they don't live anywhere near the project. they won't be impacted by it. reviewing the project, and also review the plan and looked at numerous objectives and policies that are in there. i want to bring up the obvious one that is referred to here, to maximize development potential and keeping with neighborhood character. it uses the word character 44 times. that is very important in these guidelines. i see that this project gets the benefit of the higher density, but it fails to fulfill the other part of it, staying in character with the neighborhood. of all the ideas that are promoted, all of them are

encouraged or discouraged. there is only one item that is strongly discouraged. that is street level parking. i wonder if they would consider eliminating street level parking to identify the high density development appropriate for this area without sacrificing the quality of the neighborhood. the neighbors spoke to the east and west. those are large apartment buildings. they would also be diminished and their value. one last thing, it is a strong recommendation to build family housing. [chime] i think it is going to be hard to keep families and their. president miguel: next d.r. two minutes.

>> commissioners, i would underscore the simple request for the minor modification that the project sponsor has agreed to. i notice they have not mentioned it, but we have an e-mail exchange here where it is clear that they were willing to accept this. the conditions being that the garage would not be modified. and he would withdraw his d.r. i am showing you that the dialogue took place and they are requesting that they take the d.r. she has three units affected

directly on the main living room of those units. thank you. >> it is difficult when you have neighbors saying it will change our neighborhood. you are the city planning commission. you adopt a neighborhoods plan and deliberated. this used to beat a 50-foot height limit since 1972. you chose to raise the height of it by 5 feet. recognizing the fact that the city needs more housing and that makes sense to build higher density transit corridors. i think you have demonstrated that this building is

essentially 40 feet tall visually, and it is set back 15 feet from the front. basically 32 feet from the rear property line. that impacting neighbors in any significant way, there are those diagrams that get more by having the building design the way is as opposed to a 40-foot building that would match the existing development. i respectfully ask the not take the discretionary review and you approve this project has designed. we're open for the design modifications with respect to the elevation. it has been demonstrated that the architect is very versatile. he did the design in he can do whatever he wants.

he is very capable. in terms of process, you can't design for two people. that is why he likes the victorian motif. that's fine. we are working with in the residential design team. [chime] that is who we listen to. you can't please -- president miguel: thank you. commissioner borden: this is a lot different from the case earlier. i was one of the commissioners that spent months with the few of us that were able to go through the majority of the eastern neighborhoods process. it was not easy figuring out the process and the height and the zoning and all that stuff. it is refreshing to see a project that comes in requiring no variances or exceptions and

below the height limit we sat. that is what we asked for. it wasn't something that we sell 20 years ago. it was the last couple of years. it is hard to do a project that does those things. i understand the concern, and the issue that we deal with is knowing that people would be upset about a taller building. the project sponsor could do 55 feet. i think that there is obviously some issues with communication among neighbors. i am glad to know that the picture we saw was the result of something else and not a general maintenance of the site. i would like to think that hopefully, in the future, the

project sponsor will move forward in a much better direction. i spoke to him about my concerns about their and they assured me they had done community outreach. i wanted to say something about this piece of metal. -- the submittal. i don't appreciate the name calling of our planner. it was inappropriate and wrong. there are some things that are outrageous accusations. it is never the right approach to go. you may not like what the staff is saying, but is never appropriate to make acquisitions -- accusations the are quitedamnig. -- quite damning. in deference to their agreement

that was made, they will make the modification. my motion is to accept the modification that the project sponsor agreed to. in to approve the project otherwise. >> second. commissioner antonini: it has been a long process and it was interesting to see the earlier purgation. i would have been fine with a few units workings. the project sponsor has been encouraged to build a higher building and build more density and smaller units. that is what the project is. we can't go back to where we were before. i would like to see a couple of design things. if we can somehow cover up that stairwell.

i know you have to have it, but the building would look nicer if you didn't look into an open stairwell from the front. and possibly we could articulate be smaller windows a little bit. and perhaps has strengthened the top of it. those are some of my design ideas. you can work with staff to make the design changes and i think the envelope seems to be fine. i did want to ask a question about this motion. it did ask that this agreement hobby codify that? >> i believe what i saw was not what we had agreed to. there is a property line window

essentially. they have windows that are property line windows. i don't think they are necessary. we would matched to their light well. they are asking us to step back where they had property line windows. >> whatever you signed up to is what i am talking about. >> i would like to have the drawing back up so that there is clearly on that. >> what are we gaining by this there? it doesn't seem like a serviceable space. you can't do anything with it. what are we really gaining with that foot? >> maybe you can pass of the e- mail.

