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supervisor avalos: good afternoon and welcome back to our recessed budget and finance committee meeting. last wednesday i said this would be the last meeting of the year for the budget and finance committee of the year and i was right. it's the last meeting. it was recessed. the other half of the last meeting. we are here to discuss final approval of america's cup agreement as well as the civic center community benefits district and budget updates. mr. young, if you could call the items number three and actually did, two and three first. >> item number two, hearing before the budget and finance committee to review the fiscal feasibility and responsibility including analysis from the

budget analyst of the city hosting the america's cup regatta under the conditions contemplated and set forth in the term sheet to fully understand and define the city's expectations for both the short term and long term benefits that would accrue to the city for the purposes of negotiating a formal host city agreement. people number three, resolution approving a host city and venue agreement among the city, the america's cup event authority, and the san francisco america's cup organizing committee authorizing the mayor or his designee and the port to execute the host city and venue agreement, authorizing and urging the mayor, office of economic and workforce development, port and other such city officials as appropriate to take such steps and execute such additional agreements as are consistent with the host city and venue agreement and this resolution to bring the 34th america's cup to the san francisco bay and finding that the proposed event is fiscally feasible as set forth in administrative code chapter 29. supervisor avalos: thank you,

mr. young. supervisor mirkarimi. supervisor mirkarimi: thank you, mr. chair. as you indicated, we are continuing our hearing from last week. i want to say in advance our strong appreciation to the city family in working around the clock in order to produce the kind of analysis that we just did not have the ability to have a thorough vetting of last wednesday. thank you to the budget analyst's office, controller's office, economic analysts and all of the city family. as we had well indicated in last wednesday's hearing, the plan for the northern waterfront, in order to strengthen oured by to secure the rights -- our bid to secure the right to host the america's cup is substantial improvement. it has been amazing that based

upon time lines that have been imposed upon us and how the city family has been able to marshall i think the resources to together in order to try to put forward the best bid we possibly could. the bid that is under consideration now on the northern waterfront is, we think we believe, the best that the city can do. and that we think by moving to the northern waterfront presents a number of advantages for both the city and the event authority. most certainly to develop facilities within the very restricted timeline that is required in order to certainly allow for the race and prepare for the race to happen as delineated in 27 and 29. the cruise terminal process which is already underway, paragraphs 30 and 32 which has substantial ceqa review because of prior projects. there is less risk to the

authority, smaller investment to achieve the same result and the questions of potential development in paragraphs 26 through 28 would certainly be facilitated a lot more smartly through our port. proximity to guests and hospitality facilities, housing options for teens within walking basis to industrial base, robust transportation infrastructure on embarcadero, f, f, and t and k lines. i'm surprised to the recent press as it relates to the city's good faith and very steadfast commitment in trying to proffer the best deal possible where elected officials, we're part of the city family. we're working with public tax dollars and pursestrings that are well obligated in the sunshine of light by having these negotiations in somewhat of a very surreal way operate unlike any of the other

competitors or contenders that are vying for the same rights to secure america's cup. spain who has a king, italy, a prime minister, they have more or less a unilateral right in order to affectate whatever deal they would like and not have to operate under the same conditions we necessarily do. other cities around the country and maybe abroad are hoping san francisco stumbles in some way to disadvantage so that the event authority would then be able to capitalize on my misunderstanding or mistake. we are not going to allow any misunderstandings to happen. we are putting forth the best deal possible. i'm confident with the information that i think will be shared with us today that that will be well evidenced. mr. chair, i would like to go ahead and start the discussion, if we would, please, by bringing up the office of economic workforce developer, jennifer. >> thank you, supervisors, through the chair, jennifer matts from the office of

economic and workforce development. supervisor mirkarimi, you referred to the press over the weekend. there has been one concern that i have heard or rumor today that was floating around that i would like to take a moment to dispel. within the framework somehow peer 50 continues to be a venue that is being discussed. it is not. it was not last week and it is not today as part of the northern waterfront alternative that we have now adopted, that you have now forwarded as the only alternative to be considered as part of the host city agreement. supervisor mirkarimi: that was our understanding, too. >> ok. thank you if i could have the overhead for a moment what you see before you are the venues that would be included in the northern waterfront alternative to host the america's cup. i know we have talked about them at length, i want to include a visual that shows the full breadth of the piers that are anticipated to be used for

short term and long term used by the authority to briefly go through. at pier 80 would be the berthing of the u.s. a 17. other temporary facilities and preare ngata staging for the 34th america's cup. moving up there would be race yacht viewing. 30 and 32 would be the team bases. sea wall lot 30 would be used for tv compound and parking. 36 and 28 would be team hospitality. the area between pier 14 and 22 1/2 would be superyacht center and mo motherings for boats. and pees 19 through 29 -- piers 19 through 29 is the media center to watch the event when it takes place. last week, supervisors, i just wanted to share that visual because we talked a great deal

