chair chu: the, and welcome to the regular meeting of the san francisco budget and finance committee. my name is carmen chu, and i am the chair. joining us today include supervisor avalos and supervisor kim will be coming later. our clerk today is victor young. we also have people from sfgtv. could you please read?

clerk young: -- chair chu: item number one. clerk young: i number one, a permit of a north feasting wall sign. >> when the city required the building, it also assumed all of the existing leases and permits on the building, which included a lease with cbs outdoor. they then sold the space for uses such as the one i have on the overhead now. that continued until that particular lease expired naturally on march 31, 2011. knowing that that expiration was coming forward, and knowing the regulations relative to

advertising on city property, the city issued a request for proposals from outdoors signage companies in the spring of 2011. this request specifically excluded advertising for alcohol or tobacco products, in any way, shape, or form, either direct or indirect. following that process, we had five potential bidders interested in this light. negotiations with the highest bidder failed to produce a permit and a fashion that the city was comfortable with. we then went to the number two bitter, and that is what is before you today. total outdoor, west coast media actually tendered the proposal in the spring of 2011. the terms of the permit is an initial term that sticks out to the end of 2016, with the and 35-year options.

those options are at mutual agreement. as i mentioned, they are we vocable. there are some writes about the city retains to terminate, and those have to be fairly extreme in nature. the payment stream is a little bit complicated. there is a base minimum guarantee of $63,000 per year. there is an initial bonus payment of $30,000 made during the initial execution of the permit, amortized over an initial term, and then there is a percentage, 35% of any net over $180,000 per year that they might receive from advertisers, and then there is a tiered system we created, where in the course of negotiations, we learned that the elimination rights to the board were not documented to the degree that we

thought they were, and in consultation with the planning department to see that the board does not have the right to be a eliminated, said there is no light at night. that $63,000 number i gave you is, perchance, the permittees should secure in the future the right to light to the board, the rate automatically bombs up -- bumps up over $100,000 per year, so we can capture that additional revenue we are not sure we will see that, but we wanted to condition this based on that. lastly, i should note that the prior agreement was very rich for the landlord. it generated $250,000 per year. when we looked at the actuals, we had the auditing right. we learned in the last two years that we were frankly losing

money on this board location. that market has not recovered, particularly for static signage, such as these, without the human nation's rights. -- the illumination rights. these are more reflective of the industry and the difficulty of securing high-paying tenants on these boards. so that is the essence of what is before you. this is revenue and helps offset the expenses of the buildings. this goes into a special fund that funds our operations within the civic center, specific emission quarter buildings that are managed by real estate, and this is like any other rent paying tenant. those funds go back into the building operation and management. chair chu: thank you. just in terms of a question for me, in terms of the rfp that you said went out in the spring, you said there would be no alcohol

or tobacco. is that in the current contracts? >> the expired contract? no, that was not the case. chair chu: that could explain some of the differential. >> it could, it could, but i am not sure. chair chu: and the first bidder use that went into negotiations with the city but are not in the contract that you brought before us. can you explain that a bit more? >> sure. the concept of the minimum annual guarantee, we did not see eye to eye on what that meant, and when we analyzed the terms and conditions of what they put before us, it created so many potentials for a reduction as the landlord, we did not feel edmund minimum. it meant a potential, and when we looked at the actual minimum

numbers that would be reasonable return, their ranking fell frankly to the bottom of those that submitted proposals. chair chu: thank you for the explanation. why do we not go to the budget analyst's report? >> madam chair, members of the committee, on page 5 of the report, we point out that the proposed permit would generate $93,000 in the first year. that is the minimum guarantee of 63,000 plus the 30,001-time bonus, and over the initial term, the permit would generate a minimum annual guaranteed of about $324,000, and as mr. updike has indicated, there is a difference between the proposed annual guaranteed versus the prior minimum guarantee that cbs outdoor paint. it is about 73% or more less.

the fact that cbs outdoor was one of the bidders, and they bid less than the proposed permit the, the total outdoor, i think that is a further indication that they simply could not cut it with that $240,000 minimum annual guaranteed. we recommend that you approve the resolution. chair chu: thank you, mr. rose. why do we not open this up for members of the, you wish to speak on this item number one? >> good afternoon, supervisors. my name is douglas, and i have lived in san francisco for 60 years. i thought this was a very interesting resolution, and the thought that occurred to me is that maybe since it is located on mission street, in a heavily divorce neighborhood, maybe the city might get even more use of that space by using it for

public service announcements that would benefit the different groups living in that area. it could be used to advertise different programs the city is trying to help people with and can also be used for sfpd, or whenever they would need the space for, and i think it would enable a lot of nonprofit organizations to put up information there without going in paying for such space, so maybe if this space is not that a lucrative, since the top bidder did not really want it again, then maybe it might be more useful and more beneficial to the different communities along mission street to use some for our public service announcements and in this way, in a certain sense, it would not cost the city that much to advertise what it deems necessary to advertise, and it

