independently verify what we think the cost of those improvements are, and when we come to you with the term sheet approval, which includes the approval of the scope of work, we will share with you that independent, third-party engineering analysis as to what those improvements are likely to cost. there could be variations between that engineering estimate and the actual costs incurred. it will be important when we are looking at, in particular, 30, 32, that is an area where the costs are going to be high, that we look carefully together at that and make sure that we are confident about what the improvements to 30, 32 will cost. chair chu: and just last two, i want to make sure i understand this, it is not currently contemplated in the agreement, from i understand in, and it

sounds like you have two answers to that. one is the fact that you believe you can still accomplish that goal through negotiating the long-term leases, and so, it may not be in the whole agreement, but you believe that would be something that would come back to the board as we are anticipating approval of long- term leases, and that would be where to put it in, that is one thing that i heard, and the second is not really speaking to whether you are materially changing the liabilities and obligations. that is talking more about whether you are going to benefit as much or not. >> that is correct. chair chu: and that the last thing, the transfer back in the short term, the interim basis between the america's cup 34 occurs and when long-term use may occur, your answer to that is that that is not something that is unusual. the portis does short-term leases, -- the port the short-

term leases. -- upwards does short-term leases -- the port does short- term leases. in terms of liabilities and obligations, you do not see that, but what could change is the revenues, and that is not really the same vein as a change in material obligations -- that is not really the same thing? >> given the bid and scarcity of parking in this area. chair chu: ok, thank you. supervisor campos? supervisor campos: 80. let me begin by saying i have a lot of russett but.

chicks' thank you. let me begin by saying i have a lot of respect -- thank you. let me begin by saying i have a lot of respect. there are people who do not want to see the america's cup come to san francisco or come to fruition, that we are providing some ammunition to present a legal challenge here, but i do think that this is that reasonable minds can disagree about whether or not material changes were made, and at the end, the question is whether or not the amendments that were made were materially different than what the board approved, and to the extent that there is any room for disagreement, the last thing i would like to see is whereas as a city to be engaged in any litigation that will india and only hurt this projects -- that will in the end

only heard this project. this is my concern. i think you are opening the door for someone to raise that issue as a material change, and the reason i say that is because we have to put this in context. the original agreement had specific properties that were the subject of that agreement. at least one of those major properties was taken out of the agreement, so the board really does care about what port properties are included in any deal for the america's cup, so when an amended agreement adds up to five properties for development, that, i think, could arguably be material, and so, i do think that is something to think about but is very significant, especially the way in which the amended agreement deals with pier 29.

if you go with what the budget analyst's report is saying, in regards to pier 29, the authority has sold discretion as far as its selection of that for a long-term lease. that is what the budget analyst is saying, and he is basically saying in that report that there is no need, new requirements, for further board approval on that lease. you talk about reasonable discretion. i do not know what a reasonable discretion means, because the word "discretion" means that it is arguably a unilateral decision, and it is a unilateral decision that is not made by this board but by the event authority, so, again, that is a very real concern that this only goes to the heart of what this board of supervisors is , so that is another concern that i have.

on the issue of red, i just want to go over this. . on the issue rent, i just want to go over this. -- on the issue of rent, i just want to go over this. we asked for an approval. by the way, the language that covers this that it is based on the appraisals the portis does regularly to establish the fair market rent, -- the appraisals that the port does regularly. they need to be done on a regular basis because the market fluctuates. that is different from what the board of supervisors approved. another concern is the issue of what do we beat -- the rent

credits, which is something that the budget analysts also point out. the authority would not pay any base rent whatsoever for piers 30, 29, and that they will need to be reimbursed to the authority at some point, but what the -- what is pointed out is that that investment could turn out to be incorrect, so the fact that the current agreement precludes any payment in terms of how deals with that, that is something that might be problematic for the city. we might be selling ourselves short in terms of that calm and then, there is a lot -- in terms of that, and then there is the transfer of properties in the event the authorities -- term development rights -- back to the port.