last week about what the northern waterfront was and had less than ideal visuals to show the full breadth. as you know what is being discussed is he is start and finish lines would be at pier 27 allowing them to go out from there to the golden investigate bridge and back. there were a series of questions that you asked about the host city agreement as well as recommended amendments that you requested that we make. we are here today having made those changes and i would like to briefly talk through what they are. supervisor campos had wanted to understand if undue requirements could be placed on the city with regard to the security and the people plan. what we found is in section 2.2 of the host city agreement, there already exists language that allows for a termination right by either the city or the event authority should we fail

to reach agreement on the terms and conditions of those plans. so that language was already included in the plan in terms of having an ability of the city to have a say-so over the terms of that security and that people plan. in addition, we were able to add language into sections 9.4 of this agreement that really takes the language around the youth plan, the lead environmental plan, and the workforce plan and memorialize those and make a requirement of this agreement that those plans are fully fleshed out to the same degree and on the same time-lane as the people plan as the -- timeline as the people plan and the security plan. we will have a great deal more detail around what those activities will entail. in addition, there was a great deal of discussion last week around the $32 million being raised by the acoc and wanting to have a higher degree of certainty with regards to that

fundraising. one of the things we were able to do over the past week if i could also have the overhead again was develop a more specific list of sources and uses of funds that we see as necessary to properly host the america's cup. in this worst case scenario that i put before you, we assume no acoc fundraising whatsoever. if you assume there is no acoc fundraising whatsoever, what you see in the gray column is that this event still nets out a $5 million general fund surplus for the city. however, we obviously have a time, we have a time flow issue as to when the projected tax revenues from the america's cup land, accrue to the city versus when our expenses and our costs are going to be incurred. if you see in 2011, we

anticipate that, assuming no acoc, there are $6.3 million in costs that will be incurred by the city in order to support the america's cup. in 2012, that number rises to $11 million. in 2013, all of the costs are offset by taxes that are accrued in that year. so in a world in which there is no acoc contribution, we have liabilities in the first two years of $6.3 million and $11.2 million that do not net out until after the event occurs. however, what we have done is in consultation with mark buehl, the president of the acoc, we have strengthened the language by creating a new section which states that the aco:will use best evidence to raise $32 million over a three-year period that includes raising $12 million for year one, $10 million for years two

and three that the city retains a termination right if that $12 million is not raised in the first year. section 2.2 of this agreement lists a host of termination rights that the city and the event authority have in this first year before ceqa is completed and at the moment in which ceqa is completed. we added a section if the fundraising has not been met, the city can terminate. by having gone through this exercise of really drinking down what our costs are and requiring in effect double fundraising from the acoc that we have well covered our costs. supervisor mirkarimi: that's a hell of a layaway plan over the next three years. i understand the 32 ceiling, but what about a floor, to make sure we're absolutely seeing a minimum amount that is being raised? >> i would tever to mark buehl to come speak to that. as we have said, a central

tenant of this event has always been philanthropic fundraising in order to make the city whole. it depends on the mothers and fathers of the city and the region coming together to support this. we have to look to the commitments that are being made for some degree of assurance. what i do think we have shown by diligently working on the northern waterfront alternative is to create an event which does pencil for the city and the general fund over the life of the event and i look forward to hearing harvey rose, the budget analyst's report. ted egan's report on the numbers we can talk about our feasibility analysis as well. what we believe we're talking about now is a balancing. lastly, supervisor campos had some concerns about the binding arbitration provision. we have added language in there

which says that should any dispute or difference arise out of this agreement that is subject to binding arbitration that that would be in a location in northern cal and in the event that the parties file a suit, that the venue for this action should also be northern california. supervisor mirkarimi: the suggestion that grew out of that conversation between supervisor campos and you all was that is the terms riddled potentially with the other what ifs of there being the possibilities that were taken abroad to mediate any kind of disagreement or discrepancy. and i think that we want to try to do our best to address that so there is no unresolved concerned in that regard. >> we heard that concern and we went back over the past week and reviewed the disagreement

with an eye towards the discretion making decisions that are to be made by the city, to be made by the events authority and the ones that are to be made in consultation with each other. we're confident that this agreement provides the city with discretionñ with discretion where it needs to be. and more importantly, there are further decisions to be made with regards to hosting this event, with regard to the venue leases, with regard to the long- term legacy leases that will be before either the port commission or this body again. and in addition to the sequel -- ceqa process that will come before this body, we believe we will have ample opportunities to weigh in. the last question put forward by supervisor campos was around the city offering development in

exchange for infrastructure improvements necessary to host the event. we did some research with the chicago olympic bid, the london olympic bid, and the host offer. those jurisdictions of for the enormous amounts of cash subsidy from the local government, the regional government, and the state government. they put a large degree of risk on the venues to cover cost overruns. chicago had been publicly guaranteed $500 million in costs for their olympic bid, and private revenue was expected to $246 million. the london olympic bid required 875 -- 875 million pounds worth

of risk and costs. the valencia local and regional government had a 16 million euro agreement. obligating the general fund directly might be a feasible way to pay for the costs we are going to incur to host this event. we landed on development agreement where we get improved assets and the team gets to recoup the cost that they would be investing in our waterfront in order to host the event. that is just to answer how we landed on that formula. those were my specific updates. i wanted to invite brad benson

from the port to come up that directly affect the port. supervisor mirkarimi: mr. bentsen. >> and the special projects manager representing 14. i wanted to address supervisor avalos's questions from the hearing. and to talk a little bit about the jobw impactwwwwwwww ofwwwwww that displacement -- and to talk a little bit about the job impact of that displacement. that have the overhead display?

