32. those are the rates needed to stage the race and those that needed for the development after the event. that can be deferred up to 10 years. then there are other related improvements for pier 29, short power, regulations, etc. included in that infrastructure work basket. here is the budget for authority infrastructure work and this includes both pre match and post match work. the total is 111.3 million. you'll notice on this chart that there are grayed out columns, those are work that remain under the ports control. some are direct improvement to assets. we will continue to control. the net present value is $88.5

million. >> this has not change, right? this is the same as what we have seen before? >> this is substantially the same as what you have seen before. the port staff memo in december, there was an error in the calculation so it has gone up but it is basically a rounding error in terms of what you are seeing. how was the authority repaid for this level of investment? jonathan laid out the waterfall and i wanted to show you the value that is associated with that. this assumes the $111 million investment but remember the net present value is 80.5 million. the sources of repayment, the

interim leases >> interim lease at 29, and the residual on pier 30-steady to. the total, $88.7 million. you will note that the event authority's budget for. the infrastructure work is very close to the sources of repayment. 88.5 compared to $80.7 million. -- $88.7 million. this is work at pier 26 and 28, the total is $38.8 million. here, you will see a demonstration of the services of the payment. the value is assisted with these sources. a 66-year lease. this is a historic tax credit,

20 million. and the residuals or another alternative. it is is explicitly stating that if we can find another presentation source like the financing tool, that would be extinguished. the net present value of the improvements the authority made on 26 and 28 are basically i known at this point but we know the value of potential repayment sources. what does this mean to the port in terms of our opportunity costs? we know what the repayment sources are for this large amount of private investment. i just wanted to briefly explain the methodology. we looked at the assets and a bit remaining useful life according to our engineering department and the potential rent from our uses on these assets for authority

infrastructure work, the opportunity costs to the port is $52.5 million and that is the rent we would have otherwise received from those peers with the existing resources, existing rents. if you think about that $52 million compared to the benefits and the investment of $111 million, you can see clearly that the benefits of the event, the development potential are greater than the opportunity costs of this lost went. for additional work come the ports opportunity cost is only 14.9 million and that is the rent we would have received for the useful life of those assets. the additional work is leveraged with lots of other sources. so, while the of that authority

can be repaid 38.8 million coming up to the cost is only 14.9 million. one of the benefits of this project is the event authority will extend the useful lives of our assets. the purple color is the useful life for the port. 3:30 will extend into the far future the black indicates the time between their race and the development. i purposefully made it that green because it is paid to the port, not a rent credit source. the gray is the long-term leases. the repayments sources.

the blue indicates that tails. you can see graphically how the port under existing plans would not be able to extend the terms and we are maximizing value of repayment of this private investment. i spent a lot of time talking about the buyout option. i wanted to let you know how works. the port must notify the event authority of its intent to buy out six months after approving the scope of work. the buyout must be completed within five years of notification. it does not eliminate expenses of the functional cap. this shows you the current cost estimate. it assumes a buyout of 10

million. just to give you a sense to buy back pier 29, we would need to get back because the buyout does not eliminate the sources you see in the chart next to it. the expenses would exceed the amount of the buyout. it depends on the estimates of total costs whether it is beneficial to the ports to exercise this option. i want to go in to the budget analyst recommendations.

that deal we initiated because of the non-exclusive options are off the table, we have balanced benefits with cost and risks and rewards. i wanted to tell you what they are. the first is to base costs on estimates rather than actual cost. this is an idea to contain cost increases. the budget analysts would like the board of supervisors to look at post match expenditure on 30-32 and require that we talked to the board of supervisors about the most economically efficient way to perform that work, whether it is doing it ourselves, buying out the investment, or having them do

the work and it reimbursing them. the budget analyst at recommends a cap on spending. we have a functional cap and recommend a hard cap on spending and recommend all short-term of venues immediately after the event. i would categorize all of these risk containment recommendations. this one, i would characterize as consistency least terms. they would have the same methodology as pier 29 which is to escalate the base rents prior to the start dates of the long term lease. the next steps are to take the current proposal and returned