the rent would be less than what they are entitled to by the authority. there are a number of items where i think someone can make an argument that there has been a material change in terms of the city's financial situation, vis a vis the agreement that we approved and sent -- and the agreement that is before us. i want to see this event in san francisco, but i want to make sure that we do with in a manner that is consistent with what the 11 board members agreed on. i think that serious questions have been raised by the budget analysts, and while i recognize the reasoning behind what you are saying, and what the city attorney's office is saying, i do have very serious concerns about it. chair chu: thank you,

supervisor campos. we have asked and mentioned a lot of things under mr. rose's report, but i will ask if you think there is anything in your report that we should draw attention to? supervisor mirkarimi: do we want to bring this up for someone else before we go to him? chair chu: sure, anybody else? >> thank you, supervisors. the port staff read about what was transpiring and some of the changes that were made after the 14th are accurate, in our view, as well. it we have been together the entire time. we are also there with the city attorney the entire time -- we were also there. this was not a situation in

which staff under the policy guidance of the mayor was making changes that we were then bringing to the city attorney's office. the city attorney's office was part of all of the discussions, and we had the authority granted to us by the board and the mayor to further it to bring this event here, and all the concepts that were being discussed in debated -- in debated, we relied on others for the determination and to give us the guidance that we needed on what was and was not a material change as we were going, and we were advised we were not making material changes to this document. we endeavored as some of these changes were being made at both the director of the port commission and myself reached out to members of the board to acknowledge that some of these

were significant and that they were being done in order to bridge the gulf between us and the event authority concerning certainty, and that is why we endeavored on january 4 to provide with a memo to memorialize those changes, and we think that the changes that they hyalite are the ones that we acknowledge are the ones that were made -- and we think that the changes that they highlight of the ones that we acknowledge are the ones that were made. these changes as they relate to the long-term development. they are not really about the america's cup and putting on the van. what we have been doing since december 31 is actually getting prepared for this event. the sustainability plan and the

outreach that we have made to our sister agencies at the state and federal level, and many, these changes are all about the long-term development rights that stem from the developments, as brad benson said, we do not know what they will be , so that is it for now. we do what they will be , so that is it for now. -- we do not know what they will be, so that is it for now. chair chu: -- >> i respectfully have disagreements with respect to the question of materiality as to what the city attorney's office has stated. i have a statement, if this committee wants me to make the statement. if not, i will respond.

whatever the committee would like me to do. supervisor mirkarimi: -- >> the objective of our report, as requested by supervisor mirkarimi, is to identify any disagreements between what was previously approved by the board of supervisors on december 14, 2010, with the agreement that was modified by the mayors of this and other officials -- by the mayor's office and other officials. our analysis did not, and i emphasize not, include an assessment as to whether the agreement as modified is in compliance with the resolution 585-10, as recently approved by the board of supervisors. to modify and amend the agreement and to do what was necessary to bring the cup to san francisco, provided that

such changes, quote, do not materially increase the obligations and liabilities of the city and are necessary or advisable to bring the 34th america's cup to san francisco, and of -- end of quote. in compliance with the board of supervisors resolution 585-10, based on analysis. we have identified modifications to the agreement since its approval by the board of supervisors on december 14, 2010. they became material changes in the process and contain material impact on the port. as previously approved by the

board of supervisors on december 14, 2010, so i use the term "material impacts," as opposed to what was stated in the resolution, liabilities and obligations, and that is why i stated we made no judgment as to whether the board of supervisors' resolution -- we simply at the request of supervisor mirkarimi, we are reporting on changes that are made. regarding the inclusion of pier 29, as modified by the mayor's office and other city officials, we have been asked, and some of question the accuracy about our report, that they can decide unilaterally to include that as a -- turbulence inside. to clarify, et -- to include that as a long-term developed at -- development site.

19, 23, 27, 29, and 80. these five properties were not included in the agreement that was previously approved by the board of supervisors on december 14, 2010. as stated throw out the details and the report, the properties can only be conveyed to the of the authority if the expenditures on infrastructure approve minutes is agreed to by the city and exceed a certain value and have not been reimbursed by the city -- can only be conveyed to the event authority if the expenditures on infrastructure improvements is agreed to by the city. in one part of section 7, it states that if the event authority note -- maturity expenditures exceed a certain

value, but -- if the event of 40 expenditures exceed a certain value, -- if the event authority expenditures exceed a certain value, -- each of which would be subject to city approval. of course, leases for any of these five properties would be subject to the board of supervisors. however, i want to emphasize that many of -- none of these long-term leases were included in the agreement of december 14, 2010. that concludes my presentation. i was going to have one man go over very briefly which of the changes -- again, this is certainly up to the committee. chair chu: thank you very much. i think we have gone through the changes that you had indicated

pretty exhaustively, so we will skip that. thank you very much for the work on your report. we want to go into public, and so we can make sure we provide for that unit there may be some statements. just one last thing from me from it -- to the city attorney's office. i think people are differing about what is or is not a material change, board members, the city, the court. there are differing conclusions about that. just to clarify, the official conclusion and determination of the city attorney is that it is not a material change. is that correct? is that sort of generally where the city attorney's office is? >> supervisor chu, deputy city attorney.