>> on the very last sheet. it is directly from what they mailed. >> this is not modified. the property is set back 1 foot and only requires a two-foot incursion. it's not one foot past the window, the angle starts where the window begins. president miguel: we are just saying where the light well is matched. is that what we're doing? do you understand that? >> [inaudible]

here's the rational. that one room that comprises the living room -- >commissioner borden: i made the motion of something that was agreed to. >> the whole reason is to allow that living room ventilation. it is not about life. >> if they were in agreement, we wanted to make sure it was part of the plan. if there is not agreement --

>> [inaudible] commissioner borden: so the modification would be to take the d.r. and match the light well? >> that is how it is now. the whole reason was to allow that one window to be free. commissioner borden: i understand your point. the building is otherwise compliant. we were trying to make an agreement there and we would like to recognize a private agreement when there is told there is mutual agreement so that there is something to be held later. >> perhaps what we could compromise on is where the light well is, match that at the same

45 degree angle. you get that matching. president miguel: that would be my interpretation of it. >> matching the 45-degree well. commissioner olague: is that okay with you guys? i don't want to belabor it, but i want a sense of what you actually -- in going through some of the materials, it is sort of alarming the number of allegations that are made here. i might ask mr. murphy to respond to some of them.

there are all of these sort of allegations in this document. i didn't really want to go into it. i wanted to second the motion because i wanted to make sure there was language that would make something enforceable on some lovell -- level. why did not get to address this with mr. murphy, but i wanted to encourage a more positive interaction. it seems in the past, that has not always been the case. >> this change shown in the drawings would go a long way to satisfying end. there is concern for having to defend the property rights.

[unintelligible] commissioner antonini: the only other thing that i would mention, hopefully continue to work with the staff on that. they did mention [unintelligible] commissioner moore: i wanted to take a second in discuss the suggestion by commissioner antonini. i do not think i want to participate in a design recommendation like this. it comes -- it could create a very difficult situation.

i don't think i should really caapprove the project with conditions like that. i am not disrespecting in. commissioner antonini: i believe they have that latitude with the design. >> there is a motion and a second to take the d.r. and require the project sponsor is here to the agreement to provide a matching 45 degree angle.

president miguel: -mirror image. >> on that motion -- [roll call vote] so moved, commissioners. that motion passes 6-1. president miguel: 15 minutes. >> we resume to 6:00 p.m. calendar, close to 10:00 p.m.. item 18, park merced mixed use project overview and development agreement. informational presentation only.

if everyone who speaks could approach the shorter microphone, we are having technical difficulties, and we appreciate that. i>> good afternoon. we have this evening the informational hearing for the park merced mixed use project. this is the fourth in a series. in 2010, we had a hearing to go over the project an agreement in general. we had hearings for the open space. in december, we were at san francisco state for a hearing out there. on the 16th, we were back at city hall, where we had a hearing to discuss transportation and housing and rent control portions of the

development agreement. today is the final scheduled informational hearing. there is one primary topic scheduled for this hearing and that is the economic analysis. michael will be giving the presentation on that. we also prepared a few slides to follow-up on specific questions commissioners had brought up that previous hearings, particularly the last one. there was some questions about facing. we have also prepared a couple slides to update you on the latest developments regarding the development agreement and right control issues. we have prepared a couple of slides that commissioner olague had requested regarding parking. we also wanted to present to you briefly to renewable energy agreement, which is part of the project. because of time, we may skip the

miscellaneous topics unless the commission wishes to discuss them and focus on the economic analysis. the other item on the calendar is the proposed initiation of amendments to the general plan, planning code, and zoning maps related to the plants. it this item has been continued a couple times from earlier hearings. should you initiate today, he could hold a hearing on or after february 3 to take action on these items. president miguel: it probably will not be february 3, because that is chinese new year, lunar new year. >> with that, i will turn over the microphone. >> good evening, commissioners. my name is michael, office of economic and workforce

