chairwoman chu: supervisor chiu? supervisor chiu: thank you itch also want to reiterate my colleagues' commence about appreciating the work that you and your staff are doing at the airport, understanding it is a well-run agency. it's a pleasure to have this conversation. i think we wish that, say, the m.t.a., we could say the same for other transit-related agencies at this point. but thank you for being here. the question that i have for you is around i.t. this is a question not specific to the airport but one that i'll be asking a lot of departments about what your overall budget is for i.t. expend tours what fraction of that -- expenditures, what fraction of that goes specifically to airport-related specific applications, hardware and software that you need. you mentioned some of the things that you're doing that are unique to what we do here in san francisco, vis-a-vis other airports. and then i do know that the airport is helping to shoulder the burden of helping to look at a variety of other enterprise,

systemwide issues. and i wanted you to talk about that for a moment. >> our budget for i.t. is about $14 million. i would like to provide a follow-up report to answer your question in more detail on how that breaks down, what are airport unique services and highlight some of those and what are general services, e-mail, data center. so the airport is supporting the city's efforts to centralize and consolidate efforts where we the city can realize efficiencies. so the airport is building the new city date i can't center -- data center. we work carefully with the controller's office to make sure we meet the federal requirements. our plan is to have that in operation in about 13 months from now. we've also offered to help the city in any way we can with the citywide e-mail system. i think options are still being considered, but if necessary we would be willing to take that

on, too. so we want to make sure we're operating consistently with the city and supporting the city in any way we can. supervisor chiu: great. i look forward to that. i certainly appreciate the effort that you and your staff are doing as far as helping to lead different aspects of centralization efforts. i think it's very important that because of that i'm very likely to support what you guys are trying to do in that area from a budgetary standpoint to make sure that we can continue that effort. thank you. >> thank you. chairwoman chu: thank you, supervisor chiu. why don't we go to the budget analyst report if that's all the questions that we have at the moment. >> madam chair and members of the committee, on page 3 of our report on airport, we state that we recommended -- our recommended reductions to the proposed airport's total budget is the total amount of recommendations is $21,760,068

in fiscal year 2011-2012. i would note that these recommendations still allow an increase of 5.8 million or 8/10 of a percent in the department's 2012 budget and $68.2 million or 9% in the department's 2011 -- the 2012-2013 budget. our detailed recommendations are shown, supervisors, on pages 4 through 13. we are still working with the airport on these recommendations. and we will report back to you next week. so, madam chair, if you want, i can go over any one of these recommendations, or given the fact that we are still working with the airport, we can report back to you next week. whatever your pleasure is. chairwoman chu: thank you very much, mr. rose.

just so i can understand from the department's point of view, there's a number of recommendations that the budget analyst has put forward. are there any at the moment where the department is in agreement with the budget analyst? >> madam chair, my budget manager has been working with the staff i think there's some areas of agreement. but i think there are some areas of disagreement. i'm very confident that within the next week we will get everything resolved. i think probably 19 of the last 20 years we've been able to reach agreement with the staff. chairwoman chu: thank you so we can continue this item until next week when we do hear your budget again. in the meantime, if would you work with the budget analyst to come to an agreement with some of the proposals would be helpful. i think also to the extend that there's further conversations around the police staff and i.t. questioning, if would you distribute that, that would be helpful as well. thank you. why don't we move on to the san francisco port.

>> good morning, chair chu, president chu, supervisor mirkarimi and members of the audience. the port of san francisco. i have a couple of slides here which i will go through very, very quickly just to give a little background. but i want to start by saying that we have in the audience with us today, we have the port c.f.o. and a couple of our

financial analysts, nate cruz and marilyn ya who are both terrific. i wand to comment debra newman for all of her help, as well as the budget staff, megan wallace and greg wagner so it's been a very collaborative process. i'll just say from the outset that we agreed with the budget analyst's recommendations. and we thank them for helping us to put a finer point on our budget. very quickly, by way of background, i think it's always important to review the port's mission. and that is encoded and embedded in state law and in the appendix of the charter. but very quickly, our primary mission is to support maritime commerce, transportation, recreation, personal activities, and public access. and we do that in a way that, frankly no other port in the state, let alone the entire united states does. as you know, the port of san francisco is one of the very few that is not hidden behind fences. and so one of our primary goals is to bring people to the water