it to the terms of the board of supervisors approved in 2010, which would eliminate the financial tables that go out 15 years after the long term lease. they recommend participation be put back into the deal which is specifically for a transfer fee equal to 1%. participation they are asking to require the authorities to retain peers 20 and 28 unless the authority expenditures don't require those assets. this is a leasing risk and interest risk. their thinking is the port would have difficulty releasing those in the short term and we ought to be making payments to the authority infrastructure to

avoid that sitting there and accruing at 11% per year. with that, i will turn it back to jonathan but i will be able to answer any questions that you have. >> thank you. starting from the budget analyst recommendations, i'm not going to go over this again but i want to reemphasize that these are a very sound recommendations in terms of thinking about financial risks. every real estate deal is a negotiated deal, so i would be happy to answer any questions about that. before i respond to any questions about that, i thought we should talk about the project benefits and the extraordinary risk profiles. to me, that answers the questions of why there might be extraordinary terms, partially because this is an extraordinary

deal. the event has a dramatic lift of benefits. they are also to the city or to the public and many of them have been hit on today. it has to do with the $111 million of improvements to the property and transfer to the capital plan costs that the support already has as we found out in the finance and budget section. we are finding sources for relieving port of some of those capital plan risks. there's also a benefit to the maritime histories. that is something we see as a key benefit. there are a lot of benefits you can see from this event. the similar kind of benefits that accrue to the city overall. one of our primary industries city-wide is tourism and this is a flood of tourism and its own

right and a lot of exposure and there is financial benefits. we have heard varying estimates of the overall dollars spent, but they are very high. all of them seem to be over a billion dollars. softer goals include the completion of redevelopment of the area of the waterfront. we have struggled to redevelop appears that are left. there are also a temporary jobs. almost 9000 jobs. these are significant benefits and that is why the d.a. does not stand alone as a real-estate project. it is embedded within an event. there's an extraordinary risk profile which i would say there

are extraordinary risks, but there are extraordinary opportunities. let's go through some of the normal risk profiles. these are the broad categories and there are some really good reasons it has shaped up this way. we don't know yet what is going to happen. the port commission contains those controls. that makes it the rest to the authority high. -- the risk to the authority high. they say we will get repaid by revenues but because they don't know the uses or magnitude, this is a big risk they're taking. this is a risk profile that is

advantageous. this gives them flexibility and they have 10 years to try it out. it is hard to assess. on the construction side, the normal side has to do with time and money and how much it's going to cost and time over run. i'm confident they will be able to perform even on the tight schedule that they had. they are responsible for some of the cost overrides. the most we can reimburse them is we are evaluating that at about $88 billion. we have no obligation to

reimburse them. on the port side, there are some flip side risks and i would say this is a big benefit. we do not have $88 million to make improvements to the waterfront. we are getting short term venue's back. the current space on revenues is the current amount we would try to release is about $200,000. we have to get new tenants when a short-term sites return to us. the city is back stopping the port matching rent losses.

finally, a long-term revenue, i thought the graph was brilliant. the reality is we're not giving up the revenues we expected to have. getting these sites redeveloped is in a form of options right now. this provides a pathway -- that said, i will talk about the next steps and opening up and be available for questions. tomorrow, we will be in front of the budget finance committee and the port staff will be there to answer any questions from the board of supervisors' committee and the full board is expected to take up this item on february 28. if that goes according to plan, we will be back in her early

march 2012, both to improve the changes -- especially if the board changes us again. these are the legal instruments were the authority will be able to entrants are making these improvements. we plan on bringing that to you in march and with that, we're here for any questions. >> is there any public comment? >> i live and work here in san

francisco and i grew up sailing in northern california. i currently a sale on the day with my two boys, ages 11 and 13 and we have a great time out there. i wanted to come here today to flag an issue you are going to be confronting soon as you begin to consider the long-term development deals that will be generated out of this agreement. one of the great ironies emerging out of this whole deal is the america cup -- america's cup legacy actually does very little to support saving on the day. you will notice it is conspicuously absent from the benefits listed. the recreational marine as envisioned by the development is position an agreement are optional to the event authority. the incentive that is bill been to get those marinas built --

the incentive that is built in to get those marinas built -- i would note that dredging is not mandatory and the rent credits can be applied to something else besides the are read. the incentive to get any facilities done to support sailing and boating on the bay are almost insignificant. to be blunt, it's like vaporware. against this context, you have to ask what you get out of this deal. i thought your own ceqa findings to the good job in noting that it would generate interest in the sport of sailing. the problem is neither the court nor the city can meet the current interest that we have in san francisco. we are already one of the world's capitals for sailing. that is well known. there are no public boatyard facilities for sailing this side of the bay bridge.

