subordinate General Rating Agency Senior Revenue Bonds Revenue Bonds Obligation Bonds Moody’s Investor Services Aa3 A1 Aa2 Standard & Poor’s Corporation AA- A+ AA

2016 Financial Report | 35 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX B

COPY OF RESOLUTION

[THIS PAGE INTENTIONALLY LEFT BLANK] PORT OF TACOMA RESOLUTION NO. 201705-PT TABLE OF CONTENTS

Page Section I. DoOoitioom_-,,~^..~,..,,.__,_',,____,,~_.__,,_____..._._._..__..._.] Section 2. Plan of Finance; Authorization of Bonds ...... 8 PORT OF TACOMA Section 3. BoodDetmils...... -,..-...,...... -.--_.-_--.--..-----.---.--.9 Section 4. Registration, Payment aodTcuoaOur_...~...... ------.--..-...g Section 5. Redemptionuod Purchase oCBoods.---._~-_-..-----..---.--.-.I4 Section6. Form ofBmoda...~~...... _._---...... -....-.,_.----.-..---10 Section 7. Execution ofBooda---.--_----..--.-.,-.....-..-,.-...... ~..-..2l RESOLUTION NO. 2017-05-PT Section 8. Bond Fund and Provision for Tax Levy ....'..-.---..—.--.--22 Section 9. DeD:nuaoce--.-----..,....----_.._.~...... -.---.....,.--..-..ZZ A RESOLUTION OF THE PORT COMMISSION OF THE PORT Section 10. Sale of Boods_-.--.,-.,.------.-.----..-.-.------._---_.Z5 OF TACOMA, WASHINGTON, PROVIDING FOR THE Section 11 Dispositiono[ Sale Pcouendu....-...... _-..--~~,—'—.....-.-....--'28 ISSUANCE AND SALE OF LIMITED TAX GENERAL OBLIGATION REFUNDING BONDS OF THE PORT IN THE Section 12. Tax Covenants ------.------.---.--....-...... _-3O B-1 PRINCIPAL AMOUNT OF NOT TO EXCEED 521,585,000 Section 13. Undertaking 1m Provide Ongoing Discbsume~--...~^--..-...-..-..-...... ]l FOR THE PURPOSE OF PROVIDING FUNDS TO REFUND Section 14. Lost, Stolen or Destroyed Boode-----.-----_.---...... -.-..J} CERTAIN OUTSTANDING LIMITED TAX GENERAL OBLIGATION BONDS OF THE PORT; SETTING FORTH Section 15. l0oodIomaraooe-..---~..~..--,,--,.._-.._.-...-...,-'..------3l CERTAIN BOND TERMS AND COVENANTS; AND Section 16. 8everu6ilhn--.-.-.---....._--.-.~^^~~,...... ,.-...... ---..----.~,3% DELEGATING AUTHORITY TO APPROVE FINAL TERMS AND CONDITIONS AND THE SALE OF THE BONDS.

Exhibit A - Form of Escrow Agreement ADOPTED: July 20, 2017 Exhibit B -- Form of Costs of issuance Agreement

Prepared by:

K&L GATES LLP Seattle, Washington

This table of contents and the cover page are for convenience of reference and are not intended to be a part of this

RESOLUTION NO. 2017-05-PT Maturity Principal Interest (December 1) Amount Rate 2017 $ 540,000 4.750% A RESOLUTION OF THE PORT COMMISSION OF THE PORT 2018 565,000 4.750 OF TACOMA, WASHINGTON, PROVIDING FOR THE 2019 595,000 4.750 ISSUANCE AND SALE OF LIMITED TAX GENERAL 2020 625,000 4.750 OBLIGATION REFUNDING BONDS OF THE PORT IN THE 2021 650,000 4.750 PRINCIPAL AMOUNT OF NOT TO EXCEED $21,585,000 2022 685,000 4.750 FOR THE PURPOSE OF PROVIDING FUNDS TO REFUND 2023 715,000 4.750 CERTAIN OUTSTANDING LIMITED TAX GENERAL 2024 750,000 4.750 OBLIGATION BONDS OF THE PORT; SETTING FORTH 2025 785,000 4.750 CERTAIN BOND TERMS AND COVENANTS; AND 2026 825,000 4, 750 DELEGATING AUTHORITY TO APPROVE FINAL TERMS 2027 860,000 4.750 AND CONDITIONS AND THE SALE OF THE BONDS. 2028 905,000 4.750 2029 945,000 4.750 WHEREAS, the Port of Tacoma (the "Port"), a municipal corporation of the State of 2033* 4,250,000 4,750 Washington, owns and operates a system of marine terminals and properties; and 2038* 6,565,000 4.875 * Term Bonds WHEREAS, the Port is authorized by RCW 53.36.030 and ch. 39.46 to issue general (the "2008B Bonds"); and obligation bonds payable from, inter alia, regular tax levies of the Port; and B-2 WHEREAS, the 2008 Bond Resolution authorizes the redemption and defeasance of the WHEREAS, pursuant to Resolution No. 2007-17 (the "2008 Bond Resolution"), adopted 2008 Bonds maturing on or after December 1, 2018, in advance of their scheduled maturity on or on December 20, 2007, the Port has issued and has outstanding the Limited Tax General after June 1, 2018, at any time at a price of par plus accrued interest to the date of redemption Obligation Bonds, Series 2008B (AMT), issued under date of January 17, 2008, and outstanding (the "Refunding Candidates"); and as follows: WHEREAS, after due consideration it appears to this Commission that all or a portion of

the Refunding Candidates may be defeased and/or refunded by the proceeds of the bonds

authorized herein (the "Bonds") at a savings to the Port; and

WHEREAS, this Commission has determined to delegate authority to the chief executive

officer and the chief financial and administrative officer of the Port to approve the designation of

the Refunding Candidates to be refunded, approve the manner of sale, final tax status, the interest

rates, maturity dates, redemption rights, interest payment dates, and principal amounts under

such terms and conditions as are approved herein;

-2- 500409726 v1 NOW, THEREFORE, BE IT RESOLVED BY THE PORT COMMISSION OF THE Bond Purchase Contract means, if the Bonds shall be sold by Negotiated Sale, the

PORT OF TACOMA, WASHINGTON, as follows: purchase contract relating to the Bonds between the Port and the Underwriter.

Section 1 . Definitions. As used in this resolution, the following words shall have the Bond Register means the registration books showing the name, address and tax

following meanings, unless a different meaning clearly appears from the context. identification number of each Registered Owner of the Bonds, maintained pursuant to

Acquired Obligations mean the noncallable Government Obligations acquired by the Section 149(a) of the Code.

Port under the terms of this resolution and the Escrow Agreement to effect the defeasance and Bonds mean the Port's Limited Tax General Obligation Refunding Bonds, [2017][2018]

refunding of the Refunded Bonds. [(AMT)][Taxable], issued pursuant to this resolution.

Approved Bid means the winning bid submitted for the Bonds if the Bonds are sold by Call Date means June 1, 2018.

Competitive Sale. Chief Executive Officer means the chief executive officer of the Port, or any successor to

Beneficial Owner means any person that has or shares the power, directly or indirectly to the functions of the chief executive officer,

make investment decisions concerning ownership of any Bonds (including persons holding Chief Financial and Administrative Officer means the chief financial and administrative

B-3 Bonds through nominees, depositories or other intermediaries). officer of the Port, or any successor to the functions of the chief financial and administrative

Bond Fund means the Port of Tacoma, Washington, General Obligation Bond officer.

Redemption Fund created or maintained pursuant to this resolution. Code means the Internal Revenue Code of 1986, as amended, and shall include all

Bond Insurance Commitment means the commitment(s) of the Bond Insurer, if any, to applicable regulations and rulings relating thereto.

insure one or more series, or certain principal maturities thereof, of the Bonds. Commission means the Commission of the Port, or any successor thereto as provided by

Bond Insurance Policy means the policy(ies) of municipal bond insurance, if any, law.

delivered by the Bond Insurer at the time of issuance and delivery of Bonds to be insured Competitive Sale means the process by which the Bonds are sold through the public

pursuant to the Bond Insurance Commitment. solicitation of bids from underwriting firms.

Bond Insurer means the municipal bond insurer(s), if any, that has committed to insure Continuing Disclosure Undertaking means the undertaking for ongoing disclosure

one or more series, or certain principal maturities thereof, of Bonds pursuant to the Bond executed by the Port pursuant to Section 13 of this resolution.

Insurance Commitment. Costs of Issuance Agreement means the Costs of Issuance Agreement(s) dated as of the date of the closing and delivery of the Bonds between the Port and the Escrow Agent to be

-4- ~ 3u 500409726 vi 500409726 v1 executed in connection with paying the costs of issuance of the Bonds, substantially in the form Exchange Commission, any information, reports or notices submitted to the MSRB in

of Exhibit B to this resolution. compliance with the Rule are to be submitted through the MSRB's Electronic Municipal Market

Designated Port Representative means the Chief Executive Officer of the Port, the Access system, currently located at www.emma.msrb.org .

Deputy Chief Executive Officers, the Chief Financial and Administrative Officer and any other Negotiated Sale means the process by which the Bonds are sold by negotiation to one or

person appointed in writing by any of them. more underwriting firms selected by the Designated Port Representative.

DTC means The Depository Trust Company, New York, New York, a limited purpose Official Notice of Sale means, if the Bonds shall be sold by Competitive Sale, a notice of

trust company organized under the laws of the State of New York, as depository for the Bonds bond sale authorized to be given in Section 10 of this resolution.

pursuant to Section 4 of this resolution. Official Statement means a final Official Statement delivered to the initial purchasers of

Escrow Agent means U.S. Bank National Association or such other Escrow Agent for the the Bonds.

Refunded Bonds appointed by the Designated Port Representative. Record Date means the close of business on the 15th day prior to each day on which a

Escrow Agreement means the Escrow Deposit Agreement dated as of the date of the payment of interest on the Bonds is due and payable.

B-4 closing and delivery of the Bonds between the Port and the Escrow Agent to be executed in Refunded Bonds means (i) the Refunding Candidates selected for refunding with

connection with the refunding of some or all of the Refunded Bonds, substantially in the form of proceeds of the Bonds, and/or (ii) the 2017 maturity of the 2008B Bonds selected for defeasance,

Exhibit A to this resolution. by the Designated Port Representative pursuant to Section 10 of this resolution.

Federal Tax Certificate means the certificate(s) of that name executed and delivered by Refunding Candidates means the 2008B Bonds maturing on and after December 1, 2018.

the Designated Port Representative at the time of issuance and delivery of the Bonds that are Registered Owner means the person in whose name ownership of a Bond is identified in

issued on a federally tax-exempt basis. the Bond Register.

Government Obligations means those obligations now or hereafter defined as such in Registrar means the fiscal agent of the State of Washington, appointed by the Designated

chapter 39.53 RCW. Port Representative for the purposes of registering and authenticating the Bonds, maintaining the

Letter of Representations means the blanket issuer letter of representations from the Port Bond Register and effecting transfer of ownership of the Bonds. The term Registrar shall

to DTC. include any successor to the fiscal agent, if any, hereinafter appointed by the Designated Port

MSRB means the Municipal Securities Rulemaking Board or any successors to its Representative.

functions. Until otherwise designated by the MSRB or the United States Securities and

-6- 500409726 vi 500409726 vi Rule means the SEC's Rule 15c2-12 under the Securities Exchange Act of 1934, as the (b) Words of the masculine gender shall mean and include correlative words of the

same may be amended from time to time. feminine and neuter genders, and words importing the singular number shall mean and include

Savings Target means a dollar amount of debt service savings at least equal to three the plural number and vice versa;

percent (3%) of the principal amount of the Refunded Bonds being refunded by the Bonds. (c) Words importing persons shall include firms, associations, partnerships (including

SEC means the United States Securities and Exchange Commission. limited partnerships), trusts, corporations and other legal entities, including public bodies, as well

Term Bands means any Bonds designated by the Underwriters as Term Bonds in the as natural persons;

Bond Purchase Contract. (d) Any headings preceding the text of the several articles and Sections of this

Treasurer means the person currently appointed as the Treasurer of the Port, or any resolution, and any table of contents or marginal notes appended to copies hereof, shall be solely

successor to the functions of the Treasurer. for convenience of reference and shall not constitute a part of this resolution, nor shall they affect

2008 Bond Resolution means Resolution No. 2007-17 adopted by the Commission on its meaning, construction or effect;

December 20, 2007, authorizing the issuance of the 2008B Bonds. (e) All references herein to "articles," "sections" and other subdivisions or clauses are

B-5 2008B Bonds means the Port of Tacoma, Washington, Limited Tax General Obligation to the corresponding articles, sections, subdivisions or clauses hereof.

