people involved, and those sorts of things, and so, as i stand here, i think we have made fantastic progress with regard to that. with regard to the revenue raising, it is fair to say that we got off to a slow start, but with the help of the group, we have met an excess of eight corporations, and momentum is building. the america's cup is characterized by most of the money for the event coming in the last year, the year of the event. the fact that they have raised this money, the 12 million, prior to that, is really -- i commend them for that. we expect to get most of our money in the year of the cup, and as i said, momentum is building for us, so i am optimistic that the revenues to support the event will be there for us, so that is another. the third. is long-term agreements that replicate the host and the new

agreement that was signed in december 2010. it now, we have made changes to that agreement through the course of 2011, and this changes have been made by mutual consent. the biggest change that i can talk to you about is the authority agreeing to cap the places upon which it can use its rent credits for money spent, because the cornerstone of the deal was signed, a cornerstone on which san francisco was awarded the america's cup, was that the event authority would be reimbursed for its expenditures on actual costs. the mayor came to the event authority, came to me personally, and said, "stephen, we have a problem." "what is the problem?" and the problem was in a catastrophic situation where we

had problems with the piers, we could potentially compromise the port, so he said, "we are going to have to limit the places where you get reimbursed for the money that you spent, and we agreed to that. we eliminated some piers and also compartmentalized 26 and 28. we can only recover rent credits on those. we have shifted the risk, the majority of the project risk, from the port to ourselves, and i can tell me that we took a sharp increase in risk when we did that, but the point i am making is that we did it by mutual agreement. the second thing i will mention is the rincon area basin. part of the deal that was signed was that the authority would receive a long-term rights to that area, and that is one of

the reasons, as i said, that san francisco was awarded the cup. once again, the mayor came and said," steven, we have a problem." and he pretty much said it was not going to work, so by mutual agreement, we eliminated those rights and transferred them to pier 54, miles away, having no real linkage with some others, but, again, in the spirit of partnership, because potentially we will be partners for a long time, we looked for a solution. the point of raising all of this is only for this reason. any changes we make to the sign deal, the host an event agreement, must be done by mutual consent, because if they are not, one party has agreed, only one party is happy, and that is the point i would like to make. the final thing i would like to say is regarding time. the port and the city known that

ever since we started discussions in 2010, we had wanted 2012 to be the year of construction for piers 30, 32, 27, and the cruise ship terminal. the current timetable highlights that the board of supervisors could approve the project on february 20 it. if this happens, the major permit will be issued around the middle of march, and construction will happen around the end of march, beginning of april. straightaway, we have compressed a year-long construction project to 9 months. the teams are expected to arrive and set up. we do not have any time to delay. a nine-month construction project that used to be one year, so i am pressing upon you

the importance of time over the next couple of weeks, and i really hope that we get to the 28 and that we have a successful outcome because we're really looking forward to the project. thank you. chair chu: thank you very much for your comments. if there are no comments from the committee at this time, why do we not go to the budget analysts report? >> good afternoon, a share, members of the committee. from the budget analysts office. the board of supervisors is being asked to approve two resolutions. the second one, it would affirm that the board of supervisors intends to form a financing district on the port, in resolution of intent. the other major one does several things. it adopts the ceqa findings and approves the project as described in the final eir.

it approves a memorandum of agreement with the city and the event authorities and their respective responsibilities with ceqa, and it approves the agreement of the dda between the city and the america's cup authority, and there are certain determination rights provided in the host and any agreement, and because there was this discussion about the $12 million and the provisions, i want to start with the discussion about the impact of waving termination rights. so page 9 of the resolution states that the board of supervisors finds that the america's cup organizing committee has made some of the in progress towards meeting its year-1 fund-raising target of $12 million, and waves the right to terminate per the host and venue agreement.

there has been a lot of discussion about whether that has been met or not. i do not think that we can say affirmatively that that goal has been met. i will say that when we look at the cost projections, we found that there would be a net benefit. certainly, the city would break even in terms of its net cost and may have a net benefit if this $32 million that has been pledged to the city actually arrives in the city. we looked at another scenario where we looked at the $8 million, which we believe based on the controllers analysis, is available in terms of pledges. out of the $12 million that has been pledged, there is a $4 million in operating costs that were subtracted out of that, so i just wanted to point than out as an important point about the rights to terminate the agreement. there is another important part on page 28, that the organizing

committee is required to provide the event committing a letter of credit or shorten bond in the amount of $32 million. its intent is to protect the general fund from liability by providing a source of funds for the event authority to pay claims. the deadline or the goal for this was january 31, 2012. the organizing committee, my understanding is that negotiations are ongoing at this time, but we do not have any information on what the status of that is or what the status is going to be, so if the board of supervisors does approve the agreement, and they do waive their right to terminate, whether or not the organizing committee has provided the sure to bond, so those are two pieces that are part of the legislation that is before you.

