commission. our plans at this point are to come back to you at the june 28 meeting that will happen in the southeast with a couple of items. one is a more in-depth overview about the work we have been doing over the last four months. looking at the 2% set aside required based on the administrative code, all above- ground construction needs to be allocated to arts in richmond, so we have been spending the last several months working with our city attorney an arts commission staff to revise the mou about how those dollars get spent. on june 20, we will get back to you with an overview about the work that has been happening at policy and resolution for your adoption, and by that point, we should have finalized the mou between the puc an arts commission that will realign those dollars, which ends up being millions of dollars to be more consistent with the puc's priorities. >> so we will be back next

month, but you should have an answer to your questions for the last year-and-a-half. >> if you would like a preview, i am happy, but i know commissioner vietor wanted us to be brief today. >> in the mou, do you know any advance if we have any say sell about the approval of the arts that will be in our facilities? >> i do. [laughter] >> will you share with us? >> i would love to share with you. what we uncovered as part of the process is that in 2004, there was a city attorney opinion that let us know that the puc has full discretion over how our arts enrichment dollars are spent, so we have the capacity to approve all arts enrichment dollars and the expenditure, and that is what we are proposing. >> we certainly want their

assistance and cooperative working arrangement, but yes, we have more authority than we have sometimes exerted. >> we have come a long way, so it should reflect that collaboration moving forward. >> briefly, how much -- he said millions of dollars this year and last year? >> the relationship between what has been designated but has not yet been spent, there is quite a bit of money -- $1 million-plus -- that has been earmarked for the new golden gate headquarters, but to give you a sense of how much we have spent, which contributed $180,000. for example, for the buddha that was outside of city hall. >> the water system improvement program is typically for above- ground facilities, so you cannot but anything in for pipes, before the water system improvement program, it is something in the neighborhood of $4 million to $4.5 million in total being spent on art for the sewer system improvement program.

it will be laid the decision of the digesters, and they are above ground, but there is not a lot of our opportunities. it could be $6 million and more. >> and thank you to commissioner vietor. >> we look forward to hearing from you next meeting, next month. >> the third item, several meetings ago, commissioner torres and others were asking about the status of redevelopment. since we're talking about treasure island today, it seemed like a good opportunity to ask fred blackwell to give his thoughts about where we are with redevelopment agencies. thank you for being here. >> thank you. good to be here. madam president, members of the commission, fred blackwell, head of the redevelopment agency. i see you guys have a long agenda, so i will try to dvd less filling version of the

update, but there is a lot to talk about. i wanted to do four things. give your essence of what is in the governor's -- the government proposal in a general sense and then talk more specifically about what is in the trailer bills that comes behind the governor's proposal, give you a brief update on the status of things right now, and close with a little bit of discussion about what the concrete implications are for san francisco under a couple of scenarios. the governor's budget was released on january 10 of this year, and has included a net basically have cuts and half revenue -- included in a basically have cuts and half revenue. the elimination of redevelopment was in the cut side of the governor's proposal. the dollar figures associated with -- that has been associated with the elimination

of redevelopment is $1.7 billion, which would be new revenue to the state in the first year and in subsequent years, the dollars that would have gone to redevelopment would flow with regular property tax dollars. the $1.7 million figure has been disputed quite a bit. the way you get there is you look at the total amount of tax increments being generated in the state annually. it is about $5 billion. you subtract from it existing debt obligations, and you get about $1.7 billion. there are four key components to the proposal to eliminate redevelopment. the first is the elimination of agencies statewide by july 1 of this year. the second is an acknowledgement from the governor that all the agencies have existing obligations. some of those financial in nature and some of those contractual in nature. i will come back to the contractual in nature because

that has implications for san francisco. the third component of the proposal basically calls for the creation of successor entities that would take on this existing obligations with the intent being that the successor entities would be winding down the previous activities of redevelopment agencies, and i think most folks anticipate the successor agencies will be cities and counties themselves. the last piece, which has not gotten a lot of oxygen but is really interesting, is the governor is going to the voters in the state of california and asking them to amend the constitution to allow local jurisdictions to increase taxes for economic and development purposes. in other words, create a new funding stream for that kind of activity, with 55% voter approval, rather than the 2/3 that would be needed under proposition 13. there's an underlying suggestion that jurisdictions may be able to create funding streams to do the kinds of things that