Bonds, Series 2008B (AMT)," issued under date of January 17, 2008, pursuant to the 2008 Bond Section 2. Plan of Finance: Authorization of Bonds.

Resolution. (a) Plan of Finance. The Refunding Candidates are callable in whole or in part prior

Underwriter means the underwriter(s) of the Bonds if the Bonds are sold by Negotiated to their scheduled maturity dates. The final selection of the Refunding Candidates, if any, to be

Sale or the successful bidder submitting the Approved Bid if the Bonds are sold by Competitive designated as the Refunded Bonds to be refunded by the Bonds shall be made by the Designated

Sale. Port Representative pursuant to the authority granted in Section 10 of this resolution. The Port shall issue its limited tax general obligation Rules of Interpretation. In this resolution, unless the context otherwise requires: (b) Authori ation of Bonds.

(a) The terms "hereby," "hereof," "hereto," "herein, "hereunder" and any similar refunding bonds in an aggregate amount not to exceed $21,585,000 for the purpose of providing the funds necessary to (1) refund the Refunded Bonds; and (ii) pay all or a portion of the costs terms, as used in this resolution, refer to this resolution as a whole and not to any particular incidental to the foregoing and to the issuance of the Bonds. The aggregate principal amount of article, section, subdivision or clause hereof, and the term "hereafter" shall mean after, and the Bonds shall be determined by the Designated Port Representative, pursuant to the authority term "heretofore" shall mean before the date of this resolution; granted in Section 10 of this resolution.

-S.. -7- 500409726 v1 500409726 v1 Section 3 . Bond Details . The Bonds shall be designated as "Port of Tacoma Limited successor Registrar shall have accepted the duties of the Registrar hereunder. The Registrar is

Tax General Obligation Refunding Bonds, [2017][2018]," with such description and additional authorized, on behalf of the Port, to authenticate and deliver Bonds transferred or exchanged in

designations for identification purposes as may be approved by the Designated Port accordance with the provisions of such Bonds and this resolution and to carry out all of the

Representative, shall be registered as to both principal and interest and shall be numbered Registrar's powers and duties under this resolution. The Registrar shall be responsible for its

separately in the manner and with any additional designation as the Registrar deems necessary representations contained in the Certificate of Authentication on the Bonds.

for purposes of identification, shall be dated as of their date of original issuance and delivery, (b) Registered Ownership. The Port and the Registrar, each in its discretion, may

shall be in the denomination of $5,000 each or any integral multiple of $5,000, provided that no deem and treat the Registered Owner of each Bond as the absolute owner thereof for all purposes

Bond shall represent more than one maturity, shall bear interest from their date until the Bond (except as provided in the Continuing Disclosure Undertaking), and neither the Port nor the

bearing such interest has been paid or its payment duly provided for, at the rates, payable on the Registrar shall be affected by any notice to the contrary. Payment of any such Bond shall be

dates, set forth in the Bond Purchase Contract or Approved Bid and shall mature on the dates and made only as described in Section 4(h) of this resolution, but such Bond may be transferred as

in the years and in the principal amounts set forth in the Bond Purchase Contract or Approved herein provided. All such payments made as described in Section 4(h) of this resolution shall be

B-6 Bid, all as approved by the Designated Port Representative pursuant to Section 10 of this valid and shall satisfy and discharge the liability of the Port upon such Bond to the extent of the

resolution. amount or amounts so paid.

(c) DTC Acceptance/Letter- of Representations. To induce DTC to accept the Bonds Section 4. Registration. Payment and Transfer . as eligible for deposit at DTC, the Port has executed and delivered to DTC a Letter of (a) Registrar Bond Register. The Port hereby adopts the system of registration and

transfer for the Bonds approved by the Washington State Finance Committee from time to time Representations. Neither the Port nor the Registrar will have any responsibility or obligation to DTC through the appointment of state fiscal agents, The Port shall cause a bond register to be participants or the persons for whom they act as nominees (or any successor depository) with maintained by the Registrar. So long as any Bonds remain outstanding, the Registrar shall make respect to the Bonds in respect of the accuracy of any records maintained by DTC (or any all necessary provisions to permit the exchange and registration of transfer of Bonds at its successor depository) or any DTC participant, the payment by DTC (or any successor principal corporate trust office. The Registrar may be removed at any time at the option of the depository) or any DTC participant of any amount in respect of the principal of or interest on Senior Director of Finance and Administration upon prior notice to the Registrar, DTC and a Bonds, any notice which is permitted or required to be given to Registered Owners under this successor Registrar appointed by the Designated Port Representative. No resignation or removal resolution (except such notices as shall be required to be given by the Port to the Registrar or to of the Registrar shall be effective until a successor shall have been appointed and until the

-10- -9- 500409726 v1 500409126 v1 DTC (or any successor depository), or any consent given or other action taken by DTC (or any (3) In the case of any transfer pursuant to clause (A) or (B) of subsection (1)

successor depository) as the Registered Owner. For so long as any Bonds are held in fully above, the Registrar shall, upon receipt of all outstanding Bonds, together with a written request

immobilized form hereunder, DTC or its successor depository shall be deemed to be the from a Designated Port Representative, issue a single new Bond for each maturity of the Bonds

Registered Owner for all purposes hereunder (except as provided in the Continuing Disclosure then outstanding, registered in the name of such successor or such substitute depository, or their

Undertaking), and all references herein to the Registered Owners shall mean DTC (or any nominees, as the case may be, all as specified in such written request of the Designated Port

successor depository) or its nominee and shall not mean the owners of any beneficial interest in Representative.

such Bonds. (4) In the event that (A) DTC or its successor (or substitute depository or its

(d) Use of Depository. successor) resigns from its functions as depository, and no substitute depository can be obtained,

(1) The Bonds shall be registered initially in the name of "Cede & Co.," as or (B) the Designated Port Representative determines that it is in the best interest of the

nominee of DTC, with one Bond for each interest rate maturing on each of the maturity dates for beneficial owners of the Bonds that such owners be able to obtain such bonds in the form of

the Bonds in a denomination corresponding to the total principal therein of that interest rate Bond certificates, the ownership of such Bonds may then be transferred to any person or entity as

B-7 designated to mature on such date. Registered ownership of such immobilized Bonds, or any herein provided, and shall no longer be held in fully immobilized form. The Designated Port

portions thereof, may not thereafter be transferred except (A) to any successor of DTC or its Representative shall deliver a written request to the Registrar, together with a supply of

nominee, provided that any such successor shall be qualified under any applicable laws to definitive Bonds, to issue Bonds as herein provided in any authorized denomination. Upon

provide the service proposed to be provided by it; (B) to any substitute depository appointed by receipt by the Registrar of all then outstanding Bonds together with a written request on behalf of

the Designated Port Representative pursuant to subsection (2) below or such substitute the Designated Port Representative to the Registrar, new Bonds shall be issued in the appropriate

depository's successor; or (C) to any person as provided in subsection (iv) below. denominations and registered in the names of such persons as are requested in such written

(2) Upon the resignation of DTC or its successor (or any substitute depository request.

or its successor) from its functions as depository or a determination by the Designated Port (e) Registration of Transfer of Ownership or Exchange; Change in Denominatiorns.

Representative to discontinue the system of book-entry transfers through DTC or its successor The transfer of any Bond may be registered and Bonds may be exchanged, but no transfer of any

(or any substitute depository or its successor), the Designated Port Representative may appoint a such Bond shall be valid unless such Bond is surrendered to the Registrar with the assignment

substitute depository. Any such substitute depository shall be qualified under any applicable form appearing on such Bond duly executed by the Registered Owner or such Registered

laws to provide the services proposed to be provided by it. Owner's duly authorized agent in a manner satisfactory to the Registrar. Upon such surrender,

-12- 500409726 v1 500409726 v1 the Registrar shall cancel the surrendered Bond and shall authenticate and deliver, without the parties entitled to receive payment as of each Record Date in accordance with the operational

charge to the Registered Owner or transferee therefor, a new Bond (or Bonds at the option of the arrangements of DTC referred to in the Letter of Representations.

new Registered Owner) of the same date, maturity and interest rate and for the same aggregate In the event that the Bonds are no longer in fully immobilized form, interest on the Bonds

principal amount in any authorized denomination, naming as Registered Owner the person or shall be paid by check or draft mailed to the Registered Owners at the addresses for such

persons listed as the assignee on the assignment form appearing on the surrendered Bond, in Registered Owners appearing on the Bond Register as of the Record Date, or upon the written

exchange for such surrendered and canceled Bond. Any Bond may be surrendered to the request of a Registered Owner of more than $1,000,000 of Bonds (received by the Bond

Registrar and exchanged, without charge, for an equal aggregate principal amount of Bonds of Registrar at least fifteen (15) days prior to the applicable payment date), such payment shall be

the same date, maturity and interest rate, in any authorized denomination or denominations. The made by the Bond Registrar by wire transfer to the account within the continental United States

Registrar shall not be obligated to register the transfer of or to exchange any Bond during the designated by the Registered Owner. Principal of the Bonds shall be payable upon presentation

fifteen (15) days preceding the date any such Bond is to be redeemed. and surrender of such Bonds by the Registered Owners at the principal office of the Bond

(f) Registrar's Ownership of Bonds. The Registrar may become the Registered Registrar.

B-8 Owner of any Bond with the same rights it would have if it were not the Registrar, and to the If any Bond shall be duly presented for payment on a principal and/or interest payment

extent permitted by law, may act as depository for and permit any of its officers or directors to date and funds have not been duly provided by the Port on the applicable date, then interest shall

act as member of, or in any other capacity with respect to, any committee formed to protect the continue to accrue thereafter on the unpaid principal thereof at the rate stated on such Bond until

right of the Registered Owners of Bonds. such Bond is paid.

(g) Registration Covenant. The Port covenants that, until all of the Bonds have been Section 5 . Redemption and Purchase of Bonds .

surrendered and canceled, it will maintain, or cause to be maintained, a system for recording the (a) Optional Redemption. The Bonds may be subject to optional redemption on the

ownership of the Bonds that complies with the provisions of Section 149 of the Code. dates, at the prices, and under the terms set forth in the Bond Purchase Contract or Approved

(h) Place and Medium of Payment. Both principal of and interest on the Bonds shall Bid, all as approved by the Designated Port Representative pursuant to Section 10 of this

be payable in lawful money of the United States of America. Interest on the Bonds shall be resolution.

calculated on the basis of a 360-day year and twelve 30-day months. For so long as all Bonds (b) Mandato,y Redemption. The Bonds may be subject to mandatory redemption to

are in fully immobilized form, payments of principal and interest shall be made as provided to the extent, if any, set forth in the Bond Purchase Contract or Approved Bid, all as approved by the Designated Port Representative pursuant to Section 10 of this resolution.