for the negotiators to conclude that there was no material increase in the obligations and liabilities. chair chu: that being said, and still appreciate the opposite of economic and work force development's comments about whether or not there is opportunity to correct some of them if we are able to, so i do want to say they keep for that. -- say thank you for that. supervisor mirkarimi: what would constitute a material change? i think we can debate this as to what is material changes, but if, in fact, we are now made aware of there being a modification to the agreement of december 14, 2010, to december 31, a dollar amount that had shifted, adverse to

what we had hoped, maybe, maybe it was compensated by some other part of the agreement, what part of the idea was considered a material change? you are not on mic. >> i think i am. i am sorry. i did not have the microphone close enough. again, i would like to say that it is the opinion of the city attorney's office, with respect to the overall changes and not to a change that was proposed or adopted in isolation, but, certainly, if there was a significant increase in the cost to the city -- supervisor mirkarimi: if it is not quantitative as to what significant would mean, what is the qualitative, then? >> again, in totality, and there could be either a quantitative

or a qualitative increase. " it depends on the particular circumstances -- it depends on meticulous circumstances and the changes adopted. -- it depends on the particular circumstances. hypothetically, if the event authority was going to pay a slightly lower rent, so there was a rent reduction of $100 for a particular pier, but the city was getting an increase on another pier of $500 in rent, we would look at that in the aggregate and consider that it was a positive and that there was no increase and the liabilities. supervisor mirkarimi: so in the question of pier 30 and 32, and

after it other people spoke, mr. -- and after other people's oh, -- other people's " -- people spoke, mr. benson and mr. rose, that could have been part of another agreement that was modified? >> that is correct. one can draw a distinction between a material obligation and a liability and a reduction in the potential for future revenue. they are not necessarily the same. supervisor mirkarimi: sure, sure, absolutely. that is why this conversation seems a little bit more abstract, identifying what is material and its increase or not of our liabilities and obligations.

would it be different if this were the end of the negotiations, where we have a dda before us as opposed to this sort of interim check up? we have a concern to say there is a $2 million modification, where we are getting less rent? would that the less abstract? the laws? >> the leases and the dda's are stand-alone agreements. that had to do with the change. supervisor mirkarimi: i am looking for the contra. -- the entry points. the term sheets or whatever comes back to us, i am looking for the entry point. -- points. chair chu:

that is an excellent question. just to step back, part of what everyone is struggling with, the staff, for staff. this is really a road map and tries to go through many cases depending on level of spending. how much money do we expect to be expanding. it is that point that this is a successor agreement that can be drafted and we have the term

sheets in the summer based on those numbers that would leave a great deal of uncertainty. >> but you are operating under a different standard as modified. that standard is the point and the concerns and raised eyebrows as to whether how substantial these changes are. starting from that bracket -- >> given where we are in the process, it is important to note that we have the signed agreement. we have had a number of hearings back through december and november where many of the public concerns have been

voiced. some of these contingencies, some of these cases about whether they give back the property or whether certain properties would be in play or not is based upon the investment value. if you say that there are some remnants in the amended agreement that will have to be addressed, that would be a possibility.

>> who was informed of these changes? is it through the protocol with the president for was no one notified? >> i know that any board of supervisors member that expressed interest was contacted on a regular basis. >> i was an interested party and i guarantee you i was not contacted. >> we have one more item. >> just a quick question. you said that the staff had a reasonable argument that there was no material changes to the agreement.

taking the other side, is it possible that a taxpayer could be found to have a reasonable argument that there was in fact reasonable changes? >> i would agree that reasonable minds could differ but the question is whether or not the negotiators could reasonably have concluded that there was a factual basis for their business assessment, that there was no material increase in the liabilities. if so, our office believes that they can appropriately and less the changes made. >> do you think that a taxpayer looking at this could have a reasonable expectation that there was a change?

>> i would think the reasonable minds could differ. just as there is an interpretation made by the negotiators, that does not then mean that the budget analysts could not come to a different interpretation. >> that goes to the heart of this point for me. i and a stand that there was a reasonable basis for staff to understand that there was a reasonable change. someone could in fact are due that the material change happened. i want to make sure that there is clarification that there was a point made with respect to peer 29. looking at section seven point s