redevelopment agencies had previously done, but with voter approval. that piece of the proposal stayed out for a minute. in, i think february of this year, the trailer bills were introduced as a companion to the bills that the legislature was asked to act on to kind of exercise what was in the governor's proposal. the trailer bill had a few key things in it that i think are important to highlight. in terms of howard was envisioning the wind down, it was actually quite rapid. still with the elimination by july 1, but the idea that once the bill was voted on, if approved, it would be effective as of the governor's signature. what would happen is that it would not allow agencies to enter into new obligations between the time when the governor signed the budget and when agencies would be

eliminated in july. the third piece that was important to highlight is that the successor entities -- the successor into the concept i talked about was clearly designed as a wind down activity, not for something that would be a robust entity that would be allowed to kind of employment programs the same way that redevelopment agencies have been implementing them before, and that is important for a reason i will come back to in a minute. it also talks about the role of successor entities being very narrowly defined. in other words, they would not be able to issue new bonds without approval from the state. they would not be able to enter into new contractual agreements and things like that. it really was, i think, envisioned as a shell entity responsible for writing checks and paying down debt. on the issue of bond issuance, with the trailer bill detailed

was a pretty cumbersome process as well, one where a new oversight body would be put together in order to advise around the activities that were formally going on, but even if that body decided it needed to issue bonds to carry out existing obligations, the trailer bill calls for the creation of a three-person body at the state level that would be able to review and approve any new bond issuances, and that three-person group would be made up of the treasurer, the comptroller, and the head of finance. so there was an additional check put into place in terms of making new commitments. the oversight body that i referred to a little bit earlier would be very different than what the agency commission is right now. right now, the agency commission is a seven-member commission appointed by the mayor. what the trailer bill proposes and sets forth is a seven-member commission with a your

appointments from the mayor but three that come from school interests. i think one or two would be from the school district themselves and one from the community college district. the idea was to bring on some of the key stakeholders that had a say in property tax dollars in order to be involved in the decisionmaking process. in terms of status, this bill had an interesting line through the legislative process. the budget committee within the assembly voted to score the $1.7 billion that would have been associated with the elimination of the redevelopment, but to find that $1.7 billion through means other than elimination. in other words, try to figure out if there was some talk of compromise that could be struck with agencies statewide, principally probably through negotiation with the california redevelopment association.

the senate budget committee adopted the proposal. in other words, they decided to score the $1.7 billion but also go with the elimination of redevelopment. a conference committee was put together to reconcile the differences between those two committees, and the conference committee basically adopted the government's recommendation. it moved to the floor of the assembly in the senate. in the assembly, the bill fell one vote shy of the 2/3 that was needed to move the government goes the proposal. since they fell one vote shy, the senate actually never took up the item. that since then, there has beent of speculation about what is going to happen next. the way that the bill is actually drafted, it not only called for elimination of

redevelopment, but in the first year, it called for a redirection of property taxes to the state in order to support medical and child force. for that reason, this bill required 8 2/3 vote rather than a maturity vote. the reason why it is important is because of the governor were to be drafted this bill in a way that did not be direct property tax dollars, he could seek elimination with a majority vote. that has not happened yet, but there is a lot of speculation that might occur. when that would occur is coming up probably within the next week or so. as you all are probably aware, this is about the time of year when the revenue projections are submitted at the state level, and around that time, the governor usually ends up submitting a revised budget. we predict that the elimination of redevelopment will still be in the governor's revised budget, but we do not know whether he will be proposing that as a 2/3 bill or as a

majority bill. in this kind of quiet time, a couple of things have happened. one is that a number of alternative proposals are really falling into two categories. one category is those proposals that our financial in nature. the second category is what i would describe as programmatic in nature but more focused on actually reforming redevelopment rather than eliminating it. on the financial side, there are two proposals out there, one from the california redevelopment association, and the other from the city of long beach. both of those are voluntary proposals. in other words, agencies could voluntarily submit or impose a fee on themselves in order to balance the state budget. the reason why all of these

proposals are voluntary in nature is because of the passage of proposition 22 in november of last year. proposition 22 basically said that the state could not take local money in order to balance the state budget, and tax increment is included in that pool. in order to get access to the money that would be necessary in order to balance the state budget, they had to eliminate redevelopment, and therefore, any of the proposals to send money to the state from redevelopment agencies were determined to have to be voluntary in nature. on the performance side, there are two bills out. senate bill 450 was put out. the other is senate bill 286 here both are offered by democrats. the lowentjal bill focuses on reforms in the area of