front. our budget is balanced, i'm happy to say with some help from the board earlier on m.o.u. with respect to the america's cup, anticipated revenues and expenditures. it is extremely flat. we have been fortunate enough to be able to absorb our increases in fringe benefits and other such things. and we are moving forward to continue to fund some very significant capital projects. it's important, i think to see where we are today, where we think we'll go. as you can see, we think we'll still be fairly flat. the majority of our revenues are derived from our real estate commercial operations. the port manages approximately 21 million square feet of actual building space. to give you some perspective about that, i believe the airport square footage is about 14 million square feet of buildings. they obviously have much more anchorage because of their

runways. but that 21 million square feet is leased out to approximately 400 different tenants both on the commercial real estate and the maritime side. we have approximately 60 restaurants which operate on port property. the bulk of our revenues actually come from our real estate leases which are primarily retail restaurant and class b and c officers. there's very little of that and industrial and warehouse. as we look forward, though, for our five-year outlook, it is pretty much the same as looking back to the challenges of the last five years, which is that our revenues grow at a lower rate than our expenses grow. and so beginning as early as fiscal year 2013-2014 without action by the court, we see that we could start to run some deficits on our overall budget. and so we will continue to have that as our highest priority which is to continue to manage a structural balance of our

operating budget. to do that, what will happen is we will likely have to reduce our spending on capital repair, operating capital repair. annually we strive to get somewhere between $8 million and $10 million available for reinvestment in our 21 million square feet. and that comes from anything that we were able to make above our expenses. and so looking forward without any intervention on our part, we'll probably have to reduce that significantly. at about $8 million a square foot, that's approximately $1 million a mile to reinvest in the port's assets. and as you well know, our asse assets, most of them, are well over 100 years old so they need continuous investment. to that end, we have a number of goals with respect to how we prioritize our investment and our capital assets. our goal is obviously to keep as much of our assets and revenue

functioning standards -- i guess is the best way to put it. most of these piers were built over 100 years ago. we were built with the utilities underneath the pier. they have done an amazing job in this climate and in these waterways. and we are trying to prioritize some very significant utility improvements in the five-year forecast. but as you know, since the 1970's, the port transferred back to the city of san francisco in 1969. prior to that it was a state agency. we have lost 15 piers already in what we call the central and northern water front. and every time that we lose a pier or it goes out of revenue service it doesn't necessarily mean that the pier comes out of the water. but it goes out of revenue service. that has an impact on the economic impact and jobs that we can provide to the city as a whole. and so just briefly about that i apologize. the handout, something happened to the verbage at the bottom of the slide.

but in 2006 we commissioned an economic impact report. that was back when our operating budge eliminate was about -- budget was about $58 million. the results were that we would provide approximately 9,500 jobs throughout our 21 million square feet. our operating budge eliminate has grown. so that would mean the amount of jobs -- if you just did a straight line map which is probably inaccurate -- nonetheless, if you were to do some straight line map, it would grow that number to about 11,300. and so we think that these are very important jobs. they're obviously, as you know with the adoption of the eastern neighborhoods plan, the port is where the city's p.d.r., production distribution repair businesses are located, as well as of the 400 tenants i told you, the vast majority of them are very small businesses, as well as nonprofits. so to meet our goals looking ahead, again, we need to make sure that our budget is

stabilized. and with your assistance we have some help for the america's cup. look forward to that for the next year or two. we really envision the america's cup as a macroeconomic engine for the entire city of which the court can benefit. and you may recall that with the m.a.u. that you adopt, for each dollar that the port earns it offsets the amount of money that the general fund would need to support us with. so our goal would to be minimize that general fund support as well as to have other enhancements that come from the america's cup. already we have a lot of tenants talking about making improvements to their facilities. they're able to talk with their banks about loans for those facilities. and we see all kinds of organizations, public and private, throughout the city, getting ready for the america's cup. so we see that as a very big impact. to just the tenants that we have already as well as to the