the other piece, because i think a lot of discussion is about cost and changes in cost, so i want to focus this on our actual revenue that we presented in our report. basically, we recommend the proposed be redone, while continuing to do this. we are recognizing be given authority is assuming some risk. and finding the improvements for the court. but we do have some non specific recommendations that we do have on page 29 of the report. first, under the proposed, even authority is reimbursed based on actual expenditures. i think this was alluded to by jonathan when he gave his presentation. our recommendation rather than

recommendations, it would be from third-party, so there would be reimbursement for expenditures. second, estimated costs for 30 and 32, these are costs that happen after the event. $32.10 million out of the total cost of over $100 million, so we recommend there be a revision so that the port reports back to the board of supervisors prior to the word beginning of the most fiscally effective options and also may be considered rather the city rather than the event authority make these upgrades. part of the consideration would be the reimbursement would be per year they may have funds that are less expensive, should they proceed with that. and then the port must pay

precipitation up to 15 years after the termination for 32 and 26 and 28. this is a new provision. it was not in the post and the new agreement. the present vallium to the event authority is actually pretty negligible. it was not in the numbers that the port estimate on the present value of their reimbursement, but it will impact report for 91 years into the future. fourth, we recommend that the board could consider imposing a cap on the expenditures to be reimbursed, and i know there is discussion on that today. next, the property transfers. this is something that was in the host and the new agreement that was approved by the board on december 14, 2010. our recommendation is to go back to that agreement, but this

would be not the first sale of condominiums. it would be on the resale. the sec and with the net proceeds for more than 55% rights in any long-term leases, not on the force but on subsequent transfers. especially because participation and proceeds would not occur with the first transaction, but subsequent transactions, it does not significantly reduce the amount of the reimbursement to the event authority and would provide a fair return to the port. since the event authority should return short-term venues at the end of the event, instead of six months after, the port would be able to lease those properties out and get revenues from those properties immediately, helping with port cost. the event authority should retain piers 26 and 28 between

the end of current leases and commencement of future releases. under the of which will host and the new agreement approved by the board, there was not this -- under the original host and the new agreement approved by the board -- and venue agreement approved by the board, the port would lose that source of rent revenue during that period. 8, in the event authority should return pier 29 to the port at the close of the event. as it is, they can maintain it for up to six months, not entering a longer-term lease. finally, there should be rent considered by the consumer price index.

there is a significant delay in the start of these leases. this is particularly radical. it is already there for pier 29, but is absent for 26 and 28. supervisor kim: i was wondering if you could articulate further -- from your perspective as the budget analyst, what exactly is the risk that the event authority has taken on in this agreement? i have an understanding of the risks the city is taking on in improving -- in approving the cda, but it is not clear what the event authority is taking on as a risk. >> madam chair, to answer this question, i think that would be best answered by the port, or the oewd. as we have looked at development

agreements in the past, the belt -- the developer assume some risk in terms of return on their investment. supervisor kim: that is fairly clear to me. but in this case, the event authority will be reimbursed. there is a schedule put in place to reimburse them for the expenses they made for the infrastructure. for example, if the ifd is enough, they can go on to the 10 year lease. it keeps going. the only risk ic for the event authority is that it is a time at which they will get paid back, the length of time it takes for reimbursement. the city has to pay an 11% interest rate on the amount. i am not sure. that negates some of the risk on the event authority.

i keep hearing the event authority is taking on risks. that is not clear to me. nobody has been able to articulate to me what that risk is. >> jonathan stern, from the port. i received a similar inquiry from the port commission. i had prepared this slide on the screen. in the interest of time, we did not give a full presentation like we did the port commission. there are a number of risk factors, if i could have the slide above these -- up on the screen, the we have talked about in terms of development. the first test to do with it -- taking this out of order, to cut to the construction and costs risk we of talk about, the budget analysts have pointed out a number of ways and the supervisors have pointed out the ways there are cost risks and

cost reimbursement risks, and whether the standards should be a practical cap. based on the estimates we are showing, that balance between $88 million in the present value on the engineering estimates for cost, which third-party engineers have already verified, it looks like the practical cap of what is offered for reimbursable sources, for all intents and purposes, cover those costs and no other costs. any cost containment is essentially achieve as a practical matter in the dda. that is the construction risk at the bottom. there are other risk factors we discussed with the port commission. the first is entitlement risk. i touched on this earlier. the way they are reimbursed, for the most part, is through development rights. seawall lot 330 is a piece of

property with a certain appraised value that is part of the host agreement. that is relatively certain. in other cases, it is steps -- is that the real value of reimbursement for the real costs that will occur in 2012 was a future development value, based on what they can get improved and built. the entitlement risk is high. we acknowledge they have not yet come up with a plan. we do not know if it is something they can get approved, or will really make enough money to meet the estimates we have put up there today. supervisor kim: in terms of the development rights for the sea wall lot 330 -- is it 330? there is something that are building and a risk there will not get their costs back through