affordable housing. you may have seen some of the audit reports. there are many agencies -- not many, but some -- that are not spending that 20% money properly, so they are a set of reforms that focus on making sure that 20%, which amounts to $1 billion a year, is actually spent towards affordable housing production. the second set of reforms focuses on what we call the 80% money, which is the 80% that is not affordable housing, and focuses on a variety of issues. i will not gone to all the details, but the focus on administrative reforms. it focuses on limiting the use of tax increments so things like luxury golf courses cannot be constructed with tax increment money, and even focuses in on stadiums as being in know now -- stadiums as being a no-no without approval. the last piece is about limiting

the future obligation that the state has that is associated with redevelopment, by not touching the school portion of property tax that goes to tax increment bonds. in terms of the implications to san francisco -- and i am going to close on this -- there are a few, and they all depend on how a couple of things get defined. as i talked about, the trailer bill acknowledges existing obligations, but they have a term that they call approved process. approved brought -- approved projects. those are contractual obligations that would have to be implemented within the success of entities that get put together after the abolishment of redevelopment. approved projects are defined as projects that have contractual obligations in place. in other words, a disposition and development agreement or something like that. and substantial performance against that contract. under their definition, there are a number of things that we

are working on that would satisfy that. obviously, mission bay is a place where we have an existing contractual obligation, and we have substantial performance under the disposition and development agreement. transbay falls into a different category for is because it is the joint powers authority, the implementing in detail there, but we have been conveyed state property that we are developing , and there are increases in assessed value actually going towards filling the gaps in a performance for the terminal. it is questionable as to whether or not we would be able to kind of move forward with those parcels that have been conveyed to us. that would mean transbay would move forward but under a much more significantly challenging budget environment because we would not be able to move forward with the assessed value. the hunters point shipyard phase

one and two fallen to different categories. we have a separate disposition and development agreement with the developer on phase one of the shipyard, and under that agreement, we have actually quite substantial performance. we're looking this summer to go to vertical development. as you all probably know, on phase two, while we have a disposition and development agreement, because there have been lawsuits against the eir and that project, we do not have substantial performance, so that falls into a questionable category. we have heard directly from the governor's office that the hunters point shipyard is a project they consider exemplary of how redevelopment should be used and have no intention of putting the brakes on that project. again, what is being said is out of sync with what is actually in the legislation. there are a number of things that would not move forward under the governor's proposal.

visitation valley would not go forward because we do not have the contract in place. the bulk of our work in the south of market would not happen because they rely on the execution of future contracts. mid-market was a survey area, which means we are studying whether or not we could make that a project area. clearly, with that not being a project area, we would not be able to implement mid-market. and we have a pipeline of affordable housing that we would not be able to execute under the governor's proposal, including projects like the hugo hotel, which you guys probably know at 6 and howard with the furniture hanging off the side. we would not be able to move forward with the project, and there are a number of others we would not be able to move forward on. i will stop there. i would longer than the tip, but i wanted to give you a sense of where things stand and what the implications are for san francisco -- i went longer than i wanted to.

commissioner torres: welcome to the commission, and a pleasure to hear your report. i was informed that there was a legislative council's opinion suggesting that the governor's proposal was unconstitutional. are you familiar with that opinion? >> i am. that opinion zeros in on the aspects of the governor's proposal that had to do with the redirection of property tax dollars. basically, they say that the notion of taking property tax dollars, sending that to the state and using that for child force and medical was probably unconstitutional. it should be noted that the governor's staff responded to that report. they said they are confident that the way they have cracked this bill -- >> they responded to the counsel's opinion? >> yes. commissioner torres: their advice compared to counsel's opinion are two very different issues. getting back to what affects san francisco, because obviously that affects us here, what projects would be in that

category? and how much would that amount to? >> i think that of all of our project areas, the most significant one where you all would be supplying power would be the shipyard. the shipyard, as you all know, is one of the largest development projects west of brooklyn. it is 10,000 new units of housing, the biggest investment in parks and open space since golden gate. commissioner torres: that will be included under the protection -- >> that would go over to the other side. we would argue pretty consistently that that is an existing obligation that needs to carry over. commissioner torres: you are comfortable with that happening? >> i am somewhat comfortable. here is my concern with the shipyard. in order to fully implement the shipyard project, it actually requires layers of new