-13- -14- 500409726 v1 500409726 v1 (c) Purchase of Bonds. The Port reserves the right to purchase any Bonds offered to (f) Notice of Redemption.

the Port at any price deemed reasonable by the Port. (l) Official Notice. For so long as the Bonds are held in uncertificated form,

(d) Effect of Optional Redemption/Purchase. To the extent that the Port shall have notice of redemption (which notice may be conditional or may be rescinded or revoked at the

optionally redeemed or purchased any Term Bonds prior to scheduled mandatory redemption of option of the Port) shall be given in accordance with the operational arrangements of DTC as

such Term Bonds, the Port may reduce the principal amount of the Term Bonds to be redeemed then in effect, and neither the Port nor the Registrar will provide any notice of redemption to any

in like aggregate principal amount. Such reduction may be applied in the year specified by a beneficial owners. Thereafter (if the Bonds are no longer held in uncertificated form), notice of

Designated Port Representative. redemption shall be given in the manner hereinafter provided. Unless waived by any owner of

(e) Selection of Bonds for Redemption. For as Iong as the Bonds are held in Bonds to be redeemed, official notice of any such redemption (which redemption shall be

book-entry only form, the selection of particular Bonds within a maturity to be redeemed shall be conditioned by the Registrar on the receipt of sufficient funds for redemption) shall be given by

made in accordance with the operational arrangements then in effect at DTC. If the Bonds are no the Registrar on behalf of the Port by mailing a copy of an official redemption notice by first

longer held in uncertificated form, the selection of such Bonds to be redeemed shall be made as class mail at least twenty (20) days and not more than sixty (60) days prior to the date fixed for

B-9 provided in this subsection (e). If the Port redeems at any one time fewer than all of the Bonds redemption to the Registered Owner of the Bond or Bonds to be redeemed at the address shown

having the same maturity date, the particular Bonds or portions of Bonds of such maturity to be on the Register or at such other address as is furnished in writing by such Registered Owner to

redeemed shall be selected by lot (or in such manner determined by the Registrar) in increments the Registrar.

of $5,000. In the case of a Bond of a denomination greater than $5,000, the Port and the All official notices of redemption for Bonds shall be dated and shall state:

Registrar shall treat each Bond as representing such number of separate Bonds each of the (A) the redemption date,

denomination of $5,000 as is obtained by dividing the actual principal amount of such Bond by (B) the redemption price, if fewer than all outstanding Bonds are to be redeemed, the $5,000. In the event that only a portion of the principal sum of a Bond is redeemed, upon (C) identification by maturity (and, in the case of partial redemption, the respective principal surrender of such Bond at the principal office of the Registrar there shall be issued to the

Registered Owner, without charge therefor, for the then unredeemed balance of the principal sum amounts) of the Bonds to be redeemed, any conditions to redemption, if the notice of redemption is a thereof, at the option of the Registered Owner, a Bond or Bonds of like maturity and interest rate (D)

in any of the denominations herein authorized. conditional notice,

16-= -15- 500409726 v1 500409726 v1 (E) unless the notice was conditional and the conditions have not been additional information as the Port shall deem appropriate, but such mailings shall not be a

satisfied or if the Port has not revoked a notice of redemption that on the redemption date the condition precedent to the redemption of such Bonds.

redemption price will become due and payable upon each such Bond or portion thereof called for (3) Amendment of Notice Provisions . The foregoing notice provisions of this

redemption, and that interest thereon shall cease to accrue from and after said date, and Section 5, including but not limited to the information to be included in redemption notices and

(F) the place where such Bonds are to be surrendered for payment of the persons designated to receive notices, may be amended by additions, deletions and changes

the redemption price, which place of payment shall be the principal office of the Registrar. in order to maintain compliance with duly promulgated regulations and recommendations

On or prior to any redemption date, unless the redemption was conditional and the regarding notices of redemption of municipal securities.

conditions for the redemption have not been satisfied or if the Port has not revoked a conditional (g) Effect of Redemption. Unless the Port has revoked a notice of optional

notice, the Port shall deposit with the Registrar an amount of money sufficient to pay the redemption (or unless the Port provided a conditional notice and the conditions for redemption

redemption price of all the Bonds or portions of Bonds that are to be redeemed on that date. set forth therein are not satisfied), the Port shall transfer to the Registrar amounts that, in addition

(2) Additional Notice. In addition to the foregoing notice, further notice shall to other money, if any, held by the Registrar for such purpose, will be sufficient to redeem, on B-10 be given by the Port as set out below, but no defect in said further notice nor any failure to give the date fixed for redemption, all the Bonds to be redeemed. If and to the extent that funds have

all or any portion of such further notice shall in any manner defeat the effectiveness of a call for been provided to the Registrar for the redemption of Bonds then from and after the date fixed for

redemption if notice thereof is given as above prescribed. Each further notice of redemption redemption for such Bond or portion thereof, interest on each such Bond shall cease to accrue

given hereunder shall contain the information required above for an official notice of redemption and such Bond or portion thereof shall cease to be outstanding. All Bonds which have been

plus (A) the CUSIP numbers of all Bonds being redeemed; (B) the date of issue of the Bonds as redeemed shall be canceled and destroyed by the Registrar and shall not be reissued.

originally issued; (C) the rate of interest borne by each Bond being redeemed; (D) the maturity Section 6. Form of Bonds.

date of each Bond being redeemed; and (E) any other descriptive information needed to identify The Bonds shall be in substantially the following form:

accurately the Bonds being redeemed. Each further notice of redemption may be sent at least (DTC HEADING] fStatenlent of Insurancej twenty-five (25) days before the redemption date to each party entitled to receive notice pursuant UNITED STATES OF AMERICA to Section 13, and to such persons (including securities repositories who customarily at the time NO. $

receive notices of redemption in accordance with rules promulgated by the SEC) and with such STATE OF WASHINGTON PORT OF TACOMA LIMITED TAX GENERAL OBLIGATION REFUNDING BOND, [2017][2018] [(AMT)][(Taxable)]

-1`- 18a 500409726 of 500409726 vi MATURITY DATE: CUSIP NO.: [The bonds of this issue are "private activity bonds" as such term is defined in the Internal Revenue Code of 1986, as amended (the "Code"). The bonds of this issue are not INTEREST RATE: °fa "qualified tax-exempt obligations" under Section 265(b) of the Code for investment by financial institutions.][The Port has taken no action to cause the interest on this bond to be exempt from REGISTERED OWNER: CEDE & Co. general federal income taxation.]

PRINCIPAL AMOUNT: The Port hereby irrevocably covenants that it will levy taxes annually upon all the taxable property in the Port within the levy limits permitted to port districts without a vote of the electors THE PORT OF TACOMA, WASHINGTON (the "Port"), hereby acknowledges itself to and in amounts sufficient, with other monies legally available therefor, to pay the principal of owe and for value received promises to pay to the Registered Owner identified above, or and interest on the bonds of this issue as the same shall become due. The full faith, credit and registered assigns, on the Maturity Date identified above, the Principal Amount indicated above resources of the Port are hereby irrevocably pledged for the annual levy and collection of such and to pay interest thereon from _, 20_, or the most recent date to which interest has taxes and the prompt payment of such principal and interest. The pledge of tax levies may be been paid or duly provided for until payment of this bond at the Interest Rate set forth above, discharged prior to maturity of the bonds by making provision for the payment thereof on the payable on 1, 20, and semiannually thereafter on the first days of each succeeding terms and conditions set forth in the Bond Resolution. June and December. This bond shall not be valid or become obligatory for any purpose or be entitled to any Both principal of and interest on this bond are payable in lawful money of the United security or benefit under the Bond Resolution until the Certificate of Authentication hereon shall States of America. The principal of, premium, if any, and interest on this bond are payable in have been manually signed by or on behalf of the Registrar or its duly designated agent. lawful money of the United States of America. Interest shall be paid in accordance with the operational arrangements of The Depository Trust Company ("DTC") referred to in the Blanket The bonds of this issue are issued under and in accordance with the provisions of the Constitution and applicable statutes of the State of Washington and resolutions duly adopted by

B-11 Issuer Letter of Representations (the "Letter of Representations") between the Port and DTC. Principal also shall be payable in accordance with the operational arrangements referred to in the the Port Commission including the Bond Resolution. foregoing sentence to the Registered Owner or assigns upon presentation and surrender of this bond at the principal office of the fiscal agent of the State of Washington (the "Registrar"). It is hereby certified that all acts, conditions and things required by the Constitution and Capitalized terms used in this bond which are not specifically defined have the meanings given statutes of the State of Washington to exist, to have happened, been done and performed such terms in the hereinafter defined Bond Resolution. precedent to and in the issuance of this bond have happened, been done and performed and that the issuance of this bond and the bonds of this issue does not violate any constitutional, statutory This bond is one of an authorized issue of bonds of like date and tenor, except as to or other limitation upon the amount of bonded indebtedness that the Port may incur. number, amount, rate of interest and date of maturity in the aggregate principal amount of $ , and is issued pursuant to Resolution No. 2017-05-PT (the "Bond Resolution") IN WITNESS WHEREOF, the Port of Tacoma, Washington, has caused this bond to be for the purpose of refunding certain outstanding limited tax general obligation bonds of the Port. executed by the manual or facsimile signatures of the President and Secretary of the Port Commission and the seal of the Port imprinted, impressed or otherwise reproduced hereon as of The bonds of this issue are subject to redemption at the option of the Port in whole or in this day of , 20l 7. part at any time on or after December 1, (maturities to be selected by the Port) at a price of par plus accrued interest, if any, to the date of redemption. PORT OF TACOMA, WASHINGTON

[Unless redeemed pursuant to the forgoing provision, the bonds stated to mature on By. December 1, 20_ are subject to mandatory redemption on December 1 of the following years President, Port Commission in the following principal amounts, at a price of par: ATTEST:

Redemption Dates Amounts Secretary, Port Commission $ * [SEAL] * Maturity.]

-19- -20- 500409726 v1 500409726 v1 The Registrar's Certificate of Authentication on the Bonds shall be in substantially the actual date of delivery of such Bond are the proper officers of the Port although at the original

following form: date of such Bond any such person shall not have been such officer of the Port. Section 8 . Bond Fund and Provision for Tax Levy Payments . A special fund of the CERTIFICATE OF AUTHENTICATION Port known as the "Port of Tacoma, Washington, General Obligation Bond Redemption Fund" This bond is one of the bonds described in the within-mentioned Bond Resolution and is one of the Limited Tax General Obligation Refunding Bonds, [2017][2018] [(AMT)] (the "Bond Fund") shall be continued in the office of the Treasurer of the Port. The Bond Fund [(Taxable)], of the Port of Tacoma, Washington, dated ®, 20 ®. shall be drawn upon for the sole purpose of paying the principal of and interest on general WASHINGTON STATE FISCAL AGENT, as Registrar obligation bonds of the Port.

The Port hereby further irrevocably covenants that, unless the principal of and interest on

In the event that any Bonds are no longer in fully immobilized form, the form of such the Bonds are paid from other sources, it will make annual levies of taxes upon all of the

Bonds may be modified to conform to printing requirements and the terms of this resolution. property in the Port subject to taxation within and as a part of the tax levy permitted to port

Section 7. Execution of Bonds. The Bonds shall be executed on behalf of the Port districts without a vote of the electors in amounts sufficient to pay such principal and interest as

B-12 with the manual or facsimile signatures of the President and Secretary of the Port Commission the same shall become due. The full faith, credit and resources of the Port are hereby irrevocably

and the seal of the Port impressed, imprinted or otherwise reproduced thereon. pledged for the annual levy and collection of such taxes and for the prompt payment of such

Only such Bonds as shall bear thereon a Certificate of Authentication in the form principal and interest.

hereinbefore recited, manually executed by the Registrar, shall be valid or obligatory for any Section 9. Defeasance. In the event that money and/or noricallable Government

purpose or entitled to the benefits of this resolution. Such, Certificate of Authentication shall be Obligations that are direct or indirect obligations of the United States or obligations

conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and unconditionally guaranteed by the United States maturing at such time or times and bearing

delivered hereunder and are entitled to the benefits of this resolution. interest to be earned thereon in amounts (together with such money, if necessary) sufficient to

In case either of the officers who shall have executed the Bonds shall cease to be an redeem and retire part or all of the Bonds authorized hereunder in accordance with their terms,

officer or officers of the Port before the Bonds so signed shall have been authenticated or are set aside in a special account of the Port to effect such redemption and retirement, and such

delivered by the Registrar, or issued by the Port, such Bonds may nevertheless be authenticated, moneys and the principal of and interest on such obligations are irrevocably set aside and

delivered and issued and upon such authentication, delivery and issuance, shall be as binding pledged for such purpose, then no further payments need be made into the Bond Fund of the Port

upon the Port as though those who signed the same had continued to be such officers of the Port. for the payment of the principal of and interest on the Bonds so provided for, and such Bonds

Any Bond may also be signed and attested on behalf of the Port by such persons who are at the -22- -21- 500409726 v1 50040s726 v1 shall cease to be entitled to any lien, benefit or security of this resolution except the right to the Bonds issued pursuant to this resolution does not exceed $21,585,000 and (B) so long as the

receive the moneys so set aside and pledged, such Bonds shall be deemed not to be outstanding Savings Target is met.

