homogeneous neighborhood versus eastern neighborhood versus market octavia of how that hinders or enhances and obviously in a severe housing crisis. and rincon hill particularly addresses a particular housing type and are we going to be able to get some reading of how to track from oh more mixed use, multi-use projects within the city? >> that last bit, you said, to detract? commissioner moore: how it would affect. >> i am not sure that the notice is create it and get better at doing others. and we have pledged if we sponsor one in the eastern neighborhoods, we would love to initiate that now and will lay

out what needs to be done in the eastern neighborhoods to create the tool kit, if you will, and all we need is the money to launch the formation of the district. there is a bunch of legal work, frankly, that is required to do that, and that is the only obstacle for doing this and other neighborhoods. and we want a citywide policy so we're not doing these things in an arbitrary fashion. vice president olague: commissioner lee? commissioner lee: i would to acknowledge that if you can think outside the box to produce additional revenue fund, it's got to be you because this is a good way of funding public works projects outside the general fund to fix the potholes, the sidewalks, the infrastructure and create jobs, but i have to say i am amazed every time you come here you have stimulus one, two, and three and somebody public has never done before and i think the city should acknowledge the work you have

done with this and you got someone to donate money to do this which is very important given the next several years that we know we will have a slow economic growth. i want to thank you. vice president olague: i have a question and i know this is at the board in a week or -- >> two weeks. vice president olague: yeah. i guess my question is, and if you can answer that one first. >> i would remind that i haven't gone through the analysis or recommendations, so i would like to provide more information. vice president olague: for mr. yarney, i went through it a

couple of times and didn't get a chance to focus on anything. but my question is, how would these committees interface with the cac's? and have the cac's weighed in on it? i know they were charged with the allocation of the infrastructure fees, at least that's one of their roles, right? how does this all work together? >> they interface two ways. one is this resolution creates the committee. we have a ways to go unfortunately, but we do. and this is just the committee to create the policy and support the study and to guide the formation of the pilot. the first way to interact from the existing c.a.c.'s and the market octavia c.a.c. and two at-large community stakeholder seats. and in a direct way those people

will be involved in the process and guiding this policy. so that is the first thing. and i imagine whatever infrastructure money we get would be pooled together with impact fee monies and grant monies and be managed strategically. and so given we do have a process for the c.a.c.'s to provide input and i forget what it stand for right now, but maybe director ramp can clarify and the acronyms and to the capital planning program. so they are going to be receiving that input from the c.a.c.'s on a regular basis and this would supplement other monies that are already coming in or we hope that will be coming in in the future. and i hope they have a say in what projects get built and what the priority of the projects. vice president olague: that makes sense. and the budget review was sort of limited right now but i don't know if that's going to change in the future or not.

they might be more advisory to us. >> does the director want to comment on it? >> i think the role is in both of those area plans was to weigh in on how monies should be spent towards infrastructure. what michael is talking about is a way of funding those. that would happen before that and the c.a.c. would weigh in on how to spend this money once it's collected through this mechanism. vice president olague: okay. thank you. i have to talk about the c.f.d. and i'll be quick. that concludes my presentation on the area plan infrastructure finance committee resolution and going to speak as briefly as i can on the community facilities district although it is more complicated subject. briefly, what is it?

well, the melaruse is a public financing tool, not a land use policy per se, not zoning. it's a public financing tool that is a creature of state law and this thing is authorized by the state and i believe in the early 1980's in response to prop 13, so it's been around for a long time. and what this resolution does is grant the association area of bay government's finance authority for nonprofit corporations which is a governmental entity, a regional governmental entity that issues these or creates these sorts of districts and gives them the permission to create the districts in san francisco. and this resolution did not actually create a c.f.d. today or when the board approves it. it just simply says to the abag

board and all we're doing is opening a door, not taking people through. and the community facilities district is a special property tax assessment district. it increases the property tax in a given area. unlike the i.f.d. which keeps property taxes the same way and takes away an increment in the future, the c.f.d. increases the property tax overall, so that's an important distinction. and once this district has been established, bonds can also be issued from the c.f.d. and to pay for infrastructure today and those bonds are amortized or paid off over the life of the district and the districts can be from 20 to 30 years in length. the goal here is to create the process by which a project