infrastructure. but one of them is our pier 27 cruiseship terminal. you may recall that the port and a number of enterprises that are here today did a five-year projection last year. and our cruise terminal was one of our most prized programmed policies in that five-year look. and it is -- it continues to be. and the america's cup helps us close the gap, but also to get that facility fast tracked. as you may recall, we want the cruiseship terminal to be an event space. and we already have our very first tenant of that event space booked which is the host facility for the america's cup. we're very excited about that. supervisor chiu: before we move on, could you talk about how the america cup's budget -- or how the america's cup success, if we end up winning in in 2013 what have you built into your five-year plan as far as assuming what may or may not happen? >> well, assuming that the winner brings it back to san

francisco? is that your question, supervisor? we have built nothing into our budget for that. supervisor chiu: so we lose the cup after -- >> it's a one-time event only. and partially the reason for that is because he would have to renegotiate the host city agreement. we'll see how we do with that. rumor is that if it is won and brought back here no matter who wins it and chooses to bring it back to san francisco, it could come back as early as 2015 so definitely in that early horizon. this is a very quick rendering of the cruiseship terminal that would be pier 27. i've talked about that. another aspect of our five-year forecast is to complete the wharf. we are very close to finishing the environmental impact report on that. we have demolition slated to begin at the end of this calendar year. again, that's a very key at beauty for the public to be able to enjoy the america's cup, as well as a key amenity for the neighborhood that is long

overdue. and then, as you know, particularly you, president chu, the goal of the america's cup is to also have a long-term redevelopment of some significant and fallow areas of our water front. so we could conceivably in this five-year start to see some changes in repairs in those. if you recall, our cap stall plan is approximately -- our 10-year capital plan is approximately $2.17 billion. we are not right nowwe are not f these potential developments against that need. if we are to move forward with the america's cup development agreement, this would be a critical way of finding sources of funds to offset that 2.1 $7 billion. and that is it.

supervisor chu: taking a look at your five-year outlook, it looks like the expenditure is outpacing revenue growth we are seeing. in the previous slide you showed the projected for revenue growth, going from $68.9 million to $78.4 million. the growth is not tremendously large. do you think that there are any opportunities to be more aggressive on how we negotiate leases, for example? to generate more real-estate money? or do we have more locked in contracts? what is driving this? >> in terms of revenue growth for maritime, it is estimated at $2 million, a significant amount of growth in five years. we continue to make assumptions

to promote the cruise terminal, cruise business, and ship repair that goes with it. the bulk of it is related to the cruise industry, including harbour businesses. on the maritime side, excuse me, on the commercial side, we have a little bit of everything. about one dozen long-term leases that are 66 year leases that are probably halfway through their terms well. the percentage of rent can fluctuate. we also have long-term leases at the ballpark and a couple of other development projects. we have been successful in the last couple of years growing revenue by taking a hard look at off street parking to the meter program. what has allowed the port to maintain its budget over the last year and into the current year has been renegotiation of

those parking lot leases. however, as you know, some aspects of the america's cup will cause those parking aspects to go away. some of that growth in commercial real estate from today to the five-year is a net reduction in parking that is all set -- to your point, we worked hard the last time to be issued bonds early to try to invest in areas that we do not feel our meeting revenue potential, one of which was pure 27 and the other is the back lands. we still think that those have a great potential. but we pushed those out just a little bit farther when we worked on the america's cup. for myself, i think we are being conservative with respect to the benefits that we expect to see. i would hope that we see a lot

more in terms of revenue or offsets to the capital plan needs. supervisor chu: let's go to the budget analyst report if there are no questions. supervisor chiu: actually, i have a couple of questions. as far as your budgeting improvements, $14 million for the coming year? if you have 2.1 $6 billion in capital expenditures, are you hoping to -- i was wondering, how do you think about reconciling that. >> it is a challenging question and you are correct, the 10 year capital plan assumes a certain amount of need to bring the facilities up to code, frankly, to modernize the facilities. as you know, each time we