hereunder. Initially, the Designated Port Representative is hereby authorized to determine whether

Section 10 . Sale of Bonds. the Bonds shall be sold by Negotiated Sale or by a Competitive Sale. If the Bonds are sold by

(a) Designation of Refunded Bonds. As outlined in Section 2 and Section I6 of this Negotiated Sale, the Designated Port Representative shall select one or more underwriting firms

resolution, the Refunding Candidates may be called for redemption prior to their scheduled from the Port's current team to underwrite the Bonds. Upon the selection of one or more

maturities. All or some of the Refunding Candidates may be refunded with the proceeds of the underwriters, the Designated Port Representative shall negotiate the terms of sale for the Bonds,

Bonds authorized by this resolution, and the 2017 maturity of the 2008B Bonds may be defeased including the terms described in this section, which shall be set forth in the Bond Purchase

with other legally available funds of the Port. Contract. If the Bonds are sold by Competitive Sale, all bids submitted for the purchase of

(b) Bond Sale. The Commission has been advised by the Port's financial advisor that Bonds shall be as set forth in the applicable Official Notice of Sale or otherwise as established by

the most favorable market conditions may occur on a day other than a regular meeting date of the the Designated Port Representative, which will be furnished upon request made to the B-13 Commission. The Commission has determined that it would be in the best interest of the Port to Designated Port Representative. Such bids may be accompanied by a surety bond or by a wire

delegate to the Designated Port Representative for a limited time the authority to select the transfer or a cashier's or certified check, as a good faith deposit, made payable to the order of the

Refunding Candidates to be refunded and designate the Refunded Bonds, approve the manner of Port. The Port reserves the right to reject any and all bids and to waive any irregularity or

sale, date of sale, final tax status, final interest rates, maturity dates, aggregate principal amount, informality in any bid.

principal amounts and prices of each maturity, redemption rights (provided that the Bonds shall In designating the Refunding Candidates for refunding, determining the final tax status,

not be subject to optional redemption in less than five years from the date of issue), and other interest rates, maturity dates, aggregate principal amount, principal maturities, redemption rights

terms and conditions of the Bonds. The Designated Port Representative is hereby authorized to or provisions of the Bonds for approval, the Designated Port Representative, in consultation with

select the Refunding Candidates to be refunded, approve with respect to Bonds, the manner of Port staff and the Port's financial advisor, shall take into account those factors that, in his/her

sale, the date of sale, the final tax status, the final interest rates, maturity dates, aggregate judgment, will result in the most favorable interest cost on the Bonds to their maturity, including,

principal amount, principal amounts of each maturity and redemption rights (provided that the but not limited to current financial market conditions and current interest rates for obligations

Bonds shall not be subject to optional redemption in less than five years from the date of issue) comparable in tenor and quality to the Bonds. Subject to the terms and conditions set forth in

for the Bonds in the manner provided hereafter (A) so long as the aggregate principal amount of this section, the Designated Port Representative is hereby authorized to accept an Approved Bid

-23- 24- 600409726 v1 500409726 v1 or to execute a Bond Purchase Contract, upon his or her approval of the selection of the The Designated Port Representative is authorized to deem final and to approve for

Refunding Candidates to be refunded, final tax status, the final interest rates, maturity dates, purposes of the Rule, on behalf of the Port, any Preliminary Official Statement and Official

aggregate principal amount, principal maturities and redemption rights set forth therein. Statement and any supplement thereto relating to the issuance and sale of the Bonds and the

Following the execution of an Official Notice of Sale and Approved Bid or the Bond Purchase distribution of the Bonds pursuant thereto with such changes, if any, as may be deemed by

Contract, the Designated Port Representative shall provide a report to the Commission, him/her to be appropriate.

describing the final terms of the Bonds approved pursuant to the authority delegated in this The Designated Port Representative and other Port officials, agents and representatives

section. are hereby authorized and directed to do everything necessary for the prompt issuance, execution

The authority granted to the Designated Port Representative by this section shall expire and delivery of the Bonds to the Underwriter and for the proper application and use of the

on July 31, 2018. If an Official Notice of Sale and Approved Bid or Bond Purchase Contract for proceeds of sale of the Bonds. In furtherance of the foregoing, the Designated Port

the Bonds has not been approved and/or executed within such period, the authorization for the Representative is authorized to approve and enter into agreements for the payment of costs of

issuance of the Bonds shall be rescinded, and the Bonds shall not be issued nor their sale issuance, including Underwriter's discount, the fees and expenses specified in the Official Notice

B-14 approved unless such Bonds shall have been re-authorized by resolution of the Commission. of Sale and Approved Bid or the Bond Purchase Contract, including fees and expenses of

The resolution reauthorizing the issuance and sale of the Bonds may be in the form of a new Underwriter, if any, and other retained services, including bond counsel, disclosure counsel,

resolution repealing this resolution or may be in the form of an amendatory resolution approving rating agencies, Registrar, Escrow Agent, verification agent, financial advisory services, and

a bond purchase contract or establishing terms and conditions for the authority delegated under other expenses customarily incurred in connection with issuance and sale of bonds.

this section. Section 11 . Disposition of Sale Proceeds .

Upon the adoption of this resolution, the proper officials of the Port including the (a) Application of Bond Proceeds. The net proceeds of the Bonds (net of

Designated Port Representative, are authorized and directed to undertake all other actions underwriter's discount and any amounts that may be designated by the Designated Port

necessary for the prompt execution and delivery of the Bonds to the Underwriter and further to Representative in a closing certificate to be allocated to pay costs of issuance or any Bond

execute all closing certificates and documents required to effect the closing and delivery of the Insurance Policy), together with other available funds of the Port in the amount specified by the

Bonds in accordance with the terms of the Official Notice of Sale and Approved Bid or the Bond Designated Port Representative, shall be utilized immediately upon receipt thereof to pay and

Purchase Contract. redeem the Refunded Bonds and/or shall be paid at the direction of the Treasurer to the Escrow

-.26 -25- 500409726 vt 500409726 v1 Agent (if the Designated Port Representative has determined that an escrow is necessary or beginning cash balance, will provide for the payment of each of the following bonds that have

desirable to effect the defeasance of all or a portion of the Refunded Bonds). been designated as "Refunded Bonds":

(b) Designation of Refunded Bonds. As outlined in the recitals to this resolution, the (1) interest on the Refunded Bonds coming due on each date on which interest

Refunding Candidates may be called for redemption prior to their scheduled maturities. All or is due and payable, to and including the Call Date; and

some of the Refunding Candidates may be refunded and defeased with the proceeds of the (2) the redemption price of the Refunded Bonds (100% of the principal

Refunding Bonds authorized by this resolution, and the 2017 maturity of the 2008B Bonds may amount thereof) on the Call Date or maturity date, as applicable.

be defeased with other legally available funds of the Port. As provided in Section 10 of this Such Acquired Obligations shall be purchased at a yield not greater than the yield

resolution, the Designated Port Representative may select some or all of the Refunding permitted by the Code and regulations relating to acquired obligations in connection with

Candidates and the 2017 maturity of the 2008B Bonds and designate them as the "Refunded refunding bond issues.

Bonds" in the Bond Purchase Contract. (d) Appointment of Escron, Agent. U.S. Bank National Association is hereby

(c) Refunding. A portion of the proceeds of sale of the Bonds, together with legally designated as the escrow agent for the Refunded Bonds (the "Escrow Agent"). The Bond B-15 available funds of the Port, if any, in the dollar amount certified by the Port to the Escrow Agent proceeds designated in the foregoing subsection together with a cash contribution from the Port,

shall be delivered to the Escrow Agent for the purpose of defeasing the Refunded Bonds and if any, shall be transferred to the Escrow Agent in order to implement the refunding plan. A

paying related costs of issuance. beginning cash balance, if any, and Acquired Obligations shall be deposited irrevocably with the

Money received by the Escrow Agent from Bond proceeds and other money provided by Escrow Agent in an amount sufficient to defense the Refunded Bonds. The proceeds of the

the Port, if any, shall be used immediately by the Escrow Agent upon receipt thereof in Bonds remaining after acquisition of the Acquired Obligations and provision for the necessary

accordance with the terms of the Escrow Agreement to defease the Refunded Bonds, as beginning cash balance shall be utilized to pay expenses of the acquisition and safekeeping of the

authorized by the 2008 Bond Resolution, and to pay costs of issuance of the Bonds, The Port Acquired Obligations and expenses of the issuance of the Bonds and/or returned to the Port for

shall defease the Refunded Bonds and discharge such obligations by the use of money deposited the payment of such expenses.

with the Escrow Agent to purchase certain Government Obligations (which obligations so (e) Call For Redemption of the Refiuuled Bonds. The Port hereby irrevocably sets

purchased, are herein called "Acquired Obligations"), bearing such interest and maturing as to aside sufficient funds out of the purchase of Acquired Obligations from proceeds of the Bonds to

principal and interest in such amounts and at such times which, together with any necessary make the payments described in this Section.

-27- -28- 500409726 v1 500409726 v1 The Port hereby irrevocably calls the Refunded Bonds for redemption on the Call Date in (f) Escrow Agreementt/`Costs of Issuance Agreement. The Designated Port

accordance with terms of the 2008 Bond Resolution, authorizing the redemption and retirement Representative is authorized and directed to execute and deliver to the Escrow Agent an Escrow

of the Refunded Bonds prior to their fixed maturities. Deposit Agreement (the "Escrow Agreement") and a Costs of Issuance Agreement (the "Costs of

Said defeasance and call for redemption of the Refunded Bonds shall be effective and Issuance Agreement").

irrevocable after the final establishment of the escrow account and delivery of the Acquired The Port hereby irrevocably sets aside for and pledges to the payment of the Refunded

Obligations to the Escrow Agent. Bonds the moneys and obligations to be deposited with the Escrow Agent pursuant to the Escrow

The Escrow Agent is hereby authorized and directed to provide for the giving of notice of Agreement to accomplish the plan of refunding and defeasance of the Refunded Bonds set forth

the redemption of the Refunded Bonds in accordance with the applicable provisions of the 2008 herein and in the Escrow Agreement. When all of the Refunded Bonds have been redeemed and

Bond Resolution, The Treasurer of the Port is authorized and requested to provide whatever retired, the Port may cause any remaining money to be transferred to the Bond Fund for the

assistance is necessary to accomplish such redemption and the giving of notice therefor. purposes set forth above.

The Escrow Agent is hereby authorized and directed to pay to the fiscal agent or agents Section 12 , Tax Covenants .

B-16 of the State of Washington, sums sufficient to pay, when due, the payments specified in this (a) General. The Port covenants that it will not take or permit to be taken on its

Section. All such sums shall be paid from the moneys and Acquired Obligations deposited with behalf any action that would adversely affect the exclusion from gross income for federal income

said Escrow Agent pursuant to the previous section of this resolution, and the income therefrom tax purposes of the interest on such Bonds issued on a federally tax-exempt basis and will take or

and proceeds thereof. All moneys and Acquired Obligations deposited with said bank and any require to be taken such acts as may reasonably be within its ability and as may from time to

income therefrom shall be credited to a refunding account and held, invested (but only at the time be required under applicable law to continue the exclusion from gross income for federal

direction of the Treasurer) and applied in accordance with the provisions of this resolution and income tax purposes of the interest on the Bonds issued on a federally tax-exempt basis. The

with the laws of the State of Washington for the benefit of the Port and owners of the Refunded Port shall comply with its covenants set forth in the Federal Tax Certificate with respect to the

Bonds. Bonds issued on a federally tax-exempt basis,

The Port will take such actions as are found necessary to see that all necessary and proper (b) No Designation under Section 265(b). The Bonds are not "qualified tax-exempt

fees, compensation and expenses of the Escrow Agent for the Refunded Bonds shall be paid obligations" under Section 265(b)(3) of the Code for banks, thrift institutions and other financial

when due. institutions.

s29 -30- 500409726 v1 500409726 v1 Section 13 . Undertaking to Provide Ongoing Disclosure. The Designated Port Section 16. Severability. If any one or more of the covenants or agreements provided

Representative is authorized to execute and deliver a Continuing Disclosure Undertaking in this resolution to be performed on the part of the Port shall be declared by any court of

regarding ongoing disclosure in order to assist the Underwriters in complying with Section (b)(5) competent jurisdiction to be contrary to law, then such covenant or covenants, agreement or

of the Rule. agreements, shall be null and void and shall be deemed separable from the remaining covenants

Section 14. Lost, Stolen or Destroyed Bonds . In case any Bond or Bonds shall be lost, and agreements of this resolution and shall in no way affect the validity of the other provisions of

stolen or destroyed, the Registrar may execute and deliver a new Bond or Bonds of like date, this resolution or of the Bonds.

number and tenor to the owner thereof upon the owner's paying the expenses and charges of the Section 17. Effective Date. This resolution shall become effective immediately upon

Port in connection therewith and upon his filing with the Port evidence satisfactory to the Port its adoption.

that such Bond was actually lost, stolen or destroyed and of his ownership thereof, and upon ADOPTED at a meeting of the Commission of the Port of Tacoma, Washington, held this

furnishing the Port with indemnity satisfactory to the Port. 20th day of July, 2017.