development. it could be here on this late evening. -- good to be here on this late evening. we will try to move quickly. i understand you have had a long day. i am going to focus my presentation on two reports that were generated from the office of economic and workforce to government on behalf of the city. they were posted on the department's website over a week ago, and i believe you have received copies as well. these reports are the draft pro- forma review and public benefits analysis, and the second is the draft fiscal and economic impact analysis. there are two consultants from a consulting firm here tonight. if for some reason any of you have specific methodological or technical questions i cannot answer, they are available to answer any questions that i

cannot. it just broadly, the purpose of these two documents is to provide the city with an independent, third party, a professional review of all matters related to the feasibility of the project and the fiscal impact of the project. both reports are based on a 20 year development projection, outlined in the eir and made up of four illustrative development phases. these are all in the eir in great detail. the assumptions and the pro forma review inform the fiscal and economic impact analysis. that means the projections for rent, sales prices, office lease rates, etc., that is what ultimately gives us the data that tells us what the benefits are for the city's general fund and tax base. the estimates and projections

and both of these reports represent the best professional estimates of likely market conditions and build out. market conditions are dynamic, and these conclusions are general projections and not specific predictions. but we believe they are about the best that we can give you. first i will focus on the draft pro-forma review and public benefits analysis. again, our goal was to provide you, the decision makers and policy makers, with an informed an independent third party perspective. we're not relying on the developer's numbers but our own analysis. a second, we wanted to verify the economic feasibility of the project to assist us in our negotiations. we also wanted to quantify for all of you and for the board the greater public benefits than what could be achieved through application of existing

ordinances and regulations. that is one of the prerequisites for economic agreement and california, that we're getting more than we could have gotten under other existing regulations. we also wanted to assess the risks resulting from altering the negotiated public benefits package or from changed market conditions. we want to provide you with some of the trade office, if you will. and finally we wanted to understand the projects impact for the city's long-term and short-term fiscal health. the key findings from the study. under current market conditions and under best estimates for future market conditions, the product currently has an internal rate of return of 17.8%, which is slightly below the market threshold normally required to attract investment. for those of you familiar with the term, this is how investors

judge between the various investment vehicles. itthe irr is usually adjusted for risk. for horizontal or master developments like this, irr's in the 20%-25% range are more common. but this project is somewhat unique because it has a source of interim income in the form of the 3200 apartments already there. in some respects, it is perhaps less risky than a standard master development project because there is a source of revenue and the developer has income while they wait to build out the project. we would suggest an are consultants believe that perhaps the irr for this project may not be necessarily as high to attract investment. the big news here is that the proposed public benefits package, and this is important,

this deli represents those benefits above and beyond the planning code required, ceqa required improvements. specifically, what does this exclude? all existing impact fees, including about $22 9 million of estimated affordable housing this project will pay out over time, including school fees, including jobs housing linkage fees, including transit impact about fees. -- impact fees. what is represented here is what we believe it is above those benefits. roughly that equals about $500 million. about $360 million of capital improvements. it is about $172 million of committee benefits, parks, streetscape improvements, organic forms, intersection

improvements, and $156 million in present value terms of future operations and management. it if you recall, we have quite ambitious operations and maintenance requirements. essentially, the project will pay its own way, with the exception of the streets. that is a big package of benefits. some caveat. where do we get these numbers from? we reviewed it and that tested the developers performer assumptions. this is not are pro-forma, it is a project pro-forma owned by the developer and is not necessarily public information, but we were allowed access to look at their inputs and assumptions and test various changes in those inputs. accordingly, we cannot rely on the developer's projections for sales prices. we did our own independent

research on what they thought were reasonable projections for rent and sales prices and weak and put it our own variables and check what we thought were the estimated costs -- and we input are invariables and we checked the estimated costs. in sum, we concluded that some of the developers revenue projections were perhaps aggressive. again, our estimates were based on what we believe are the most reasonable projections for future market performance. what does this mean? we ran a series of sensitivity tests to look at what change conditions, how that would affect the project. again, we feel that the best projection in the future would render about 17.8% irr for the project. we believe that the project is close to the margin of feasibility, but for those other reasons i stated, we think it is viable. maybe no