adopt like the other strong financial policies you have adopted to set aside surplus revenues for capital to designate it specifically for capital city can make the trade- off between operating expenses and capital. i will be coming back on the 28 for those details. we are seeing that the improved financial forecast hold in the operating budget costs and adopting a policy and we can really reverse this trend. in terms of strategies for the improvements, will be talking about that on the 28 and we will make this trade routes between operating and capital funding to enter this commission has done an excellent job in controlling operating costs. i have not seen a department that has so few over a long

horizon. this is already something that is a practice but just to institutionalize that, also it continually identifies the most efficient uses of our limited support resources for capital and always figuring out how to maintain or enhance revenue through capital improvements. again, in sharing that your financial policies are maintained and relying on the city wide efforts to control labor costs. we had the pension reform that was beneficial but we're hoping to continue to see a citywide effort to control those costs and always to tighten up on and on personal expenditures. we are about to go through the numbers and talk through more of the details but i do want to remind everyone that this next two years is a very busy time. we are quite full and subscribed

on the near-term needs to deliver for the city wide efforts for the america's cup and some capital projects at pier 27. this is a time where we need a plan for the unplanned. should we have unanticipated cost increases?

despite all the need, we are meeting our reserves and despite the need to plan for the unplanned, we have done quite a good job in holding caused it to these principles. with that, i will turn it over to making to go over the numbers. good afternoon, commissioners. >> i want to touch on a couple of things we have focused on where but in this budget together and really first of all we looked at the actuals and we tried to project based on those numbers what we really needed in our operating budget tend to be news -- we used that as a guide line that keeps the operating costs pretty flat. we also recognize revenues based

on trends that we saw in 10-11. with trying to take measures, we were able to continue to meet our operating needs by adding new positions. what we're looking like is that we see we will keep needing to have to make operating capital tradeoffs, particularly with the goal of potentially getting to 20 million of an annual investment capital at some point. this is just to get you ready for the next meeting. i will be covering two things in my portions of the presentation.

those of the budget details and trends. the staff report focuses on comparing the proposed 12-13 budget would what you approved last year. i will give you a reminder of what it was that you approved last year and then go through the 12-13 proposed budget details. then i will go over the overall trend to see how these fit into what we are seeing. first of all, what happened in the budget last year? compared to fiscal year 11-12, it was reduced by $3.1 million. you will see that our revenues grew slightly, by about $500,000. overall, we had to take a

reduction. that's partly because of their capital funding, we had appropriated funds from ones that were not performing. despite the reduction in the overall budget, you improve and increase in the salaries and fringe and the drivers behind that were labor concessions and proposition c. the impact was a sharp decline in capital. that is what triggered -- we need to start trading this around. now going to go into how the

proposed budget compares with the approved budget that was passed. this is 95 $26 million, an increase over last year. that's pretty significant in growth and the balkans in revenue. -- the bulk of it is in revenue. we need to show that in the budget. we will see that parking revenue grew by $1.5 million, partly through expansion of meters and enforcement of the meters along the waterfront. commercial and industrial read group but $2.4 million. we see increases in those revenues and we want to make sure we were capturing it in the budget so that when we were looking in the long term, we could really see revenues are keeping up with the expenditures better than we expected.

maritime as an exciting story. we're all invested in the cruise terminal and making sure that industry is sustained. already, our maritime division is reflecting 44% growth in passenger volume through san francisco in 2012 and 13. that has added benefit of about a million dollars to that division. another key story is fund balance. fund balance is critical to our capital program. i don't know what each of your individual backgrounds are in understanding this funding, but it is replenished every year by operating a surplus. it is critical for supporting our operating reserves and capital projects. we were able to assume another $3.5 million in this balance and

it has an impact to the capital spending. the operating budget increase also, along to help ease up some of those new sources of funds. $2.9 million worth of growth, at $2 million is taken up by the america's cup project. staff recognizes we have potential vulnerability there and we wanted to make sure we had funds in place if we were called upon to use them. staffing stays steady. we added positions to the budget and substituted of budget positions. they need to be supported by our operating revenue. by adding those positions, we would have seen an increase in salaries, but because of proposition see, we benefit from that.