Section 15 . Bond Insurance . The payments of the principal of and interest on one or PORT OF TACOMA, WASHINGTON B-17 more series, or principal maturities within the Bonds may be insured by the issuance of the Bond

Insurance Policy. The Designated Port Representative may solicit proposals from municipal President and Com 'ssioner bond insurance companies, and the Designated Port Representative, in consultation with the

Port's financial advisor, is hereby authorized to select the proposal that is deemed to be the most 1 a21fl'jj ,tiVice-President and Commis . ner cost effective and further to execute the Bond Insurance Commitment with the Bond Insurer,

which may include such covenants and conditions as shall be approved by the Designated Port Commissioner Representative. U

Nit Commissioner

Commissioner

-32- -31- 500409726 v1 500409726 v1 EXHIBIT A Bonds shall no longer be regarded as outstanding except for the purpose of receiving payment ESCROW DEPOSIT AGREEMENT from the funds provided for such purpose; and

PORT OF TACOMA WHEREAS, the Bonds have been duly authorized to be issued, sold, and delivered for the purpose of obtaining the funds required to provide for the payment of the principal of, LIMITED TAX GENERAL OBLIGATION REFUNDING BONDS, ]2017][2018] interest on and redemption premium (if any) on the Bonds when due as shown on Exhibit C; and [(AMT)] [(Taxable)) WHEREAS, the Port desires that, concurrently with the delivery of the Bonds to the purchasers, the proceeds of the Bonds, together with certain other available funds of the Port, THIS ESCROW AGREEMENT, dated as of , 2017 (herein, together with shall be applied to purchase certain direct obligations of the United States of America hereinafter any amendments or supplements hereto, called the "Agreement") is entered into by and between defined as (the "Escrowed Securities") for deposit to the credit of the Refunding Accounts and to the PORT OF TACOMA (herein called the "Port") and. U.S. BANK NATIONAL establish a beginning cash balance (if needed) in the Refunding Accounts; and ASSOCIATION, as escrow agent (herein, together with any successor in such capacity, called the "Escrow Agent"). The notice addresses of the Port and the Escrow Agent are shown on WHEREAS, simultaneously herewith, the Port is entering into a Costs of Issuance Annex A attached hereto and made a part hereof. Agreement with the Escrow Agent to provide for the payment of costs of issuance relating to the Bonds;

WITNESSETH: NOW, THEREFORE, in consideration of the mutual undertakings, promises and agreements herein contained, the sufficiency of which hereby are acknowledged, and to secure WHEREAS, the Port has issued and there presently remain outstanding the obligations the full and timely payment of principal of and the interest on the Refunded Bonds, the Port and described in Exhibit B (the "Refunded Bonds"); and the Escrow Agent mutually undertake, promise and agree for themselves and their respective representatives and successors, as follows: B-18 WHEREAS, pursuant to Resolution No. 2017-05-PT adopted on July 20, 2017 (the "Bond Resolution"), the Port has determined to issue its Limited Tax General Obligation Refunding Bonds, [2017][2018] [(AMT)] [(Taxable)] (the "Bonds") for the purpose of providing Article 1. Definitions funds to pay the costs of defeasing and/or refunding certain Refunded Bonds; and Section 1.1. Definitions. WHEREAS, the Escrow Agent has reviewed this Agreement and the Bond Resolution, and is willing to serve as Escrow Agent; and Unless the context clearly indicates otherwise, the following terms shall have the meanings assigned to them below when they are used in this Agreement: [WHEREAS, , a firm of independent certified public accountants, has prepared a verification report which is dated , 2017 (the "Verification Report") Escrow Account Deposits mean the cash deposits from proceeds of the Bonds and relating to the source and use of funds available to accomplish the defeasance and/or refunding contributions from the Port in the amount and all as described in Exhibit D. of the Refunded Bonds, the investment of such funds and the adequacy of such funds and investments to provide for the payment of the debt service due on the Refunded Bonds; and] Escrowed Securities means the noncallable Government Obligations described in Exhibit D, or cash or other noncallable obligations substituted therefor pursuant to Section 4.2 of WHEREAS, pursuant to the Bond Resolution, certain Refunded Bonds have been this Agreement. designated for redemption prior to their scheduled maturity dates and, after provision is made for such redemption, such Refunded Bonds will come due in such years, bear interest at such rates, Government Obligations means direct, noncallable (a) United States Treasury Obligations, (b) United States Treasury Obligations - State and Local Government Series, and be payable at such times and in such amounts as are set forth in Exhibit C; and certain (c) non-prepayable obligations which are unconditionally guaranteed as to full and timely Refunded Bonds have been designated for defeasance and shall be paid on their scheduled maturity dates, and will come due in such years, bear interest at such rates, and be payable at payment of principal and interest by the United States of America or (d) REFCORP debt obligations unconditionally guaranteed by the United States. such times and in such amounts as are set forth in Exhibit C; and means the fiscal agent of the State of Washington, as the paying agent for WHEREAS, when Escrowed Securities have been deposited with the Escrow Agent for Paying Agent the payment of all principal and interest of the Refunded Bonds when due, then the Refunded the Refunded Bonds.

A-1 A-2 500409726 vi 500409726 vi Refunded Bards mean those maturities and amounts of the Port of Tacoma Limited Tax Bond, any balance then remaining in the Refunding Account shall be transferred to the Port, and General Obligation Bonds, Series 2008B (AMT) identified in Exhibit B that are being refunded the Escrow Agent shall thereupon be discharged from any further duties hereunder. by the Bonds or defeased by other legally available funds of the Port. Section 3.2. Payment of Principal and Interest. Refunding Account means the tax-exempt escrow account of that name established pursuant to this Agreement for the purpose of defeasing and refunding the Refunded Bonds, The Escrow Agent is hereby irrevocably instructed to transfer to the Paying Agent from the cash balances on deposit in the Refunding Accounts, the amounts required to pay the Section 1.2. Other Definitions. principal of the Refunded Bonds at their respective redemption dates and interest thereon to such redemption dates in the amounts and at the times shown in Exhibit C. The terms "Agreement," "Port," "Escrow Agent," "Bond Resolution," "Bonds", and "Refunded Bonds," when they are used in this Agreement, shall have the meanings assigned to Section 3.3. Sufficiency of Refunding Accounts. them in the preamble to this Agreement. The Port represents that, the successive receipts of the principal of and interest on the Section 1.3. Interpretations. Escrowed Securities will assure that the cash balance on deposit from in the Refunding Account will be at all times sufficient to provide money for transfer to the Paying Agent at the times and The titles and headings of the articles and sections of this Agreement have been inserted in the amounts required to pay the interest on the Refunded Bonds as such interest comes due for convenience and reference only and are not to be considered a part hereof and shall not in any and the principal of the Refunded Bonds as the Refunded Bonds are paid on an optional way modify or restrict the terms hereof. This Agreement and all of the terms and provisions redemption date prior to maturity, all as more fully set forth in Exhibit E. If, for any reason, at hereof shall be liberally construed to effectuate the purposes set forth herein and to achieve the any time, the cash balances on deposit or scheduled to be on deposit in the Refunding Account intended purpose of providing for the refunding of the Refunded Bonds in accordance with shall be insufficient to transfer the amounts required by the Paying Agent to make the payments applicable law. set forth in Section 3.2., the Port shall timely deposit in the Refunding Accounts, from any funds that are lawfully available therefor, additional funds in the amounts required to make such B-19 payments. Notice of any such insufficiency shall be given promptly as hereinafter provided, but Article 2. Deposit of Funds and Escrowed Securities the Escrow Agent shall not in any manner be responsible for any insufficiency of funds in the Refunding Accounts or the Port's failure to make additional deposits. Section 2.1. Deposits in the Refunding Accounts. Section 3.4. Trust Fund. Concurrently with the sale and delivery of the Bonds the Port shall deposit, or cause to be deposited, with the Escrow Agent, for deposit in the Refunding Accounts, the funds sufficient to The Escrow Agent shall hold at all times the Refunding Accounts, the Escrowed purchase the Escrowed Securities described in Exhibit D, and the Escrow Agent shall, upon the Securities and all other assets of the Refunding Account, wholly segregated from all other funds receipt thereof, acknowledge such receipt to the Port in writing. and securities on deposit with the Escrow Agent; it shall never allow the Escrowed Securities or any other assets of the Refunding Account to be commingled with any other funds or securities Article 3. Creation and Operation of Refunding Accounts of the Escrow Agent; and it shall hold and dispose of the assets of the Refunding Account only as set forth herein. The Escrowed Securities and other assets of the Refunding Account shall Section 3.1. Refunding Accounts. always be maintained by the Escrow Agent as trust funds for the benefit of the owners of the Refunded Bonds; and a special account shall at all times be maintained on the books of the The Escrow Agent is authorized and directed to create on its books a special trust account Escrow Agent. The amounts received by the Escrow Agent under this Agreement shall not be and irrevocable escrow to be known as the Refunding Account. The Refunding Account shall be considered as a banking deposit by the Port, and the Escrow Agent shall have no right to title established for the purpose of refunding the Refunded Bonds. The Escrow Agent agrees that with respect thereto except as an Agent and Escrow Agent under the terms of this Agreement. upon receipt it will deposit to the credit of the Refunding Account certain amounts described in Exhibit D. Such deposit, all proceeds therefrom, and all cash balances on deposit therein (a) shall be the property of the Refunding Account, (b) shall be applied only in strict conformity with the terms and conditions of this Agreement, and (c) are hereby irrevocably pledged to the payment of the principal of and interest on the Refunded Bond, which payment shall be made by timely transfers of such amounts at such times as are provided for in Section 3.2. When the final transfers have been made for the payment of such principal of and interest on the Refunded

A-3 A4 500409726 v1 500409726 v1 Article 4. Limitation on Investments Article 6. Redemption of Refunded Bonds Section 6.1. Call for Redemption. Section 4.1. Investments.

Except for the initial investment in the Escrowed Securities, and except ils provided in The Port hereby irrevocably calls for redemption those Refunded Bonds designated for Section 4.2, the Escrow Agent shall not have any power or duty to invest or reinvest any money redemption on their earliest redemption dates, as shown in Appendix A attached hereto. held hereunder, or to make substitutions of the Escrowed Securities, or to sell, transfer, or otherwise dispose of the Escrowed Securities. Section 6.2. Notice of Redemption/Notice of Defeasance.