that is too small to read. what i will do is hand copy members of the committee and talk to the slide instead. essentially, we're talking about is the 19-29 sheds, and pier 28. these are all industrial warehouse sheds. most of the tenants in 19, 23, 29, 28, at 26 our warehouse -- are warehouse tenants. the activity that is going on in those areas is storage activity. there are a few smaller maritime

tenants who are in the processing business. we would try to relocate them to our fish processing facilities. there are a few office tenatnnts in piers 26 and 28, includeing ideo, a lease just before the board of supervisors. it would endeavor to relocate all of the tenants that would be displaced either too poor property or to provide -- we think there is the likelihood of a high degree of success of keeping those businesses in the

city. we know there is substantial vacancy rates. supervisor avalos: what kind of space is available? you mentioned you looked at the port. >> with respect to warehouse space, we have a vacancy at pier 50. at the other locations, we have office buildings in the northern waterfront and in the southern waterfront as well. a lot of your question was going to draw attention.

the concern would be that we would be unable to keep them as tenants and we would lose them to another port. we would be exporting jobs to another jurisdiction in the bay area. with this particular set of locations, we don't have that here. if these were successful in san francisco, we have reason to believe alternate airport locations or private-sector locations would want to stay in san francisco. we also discussed a little bit, providing some of this to tenants so that everyone knew what was happening. 26 was a late entrance to the discussion. and the poor real estate division supplied a notice to all of the tenants and all of the vineyard sites explaining

the board goes a consideration including which sites would be affected tomorrow. >> what kind of timeline are you talking about? >> it depends. it envisions a different kinds of occupancies for different sites. some of the sites might be made available as early as the beginning of 2012. that will be necessary if there will be construction activity at those sites. we envision 2012 being the construction time. we talked about shorter-term occupancy, as little as six months. that may provide some flexibility to both the team in the port -- under that type of

occupancy, they might avoid costly upgrades to facilities where they are not needed. and of course, it would realize a lesser rent loss. i will turn this into you and make sure that the clerk as a copy as well. i wanted to go to the issue that i think was raised by the budget analysts last wednesday, a question about how the team is proposed to be reimbursed for its infrastructure works. the basic proposal here is that the authority would provide private financing to meet waterfront improvements and that the city would offer long-term development rights as a way to repave that investment.

we have contemplated commercially reasonable financial terms, these longer- term development rights with a rent credit as a way of making sure that they get their money back that they have invested in the waterfront. that is a mechanism we have used in other long-term development agreements to read a private investment. the question that came up, there is also potential tax improvement financing under this proposal. the port was successful with of getting an infrastructure financing law that would allow growth and property taxes to be reinvested in public improvement along the waterfront. i think the staff raised the issue of whether or not there could be to forms of repayment

as a rent credit and financing. we have been in consultation with and the city attorney's office, and i want to thank them for crafting a new clarifying amendments. it makes clear that the grant credit calculation as to back out any tax increment financing that would be subject to approval by the board of supervisors. i want to pause there and ask their -- and ask if there are any questions. it makes clear that the city will only pay once for these improvements. there was a lot of press coverage over the course of the weekend, the letter from the team. and members of the board of

supervisors as well. there was a counter proposal sent to the city's team over the weekend. without getting too much into those in terms of my presentation, i want to say that i am available to answer any questions you might have about the concerns in a letter. if you want to discuss some of the things they raised in the counterproposal, we would be happy to do that as well. supervisor mirkarimi: other than the quality of the letter, was there anything of surprise? >> the concern underlying the letter and the counterproposal is the desire for some certainty. it is a highly uncertain process. we have future approvals are required down the road. the team is trying as much as we can to try to gain more certainty in the agreement. we understand that

representatives of the team are coming to town this afternoon to be able to sit down with them and discuss the ways in which the city can provide that certainty. we want to make sure that it is a good investment from their perspective. we talked last wednesday about commercially reasonable financial terms. we want to make sure that the port is getting a fair market rent consistent with the budget analyst recommendations, and want to make sure that private investors are realized on the terms. we look forward to those discussions and we will keep you apprised. supervisor mirkarimi: absent a king of sand francisco or prime minister, we are doing the best to provide whatever certainty we can.