the capital budget is where we are excited to see that growth. we have all $11.9 million budgeted for capital projects. not as much as we have 411-12. we are budgeting $2.9 million to operate -- to operating costs. this is the policy coming into action. this is the action of putting funds away for future capital. fiscal year 1314 -- 13-14, we increase the budget to 92 million, supported by additional revenue growth. parking, commercial, industrial, rent and cruise continues to seek growth. all that is tied to what we are

seeing in actual income in the current year. fund balance remains steady. what you saw last year is we had a robust fund balance and we thought it would have to decline for 12-13, but by putting designated funds away we're helping to sustain that level and keep pounding at a more constant level. additionally, we are doing well -- through a six month report, the port that the comptroller just issued, the port is projecting a year-end surplus that is quite healthy and we are putting that in the budget. with that the overview, want to give you a sense of how the numbers tie in to the trends we're seeing. i keep referring back to 10-11

and refer to the current year and that's what i want to show you and these charts and graphs. overall, i am comparing fiscal year 13-14 with fiscal year 10- 11. over those four fiscal years, what are the trends we are seeing? in fiscal year 10-11, we have revenue of $73.6 million. in fiscal year 13-14, we have budgeted 70. -- [inaudible] what you will see is we have particular areas of growth. commercial industrial rent as a growth of 7% and a maritime is starting to become healthier.

12-13 and 13-14 are reflected in the budget and they are a continuation of what we obscene operationally at the port. with the expenditures, it's a different story. we are seeing steeper growth and what we see in revenues. you can see in fiscal year 10- 11, we only spend $56.9 million. quite a lot of growth. as you can see, the majority is in salaries and fringe. some of the cost is from new positions. the 10-11 budget includes labor concessions that have not been assumed for fiscal year 13-14.

by the time we get through this budget process, we will likely have some savings. a growing retirement costs. that is the overview of those budget details than happy to answer any questions you have. thinking ahead, we will be introducing the budget to the mayor's office on tuesday. we will then come back to you for final approval after that. that does not hold you to this current budget. if you have major decisions, the mayor's office is aware that and i will simply be updating them to the changes. we will go through the board process and we will return to you with an update later this summer. >> commissioners, and the questions? thank you very much. >> this is a minor one because

parking is not a huge revenue source, but you were projecting an increase based on 142 new parking meters. is that the proposal that came to was at the last meeting that stalled or is that something different? will we see it part of the year but not the entire time? >> a large part of the parking revenue growth -- that is due to the meters. the meters on the port property were not as strongly contested. what is not going ford is how it filters out into the city's streets and neighborhoods. >> -- going forward.

>> one very broad question touching on some of the impact of the america's cup, but are there any projected costs we might be incurring and never accounted for those that do we have funds? >> we have an annual funding and the budget. it's not an annual expense. it does account from everything from doing environmental mitigation review to in starling -- installing parks to any regular operating cost we would otherwise have not assumed in the budget but otherwise there's a risk that might come back and we might need those funds. but by setting those costs

aside, it allowed us to keep a look at our funds separately and just account for that potential cost this one time. >> thank you. >> any further questions? we will move onto the next topic. >> public comment? >> any public comment? i will be used to this. we will move onto the next topic. >> informational presentation on the court's proposed $22.4 million capital project budget funding for fiscal years 2012- 2013 and 2013-2014. >> i'm here from the capital plan team. lawrence cannot be here but he did prepare the report. it's anything like the operating

budget, we will come to you today and come back for final approval. i alluded to the fact that our capital needs are very financially challenging. i know you are all acutely aware of this period to give you a preview of the capital plan which will be presented on february 28, it would cost $2.2 billion to adequately repair our portfolio. of this, only $693 million in funding is identified for resources to repair our portfolio. we have identified additional sources of $264 million in enhancements. we have a very big number and the need for capital and identified sources are woefully lower than is required. if we were to set aside $20

million annually and are capital budget instead of $10 million, we would not add to the backlog in this substructures of our peers. i had good number of 38 million portfolio-wide -- if we set aside $38 million, we would not add to the backlog at all. that gives you a sense of magnitude. as you are all aware, we have lost 15 years since the 1970's. it's a very serious situation. port staff has been aggressive in identifying the need in producing a robust capital plan and seeking sources that are not our annual repair and