Section 4.2. Substitution of Securities. The Escrow Agent agrees to give a notice of defeasance and a notice of the redemption of the Refunded Bonds to the Paying Agent for dissemination in accordance with the terms of At the written request of the Port, and upon compliance with the conditions hereinafter Resolutions No. 2006-15 and No. 2007-17 of the Port Commission of the Port and in substantially the forms attached as and as described in Appendices A and B to the Paying Agent stated, the Escrow Agent shall utilize cash balances in the Refunding Account, or sell, transfer, for distribution as described therein. The notice of defeasance shall be given immediately otherwise dispose of or request the redemption of the Escrowed Securities and apply the proceeds therefrom to purchase Refunded Bonds or Government Obligations which do not following the execution of this Agreement, and the notice of redemption shall be given in accordance with the ordinance or resolution authorizing the Refunded Bonds. The Escrow Agent permit the redemption thereof at the option of the obligor. Any such transaction may be effected hereby certifies that provision satisfactory and acceptable to the Escrow Agent has been made for by the Escrow Agent only if (a) the Escrow Agent shall have received a written opinion from a the giving of notice of redemption of the Refunded Bonds. firm of certified public accountants that such transaction will not cause the amount of money and securities in the Refunding Account to be reduced below an amount sufficient to provide for the full and timely payment of principal of and interest on all of the remaining Refunded Bonds as Article 7. Records and Reports they become due, taking into account any optional redemption thereof exercised by the Port in

B-20 connection with such transaction; and (b) the Escrow Agent shall have received the unqualified Section 7.1. Records. written legal opinion of its bond counsel or tax counsel to the effect that such transaction will not cause any of the Bonds or Refunded Bonds to be an "arbitrage bond" within the meaning of The Escrow Agent will keep books of record and account in which complete and accurate Section 148 of the Internal Revenue Code of 1986, as amended. entries shall be made of all transactions relating to the receipts, disbursements, allocations and application of the money and Escrowed Securities deposited to the Refunding Accounts and all Article 5. Application of Cash Balances proceeds thereof, and such books shall be available for inspection during business hours and after reasonable notice. Section 5.1. In General. Section 7.2. Reports. Limitation regarding the Bonds. Except as provided in Section 2.1, 3.2 and 4.2 hereof, no While this Agreement remains in effect, the Escrow Agent annually shall prepare and withdrawals, transfers or reinvestment shall be made of cash balances in the Refunding send to the Port a written report summarizing all transactions relating to the Refunding Account Accounts. Cash balances shall be held by the Escrow Agent in United States currency as cash during the preceding year, including, without limitation, credits to the Refunding Account as a balances as shown on the books and records of the Escrow Agent and, except as provided herein, result of interest payments on or maturities of the Escrowed Securities and transfers from the shall not be reinvested by the Escrow Agent; provided, however, a conversion to currency shall Refunding Account for payments on the Refunded Bonds or ;otherwise, together with a detailed not be required (i) for so long as the Escrow Agent's internal rate of return does not exceed 20°/0, statement of all Escrowed Securities and the cash balance on deposit in the Refunding Account or (ii) if the Escrow Agent's internal rate of return exceeds 20%, the Escrow Agent receives a as of the end of such period. letter of instructions, accompanied by the opinion of nationally recognized bond counsel, approving the assumed reinvestment of such proceeds at such higher yield.

A-6 A-5 500409726 v1 500409726 v1 Article 8. Concerning the Paying Agent and Escrow Agent Section 8.3. Successor Escrow Agents.

Section 8.1. Representations. If at any time the Escrow Agent or its legal successor or successors should become unable, through operation or law or otherwise, to act as Escrow Agent hereunder, or if its The Escrow Agent hereby represents that it has all necessary power and authority to enter property and affairs shall be taken under the control of any state or federal court or into this Agreement and undertake the obligations and responsibilities imposed upon it herein, administrative body because of insolvency or bankruptcy or for any other reason, a vacancy shall and that it will carry out all of its obligations hereunder. forthwith exist in the office of Escrow Agent hereunder. In such event the Port, by appropriate action, promptly shall appoint an Escrow Agent to fill such vacancy. If no successor Escrow Section 8.2. Limitation on Liability. Agent shall have been appointed by the Port within sixty (60) days, a successor may be appointed by the owners of a majority in principal amount of the Refunded Bonds then The liability of the Escrow Agent to transfer funds for the payment of the principal of and outstanding by an instrument or instruments in writing filed with the Port, signed by such owners interest on the Refunded Bonds shall be limited to the proceeds of the Escrowed Securities and or by their duly authorized attorneys-in-fact. If, in a proper case, no appointment of a successor the cash balances from time to time on deposit in the Refunding Account. Notwithstanding any Escrow Agent shall be made pursuant to the foregoing provisions of this section within three provision contained herein to the contrary, the Escrow Agent shall have no liability whatsoever months after a vacancy shall have occurred, the owner of any Refunded Bond may apply to any for the insufficiency of funds from time to time in the Refunding Account or any failure of the court of competent jurisdiction to appoint a successor Escrow Agent. Such court may thereupon, obligors of the Escrowed Securities to make timely payment thereon, except for the obligation to after such notice, if any, as it may deem proper, prescribe and appoint a successor Escrow Agent. notify the Port promptly of any such occurrence. Any successor Escrow Agent shall be a corporation organized and doing business under The recitals herein and in the proceedings authorizing the Bonds shall be taken as the the laws of the United States or any state, authorized under such laws to exercise corporate trust statements of the Port and shall not be considered as made by, or imposing any obligation or powers, having a combined capital and surplus of at least $100,000,000 and subject to the liability upon, the Escrow Agent. supervision or examination by federal or state authority. B-21 It is the intention of the parties that the Escrow Agent shall never be required to use or Any successor Escrow Agent shall execute, acknowledge and deliver to the Port and the advance its own funds or otherwise incur personal financial liability in the performance of any of Escrow Agent an instrument accepting such appointment hereunder, and the Escrow Agent shall its duties or the exercise of any of its rights and powers hereunder. execute and deliver an instrument transferring to such successor Escrow Agent, subject to the terms of this Agreement, all the rights, powers and trusts of the Escrow Agent hereunder. Upon The Escrow Agent shall not be liable for any action taken or neglected to be taken by it in the request of any such successor Escrow Agent, the Port shall execute any and all instruments in good faith in any exercise of reasonable care and believed by it to be within the discretion or writing for more fully and certainly vesting in and confirming to such successor Escrow Agent power conferred upon it by this Agreement, nor shall the Escrow Agent be responsible for the all such rights, powers and duties. consequences of any error of judgment; and the Escrow Agent shall not be answerable except for its own action, neglect or default, nor for any loss unless the same shall have been through its The obligations assumed by the Escrow Agent pursuant to this Agreement may be negligence or want of good faith. transferred by the Escrow Agent to a successor Escrow Agent if (a) the requirements of this Section 8.3 are satisfied; (b) the successor Escrow Agent has assumed all the obligations of the Unless it is specifically otherwise provided herein, the Escrow Agent has no duty to Escrow Agent under this Agreement; and (c) all of the Escrowed Securities and money held by determine or inquire into the happening or occurrence of any event or contingency or the the Escrow Agent pursuant to this Agreement have been duly transferred to such successor performance or failure of performance of the Port with respect to arrangements or contracts with Escrow Agent. others, with the Escrow Agent's sole duty hereunder being to safeguard the Refunding Account, to dispose of and deliver the same in accordance with this Agreement. If, however, the Escrow Agent is called upon by the terms of this Agreement to determine the occurrence of any event or contingency, the Escrow Agent shall be obligated, in making such determination, only to exercise reasonable care and diligence, and in event of error in making such determination the Escrow Agent shall be liable only for its own misconduct or its negligence. In determining the occurrence of any such event or contingency the Escrow Agent may request from the Port or any other person such reasonable additional evidence as the Escrow Agent in its discretion may deem necessary to determine any fact relating to the occurrence of such event or contingency, and in this connection may make inquiries of, and consult with, among others, the Port at any time.

A-8 A-7 500409726 v1 500409726 v1 Article 9. Miscellaneous Section 9.7. Notice to Moody's and S&P. In the event that this Agreement or any provision thereof is severed, amended or revoked, Section 9.1. Notice. the Port shall provide written notice of such severance, amendment or revocation to Moody's Any notice, authorization, request, or demand required or permitted to be given Investors Service at 7 World Trade Center at 250 Greenwich Street, New York, New York, hereunder shall be in writing and shall be deemed to have been duly given when mailed by 10007, Attention: Public Finance Rating Desk/Refunded Bonds; and to S&P Global Ratings, registered or certified mail, postage prepaid addressed to the Port or the Escrow Agent at the 55 Water Street, New York, New York 10041, Attention'. Public Finance Rating Desk/Refunded address shown on Exhibit A attached hereto. The United States Post Office registered or Bonds. certified mail receipt showing delivery of the aforesaid shall be conclusive evidence of the date and fact of delivery. Any party hereto may change the address to which notices are to be Section 9.8. Amendments. delivered by giving to the other parties not less than ten (10) days prior notice thereof. This Agreement shall not be amended except to cure any ambiguity or formal defect or omission in this Agreement. No amendment shall be effective unless the same shall be in Section 9.2. Termination of Responsibilities. writing and signed by the parties thereto. No such amendment shall adversely affect the rights of the holders of the Refunded Bonds. No such amendment shall be made without first receiving Upon the taking of all the actions as described herein by the Escrow Agent, the Escrow written confirmation from the rating agencies, (if any) which have rated the Refunded Bonds that Agent shall have no further obligations or responsibilities hereunder to the Port, the owners of the Refunded Bonds or to any other person or persons in connection with this Agreement. such administrative changes will not result in a withdrawal or reduction of its rating then assigned to the Refunded Bonds. If this Agreement is amended, prior written notice and copies of the proposed changes shall be given to the rating agencies which have rated the Refunded Section 9.3. Binding Agreement. Bonds. This Agreement shall be binding upon the Port and the Escrow Agent and their respective EXECUTED as of the date first written above. B-22 successors and legal representatives, and shall inure solely to the benefit of the owners of the Refunded Bonds, the Port, the Escrow Agent and their respective successors and legal PORT OF TACOMA representatives.

Section 9.4. Severability. Chief Financial and Administrative Officer In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall U.S. BANK NATIONAL ASSOCIATION be construed as if such invalid or illegal or unenforceable provision had never been contained herein.

Section 9.5. Washington Law Governs. Authorized Signer This Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the State of Washington. Exhibit A Addresses of the Port and the Escrow Agent Exhibit B - Descriptions of the Refunded Bonds Section 9.6. Time of the Essence. Exhibit C - Schedule of Debt Service on Refunded Bonds Exhibit D - Description of Beginning Cash Deposit and Escrowed Securities Time shall be of the essence in the performance of obligations from time to time imposed Exhibit E - Refunding Accounts Cash Flow upon the Escrow Agent by this Agreement. Appendix A - Notice of Redemption Appendix B - Notice of Defeasance

A-9 A-10 500409726 v1 500409726 v1 EXHIBIT B EXHIBIT A Addresses of the Port and the Escrow Agent Description of the Refunded Bonds (the "Refunded Bonds")

Port of Tacoma Port: Port of Tacoma Limited Tax General Obligation Bonds, Series 2008B (AMT) P.O. Box 1837 Tacoma, WA 98401 Principal Interest Attention: Erin Galeno, Chief Financial and Administrative Officer Maturity Year (December 1) Amounts Rates

Escrow Agent: U.S. Bank National Association [2017 $ 540,000 4.750%] Corporate Trust Services PD-WA-T7CT 2018 565,000 4.750 1420 Fifth Avenue, 7th FIoor 2019 595,000 4.750 Seattle, WA 98101 2020 625,000 4.750 Attention: Ryan Brennan, Assistant Vice President 2021 650,000 4.750 2022 685,000 4.750 2023 715,000 4.750 2024 750,000 4.750 2025 785,000 4.750 2026 825,000 4.750 2027 860,000 4.750 2028 905,000 4.750 2029 945,000 4.750 B-23 2023* 4,250,000 4.750 2038* 6,565,000 4.875 * Term Bonds

A-B-1 A-A- 1 500409726 v1 500409726 v1 EXHIBIT C EXHIBIT D Schedule of Debt Service on Refunded Bonds Escrow Deposit

I. Cash $ Principal/ Date Interest Redemption Price Total II. Other Obligations Principal Description Maturity Date Amount Interest Rate Total Cost B-24

A- C- A-D- 1 500409726 v1 500409726 v1 APPENDIX A EXHIBIT E Refunding Accounts Cash Flow Notice of Redemption` Port of Tacoma Escrow Net Escrow Excess Limited Tax General Obligation Bonds, Series 2008B (AMT) Date Requirement Receipts Receipts Cash Balance NOTICE IS HEREBY GIVEN that the Port of Tacoma has called for redemption on June 1, 2018, its outstanding Limited Tax General Obligation Refunding Bonds, Series 2008B (AMT), described in the table below (the "Bonds").

The Bonds will be redeemed at a price of one hundred percent (100%) of their principal amount, plus interest accrued to June 1, 2018. The redemption price of the Bonds is payable on presentation and surrender of the Bonds at the office of:

U.S. Bank National Association Global Corporate Trust Services 111 Fillmore Ave E St. Paul, MN 55107

Interest on all Bonds or portions thereof which are redeemed shall cease to accrue on June 1, 2018.

