resolution finding the proposed cruise terminal project at pier 27 is fiscally feasible pursuant to administrative code chapter 29. supervisor chu: thank you very much. i believe that john [unintelligible] has the report. >> i also have hard copy handouts of the power point presentation, if you would like to see them. again, good morning. i am with of the port, a project

manager accompanied by elaine ford, the port finance director, [unintelligible] the finance crews and [unintelligible] dpw. there is a fiscal feasibility requirement. there needs to be a determination from the board of supervisors but the plan for and begin implementing the project is fiscally feasible before the planning department can begin environmental review of the project. however, chapter 29 limits the fiscal feasibility to mean only that the project merits further evaluation and environmental review. planning staff will review the project in concert with the america's cup project. next slide.

the general project is a project that represents the heart and soul of the port. a project that represents one of the last major maritime industries in san francisco. a project that bolsters maritime commerce and employment. a project that supports the city's tourism industry, solidifying the achievements already made along the northern waterfront area. finally, a project that the port has been trying to build for the last 20 years. the port intends to develop a new primary terminal to replace the existing facility appear 35. -- at peter 35. a terminal at -- capable of handling a facility that is user-friendly, operationally efficient, and cost-effective. the existing pier 35 operation is not optimal because of its short births, narrow aprons,

limited terminal capacity, high operating costs, and minimal passenger pick-up and drop-off areas. also, the substructure need further investment to continue to be operational. october, 1998, a staff report to the port commission stated that a new cruise terminal was required to efficiently meet the current needs of cruise lines and passengers, as well as the expected future cruise business. again, that was 1998. as a result of that, at the time the staff report was written, 27 cruise ships pulled into port. 2006, the number increased to 86. we estimate that the port in the foreseeable future will receive somewhere between 40 and 80 crew calls per year. since 1998, the size of the

cruise ships have increased dramatically. cruise ships visiting san francisco right now are currently in the 1000 to 3000 passenger range. many cruise ships operating in the gulf of mexico are larger, in the 3000 to 4000 passenger range. the reason additions to the cruise terminal plates include cruise ships with over 5000 passengers. in the near future it is expected that some of these 4000 passenger vessels in the gulf of mexico will not regularly visit san francisco. the port proposes to build a terminal to accommodate these larger ships with increased passenger loads. the court has twice attempted to construct a new terminal. first with the scandinavia project of the early 1990's, more recently with the lend lease deal at the bryan st.

pierre. both of these projects were public-private partnerships and both attempts did not succeed. the current cruise terminal development at 27 would be a public works project and would be principally publicly funded. although it did not eat -- did not yield the $27 million in seed money, it belies the project at pier 32 that led to the formation of a cruise terminal advisory panel that met in a series of meetings in 2007. that panel examined the inventory and recommended that the port develop a primary cruise terminal in pier 27. pier 27 was selected to be the primary cruise terminal site as it officially recommended the most cost-effective location on the san francisco waterfront. there is no seismic upgrade

needed. the pier is 1,300 feet long, long enough for post-panama ships. it is ideal for a gang way and provisioning with ample space between the areas. it will allow for efficient drop-off and pick-up areas that beget a vehicular traffic off of the embarcadero. in 2009 the board asked dtw to help with the project and a team was hired, architects working in association with cruise terminal design consultants. working to decide appear to be designed appeared 27 cruise terminal and public plaza. there are also provisions to allow it to be used in meeting in special event usage. the design team has recently

completed schematic design and development is currently under way. next slide? december 31 of last year, the city may bid to host the america's cup and it was accepted by the event authority, including the use appears 27 and 29. this use provides funding and support from the event the authority for the overall project costs and provides a viewing experience for the event occurring in 2013. as a result of this additional usage, the cruise terminal project is aligned two-stage improvements in a compressed project delivery schedule. under the host agreement, the authority is required to demolish the entire shed at

pier 27 and the non-historic portion appear 29, paying to relocate the equipment to a different location on pier 27. the port is responsible for completing a phase one shell on the terminal building by january of 2013 for use as the america's cup village. the event authority with an install temporary improvements for the cup races during 2013. the event authority is required to return the premise free of tenant improvements in early 2014, at which time the port would construct face to construction, to fill out the remaining portions of the cruise terminal, install maritime equipment like a mobile gang way, completing the improvements to the public plaza and the ground transportation area. the phase two project would be

completed by late 2014. >> excellent. in december 2010, court staff presented a preliminary budget to the commission that was $114 million. however, this budget was not aligned with funding sources. since that time, staff has moved from conceptual and schematic design estimates to the refined and available funding sources. they have performed a value engineering exercise to reduce costs and four, reduced the project scope from phase one to phase two. given the pressure to deliver the america's cup village by 2013, phase one funding is a high priority for the city and the port. the revised total budget to the port is estimated at $90.3

