cut is -- cup is fiscally feasible. we consider, of course, the approval of the proposed resolution. supervisor mirkarimi: unless we have questions from colleagues, we will probably return to you. will ando askedewd -- we will ask oewd to respond to your recommendation. if that's all right, colleagues.

>> good afternoon, supervisors. this morning, my office released our fiscal economic assessment of the northern waterfront agreement that was introduced last week. the major change with respect to the northern waterfront agreement with the addition of long term development rights for 26 at 28. -- a and 28 -- piers 26 and 28. because of the uncertainty surrounding that, we did not try to model the infrastructure financing agreement, and it appears to have been modified to address that. what we have tried to do is

fully account for all of these assets and liabilities that this event would generate and to consider them effortlessly and together. for us, it is this sort of tail that wags the dog, to review some of the figures in the report of last week. this seems to be rough consensus that there is a neighborhood of $20 million in debt will be generated by the event itself from visitors, and tickets, the operations associated with the event. as of last week, there were varying numbers. that would be things like muni

costs. $15.2 million is about what the analyst has said. in the event itself, there is a slight gain. on the other hand, there are port-related costs of about $17.8 million. that means exclusive of the impact of long-term development, it generated $13 million loss for the city. if it generates tax revenues, rent revenues, asset values, then the america's cup generate the fiscal benefit -- generates

a fiscal benefit quite comfortably. the event authority would be required to conduct development on those sites. there seems to be general agreement that it would be redeveloped as condominiums. the project we have envisioned is slightly larger, but in any event, the important saying is that the development rights going to the authority, it will obtain a identical conversations from another developer. it does not generate a net benefit for the city. these have a useful life of 10 years. no financing has been found to restore them.

this appears to be the only way to save them. the ground lease revenues would incur commercially favorable terms, after the 66-year lease, it owns the property. all of that value would more than offset what the authority is spending on infrastructure, $55 million. the project would host or create permanent jobs after the event. this is essentially a property that is being saved that would post jobs in the future. this is a table that goes through the detailed accounting of how to get to that number.

the top is showing the general fund tax revenues. in 2027, when we project the mixed use a terminal will be feasible, the general fund obverses not having an event has a net gain of $60 million. when you consider the general fund together, then as they -- there is a net gain. in addition, the northern waterfront alternative provides optional development rights for 26 and 28. these properties are similar and that they are nearing the end of their life.

they each have a useful life of about 15 years, roughly the same amount of time. there is no project that is currently planned, and according to our analysis, if there was no america's cup stepping forward, we lose any future development that could take place. for these projects in particular that were conceived in 2025 were a mix of retail, office, and some industrial. that is only important because the more office there is, the better it is for the city getting tax revenue.

we have kept the office to a minimum. that might be the reason that these two piers in particular create a shortfall in terms of tehe rent credits they might be liable for. that shortfall is about $2.7 million. the pier 26 project was hypothetical, but given the s size andge the -- the size of the shed, the smaller structure could sustain about 190 permanent retail jobs. the shortfall that i indicated

-- and about $22 million loss for the port. this is very much dependent on what exactly the developer chooses to build and what exactly the city approves at that time. not withstanding the small shortfall, the city does gain revenue on a net present value basis. i grant you that there are cash flow issues, but the long term tax revenue gained really would not exist if they were not renovated.

it generates a long-term tax revenue to make things possible for the city even when you deeply discount the future revenue to the city. it would support about 225 permanent jobs. they would not likely be in san francisco because they're so close to the end of their life. that concludes our report. those are the main conclusions. >> one of them attached to your employees here with regard to the jobs after the event itself, what about the overall investment in that part of the pork? -- port? would that even be a possibility that you can imagine or detect if this was even being

entertained? >> if there was no america's cup, a private developer would have to take on these infrastructure costs. these projects will not pencil by themselves. that is really the stop-gap advantage of having the america's cup. if that was the case, if they had a lumber useful life and did not cost some much to renovate, you could imagining a situation where a private developer could come in and develop without any rental credits and make that much more money. given the condition that they

are in now, it is simply not feasible. supervisor mirkarimi: but it envisions what would become of this area. >> there is no developer step forward to do that. supervisor mirkarimi: supervisor alioto-pier has joined us. supervisor alioto-pier: let me make a comment to some of supervisor mirkarimi's comments. one of the things we did not get

off of the ground it was a very heavy project. i think something that we need to be very cognizant of the is that if we don't do something, we lose them. if they fall into the water, they won't let us put them back. it is a crucial time to have some type of a plan to restore because the cruise ships can be such a vital economic boost to san francisco. i am curious looking at this, he had mentioned office space and retail. was there ever any thought --

what would be best thing be for sentences go? did we ever look at the hotels? i am curious to know if we have looked at what type of businesses or tenants would be most profitable to send an it is? -- to san francisco? >> the mixed use of cruise terminal people have been talking about for a number of years. that is why we project so much sales tax for the city. for piers 30 and 32, we were conservative in what we imagined. we did not want to imagine any uses that were currently -- we are not reporting to sort of put forward a plan for those peers.

