think we are going to find ourselves below that number, but that is the maximum exposure. supervisor elsbernd: thank you for all that you have done on this. a couple of things you have said and some other things that have been said i'm hoping you can understand -- help me understand a little bit better. you said in passing that the team had the option to walk away. is that the $270 million number if we are having trouble? >> that is the $32 million number. but even in the event -- i guess, realistically, looking a year down the line, and they have already signed -- i do not know if they are ready to publicly announce it, but they have already signed one major sponsor. they are in the process of getting commitments as we speak. supervisor elsbernd: i guess that is what i'm getting at. if they do not get there, do

they have the ability to walk away? >> that is not my understanding, no. supervisor elsbernd: ok, the $32 million question, the amendment that president chiu has presented to us, as i read it, it creates the ability for the city to potentially walk away if the committee is unable to meet their goals, but the way it is written, it says that we can do that at the ceqa completion. ceqa completion, according to the presentation you just made, will be pretty much 12 months from now. >> it makes a reference to section 9.3, which says they only have to raise and 4 $5 billion in the first year, so conceivably, that creates a scenario where your one, they do really well in their fund- raising and raised $10.5 billion and hit their mark, and what happens after ceqa has been cleared -- suddenly, they hit a

brick wall on their fund raising. the city no longer has the ability to get out. am i reading that right? >> you are reading that right. the notion was that a year from now, we needed not only to achieve ceqa, but we had to demonstrate that there was the committee's ability to meet that first milestone, and the committee has chosen to break it out 10/10/10. the reality is that the costs primarily occur in 2013, so they are not even realize, but the pressure is on the committee with this commitment to meet it early, so we have questions about whether we give the team specific time while holding their feet to the fire. supervisor elsbernd: not so much, at least the way i'm reading it. 12 months from now is our last

chance to walk away, and at that point, they only need to raise $10.5 billion. and as you have just said, our costs are not going to be incurred until 2012/2013. >> a central tenet of this proposal from the beginning has been that there is $32 million of philanthropic funds that need to be raised to offset city costs, and that has not changed. because it is clear that there are going to be city costs with managing and organizing an event, and the goal is to meet all of those costs. there is no question that the city -- supervisor elsbernd: i get that, and i get the goal of the amendment is to give us the security that indeed that $32 million is going to be raised. the language referring to ceqa, though, herds that. >> the moment of see what is a

time -- there are lots of decision points that happen, and that is a time in which if there is going to be a change in whether or not the event is going to happen, that is the appropriate time. after that, you have the event authority making massive tens of millions of dollars worth of improvements in order to hold the event, and you have the city committing resources as well. that is really the moment in time in which if there is going to be any ship, that it needs to happen. we thought it was not realistic to ask the america's cup organizing committee to raise $32 million in the year for obligations that will largely occur in 2013, but that $10 million of which we think the only real expenditure in the year will be ceqa. we will have some money in banks. we will show that there is -- that this committee has some legs and the ability to raise money.

in effect, fulfilling its obligations. it is a chat, a moment in time -- it is a check with the milestone is not a cheap, the city could consider whether or not that back so -- that backstop israel. -- whether or not that backstop is real. supervisor mirkarimi: mr. bentsen. >> members of the committee and other visitors, i'm here representing director more year and the remainder of the team that has been involved in these discussions. i just wanted to open, saying that we have appreciated working with or forcing economic development staff on this project over the past couple

months. the city attorney staff that is going to assign to this have been phenomenal, and we have appreciated the opportunity to be briefing your staff and members of the board as well. i would like to dive into some of the details of the agreement. i want to start by again giving the general frame. some of this was covered in the presentation, but especially the port is called upon in this agreement to provide world-class facilities for the staging of the 34th america's cup. it is envisioned that there will need to be substantial improvements to port property to be used for those purposes. since we don't have revenue bond capacity or other funds to repay those improvements, we would offer a long to develop a rights

at some of the locations and vision for use as a way for the team to recoup its investment. a lot of the work that the staff does is to try to recoup investments. we have annual operating budget of less than $70 million a year, so we need private investment in order to continue to improve the san francisco waterfront. since development is entailed year, i thought i would take a brief moment to go over what our standard development process is so we could compare that with the process envisioned under the host city agreement.