there is no public hoist to put your boat into the water. the wait for a berth at the two city parade is is 10 years. there is tons of demand for facilities. -- birth at the two city merinos is 10 years. the facilities for small boating in san francisco are rapidly being eliminated. the ongoing renovation you are familiar with at the san francisco marina will eliminate nearly all the facilities for small boats. all of the 20 foot slips are being eliminated and 200 of the 216 25 foot slips are being eliminated. they're being converted to slips for large boats, 40-foot boats and 50-foot boat. against this context, seeing the vision in the final ier be dedicated to super yachts and a

boat that run from 25 feet to 50 feet seems like too small of the provision. we have to find a way that there's a place for recreational boating, particularly small boating. it's not going to be easy and i appreciate the port staff already beginning to have this conversation, but unless we have the support of you and other leaders in the city, this part of the public trust and it's not going to happen. i look forward to talking with you about it down the road. i have letters here that sale of this in writing. >> is there any other public comment? commissioners, questions? >> the $2 million we expect to be reimbursed, that is supposed to come through the organizing committee?

if they do not raise the entire amount they're supposed to, is there some proportional payback? is there a letter of how that money is going to be repaid to various city agencies? >> the payment in lieu of rent is a mandate. it's the first call on fund raising. the eir is referenced as an early call on fund raising. beyond that, there is nothing formal. we have all submitted our budgets. the ports budget submission is part of the submission and i would suspect that the operating costs associated with the event, police, the mta, the general fund department, that is one reason why we thought it was prudent to put in an america's cup budget allocation.

>> any other questions or comments from the commission? >> thank you for a very cogent presentation. showing us what has evolved. >> thank you. there was a slide -- in determining the lost opportunity cost for the four -- for the port that was provided -- on the net present value -- >> the present value of the rent streams we would turn on those

assets, the event authority by what we are reimbursing mumbai use of the assets is discounted by a 11%. that's a difference in methodology. baer investment earns 11% interest. >> i have a question to clarify. is it because budget and less use an estimate that we are now at 88 million and we would not -- i hear that correctly? >> that represents the estimate. the budget analyst recommends we reimburse them based on an estimate rather than actual. the actual cost may be higher or lower.

one benefit to move to an estimate model is of helps us -- >> this is now on a fixed level for us. even know it's not based on actuals to move up and down. >> the payment options are fixed. what that cost is from estimate to cost to reimbursement, that is an area where at the $88 million estimate, we may say we would want to exercise a buyout option to maintain pier 29, but if those costs raise in that 10-

year window or the actual costs is much higher than the estimate, we would not want to consider that option. >> i think at one time, many versions ago, we were concerned this was an unlimited amount that was actually more dangerous for us than the other side. >> that is right. with great thanks to our port executive director, the steering committee, and the mayor's office, they agreed to limit the sources of repayment. it's a major benefit to us that it is in that the proposal. >> there is an important new ones as well. i love this slide.

we did this 15 months ago and we were really close. but what this shows to me, on the side of 88.5 estimate of cost they're getting close to finding the maximum price guaranteed contracts. wait reputable builders getting to that point, that brackets the risks. the reality is it's not going to come much closer. it only gets higher if there is a change of scope and new conditions that were unknown and unknowable when the authority did their due diligence. if anything, back cost is only going to go up. that is almost all their risk, even under the current deal.

while the budget analyst recommendations reflect best packages -- best practices, i'm not sure there is a dramatic difference other than planning purpose and understanding whether it makes sense or not. >> the passage of time helps to clarify more. any other questions? we will have to wait for the next steps that come at the finance committee. we look forward to hearing what the next steps are thank you. >> i am 11, new business from the commission? >> how about some old business? water taxis?