The following Bonds are being redeemed: B-25 Maturity Years Principal Interest Redemption Date CUSIP (December 1) Amounts Rates (at 100%) Numbers [2018 $ 565,000 4.750% June 1, 2018 735422LR6] [2019 595,000 4.750 June 1, 2018 735422LS4] [2020 625,000 4.750 June 1, 2018 735422LT2] [2021 650,000 4.750 June 1, 2018 735422LU9] [2022 685,000 4.750 June 1, 2018 735422LV7] [2023 715,000 4.750 June 1, 2018 735422LW5] [2024 750,000 4.750 June 1, 2018 735422LX3] [2025 785,000 4.750 June 1, 2018 735422LY1] [2026 825,000 4.750 June 1, 2018 735422LZ81 [2027 860,000 4.750 June 1, 2018 735422MA2] [2028 905,000 4.750 June 1, 2018 735422MB0] [2029 945,000 4.750 June 1, 2018 735422MC8] [2023f 4,250,000 4.750 June 1, 2018 735422MD6] [20381` 6,565,000 4.875 June 1, 2018 735422ME4] I Term bonds

* This notice shall be given not more than sixty (60) nor less than thirty (30) days prior to June 1, 2018, by first class mail to each registered owner of the Bonds. In addition notice shall be mailed at least thirty (30) days prior to June 1, 2018, to The Depository Trust Company, Citigroup Global Markets Inc., Assured Guaranty Corp., Moody's Investors Service, Inc., S&P Global Ratings, and to the Municipal Securities Rulemaking Board, A-E-1 Exhibit A - Page 1—Appendix A 500409726 v1 500409726 v1 The Port and Paying Agent shall not be responsible for the selection or use of the CUSIP numbers selected, nor is any representation made as to their correctness indicated in the notice or APPENDIX B as printed on any Bond. They are included solely for the convenience of the holders. Notice of Defeasance i By Order of Port of Tacoma Port of Tacoma Limited Tax General Obligation Bonds, Series 2008B (AMT) U.S. Bank National Association, as Paying Agent NOTICE IS HEREBY GIVEN to the owners of that portion of the above-captioned Dated: bonds with respect to which, pursuant to an Escrow Agreement dated , 2017, by and between the Port of Tacoma (the "Port") and U.S. Bank National Association (the "Escrow Withholding of 28% of gross redemption proceeds of any payment made within the Agent"), the Port has deposited into an escrow account, held by the Escrow Agent, cash and United States may be required by the Jobs and Growth Tax Relief Reconciliation Act of 2003 non-callable direct obligations of the United States of America, the principal of and interest on (the "Act") unless the Paying Agent has the correct taxpayer identification number (social which, when due, will provide money sufficient to pay each year, to and including the respective security or employer identification number) or exemption certificate of the payee. Please furnish maturity or redemption dates of such bonds so provided for, the principal thereof and interest a properly completed Form W-9 or exemption certificate or equivalent when presenting your thereon (the "Defeased Bonds"). Such Defeased Bonds are therefore deemed to be no longer Bonds. outstanding pursuant to the provisions of Resolution No. 2007-17 of the Port, authorizing the issuance of the Defeased Bonds, but will be paid by application of the assets of such escrow account.

The Defeased Bonds are described as follows:

Port of Tacoma Limited Tax General Obligation Bonds, Series 2008B (AMT) B-26 (Dated January 17, 2008) Maturity Years Principal Interest Redemption Date CUSIP (December 1) Amounts Rates (at 100%) Numbers [2018 $ 565,000 4.750% June 1, 2018 735422LR6] [2019 595,000 4.750 June 1, 2018 735422LS4] [2020 625,000 4.750 June 1, 2018 735422LT2] [2021 650,000 4.750 June 1, 2018 735422LU9] [2022 685,000 4.750 June 1, 2018 735422LV7] [2023 715,000 4.750 June 1, 2018 735422LW5] [2024 750,000 4.750 June 1, 2018 735422LX3] [2025 785,000 4.750 June 1, 2018 735422LY1] [2026 825,000 4.750 June 1, 2018 735422LZ8] [2027 860,000 4.750 June 1, 2018 735422MA2] [2028 905,000 4.750 June 1, 2018 735422MB0] [2029 945,000 4,750 June 1, 2018 735422MC8] [2023] 4,250,000 4.750 June 1, 2018 735422MD6] [2038t 6,565,000 4.875 June 1, 2018 735422ME4] t Term bonds

* This notice shall be given immediately by first class mail to each registered owner of the Defeased Bonds. En addition notice shall be mailed to The Depository Trust Company, Citigroup Global Markets Inc., Assured Guaranty Corp., Moody's Investors Service, Inc., S&P Global Ratings, and to the Municipal Securities Rulemaking Board.

Exhibit A - Page 2—Appendix A Exhibit A - Page l---Appendix B 500409726 v1 500409726 vi Information for Individual Registered Owner EXHIBIT B The addressee of this notice is the registered owner of Bond Certificate No. of the

Defeased Bonds described above, which certificate is in the principal amount of $ COSTS OF ISSUANCE AGREEMENT

PORT OF TACOMA Dated: , 2017. LIMITED TAX GENERAL OBLIGATION REFUNDING BONDS, [2017] [2018] U.S. Bank National Association, as Escrow Agent [(AMT)] [(Taxable)]

THIS COSTS OF ISSUANCE AGREEMENT, dated as of _ _ . 2017 (herein, together with any amendments or supplements hereto, called the "Agreement"), is entered into by and between the PORT OF TACOMA (herein called the "Port") and U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent (herein, together with any successor in such capacity, called the "Escrow Agent").

WITNESSETH:

WHEREAS, pursuant to Resolution No. 2017-05-PT adopted on July , 2017 (the "Bond Resolution"), the Port has determined to issue its Limited Tax General Obligation Refunding Bonds, [2017][2018] [(AMT)][(Taxable)] (the "Bonds"), for the purpose of providing funds to pay the costs of refunding certain outstanding bonds of the Port; and

B-27 WHEREAS, simultaneously herewith, the Port is entering into an Escrow Deposit Agreement, dated , 2017, under which the Escrow Agent will hold invested proceeds of the Bonds in order to pay and redeem the refunded bonds under the terms set forth therein; and

WHEREAS, certain proceeds of the Bonds will be delivered to the Escrow Agent on the date of issuance of the Bonds that are required to be disbursed to pay costs of issuance of the Bonds; and

WHEREAS, the Escrow Agent has agreed, without additional compensation to disburse the Bond proceeds received to pay costs of issuance under the terms of this Agreement;

Section 1. Deposit in the Costs of Issuance Fund.

The Escrow Agent has created on its books a special trust fund and escrow fund to be known as the Costs of Issuance Fund. The Escrow Agent agrees that upon receipt it will deposit to the credit of the Costs of Issuance Fund Account the sum of $ ___ to pay those costs of issuance set forth on Exhibit A. Such deposit, all proceeds therefrom, and all cash balances on deposit therein shall be the property of the Costs of Issuance Fund to pay those costs of issuance set forth on Exhibit A upon receipt of invoices. If any of the $ deposit allocated for costs of issuance for the Bonds remains unspent on , 200, the Escrow Agent shall transfer such unspent amount to the Port, and this Agreement shall be deemed fully performed and terminated.

Exhibit A - Page 2—Appendix B B-1 500409726 v1 500409726 v1 Section 2. Investments. EXECUTED as of the date first written above.

The Escrow Agent shall not have any power or duty to invest or reinvest any money held PORT OF TACOMA hereunder.

Section 3. Limitation on Liability. Chief Financial and Administrative Officer The liability of the Escrow Agent to transfer funds for the payment of the costs of issuance identified herein shall be limited to the proceeds of the Bonds delivered to the Escrow U.S. BANK NATIONAL ASSOCIATION Agent.

Section 4. Compensation. Authorized Signer The Port shall pay to the Escrow Agent fees for performing the services hereunder and under the Escrow Agreement for the expenses incurred or to be incurred by the Escrow Agent in the administration of this Agreement and the Escrow Agreement pursuant to the terms of the Fee Schedule attached as Exhibit B. The Escrow Agent hereby agrees that in no event shall it ever Exhibit A Costs of Issuance Schedule assert any claim or lien against funds held under the Escrow Agreement for any fees for its Exhibit B - Fee Schedule services, whether regular or extraordinary, as Escrow Agent, or in any other capacity, or for reimbursement for any of its expenses as Escrow Agent or in any other capacity.

Section 5. Notice. B-28

Any notice, authorization, request, or demand required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified mail, postage prepaid addressed to the Port and the Escrow Agent at the address shown on Exhibit A to the Escrow Agreement.

Section 6. Washington Law Governs.

This Agreement shall be governed exclusively by the provisions hereof and by the applicable laws of the state of Washington.

B-2 B-3 500409726 vi 500409726 v1

EXHIBIT A EXHIBIT B

Costs of Issuance Fee Schedule

Escrow Agent Fee (U.S. Bank National lAttach Fee Schedule] Association) ...... S Bond Counsel Fee (K&L Gates LLP) ......

[Verification Agent Fee ( ) ] ...... Official Statement Printing/Distribution ...... Financial Advisor Fee (Public Financial Management, Inc.) ...... Rating Agency Fees ([Moody's, S&P]) ...... Total:...... S B-29

B-A-I B-B-1 500409726 v1 500409726 vi CERTIFICATE

I, the undersigned, Secretary of the Port Commission (the "Commission") of the Port of

Tacoma (the "Port"), DO HEREBY CERTIFY:

1. That the attached resolution numbered 2017-05-PT (the "Resolution") is a true

and correct copy of a resolution of the Port, as finally adopted at a meeting of the Commission

held on the 20th day of July, 2017, and duly recorded in my office.

2. That said meeting was duly convened and held in all respects in accordance with

law, and to the extent required by law, due and proper notice of such meeting was given; that a

quorum of the Commission was present throughout the meeting and a legally sufficient number

of members of the Commission voted in the proper manner for the adoption of said Resolution;

that all other requirements and proceedings incident to the proper adoption of said Resolution B-30 have been duly fulfilled, carried out and otherwise observed, and that I am authorized to execute [THIS PAGE INTENTIONALLY LEFT BLANK]

this certificate.

IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of July, 2017,

Secretary

500409726 v1 APPENDIX C

DEMOGRAPHIC AND ECONOMIC INFORMATION

The Port’s boundaries are coterminous with Pierce County (the “County”). The City of Tacoma (the “City”), the county seat of and largest city within the County, is located in the west-central part of Washington State near the southern tip of Puget Sound. It is the third largest city in the State with a population of 206,100. The City is located 32 miles south of Seattle and 28 miles northeast of Olympia, the State capital. The historical population of the City and the County is shown in the following table.

Table 21 Population Pierce County and City of Tacoma

Year Tacoma Pierce County 2016 206,100 844,490 2015 202,300 830,120 2014 200,900 821,300 2013 200,400 814,500 2012 199,600 808,200

Source: Washington State Office of Financial Management.

Other major cities in Pierce County include Lakewood (population 58,400), Puyallup (population 38,950) and University Place (population 31,720).

Following are economic indicators for the City and the County.

Table 22 City of Tacoma Building Permit Activity

Year Total Number Value 2016 8,230 $590,868,423 2015 8,961 344,905,383 2014 8,968 385,860,996 2013 7,879 332,362,399 2012 6,578 314,271,672

.Source: City of Tacoma Public Works Department, Planning & Development Services.

Table 23 Pierce County and City of Tacoma Taxable Retail Sales (in thousands)

Year Pierce County City of Tacoma 2016 $ 14,878,551 $ 5,015,372 2015 13,846,294 4,641,369 2014 12,736,324 4,317,891 2013 12,189,178 4,280,299 2012 11,080,669 4,046,579

Source: Washington State Department of Revenue.