sponsor may go to abag with an application to create a starter district where we say this is a citywide district and there won't be overnight a giant district and we're giving permission for the project within the city boundaries to apply to create one of the mini assessment districts on their property. that is it. just their property. no one else's. and this will require just a vote of that property owner because unless there's 12 registered voters on the development site, which is usually not the case, there is no need for -- there is no public vote. it is a vote of the property owners. to be really specific, a developer that wants to finance their impact fees through this tool would apply to the abag to create one of the districts and go through a process with the abag finance authority for nonprofit corporations to eventually form a district and eventually sell bonds. i won't get into the details of

that, but it's a six to nine month process basically with multiple hearings and multiple resolutions and a lot of the attorney time and special consultant time involved. why are we interested in this? that's probably the most important thing. we're approaching this as a stimulus policy. that is why my office is involv involved. we were asked two years ago by the mayor to look at ways to stimulate development in light of the downturn. what is the stimulative benefit of doing one of these? there are two benefits. one, it's cheaper money. a developer that is going to pay impact fees will pay by borrowing or maybe directly out of the checking account or finance it through another mechanism. this is one more financing tool and it tends to be more affordable than going through a xhishl lender and certainly taking that money from an equity

partner and a 20% turn. and a commercial bank might ask for as much as 9%. these bonds if positioned the right way and even as cheap as 5.5% in a given year, so there's savings in that. the second reason is it's stimulative is that this is money the the developer doesn't have to find on the market. and all costs included and impact fees, soft costs, hard costs, and they have to go out and they have to find $30 million in equity. and frankly, it is hard to get a project financed with even 50% of equity but let's say we'll be generous. and what this does is it takes that fee amount, whatever it might be, $2 millioner to $3 million, and takes it out of

that total project cost category which means it doesn't have to find as much equity money to start a project. so there are two benefits and the cheaper money and on the dropper spread sheet goes down which means the project is that much more feasible. if you ask me how much more feasible and how many projects will be affected, i will admit ignorance. the projects, each project has a different proforma and this just helps on the margins. that was the goal of the policy. i want to emphasize we designed this to work in con jeks with the fee deferral program and i'll be really specific about that. because we have a program that allows 80% of the fees to be peaked at the first certificate of occupancy, that is, right before the project is ready to be occupied, it will be easier to issue bonds and finance these impact fees with a nearly completed project than it would

be if you were selling the bonds before you had anything in the ground. if you are saying i want you to invest in these bonds but just starting to build, will you trust me and more risky and more expensive than financing if you have a project almost ready to be occupied. this actually plugs in, and this policy plugs in nicely with that fee deferral program and that is another really important point. another really important policy point, this does not defer payment of fees. the city receives the money when they are due today and even though there is a special tax district and all this stuff, the check, $2 million, $3 million,

that check is paid the same time it would under any other approach. if it isn't paid, they can't move into the building. i want to be really clear this doesn't defer feeses beyond the fee deferral program already refers them to. and this is another method for paying fee on time. i would like to quickly address some of our issues in the case record. the first was, and i believe that the city attorney might be here. and if he can answer the specific legal questions if you have any on the project. the question was raised about whether all the impact fees could be funded by the melaruse and the specifically child care and administration and mon the organize of the programs were called out as concerns.

we have confirmed that child care the way it's currently administered, this is the downtown child care impact fee, would likely not be subject to c.f.d. financing. we're removing that from potential fees and it is because most of the money goes to private buildings and private companies. and the second question had to do with administration and mon the organize and i received assurances from the bond council for the association of bay areas governments and the council through the bond underwriter and most recently in my conversations with the city attorney that standard administration monitoring that has to do with capital projects that would be funded and public facilities would be considered a soft cost in most circumstances be able to be financed under the financing mechanism. it's almost a moot point because

every single time a bond issuance is done, there will be a due diligence review that takes place and if the city changed the fee, for example, and if there is a new fee or the way we use fee money has changed, with every bond issuance we can adjust which fee cans be financed and which ones can't. and that is done in that thing called the joint facilities agreement which is an attachment to the resolution. even if we don't call it out here today, there is a legal process by which we will ensure we are not financing fees or facilities that don't immediate melaruse legal requirements. there was a second question of who bears the burden and on some level that's almost a