million. this does not include the event authorities obligation for demolition and to relocate shoreside power. separated into two phases, phase one is estimated at $58.2 million. the court will have funding for that amount, which we will describe momentarily. phase two costs are estimated at $32 million. at this point i would like to handed over to the port finance director to talk about funding sources. >> thank you. to reiterate what john has already described, $58.2 million, these sources " --

total 20.2 uses that meets the shortfall of $12 million. for phase one, the large majority of sources were at 87%. including sales from the water mark, land parcels at $20 million, revenue that we have issued in 2010 with interest earnings, planned future debt that we have been planning on since the last issuance of the construction phase of the project. also, we are proposing to repurchase the debt from the 2010 sale from the dock clearance project. we are also allocating our work

order budget for the fees associated with that the cruise terminal project to work with our own capital repair replacement project to fund phase one, which is 2.2 million for a total of 50.5 million. also included in phase one, the city contribution, which you can recall with discussed during the consideration of the america's cup. a southern waterfront alternative for the city to demolish the maintenance facility. shifting to the north waterfront alternative, 6.5 million for a project that adds value to the city in the long term. we also have a security grant for a total of $1.2 million in phase 1 with a total grant of $7.5 million, but that is the amount that we can use for

security improvements. those are the sources that get us to a funded phase 1 project. potential sources for phase to include the remainder of the security grant and reimbursement of the port revenue debt that i indicated was advanced in phase one. by 2012 gl bond. as you may recall, in 2008 aboard generously approved proposition a, including funding for an enhanced waterfront park as part of a larger measure. the city and council planning committee recommended that the second move from 2014 to 2012 to allow for the project in the northeast war for plaza. this was the last major parking revision to the san francisco waterfront.

but we have no shortage of advances in the bond, this budget does assume $9.9 million in proceeds. phase two of the metro operator contributions were cited at the cost of a mobile gaming system and a passenger facility charge, which we estimate to be 4.5 million, for your education, passenger facility charges utilized in several west coast ports, including san diego. it is a per head charge and a means to use a $3 per passenger charge. this is just showing the overall source usage of phase one and two in total. so, we have done a lot of thinking about the options to

close the funding gap in phase two, which we need to be for 2014, identifying a number of different potential bills before the state legislature. the first would allow the board of supervisors and the city to create an infrastructure financing district related to future development sites of the america's cup, capturing state shares. as you may recall, the worker shares are already pledged to the event. if we are successful with that measure, it will be worth $20 million. also, we will be looking at further opportunities for the new generation of special of an overflow convention parking and commercial leasing. the city will not only have an ending point of the america's cup, but also the sizing of the project and any other

opportunities for revenue. we will also be looking for new funding sources, such as grants. sized at potentially $3 million. continuing to look at our own budget if there are funds from existing works that are not required. also, the bidding environment is incredibly positive. a 5% reduction in phase two would save the project $1.2 million. we could delay the project until we find adequate funding, sized at 3.4. you can see the combination of these solutions resolving the shortfall. we are very confident that closing finance is possible given the opportunity for revenue generation based on the options but scribe. mr. dole went into some detail about -- detail about this, but to go over it again, the cruise

industry brings 200,000 passengers to the city annually, generating $30 million and supporting approximately 400 city jobs. in 2008 the advisory panel directed an economic study. they found that in addition to these local benefits that have worked regionally, that there are 66.9 million with 470 jobs. this would translate to $900,000 annually to the coffers of the city for the general fund. looking at the overall benefits of the project, it will enhance the city's reputation as a tourist destination and increased maritime command. recently, the princess cruise

lines combined with [unintelligible] to invest in the dry dock facility. cruise ships will be repaired and maintained in san francisco for crews calls, not only for dry docking. each cruise call at the port would generate significant work for members of the international longshoremen, truck drivers, supply companies and service providers, literally thousands of hours of skilled union jobs utilizing different maritime trades. the project will also continue with no. waterfront improvements, which are quite noticeable. serving as a lasting legacy for the america's cup. in conclusion, constructing this terminal is long overdue, two decades in the making. we will construct the project in

coordination with the 34th america's cup and there will be considerable benefits of this project. clearly there is an estimated shortfall to face two, 27.5 million for phase one of the project. the port and its commission strongly support the project, it is a worthy investment with a range of options to result in shortfall. supervisor chu: thank you very much. could i ask the budget analyst share report? >> as you know, this is not to improve that -- approve the project, but determined the fiscal feasibility.