C-1 Table 24 Pierce County Major Employers

Number of Rank Major Employer Organization Sector Employees 1 US Joint Base Lewis-McChord Military 57,120 2 Local Public Schools Education 13,408 3 Multicare Health System Healthcare 8,247 4 Washington State Government 6,844 5 Franciscan Health System Healthcare 6,099 6 Pierce County Government Government 3,001 7 Fred Meyer Stores Retail & Distribution 2,560 8 Tacoma, City Of Government 2,138 9 State Farm Insurance Companies Retail & Distribution 2,050 10 Emerald Queen Casino Gaming 2,026 11 Boeing Company, The Manufacturing 1,750 12 Safeway Stores Retail 1,512 13 Tacoma Public Utilities Utility 1,417 14 Wal-Mart Retail 1,287 15 US Postal Service Government 1,214 16 Costco Retail 1,205 17 Puyallup Tribe (Not Including Government 1,099 Gaming) 18 Milgard Manufacturing Manufacturing 1,061 19 Comcast Cable Media 1,046 20 International Longshore & Warehouse Union 1,026 Union Local 23

(1) Source: Economic Development Board of Tacoma-Pierce County, 2016.

Table 25 Pierce County and Washington State Median Household Income

Year Pierce County Washington State 2016(1) $ 61,042 $ 65,500 2015(2) 59,566 63,439 2014 59,998 60,153 2013 57,238 57,284 2012 57,162 56,444

(1) Projected. (2) Preliminary estimate. Source: Washington State Office of Financial Management.

C-2 Table 26 Tacoma Metropolitan Area (Pierce County) Resident Civilian Labor Force and Employment and Average Civilian Nonagricultural Wage and Salary Employment*

2017 (1) 2016 2015 2014 2013 Resident Civilian Labor Force Employment 389,809 380,239 366,862 357,914 351,352 Unemployment 22,369 25,512 25,348 27,022 32,165 Total 412,178 405,751 392,210 384,936 383,517 Percent of Labor Force Unemployed 5.4% 6.3% 6.5% 7.0% 8.4%

Nonagricultural Wage and Salary Workers Natural Resources and Mining 100 100 300 300 300 Construction 22,800 22,300 20,200 19,600 15,500 Manufacturing 16,900 17,000 17,100 17,700 17,200 Total Goods Producing 39,800 39,400 37,600 37,600 33,000

Transportation, warehousing and utilities 14,100 14,000 13,800 13,100 13,300 Wholesale trade 12,200 12,300 13,000 12,800 12,100 Retail trade 42,300 41,100 36,200 33,400 33,500 Total Trade, Transportation, & Utilities 68,600 67,400 63,000 59,300 58,900

Information 2,700 2,700 2,900 3,000 2,900 Financial Activities 14,200 14,200 13,600 14,300 13,600 Professional and Business Services 31,000 29,800 29,600 25,200 23,400 Educational and Health Services 53,700 52,900 51,500 51,700 51,900 Leisure and Hospitality 29,900 31,200 31,500 29,600 27,000 Other Services 14,000 14,000 13,900 13,400 13,100

Government Federal 11,800 12,100 11,800 12,100 11,900 State 11,500 11,600 11,600 11,200 10,600 Local 34,900 35,000 34,100 34,200 32,900 Total Government 58,200 58,700 58,500 57,500 55,400 Total Nonagricultural Wage and Salary Workers 312,100 310,300 301,100 291,700 279,200

* Columns may not add to totals due to rounding. (1) Preliminary, April 2017. Source: Washington State Employment Security Department.

C-3 [THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX D

FORM OF BOND COUNSEL OPINION

______, 2017 Port of Tacoma Tacoma, Washington ______

Re: Port of Tacoma Limited Tax General Obligation Refunding Bonds, 2017 (Taxable) —$______

Ladies and Gentlemen:

We have acted as bond counsel to the Port of Tacoma (the “Port”) and have examined a certified transcript of the proceedings taken in the matter of the issuance by the Port, of its Limited Tax General Obligation Refunding Bonds, 2017 (Taxable) (the “Bonds”), dated ______, 2017 in the aggregate principal amount of $______, issued, pursuant to Resolution No. 2017-05-PT, of the Port (the “Bond Resolution”), for the purpose of providing funds to refinance the acquisition of and improvements to Port capital facilities and pay costs of issuing the Bonds.

The Bonds are subject to redemption prior to maturity as provided in the Bond Resolution and the Approved Bid.

Regarding questions of fact material to our opinion, we have relied on representations of the Port in the Bond Resolution and in the certified proceedings and on other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.

Based on the foregoing, we are of the opinion that, under existing law:

1. The Bonds have been legally issued and constitute valid general obligations of the Port, except to the extent that the enforcement of the rights and remedies of the holders and owners of the Bonds may be limited by laws relating to bankruptcy, insolvency, moratorium, reorganization or other similar laws of general application affecting the rights of creditors, by the application of equitable principles and the exercise of judicial discretion.

2. Both principal of and interest on the Bonds are payable out of annual levies of ad valorem taxes to be made upon all of the taxable property within the Port permitted to be levied without a vote of the electorate in amounts which, together with other available funds, will be sufficient to pay such principal and interest as the same shall become due.

3. Interest on the Bonds is not excludable from gross income for federal income tax purposes under existing law.

The Bonds are not “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code.

Except as expressly stated above, we express no opinion regarding any other federal or state income tax consequences of acquiring, carrying, owning or disposing of the Bonds. Owners of the Bonds should consult their tax advisors regarding the applicability of any collateral tax consequences of owning the Bonds, which may include original issue discount, original issue premium, purchase at a market discount or at a premium, taxation upon sale, redemption or other disposition, and various withholding requirements.

This opinion is given as of the date hereof, and we assume no obligation to update, revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Very truly yours,

K&L GATES LLP

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APPENDIX E

DTC AND ITS BOOK-ENTRY ONLY SYSTEM

The following information has been provided by The Depository Trust Company, New York, New York (“DTC”). The Port makes no representation regarding the accuracy or completeness thereof. Each actual purchaser of a Bond (a “Beneficial Owner”) should therefore confirm the following with DTC or the Participants (as hereinafter defined).

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for the aggregate principal amount of the Bonds, and will be deposited with DTC.

2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (the “Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the “Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

3. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (the “Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by

E-1

arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6. Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant to be redeemed.

7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Port as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Port or the Registrar, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Registrar, or the Port, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Port or the Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

9. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Port or the Registrar. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

10. To the extent permitted by law, the Port may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC.

11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Port believes to be reliable, but the Port takes no responsibility for the accuracy thereof.

E-2

APPENDIX F FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Port of Tacoma (the “Port”) in connection with the issuance of its $______Limited Tax General Obligation Refunding Bonds, 2017 (Taxable) (the “Bonds”). The Port covenants and agrees as follows:

For purposes of the Port’s undertaking (the “undertaking”) pursuant to paragraph (b)(5) of Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as the same may be amended from time to time (the “Rule”), “beneficial owner” means any person who has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bond, including persons holding Bonds through nominees or depositories or other intermediaries.

(a) Financial Statements/Operating Data.

(1) Annual Disclosure Report. The Port covenants and agrees that not later than the end of nine months after the end of each fiscal year (the “Submission Date”), commencing September 30, 2018, for the fiscal year ending December 31, 2017, the Port shall provide or cause to be provided to the Municipal Securities Rulemaking Board (the “MSRB”), an annual report (the “Annual Disclosure Report”) that is consistent with the requirements of part (2) of this subsection (a). The Annual Disclosure Report may be submitted as a single document or as separate documents comprising a package and may include by reference other information as provided in part (2) of this subsection (a); provided that any audited annual financial statements may be submitted separately from the balance of the Annual Disclosure Report and later than the Submission Date if such audited financial statements are not available by the Submission Date. If the Port’s fiscal year changes, the Port shall give notice of such change in the same manner as notice is to be given of the occurrence of an event listed in subsection (b), and if for any fiscal year the Port does not furnish an Annual Disclosure Report to the MSRB, by the Submission Date, the Port shall send to the MSRB notice of its failure to furnish such report pursuant to subsection (c).

(2) Content of Annual Disclosure Reports. The Port’s Annual Disclosure Report shall contain or include by reference the following:

(A) Audited financial statements. Audited financial statements prepared in accordance with the Budgeting Accounting and Reporting System prescribed by the Washington State Auditor pursuant to RCW 43.09.200 (or any successor statute), except that if any audited financial statements are not available by the Submission Date, the Annual Disclosure Report shall contain unaudited financial statements in a format similar to the audited financial statements most recently prepared for the Port, and the Port’s audited financial statements shall be filed in the same manner as the Annual Disclosure Report when and if they become available;

(B) The assessed valuation of taxable property in the Port;

(C) Ad valorem taxes due;

(D) Property tax levy rates per $1,000 of assessed valuation; and

(E) Outstanding general obligation debt of the District.

Any or all of the listed items may be included by specific reference to other documents, including official statements of debt issues of the Port, or of any related entity, that have been submitted to the MSRB. If the document included by reference is a final official statement, it must be available from the MSRB. The Port shall identify clearly each document so included by reference.

(b) Listed Events. The Port agrees to provide or cause to be provided to the MSRB, in a timely manner, not in excess of 10 business days after the occurrence of the event, notice of the occurrence of any of the following events with respect to the Bonds:

1. Principal and interest payment delinquencies;

2. Non payment related defaults, if material;

3. Unscheduled draws on debt service reserves reflecting financial difficulties;

4. Unscheduled draws on credit enhancements reflecting financial difficulties;

5. Substitution of credit or liquidity providers, or their failure to perform;

F-1

6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

7. Modifications to the rights of Bond owners, if material;

8. Bond calls, if material, and tender offers;

9. Defeasances;

10. Release, substitution or sale of property securing repayment of the Bonds, if material;

11. Rating changes;

12. Bankruptcy, insolvency, receivership or similar event of the Port;

13. The consummation of a merger, consolidation, or acquisition involving the Port or the sale of all or substantially all of the assets of the Port, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.

Solely for purposes of information, but without intending to modify the Port’s undertaking, no property secures the repayment of the Bonds.

(c) Notice Upon Failure to Provide Financial Data. The Port agrees to provide or cause to be provided, in a timely manner, to the MSRB, notice of its failure to provide the annual financial information described in subsection (a) above on or prior to the Submission Date.

(d) Format for Filings with the MSRB. All notices, financial information and operating data required by this undertaking to be provided to the MSRB must be in an electronic format as prescribed by the MSRB. All documents provided to the MSRB pursuant to this undertaking must be accompanied by identifying information as prescribed by the MSRB.

(e) Termination/Modification. The Port’s obligations to provide annual financial information and notices of listed events shall terminate upon the legal defeasance (if notice of such defeasance is given as provided above) or payment in full of all of the Bonds. This undertaking, or any provision hereof, shall be null and void if the Port (1) obtains an opinion of nationally recognized bond counsel to the effect that those portions of the Rule which require this undertaking, or any such provision, have been repealed retroactively or otherwise do not apply to the Bonds; and (2) notifies the MSRB of such opinion and the cancellation of this undertaking. The Port may amend this undertaking and any provision of this undertaking may be waived, in accordance with the Rule; provided that (A) if the amendment or waiver relates to the provisions of subsections (a)(1), (a)(2) or (b) above, it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (B) this undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (C) the amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the beneficial owners of the Bonds.

In the event of any amendment of or waiver of a provision of this undertaking, the Port shall describe such amendment in the next Annual Disclosure Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Port. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a listed event under subsection (b), and (ii) the Annual Disclosure Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

(f) Registered Owner’s and Beneficial Owners’ Remedies. A Registered Owner’s and the beneficial owners’ right to enforce the provisions of this undertaking shall be limited to a right to obtain specific enforcement of the Port’s obligations under this undertaking, and any failure by the Port to comply with the provisions of this undertaking shall not be a default under the Resolution.

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(g) Additional Information. Nothing in this undertaking shall be deemed to prevent the Port from disseminating any other information, using the means of dissemination set forth in this undertaking or any other means of communication, or including any other information in any Annual Disclosure Report or notice of occurrence of an event, in addition to that which is required by this undertaking. If the Port chooses to include any information in any Annual Disclosure Report or notice of the occurrence of an event in addition to that specifically required by this undertaking, the Port shall have no obligation under the Resolution to update such information or to include it in any future Annual Disclosure Report or notice of occurrence of an event.

PORT OF TACOMA

By: ______Designated Port Representative

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PORT OF TACOMA • Limited Tax General Obligation Refunding Bonds, 2017 (Taxable)