philosophical question because of the nature of land values and development costs. the idea is it's two stimulative benefits. it's cheaper money and what they call off-the-books financing and doesn't add to the total project cost and in the end the homeowner will get a disclosure saying this is subject to the c.f.d. assessment and the legal requirement and they know they are buying a unit that has an assessment. and they are paying that additional property tax per year until the bond expires so up to 30 years. the question that is everyone always asks that i can't give a good answer is how is that cost distributed? a lot of developers will say it doesn't affect the sales price. that is why that i can lie c.f.d. and be put costs onto a bond that is paid off and not

see it affect the sales price. if you are a purist, you say every single assessment means that the price goes down. honestly, the reality is probably somewhere in between. the sales price microbiologist so to some degree absorb this assessment, but my experience is usually it is the long-term homeowner that pays this over time. as far as the question about equity, to me the question is answered by the fabbing that a homeowner gets disclosure when they buye unit, so if they don't like buying the unit with an additional $500 a year assessment on it, they don't have to buy the unit. this is a front-end proposition. this is not happening retroactively. that is what hopefully will cover most of the issues raised and i am here and the city attorney as well. vice president olague: and commissioner antonini has a

question and we'll open it up for public comment. the public may also have questions if you don't mind waiting around to address them. commissioner antonini: just briefly, michael, you made it clear if there are fewer than 12 registered voters on the i.f.d., then it needs a 2/3 vote of those owners prorata to the ownership. so generally we're looking at areas where there isn't anybody living at the present time and the owners would be the individuals or corporations that own the land at that time. so it's the chances of there being more than 12 is pretty slim. and if there were more than 12, i would assume there would have to be approved in a different manner. >> it would have to be voted by voters at that point in the district. literally if you had 14 voters, you would have a vote of 14 voters. you have to get 2/3 of the 14 to approve the i.f.d.

>> and under 12, you still have to get 2/3. >> 2/3 of the weighted assessed value -- commissioner antonini: prorata 2/3. thank you. vice president olague: ms. rodgers. >> thank you, commissioners. i'm going to go through our recommendations before i do the i.f.d. and the c.f.d. is a bit confusing and a one-word summary of each. starting in the same order as mr. yarney,the i.f.d., infrastructure finance district for those familiar with redevelopment tax increment, this is a similar topic. for the rest of us, briefly, it allows a portion of the increment of the property tax revenues above the tax level at the outset to be pledged to taxes and bonds and those are used to fund a specific project. for this item we recommended that we have considered two issues. first, that the city seek additional funding to extend the

pilot program to all eastern neighborhoods. in addition to the pilot i.f.d. proposed for rincon hill, it is important that the new committee will taxed with the development of an i.f.d. for the whole eastern neighborhoodses. funding for this additional study should be identified in the short term by the committee. this is important because eastern neighborhoods has an existing infrastructure deficit that the city could address by establishing a larger i.f.d. for your information, the department continues to look for grant funds by the larger i.f.d. and may have access to other funds. number two, insure they study the long-term effects on the fund. as commissioner sugaya brought up, capturing an increment in new and increases in property values for the specific limit of a limited geographic area diverts funding that otherwise would have went to the entire city for larger services. a portion of this new increment is made possible through the

zoning changes and other improvements that came out of the area plan. however, only a portion of the net increase in property revenues should be diverted into the area planning needs. this would enable and continue and to ensure that it continues, and make sure that the city services. and now looking at the c.f.d., community facilities district, briefly this is basically a layaway plan for your existing development impact fees. it's that simple. for this item, the department had one recommendation. if the c.f.d. can't fund all the identified projects, the city should not collect 100% of the funding through this mechanism. we made this recommendation in response to the issue that c.f.d.'s may not be able to fund

certain things like private child care or the administration of funds. after discussing this further after the publication of our report which the city attorney got late, it seems like our recommendation is one potential solution. another way to resolve this issue is at the same time that each project chooses to enter into the c.f.d., the city would evaluate the specific limitations of the law at that time and address any constraints to ensure that the city is able to fund our needs. the department is satisfied with this approach. in addition, as mepgsed, the c.f.d.'s only make sense for large projects or pools of smaller projects. therefore, our expectation is that there will be more flexible funds from other projects that can be used for implementation and child care and other costs and ensuring that all our needs can be met. and the report also identifies two points that are not modifications and issues with the c.f.d.'s for your