the sale of the condo units. in terms of the actual costs the event authority is committing to today, they will get reimbursed by the city through the schedule we are putting forward. i would like to see a more equitable distribution of the risk. one is the fund-raising committee goals. if the fund-raising committee is not able to raise $32 million, the city is on the hook for would ever the gap might be. there should be a share of the risk of what we are able to raise to covers the costs. this is a comment i have for the dda. in other development agreements, when a developer agrees to build this many units, it forces a risk in terms of their return on investment. here, i just do not see that. >> should i go to the rest of

the risk factors? have you gotten your questions addressed? thank you. supervisor kim: you were going to respond? >> i was just going to articulate another response to supervisor kim's observation. there are defined repayments sources in the agreement, and the authority is only able to get repaid most of its cost if it gets approved as a long-term lease. that is a discretionary decision by ceqa and the board of supervisors. there are other approvals required as well, including the port commission, acting in a discretionary capacity. ifd, which is the next major

source of revenue, is dependent on that happening. there is significant risk on the development side that does not address the general fund risk. supervisor kim: would you like to add to that, in terms of development risk? >> there are a couple of things i would like to add. the first is possibly an unknown fact. that is the office of economic development, when michael cullen was involved, during 2010, offered the bones of this deal to three developers, and they all turned it down. the reason they turned it down is no developer in their right mind spends between $50 million or $80 million in the hope they would get the entitlements down the track. there must be something in the

steel which is risky for the event authority, if that is the case. the second thing i will add is this continues to be discussed as a development deal. i do not consider it to be a development deal. the valencia and america's cup was awarded because they paid the event authority 60 million euros, and guaranteed 40 million euros of sponsorship. in other words, they gave in cash and guarantees 100 million euros for the rights to host the america's cup. for san francisco, we have awarded the america's cup of san francisco no payment of cash at all. all we have been awarded, really, is the repayment of our cost to operate the piers that i

think the executive director in one of the board of supervisors hearings went on record saying is good to fall into the water in the next 10 years. there is no one standing behind the event authority. i am troubled by this project that is being classified as just a development deal. at the end of the event, what will happen is that the fed authority will have the right to get its money back, provided it only spends about $80 million. after that, it won't get its money back. after that, it has the rights to go through another entitlement process to see if they can develop anything. i think that accurately describes the deal. >> thank you. supervisor kim: no further questions. i know there are a number of other items we would go through in terms of budget analyst

recommendations, but i want to open it for public comment, if we do not have additional questions at this time. i am going to read from the cards. each individual will receive two minutes of time. rubin hechanova, peter stoneburg, jim lazarus, louise renny, paul erickson, norman perce. -- perce -- pierce. >> my name is peter stone berger, and i and the commodore of the st. francis yacht club. we have 450 members. we are a small business, a nonprofit corporation. are substantial -- we are a

substantial rent-paying tenant of the port of san francisco. we are already seeing the jobs creation and economic development we were all hoping to see. most clubs are experiencing declining membership. many are even closing down. in spite of the fact we do not have a team in the competition, and in this tough economic climate, are small business is doing great. we have nearly 200 union and nonunion employees, most of whom are minorities, who rely on us for their livelihood. we are already hiring local employees in anticipation of the cup. since the host city agreement was approved by this board, and we have experienced substantial growth in our membership. you can see from this chart that

our new membership grew 69% last year. i attribute most of this growth to the america's cup. our club is a leading indicator for the path to economic stimulus and local jobs creation that we see. are city desperately needs this type of stimulus and jobs creation. our small business is living proof that we are already seeing it. please approve the recommendation to allow san francisco and its residents to enjoy the myriad benefits of the america's cup. thank you. chairperson chu: next speaker. >> good afternoon. jim lazarus, san francisco chamber of commerce, representing the chamber and the alliance for clubs and system of growth. we have been given the right to host a world-class event in san

francisco, which will sell the city to the world. we are going to get rebuilt legacy peers and infrastructure that the city and the port of ben, by and large, unable to figure out for decades how to maintain and how to put to good economic and recreational use for the people of san francisco , and recreational purposes. we have the opportunity to do some great projects built around the america's cup and the funding that will come from this partnership. i say this in good humor. please, board of supervisors, work this out over the next 10 days. get this approved on february 28. i am sure it won't happen, but please don't screw up this great opportunity to not only put a great event in the bay area over

the next two years, but to rebuild the infrastructure of san francisco for generations to come. thank you. >> i am andrea, the president and founder of ecopress partners, a minority-owned small business. we were founded to provide environmentally sound green solutions in the printing industry. as part of the workforce development and community outreach, i have been in dialogue with them for over five months now. i have found them to be extremely responsive to the proposals i put forward to them. if indeed i am awarded business, they are awarded the opportunity to work here, and i

am awarded that business, i will be able to hire both minority workers as well as individuals to expand my business. i implore you to help them to bring a major event to our city, so small businesses like mine can grow and expand. thank you. chairperson chu: thank you. next speaker? >> good afternoon. i want to thank you for your hard questions. that was great. i am here because almost 50 years ago iran and took part in match racing here on the city front, san francisco bay. we did not need quite as much area, and maybe nobody watched us. i also, as a race committee head for the golden gate yacht club,