we just need a reasonable numbers to say what might in project look like? what could we imagine those tax revenues being associated with? i think rather than saying would be the best thing for the city, it would be other considerations. obviously. >> you don't remember the numbers being conservative? gosh especially on 26 and 28. >> i left out one important point that and want to refer you to. i've already told you an hour prior report on the long term development rights, we are reporting there would be a net gain as opposed to a net loss

for the city. with respect to the direct cost of the city's treasury, if you take a look on page 3-2, we are stating it will cost the treasury of $11.9 million whereas previously we reported it would cost the city $57.8 million. that is a significant improvement over the original deal. the reason for that reduction in cost, the primary reason is that it would be used under the proposed northern waterfront alternative agreement that requires further improvements and a reduction in city costs. and the cost of any dredging and needed to prepare for the event was previously proposed as a cost of the the prior agreement and is now an event authority cost under the northern

waterfront alternative agreement. in both instances as well as the development rights, in both instances, this deal has significantly improved from the prior deal that went before you. supervisor mirkarimi: anything else? supervisor avalos: one more question. you mentioned 1765 permanent jobs, what types of jobs are you expecting? >> the facility has a cruise terminal, but also over 300,000. 375,000 square feet of office. supervisor mirkarimi: anything

else further? would this be an of daytime for you to follow back up with us and the budget analyst? >> we have reviewed the budget analyst's recommendations. i will speak to most of them and then ask the court to speak to a couple of them. with regard to the first recommendation to require that they fund raise $32 million, we expect ceqa will be completed by december 31, 2011. we can't have it to be a feasible term in the host city agreement. we believe that the organizing

committee raising what we expect to be double the amount of city exposure in the first year with termination provisions, it is all the protection we can get. we respectfully request that that formulation or languidly included in the agreement. with regard to the proposal that the agreement requires the golden gate yacht club to defend the 35th one here, we believe it will look significantly different. the current agreement requires the organizing committee to assist in raising over $270 million. it is unclear what that number would be in a subsequent race. it is unclear what their role

would be. we would want to be able to revisit that as well as their be very different facilities being used as 27 would be under way as the cruise-ship terminal. we would welcome the opportunity to negotiate that. supervisor avalos: a question on the first recommendation, you can probably answer this as well. on page 3-3 of the budget analyst report, they noted that the net loss to the city would be $11.9 million and it would be before the organizing committee would raise $32 million, is that correct?

and >> members of the committee , when the money is raised obverses when the costs are incurred? >> have an estimate of what the net cost to the city would be, and it is $11.9 million. does that count the $32 million? if we are getting $32 million and it is being raised by the organizing committee, that would offset this 11.9 million? >> this is over the entire time frame of hosting the event. it is between now and 2013. >> i want to emphasize that the

reason that we made this recommendation for a requirement, there were letters, testimony that the organizing committee would provide $32 million. we are saying let's codify it. let's put that in the agreement. it could be less than $32 million. that is why we say to codify the recommendation. the main point is that there is all this publicity about the organizing committee. coming up with a best efforts is a far different cry then making some sort of requirement. >> i am creating a temporary

assessment district. as you know, the assessment district needs to be assessed by the property owners that are affected. i think that we would hope that we would be able to tell our businesses and property owners that the added benefit of having america a 'scup would be able to recruit and we continue to believe that we have provided -- assessment districts had not flow back to the city. they flow back to the district for improvements. we don't think it is necessary a vehicle for realizing more tax revenue. lastly -- supervisor avalos: did you weigh in on the discussion of fair

market rent verses commercially feasible? >> we have been an extensive conversations with her regional transportation and security agencies about what we commonly call mutual aid for this event. we believe that entities around the region will be directly supporting security and transportation for this event. and that we are going to be counting on them to provide that added transportation and security hot water and on land. it is that kind of form of mutual aid that we think is already under way. supervisor mirkarimi: it would be safe to say that the benefits

would also be regionalized as well. >> part of what we are saying is why we should not bear the cost of the increased buses that are needed. they are realizing it upside having more tourist activity in being generated as a result of america's cup being here. >> i am in the waterfront development group and i want to address recommendations 2 and 4. number 2, regarding the oversight for term sheets, we would be pleased to work with the city attorney to come up with recommendations that essentially enacts a recommendation that stems from

the budget analysts thought it. and the procedure we have worked with for bringing things to approval. we think that recommendation is something we can work into the host city agreement. we think it reflects good public policy to have oversight. the question regarding fair market value, i think we use commercially reasonable terms. fair market value has a very specific meaning that generally refers to fair market rent. when describing the bundle of terms that would be needed to negotiate these subsequent legacy long-term leases, there was a number of terms that have the benefits -- have to enter into that.

we used a more general term of commercially reasonable terms to go beyond dust of the rent numbers. we think we are amenable and it is appropriate to create market value. there is this a specific term of commercially reasonable rent. >> i think we would clarify what commercially reasonable terms would mean. i would also like to comment with my colleagues and i have the pleasure of working with. i have been one of the chief analysts for the port teams to try to come up with devaluations of the long-term leases. if i could go to the overhead. this is the second table page 19

of the report. i like to say to the comment about whether these analyses are conservative or what these represent, to project the fiscal revenues of the legacy leases is always tricky. having worked with all of these professionals, we concur with both of these analyses. we think they reflect different ways of looking at the future of the legacy leases let alone the overall cost of the city into the port. the one thing i wanted to add to the budget analyst reports was on page 3-4, they tried analyze 26 and 28. i think you see one of the

reasons for that is that there is a number of assumptions in a short time to come up with a good picture of what the fiscal benefits are. what is important to point out, the rent was associated with 26 at 28 given their approximate life span is just over $10 million. even if you subtract the $10.1 million from the $12.3 million, you would essentially considered no fiscal benefits, no rent, though bond capacity gained unless those numbers go down but still positive in the next fiscal benefits from the current conditions. i think it is a really good summary of how to view the short-term and long-term short-term and long-term benefits.