placement budget. general-obligation bonds for park improvements which improve our assets, grants and other sources are the primary ways support staff has begun to dig into the problem. -- port staff has begun to dig into the problem. you will learn more about the plan on the 28. the capital budget implements the projects in the capital plan. the capital planning project as a scoring criteria. staff from all the divisions come together with recommended projects, the team gets together, and they score them based on the criteria listed on the screen. addresses, code, regulatory issues -- to this significantly reduces liability, and attracts people to the waterfront and protects natural and cultural resources. there are 70 points in those

items and there is financial criteria. what is the total 10-year financial benefit? those scores look to pry our terry -- and this is substantially matched by outside funding sources. you get negative point it's not match and it doesn't produce any revenue. you will see in the total fiscal year 12-13 capital budget is $11.85 million, of which $3.55 million is for specific projects. your attachments go through quite a bit of detail and i want to cover the highlights. we are recommending you set aside $1.5 million for the cruise terminal. there's a clause in the document

that requires us to deliver the project on time. if that means adding additional ships or whatever is required to do on time, we might be able to add that but we wanted to have this contingency. there are several big alternates. that would be much more cost- effective to produce in phase one than face to. i would like to potential use this source to achieve those items. the engineering and project team will get back to you should you need this but i wanted to get back to you now. there is also the removal of the dry dock at pier 1. i believe that is a $6.6 million project. >> that is not at pier 1. >> thank you.

there is a match for the leasing improvement. for the port wide projects, they noted -- notable ones are the utility program, the transition, the under peer utility program is for a under pure utilities. the transition plan is for the ag building and leasing project are for a range of improvements acquire -- required this next year. for the fiscal year 13-14 budget, a total of $10.5 million. area specific projects are $2 million. the key ones are pier 35 substructure repair. when we get to the next item, which is a supplemental request for the cruise terminal, you will see embargoing revenue bonds for the cruise terminal and i need to replace it through

the capital budget for pier 35 to meet the timing of cash for both projects. we need the cash from the revenue debt for the cruise terminal now. the pier 35 project is not ready for implementation and we have sources to replace those funds. we are adding funds to the infrastructure study, by far the most notable is the under peer utility program. this is for continuing requirements to do design work, and implementation to see better ways of addressing our utility needs. this particular study includes

utilities act wharf j one and pier 9. we went over our concept of reversing the trend and the repair and replace project. it is a needed a source, protecting it is incredibly important to our renewal costs and dredging costs are growing over time, which is one of the first call on this program. we aim to grow the budget so we can meet our basic needs and this priority setting project allows us to filter what is most important. there are always many more project requests we are not able to accomplish. i'm here to answer any questions. >> thank you. i think it is well laid out. any questions from the

commissioners? >> my recollection is we started doing this when the city started doing its 10-year capital plan. are we continuing to feed into the city's plan? >> yes. we feed in and budget through the budgeting system and go through the capital committee for review. we are doing a 10-year look every year. we have not conformed to that mostly because our priorities have changed and are changing as a result of the america's cup and other improvements required. we felt we needed to keep that continually refreshed as our priorities shift. >> ours was actually first, predating the cities and they have conformed with us.

>> of course we were first. >> what did you do before you came over here? >> something to do with money. >> the second question has to do with the first -- am i dreaming or was there talk about the possibility of another bond that would include another project for 2012? >> we have been working with recreation and parks department on a question to the voters and we have been working with the capital planning committee and we are getting well under way to coming to you with a proposal for the bond in november. we are looking for the plaza to additional prove mens and the waterfront and continue the momentum of the 2008 project and we will be to you to show you the proposal. >> >> are the tillies derived

from city sources or outside sources? >> they are our responsibility is how i understand them. >> to view mayn't funded or generated? >> i assume that would be water as well. >> yes. we are responsible for the infrastructure that the livers from the main system, whether water, power or sewer. we procure them from a san francisco public utilities commission. >> i noticed there were some relatively small amounts tied to

some of the improvements in the southern waterfront. how does that overlap with the funding coming in from the blue green way? can any of that be allocated to the funds that come in? >> i think you may be referring to what is specifically fund improvements in the southern waterfront. the blue screen way has a variety of sources, but the most recent sources we have bad are the sale of the p.o. bonds. -- cdo bonds. >> yes, they do overlap. one is from the blue green way, to is the trans date payment, but the third is the