contracts to be executed, and it calls for the issuance of debt well into the future -- 25, 30 years. if it is not clearly stated that the successor entity will have the ability to issue bonds as well as the ability to enter into new contracts and obligations, we will only be able to partially implement the shipyard project, so there is still, i think, quite a bit of work to be done to make sure the rhetoric we are hearing out of the governor's office corresponds with what is on black and white in the department of finance. my concern, just to summarize, is that it would get through to the other side but in tatters. commissioner torres: the legislature always use the rhetoric coming out of the governor's office to be tempered by the legislature. secondly, the city attorney has weighed in on this issue as well in respect to the shipyard? >> yes. we have a city team that has been responsible for responding

to this. that includes myself, the head of economic and workforce development, jesse smith out of the city attorney's office as well as other staff, including the director of the mayor's office. commissioner torres: what projects would be impacted by this redevelopment, assuming it passes the legislature, and assuming it is passed by the voters? >> yes, the treasure island project is very interesting. what has happened at this point is that the governor's proposal has already done a substantial amount of damage. by creating uncertainty in the real-estate market around rather cannot redevelop is going to be around -- around whether or not redevelopment is going to be around. we issued a bond and probably pay two percentage points more than we would have if the government's proposal was not out there and what is happening now is the developers are

looking for more certain pathways for word on their projects. treasure island falls into that category. treasure island is now not pursuing the development as a method to move forward. it will move forward with or without redevelopment. >> the final question i have, if i may, is the total amount that would be under the jurisdiction of this new caretaker agency that affects san francisco -- what is the total amount that would be put into that box? >> it would be hard to tell. it would come down to what this group, the door to the other side, under the most rosy scenario, by the definition of existing applications, you would she -- you would see shipyard

phases one and two -- commissioner torres: what dollar amount are we talking about? >> for the shipyard, that is a multi-billion dollar project. when you look at the completion of mission bay, there is probably several hundred million dollars of work to be done there still. commissioner torres: you envision a city being approachable on creating its own funding? >> yes, part of what your looking at is -- part of what you are looking at is the city's response to moving forward without redevelopment. i think it is highly unlikely he would see a scenario with the city would not elect to be the successor entity for previous redevelopment activities. i think it is highly likely that you will see some type of phoenix rise from the ashes even if we are eliminated. >> the phoenix can only rise if the voters vote to approve it. what do you think that revenue

stream would come from? >> there are a few. a couple of things on that. one is we spend half of our tax increment in san francisco, and we are unique in this way, on affordable housing production. as you all probably know, the city, on a couple of occasions, has gone to the voters for general obligation bonds for the production of affordable housing. on both of those occasions, they did not get to the 2/3 that was necessary, but they were well over the 55% threshold that the governor is suggesting. there are those that believe that at least for affordable housing, the voters would be amenable to some type of bond issuance that would allow for affordable housing production. on the kind of infrastructure development side, again, infrastructure finance districts are emerging and people are talking about that as a more blunt tool, but one

that could be used for the kinds of infrastructure investments that we have made in places like mission bay and hope to make at treasure island. that wouldcommissioner torres: . >> commissioners? >> thank you. that is very informative. i guess there is the development we will be losing now because of the affordable housing units that were envisioned. do you foresee that happening at this point in this and scenario? >> no. we've already signed that this position and development agreement already and it would be under the affordable housing obligation. the first thing that is happening in the shipyard is the

development of housing, which will represent the most significant affordable housing in the project. president vietor: but overall, that would be one of the greater losses among others? >> yes. president vietor: thank you so much. we really appreciate the update. public comment on the general manager's report? hearing none, next item, please. >> the next item is the bay area water conservation project. >> because you have a long agenda, i will keep my remarks brief. in response to commissioner caen's question earlier, you asked for a response from the staff on implementing the agreement. i will have comments and some

recommendations for consideration little on with the other items. i will keep my presentation sure this afternoon -- short this afternoon. president vietor: questions, comments? hearing none, next item, please. >> the next item is the consent calendar. and approve months -- for upgrade services for the east bay and delta electric. the proven awards contracts for upgrade services to san francisco and east bay area's 42nd lowest qualified responsible and responsive bidder -- in light energy- bidder -- in light energy- efficient lighting.