on page 11, we point out the tables, page 6 the port identifies potential funding sources to meet the estimated project costs of about $90.3 million. there is a funding shortfall of $11.9 million. as has been indicated, there are potential solutions to that funding shortfall, but we point out at page 4, as needed for phase one of the project, that total is shown on table two in previously appropriated, but the remaining 27.9 million this subject to future approval for internal control. regarding phase two on page 6 of the report, an estimated 30.2 1 million is needed for phase two of the project. of the $20.2 million identified for phase two, $0.1 million

would be subject to future board of supervisors approval. as the remaining $9.1 million would be subject and outside the control of the board of supervisors or the port. four-door -- for those reasons, we consider it a policy to be adopted by the board of supervisors. supervisor chu: a quick clarification that you had mentioned and i wanted to be sure, with at this evaluation, we are just looking at whether or not there is a financial plan for the project. in terms of general fund contributions and keogh bond, they would require further action from this body. should there be an additional funding server -- funding source to provide support? or should there be different mechanisms?

generating a financial plan at this time. >> absolutely correct, madame chair. there will be future actions that you will have to take on this project. finding solutions will have to be changed. supervisor chu: thank you. supervisor mirkarimi? supervisor mirkarimi: the driving reason behind this, the ability of moving forward with this is clocked by the eir under way for the america's cup, correct? >> absolutely correct. supervisor mirkarimi: if it was not on that constricted schedule that everyone has to abide by with the port is working overtime to do their best in making sure that this prevails, the cost of this cruise terminal, it still needs -- it

still means uncertainty work out about future funding sources. especially if they do not all,- projected. can you think of many examples in recent history where we have done this before? where we are borrowing on the future? >> supervisor, offhand i cannot think of many fiscal feasibility projects that have come before the board. supervisor chu: supervisor mirkarimi: jig -- supervisor mirkarimi: and i was going to set way, but i wanted to make sure that the creative nature of this before us is grounded on the idea of certain variables having to line up. that alignment requires the kind of perfect scenario that helps to give the cruise terminal its next step into reality.

>> because of fiscal feasibility is called for prior to signing the application at the planning department, these projects by an early inception -- i did look at some fiscal reviews in which, 2007, the transportation feasibility of the port ranged from $180 million to $3 million, allocated to each project segment, timing at that time were not established. a flavor of how the agency would fund the project, but show, yes, in fact, it had reason for further environmental review. on the port side, the exploratory and project came here in 2008 on peer's 15, 17,

and $97 million project. the primary funding source was pledges. at that time, they had $53 million of cash on hand. so definitely quite a long way. that project is moving ahead successfully, at this point. so i do not think it is unusual, prior to filing an application with ceqa, at a major project would not have all funds identified. supervisor chu: supervisor mirkarimi brings up a good point about the financial feasibility part. >> i cannot remember the year. maybe 2003, 2002. supervisor mirkarimi: why, in the regular framework, does this go into the eir for the

america's cup, and not its own? why is it not umbrellaed under everything else? >> the america's cup did have a look up the scope feasibility. given the cost and size of the project, we need to bring it to you separately. a reason for fiscal feasibility is for the board to look at overall financing plan. before a city department expense major efforts on an eir, that there is a reasonable plan of finance. supervisor mirkarimi: contingencies of what that made of light, in case some of the others are anticipated, hoped for? >> obviously, phase two has many unknowns at this point. key at issue is voter preview of the bond. -- approval of the bond.

we are dedicated to delivering the park plaza, but if the voters do not choose to approve that, we would have to look for another funding for it -- source for the park improvements. that does not mean that we could not necessarily deliver a functioning cruise terminal. other charges related to operator charges are well- established in other ports. i think we can set them up, we need to work with the cruise industry on the size of those things, but typically used. the other ideas -- revenue generation, a finding grant sources. we have been successful in finding grants for security. we're looking to get funded for the green components of the project. worst-case scenario, we delayed these days to improvements and our functioning cruise terminal.

-- we delay the phase two improvements and our functioning cruise terminal. supervisor chu: thank you. supervisor kim? supervisor kim: my first question is for the budget analyst. you mentioned the port's outstanding debt would increase by approximately 51%. one of the things that we are asked to consider is the debt load. is there any kind of basis for what is recommended for debt load, depending on the budget? >> as you know, the port is not a general fund department. when they issue debt, they have to have revenues which are sufficient to pay that debt.

then they go through a variety of procedures before any kind of a bond issue can be issued, to make certain that that debt can be fully paid by port revenues. we also point out on page 10 of the report, the board has assured the rating agency that the port plans to keep their everett debt service coverage of total revenues and total average cost above two. so there is that requirement. the port currently estimates their annual debt service ratio is at least 3.32, such that there is room for additional debt. so that is one of the procedures they go through