this is a little bit difficult to read, and i apologize to the audience for that. our normal project starts with a competitive selection process for a private developer. we are not doing that. we are instead competing to win the america's cup. after selecting a private development partner, usually based on their qualifications or their concept for the use of poor property callaway enter into a contract where we try to hammer out the major deal terms. we engage the public as well through a number of core advisory groups to try to make sure that neighbors, people who are waterfront constituents, or maritime interests, have really bothered to the program for a specific site. we bring that term sheet when we

negotiated it with our partners, to the port commission. we also bring it for the mayor's approval and approval by the board of supervisors, and if there is public funding involved in the proposal, we will seek a fiscal feasibility finding from the board of supervisors, much as we are today. that fiscal feasibility finding is a necessary step to start ceqa, california environmental quality act analysis of the project. we submit a description to the planning department. it goes through a process that may be 18 to 24 months or longer in terms of completing an eir for a project. we will also start consultations with our regulators. principally, the agency at the state level overseas the port's actions is the california state commission, and they weigh in to make sure that we are

administering the port's property consistent with our legislative grants. we manage that property for the people of california, which is why state agency oversees our activities. towards the end of the process, we will negotiate what is called a leave this position and development agreements, all subject to approval by the port commission, mayor, and the board of supervisors. then, we go to a regulatory partner, the bay conservation and development commission to get a permit for the project. we will close escrow, and the lease will become effective when our development partner satisfies certain conditions in this position and development agreement. the entire process is designed to make sure that our development is designed to deliver in the form of maritime access, public access and parks,

historic rehabilitation. the board has many historic resources that need to be saved, and visited-serving amenities consistent with the charter and our truck grant. that is what we normally do, and i would like to go a little bit into what is planned for the host city agreement. overhead please. ok. this has been a negotiated bid process. the original agreement was a completely negotiated bid. the no. waterfront alternative that you have in front of you now was really developed by court staff in consultation with the mayor of's staff, and there has been some consultation with

the team, but i stopped short of calling it a negotiated bid. the term sheet was approved by the board of supervisors earlier this fall. today, we are seeking a fiscal feasibility finding that you will hear from the budget analyst on, and now, we are considering this host city agreement, which is a binding agreement. after all of that, we enter stage two. we started to talk about ceqa in stage two. that process is going to involve exhaustive consultation with a number of state and federal permitting agencies because we are beginning to think about waterfront improvements being constructed as early as 2012, so we will need to -- or in addition to seek what -- be talking to the army corps of engineers. no, u.s. fish and wildlife, department of fish and game, the california regional water quality control board, and

again, bcdc to get the necessary approvals to build those waterfront improvements. after ceqa, and it is appealable to the board of supervisors, and as part of the process, there is a no-project alternative, so by operation of law, this board will have the opportunity to say no to the event at the end of the ceqa process. if ceqa is completed successfully, we would submit to you then you leases for the event. we talked a little bit about the different sites. i will go over them later as well in my presentation. i talked earlier about development. the long term development of port property would really happened in stage three. after the then you leases are

approved and maybe after the event. we would be in exclusive negotiations with the team regarding a long-term development program, much as i described earlier, also prevent -- present those to the groups. we imagine there would be another fiscal feasibility review of those long term development proposals. we would do ceqa again on each of those development proposals. that would also include a no project alternative, so separately, the board would have added options, the discretion to say no to one or more of those development proposals. we do an ldda in a lease subject to the approval of the mayor of the board and close the agreement. again, all of this would be designed to deliver the type of

great waterfront improvements we only tried to deliver through our development proposals. this table shows some of the sites that carry mentioned in her presentation related to the northern waterfront alternative. are not going to go over the uses of each because you have already heard that, but for long-term development proposals -- it is difficult to see on this, but they are in bold -- campos 26 and -- pier 26 and 28, both of these ad to the proposal considered by the waterfront commission in response to feedback we got from the team, and this is in part to make up for removing pier 50 as a long- term development site. 30/32 was always contemplated as a long-term development site and see wall lot 30.

-- seawall lot 30. as was mentioned earlier, there are some pretty significant financial impact to both staging the event and the long-term development on the port. i just cannot commend elaine and jonathan and monique in terms of calculating all of these potential impacts, and many of them have been detailed in the budget analyst's report. these are the impacts to the northern waterfront alternative if you add your 26 and 28 in as long term development sites. we project the bottom line is over the event, the launch to the port will be $8.7 million. that is down from about $14.5 billion in the original host city agreement, but it is still

very significant and represents a sizable portion of the port's annual revenues. this table shows all related city costs. i will discuss first be pier 27 cruise terminal. there's a synergy with the plans to develop a cruise terminal. we were excited when we started talking about pier 27. they want to have even viewing. they would like to have team hospitality sites where they are greeting some of their sponsors. meanwhile, we are planning to build a new international cruise terminal, and we appreciate

your revenue funding appropriations to make this a reality. be our plan will be to conduct ceqa and build this and allow the event -- the authority uses for a limited time in 2013. the total costs are $75 million. we have a shortfall of about $6.5 million that we would request that the city help us with. there are a tenant relocation costs of $1.5 million including claims and setements. there is some debt issuance cost of about $800,000, and we project about $300,000 in staffing costs for a total of about $17.8 million in port- related city costs. supervisor mirkarimi: i think a

number of us want to ask some questions about various variables on the math. supervisor elsbernd and -- i was going to wait until you were completely down, but you have triggered some interest, so we will delve in. supervisor elsbernd: the cruise terminal. help me understand how entering into this agreement helps us get closer to the reality of a cruise terminal there and how if we do not, what that means. >> staff has been analyzing a number of alternatives for how to deliver the terminal at the site, and there are two options. there is a current very large shed now. many of you have seen it along the embarcadero. one plan would be to remove the front to create room for a major

