COMMITMENTS AND CONTINGENCIES Environmental remediation The Partnership has an accrual for estimated environmental remediation costs of $9.1 million and $5.0 million as of December 31, 2018 and 2017 , respectively. The environmental remediation liability represents managements best estimate of payments to be made to remedy and monitor certain areas in and around the millsite of Port Gamble and Port Gamble Bay. The liability at December 31, 2018 is comprised of $1.1 million that the Partnership expects to expend in the next 12 months and $8.0 million thereafter. In December of 2013, a consent decree (CD) and a Clean-up Action Plan (CAP) related to Port Gamble Bay were finalized with the Washington State Department of Ecology (DOE) and filed with Kitsap County Superior Court. Construction activity commenced in late September 2015. The required in-water construction activity was completed in January 2017. By the end of the third quarter of 2017, the sediments dredged from the Bay were moved to their permanent storage location on property owned by the Partnership a short distance from the town of Port Gamble. This effectively concluded the component of the project related to the in-water cleanup of Port Gamble Bay. Management has adjusted the liability from time to time based on evolving circumstances, including increases to the liability of $5.6 million and $7.7 million in 2018 and 2016, respectively. Following is a summary of each of these adjustments and the next steps for the project: 2018 Adjustments and next steps During 2018, the Partnership has been working with the Washington State Department of Ecology (DOE) to formulate the design of the millsite cleanup. It was discovered during the second quarter that a greater volume of soil will need to be removed from the millsite than had been previously anticipated. The discovery of a higher volume of material to excavate, related capping, and updated estimates of long-term monitoring costs, led to an increase in the accrual of $2.9 million in the second quarter of 2018. During the second half of 2018, refinement of the design of the millsite cleanup continued and a draft remedial investigation and feasibility study (RI/FS) was submitted to DOE in January 2019 that contains the proposed scope of the millsite cleanup. As disclosed previously, certain environmental laws allow state, federal, and tribal trustees (collectively, the Trustees) to bring suit against property owners to recover damages for injuries to natural resources. Like the liability that attaches to current property owners in the cleanup context, liability for natural resource damages (NRD) can attach to a property owner simply because an injury to natural resources resulted from releases of hazardous substances on that owners property, regardless of culpability for the release. In the case of Port Gamble, the Trustees are alleging that the Partnership has NRD liability because of releases that occurred on its property. The Partnership has been in discussions with the Trustees regarding their claims and the alleged conditions in Port Gamble Bay, and has also been discussing restoration alternatives that might address the damages the Trustees allege. These discussions have progressed to the point where management believes it can now identify a short list of restoration projects that will resolve the Trustees NRD claims. Management has re-evaluated the liability to incorporate the information included in the RI/FS submission for the millsite and the current status of the discussions with the NRD trustees, and recorded an additional $2.7 million increase to the liability in December 2018. This, along with the second quarter adjustment described above, brings the total adjustment to the liability to $5.6 million for 2018. The RI/FS for the millsite will be reviewed by DOE prior to being finalized. This will be followed by the development of a CAP that will outline the specific cleanup plan for the millsite and will be codified in a consent decree. For the NRD component of the project, discussions with the Trustees will continue, and management expects those discussions will ultimately result in a settlement agreement. At present, management expects the CAP and consent decree for the millsite and the NRD settlement agreement to be finalized in 2019. In both cases, it is reasonably possible that cost estimates could change as a result of changes to either the millsite cleanup or the NRD restoration components of the liability, or both. Management currently expects the millsite cleanup and NRD restoration projects to occur over the next two to three years. Finally, there will be a monitoring period of approximately 15 years during which the Partnership will monitor conditions in the Bay, on the millsite, and at the storage location of the dredged and excavated sediments. During this monitoring phase, conditions may arise that require corrective action, and monitoring protocols may change over time. In addition, extreme weather events could cause damage to the sediment caps that would need to be repaired. These factors could result in additional costs. 2016 Adjustment In the fourth quarter of 2016, areas in the bay were encountered that contained a greater number of pilings and a higher volume of wood waste than was anticipated, requiring additional cleanup activity. In early 2017, management decided to use property owned by the Partnership a short distance from the town of Port Gamble as the primary permanent storage location for the dredged sediments rather than leaving them on the millsite as planned previously. Management also reassessed its estimates of long-term monitoring costs, taking into account the higher volume of material and the new expected storage location for the sediments. Finally, management updated its estimates for consulting and professional fees to address the NRD claim associated with the project. The combination of these factors resulted in the Partnership recording a $7.7 million increase in its liability at December 31, 2016. Changes in the environmental liability for the last three years are as follows: (in thousands) Balances at the Beginning of the Period Additions to Accrual Expenditures for Remediation Balance at Period-end Year ended December 31, 2016 $ 16,761 $ 7,700 $ 11,691 $ 12,770 Year ended December 31, 2017 12,770  7,791 4,979 Year ended December 31, 2018 4,979 5,600 1,496 9,083 Performance bonds In the ordinary course of business, and as part of the entitlement and development process, the Partnership is required to provide performance bonds to ensure completion of certain public facilities. The Partnership had outstanding performance bonds of $7.5 million and $14.6 million at December 31, 2018 and 2017 , respectively. The bonds relate primarily to development activity in connection with pending and completed sales from our Harbor Hill project in Gig Harbor. Supplemental Employee Retirement Plan The Partnership has a supplemental employee retirement plan for a retired employee. The plan provides for a retirement income of 70% of his base salary at retirement after taking into account both 401(k) and Social Security benefits with a fixed payment set at $25,013 annually. The recorded balance of the projected liability was $126,000 and $136,000 as of December 31, 2018 and 2017 , respectively. Contingencies The Partnership may, from time to time, be a defendant in various lawsuits arising in the ordinary course of business. Management believes Partnership losses related to such lawsuits, if any, will not have a material adverse effect to the Partnerships consolidated financial condition or results of operations or cash flows.