developed a peer or pier area, we spend money to beautify it or make more public benefits. the operating money that we are able to get each year really goes to tenant repairs, to keep a tenant. fix a b e window, for example. we tend to be able to fix a couple of rooms per year. to put this in perspective, one shed roof is about $3 million. to that end, in the time i have been at the port, we have been very lucky with that the generosity of the san francisco voters, allowing us to build with bond proceeds. we also have the ability to issue or receive district receipts if a project moves

forward to meet that criteria. as you know, we have been working very hard to come up with financing mechanisms. right now in a 2.1 $7 million number, we do not have all set for those costs. as we move through the process with our new developer, we hope that future iteration can be offset by development expenditures. >> how many of your peers are sitting fellow? >> there are 39 piers and 80 structures. the one that is completely shattered is pure 36. there are many others in operation, but they are weight restricted, so by definition they are not generating revenue at capacity. we have had to offset that with

revenue growth in other places. as you know, we have nine sea wall lots. it is our hope that several of them can be developed to that level and multiplied the amount of revenue that can generate per square foot. 4 per acre is probably a better way to think about it. there are a number of shattered buildings at pier 70. 98, down in the hunters point area, is condemned. supervisor chiu: are there other revenue plans? or is it a matter of not having the capital improvement ability to bring them up to a place where we can use them? >> the most creative plan that we have to date was to negotiate with the export voluploratarium..

preparthat is why the pier 27 ce ship project is so critical to the port. we hope to keep your 35 open and we make an investment every day, but what we have done with priorities is tried to look at where they have the highest and best use. pier 9 is the best example of having maritime and commercial tenants. we would like to replicate that. we have a plan to do that at pier 19 or 23. we have bond proceeds we have borrowed to do planning for that. to enter your question a different way, we tend to think that there are eight years in the plan that we will not be able to rescue, instead we are trying to maximize investments

in the ones that we can bring up revenue on as quickly as possible. supervisor chiu: for those that you can not? they are simply fellow? >> unique things do come up. you're 26 and 28 are both in and as you know, they are potential candidates for development and we are still hopeful that that could happen. in your district, pier 33 is one that we look that nell. it is functioning and actually quite full. of long-term horizon, it is difficult to see where it could go. in the time that i have been port director, out of the blue new ideas will show up. right now we have no plans. supervisor chiu: i do your love creative ideas from constituents to use them for other types of

recreational facilities. what sometimes where you see a place that would be perfect for public assembly, the amount of investment which would have to put in is fairly daunting. it is one of the problems we're having with your 32. frankly, it has changed the economics. supervisor chiu: 150 question, something i am asking of large apartments, how much of your department is i.t. related? i continue to hear that there are software systems that you are maintaining to keep track of your assets and i think we could probably manage them citywide. can you talk about that situation? >> about $4 million of our $66

million operating budget is i.t.. i think that what you are referring to, a couple of years ago there was a management report done by the comptroller's office, showing that we needed to have a better inventory system. we are in the process of buying one that we think will serve as our needs better. we are also looking to the question that you raised earlier, to try to migrate our systems on to something that will allow us to manage property on a year by year basis. so, those are some of the ideas that we have, going forward. we have a fairly robust system for property management that i do not think his views anywhere else in the city. i do not think anyone else has a similar need. and we have a lot of the same

engineering system as other departments. supervisor chiu: of their details that i could take a look at? >> we could create details. i do not know that there is a synthesized report on hand. supervisor chiu: thank you. i would say to the mayor's budget office, we have attempted to understand whether there are things that are duplicative. it is an ongoing question i am curious about. if that is a request that the mayor's department has made, we would be happy to get that information as well. thank you. >> certainly. supervisor chu: why don't we go to the budget analyst report pelop? >> page 16 of our report, we pointed out that our recommended reductions to the proposed budget total $530,000 in fiscal

year at 11-12. the recommended reductions, an increase of 3,362,000, 4.4% in the department's 11-12 budget, those recommendations are detailed on pages 17 through 20. as i understand it, recommendations have been encouraged and we would be glad to respond to any questions. supervisor chu: the court concludes -- concurs? -- port concurs? >> yes supervisor chu:c. supervisor chu: thank you. there are a number of attrition savings that the department agrees