new waterfront park, and reuse that shed or portions of it as a cruise facility. the other plan developed by the city's consultant team and staff is to essentially take down that shed and build a new building. i think that the view of staff is the the new building option at that site will provide a much more functional terminal that has a warranty associated with it. there are slightly higher costs to doing that new building. that plan will come before you in all of its detail shortly as planning to be heard at the commission on december 14. in essence, we think that' this plan to use the america's cup site here would help with the new building alternative in two

ways -- one, the authority has certain infrastructure works required under it -- under the host city agreement. we program $7.5 million in authority costs to remove the shed to make way for the new building. that closes $7.5 million of our financing gap. this $6.5 million city contribution would complete our financing needs. and the port has other plans, including security grants and related funding sources to complete the terminal after use for race-related purposes. we actually think this advances the cruise terminal projects significantly. it speeds the permitting process, and i think what staff are very excited about the prospect. it will create some issues for us in terms of how we handle close calls, and i can get into

that later. supervisor elsbernd: how you handle crews calls over the next few years, but long term, this is how we get the world class cruise terminal that we deserve. >> and that we have been trying to get for the last several decades. ok. overhead, please. we have a fairly specific staff recommendation for how to deal with some of these city costs under the agreement. the port has outstanding debts series 2010 a and b revenue bonds. we also have bond ratings. i think that director more year has worked very hard to try to improve the port for is a credit

over the last several years. we recommend that the mayor and the board of supervisors approved a memorandum of understanding between the comptroller and the port -- between the controller and the port to cover some of these costs. we have submitted a draft for review. we would hope to get that introduced to the board on monday and have it in your offices beforehand to review. essentially, the proposal would be that we would look at the rand the port would have received from the site if there were no america's cup. we would subtract any rent the port will be due from tenants that are relocated from the new sites -- supervisor mirkarimi: can you try to speak into the microphone? >> sorry about that. we would subtract from the rent

that we would have received, any that we continue to receive from tenants who were relocated. and then we would subtract our increases in percentage rent. we do expect to see an increase in purchase a patient from restaurants at our retail sites and parking operators as a result from the america's cup, and that will be a transfer to the city funds. by preserving that revenue stream, we are confident that the market will understand that the court is still a good credit. we estimate that payment to be $7.85 million over three years. the demo you would be binding pursuant to charter section -- the mou would be binding unless the port commission, the controller, and the mayor agreed

to change it. the court will pay the tenant relocation costs, including leading costs. we estimate the cost at $2.6 million. we would also spend $61 million in bonds on the cruise terminal project that we just discussed. then, i talked about the $6.5 million city contribution to the cruise terminal project. we have done some fairly extensive work with our development staff and our independent consultants and bay area economics on trying to value development rights. you are going to hear more about this from ted ebit, so i'm not

going to spend too much time on it. we look at a number of scenarios. i think it will be important going forward that we get appraisals of the subject property prior to entering into the long-term development agreement so that we have confidence about the valuation of the sites, but our estimates based on the scenarios that we run, which we think are the most likely scenarios would total $61 million in likely development value, and you will note that under the northern waterfront alternative, they are spending about $55 million in infrastructure works, improvements to port property, so there is rough parity here. they are subject to commercially reasonable terms with a bad credit just like the exploratory and needs that came before the

board within the past several months. this is the way that we'd normally structure our deals, and i think that staff can say with a high degree of confidence that we think that the port will be protecting the harbor fund in those subsequent negotiations. >> if i could pop in here, this is probably the piece of the puzzle that -- i not want to say concern, but these are two seriously valuable pieces of property. talk to me again. forget about america's cup right now. what has been the process with these two blocks? why is it even available? why has this not already been developed? >> 30/32, the court has made it number of efforts to try to develop that site.

currently, about a 12.5-acre parking lot just south of the bay bridge. we have some real structural problems. in early 2000, leading up to 2006, the court first negotiated and then into a lease to develop a mixed use cruise terminal on the site. it would have been a two-berth cruise terminal, authorized by state law, including some office space retail uses and parking uses to fund the cruise terminal improvement. after we had a fully entitled project, all the way through the major permit that i discussed before and approved by the board, our development partner took a closer look underneath the piers and found that they were in a really poor condition

and that the early estimates of the substructure costs were far too low and that it was not a commercially feasible deal, that they would not be able to get their investment out, so they essentially walked away from a fully entitled project. supervisor mirkarimi: when was that? >> that was in 2006. at the time, because it was fully entitled, staff tried to shop that project to local development interests to see if anybody would build it. this was at the time our plan to get a new cruise terminal, so we were highly motivated, and there was no interest in the site. if we think it would be great if we could take advantage of the america's cup to get development that delivers a major maritime benefits to the waterfront, provides new public open space out of this -- supervisor ern