consideration. first, as michael yarney mentioned, those shift from land owner to resident. experts do not agree on which party the landowner, developer, or homeowner, absorbses the cost of the development impact fees that we have put into place. from a policy perspective, the landowners could absorb the costs and land values have risen significantly over 20 years. if developerses and homeowners have those added costs, new development may be stalled or delayed. by amortizing the payment, it is possible that the citywide c.f.d. could shift the impact away from landowners and towards homeowners, but as described, when viewed as a stimulus policy, this proposal would help spur development. and number two, the proposed citywide c.f.d. does not create a new funding source and merely finances the cost of existing

infrastructure impact fees. the eastern neighborhood working group reports also proposed that c.f.d.'s be used for an addtive source of funding in addition to the impact fees were already getting and in addition to existing property taxes. it would need to be approved by 2/3 of the voters and would be in addition to the proposed citywide c.f.d. thunderbird proposal. the issue being if the property opts into the it in the existing fees, would this reduce the desire or ability of additional owners as an addtive source of funding as recommended by the working group? commissioners, that concludes our presentation for you. for this item, the department is asking that you move to recommend approval with modifications and considerations to the issues we raised in the report and we would al recommend

modifying the recommendation for the c.f.d. and he can help with language if you would like to include that in your motion. vice president olague: like to open it up for public comment. >> i'm going to jump in front of steve because i have a meeting i'm late for. peter cohen. i want to talk about both of these, but i only have a few minutes. i want to talk about the finance committee. i was fairly involved in look agent the iterations of that proposal and participated as an appointee to the earlier version of it. and would be interested in being appointed again at the market octavia c.a.c. representative. i have a couple of picky things on this. number one, market octavia c.a.c. is very subordinated in

hasis on eastern neighborhoods in rincon hill and i hope we get past the point that one planning area is seen as more important than other. this is an area plan infrastructure finance committee and the use of the infrastructure finance district or the other funding tools town of equal and hopefully myself or one of the other c.a.c. members investing a lot of energy and time for this committee written to benefit rincon hill and other eastern and i have talked to the sponsor as well as michael yarney and if there is a suggestion to expand the pilot, why only eastern neighborhoods? again, it is puzzling to me and i would rather see this be an i.f.d. pilot for rincon and the future use extended to all other plan area, not just the eastern

neighborhood and leaving market octavia in the dust. sorry to sound parochial but this is often the way things work. if you are in phase two, you are in a very distant phase two. when it comes to the melajerusalem, i have to admit it is a complicated proposal and i am relatively agnostic on what it does and i had a long conviction with michael yarney and some of my questions were answered. one of the things fundamentally that i would like to make sure is inclusionary housing are not an melarusable thing. we went through that argument in fee deferral and the back door changes policy by encouraging certain developers and if it's just a financing tool, nothing else will change, i have that

answered as a no is not included. beyond, that i am very interested to know where it's going to apply and ask planning staff to give a list of all the potential projects in market octavia and eastern neighborhoods that this would probably be used for and i guess that's a big ask and not enough time to provide it. but i would like to see that kind of information of where is this really going to apprelevan to our particular planning areas. thanks. vice president olague: thank you. >> good afternoon, commissioners. i would like to speak in favor of both of those commissions. and you will remember that the part of the property that the 333 harrison site is being built on is going to become a park and

this is property that the developer is buying from caltrans and we have to buy the entire piece of property that costs to the land and development of the park is then in the $5 to $8 million range and there was a hope that there would be impact fees from other high-rises in rincon hill to pay. that park and there's only one of the five or six towers approved for rincon hill and none of the unbuilt projects have paid the impact fees. what this i.f.d. will do will be to allow the land to be bought from caltrans so we don't lose that opportunity and the park to be developed earlier than it would otherwise be developed. that is why the developer of # 33 harrison is willing to pay for the cost of the i.f.d. to get this process moving quickly sot