would also give the non-profit organizations a chance to say something to help the community along mission street. thank you. chair chu: thank you. next speaker. >> ♪ would you not fix it, budget, fix it night and day proved that is the only way the magic and the music gets to you, then just enjoy the money fix it of the wall fix a of a wall fix it like crazy and that is the only way back tonight let the magic in the budget music get to you and just enjoy it if you -- in joint, fixing up wall fixing the wall ♪

chair chu: thank you. are there any members of the public wish to speak on item number one? cnn, the item is closed. colleagues, do we have a recommendation to send it forward? ok, we have got a motion and a second. we will do that without objection. i believe that supervisor david chiu wanted to be here for item number two, so let us get over that one and go to item number three. clerk young: appropriating $5,448,350, consisting of the fund balance and america's cup event font -- even authorities reimbursement, for the port commission for the development

of a mixed use cruise terminal at pier 27. chair chu: thank you. with a report, we have elaine forms. >> good afternoon. elaine forbes, support staff. this is to have money for the budget, but the reason for this item is to address the timing of the cash. there are three sources in the supplemental. the first is in the amount of three-point for under 48 million. -- $3.448 million. we need the funds appropriated earlier. the second source, the 2010 port revenue bonds. we have $1.10 million from the pier 35 project. this project is delayed. we are taking funds and reallocating this to the pier 35

project. there are bonds of 700,000. this is from a roof project that came in under budget, and we want to capture that source for the project. the final source is shoreside power. as you know, be the authority is reimbursing for moving them. the supplemental would recommend both the source and the use of that funding. i will note, as you are aware, the dda has a change, and it is coming back to the board of supervisors at the end of this month, and whether this continues to be a source of repayment from the event of 40

or whether they in turn was this cost into our budget is under discussion, so i would leave it to the committee about to handle this item on the 2 million you could reserve, and until the dda has approved. i could come back. you could sever this from the supplemental. it is really the committee's preference how to resolve this, but the other portion of the supplemental, the over $5 million, we do need to move forward because we need the cash for the project, and there is a delay on ordnances, etc., so we would prefer that. the rest of the funds. we would like to think a budget analyst for their report, and we support the recommendation to come back to you with a full report on the phase two funding and the debt financing and how

we will resolve that before we issue what makes up the balance of the sources in this project, and i am here with my budget person to answer any questions. thank you. >> -- chair chu: thank you. just to clarify, the thing that has changed is the appropriation, 7.2. there is no longer a source of the additional $2 million that was supposed to come from the reimbursement of the america's cup, given that so many things are changing at this point? >> i would not want to characterize it as no longer a source. the source would be the event authority reimbursing us, or it would be deport revenue capacity supporting that $2 million, so there will be a source. he is just because the negotiations are continuing, and we're going to look for a revised plan. we are not certain of the sources. chair chu: in terms of the

balance of the 7.2, with a 3.4, that is still available in the fund balance, and you are saying this is necessary at this moment in terms of cash flow issues. >> yes, what we issued in 2010. chair chu: ok, and then in terms of the remaining balance, the over $5 million, do you have any update on this? i know you were in agreement with a budget analyst to come back with a report to provide us with information about how they will get to balance. do you have an update at this moment? >> at this moment, there is actually somewhat in flux. we have been looking at a potential source, so we are continuing to explore that as source for the phase two project. i am actually going to flip to a slide that shows the different ways that we are looking to finance this, the 6.9 at this

point, although it has been further reduced. we're looking to ab 664, the legislation that allows us a share from the america's cup development site. we are looking to see in the revised deal what waterfront improvements would qualify under ab 664 that will still be improvements for our peers and docks -- piers and docks. the special events and then you, we know the america's cup will be the first special event, but we hope to have that for future special events, and that will be a revenue-generating option, and we're also looking to identify new planning sources, perhaps restoring other and our

mental improvements that are associated with the site, and we will continue to look at we appropriating -- restoring other in our mental improvements. i have the benefits of the positive bidding environment. that seems to be as the economy improves not as possible as we thought originally. it is good for the economy but not for the cost of our project. and then we will continue to look at select project components that could be deferred or reduced from the project scope. when we come back in april, not only will we have a funding source for your consideration, we will also have our project costs really defined better. what i have been bringing to you is conceptual design numbers. we know more now. the costs have gone up some in phase two, and we are looking at how to reduce costs and what the sources look like. chair chu: supervisor kim?

supervisor kim: this is an informational question. he pays property taxes on those? chair chu: i understand they have submitted the budget to the office. that your budget include a $6.5 million allocation from the general fund at the moment? >> no. no, we are waiting for the advice and guidance from the mayor's budget office on whether this is a cash contribution or debt. we are working with the office of public finance for the ports share, and the 6.5 could be included in that, or it could be a cash source, so we are in conversation with the mayor's budget office about their preference and its committees preference.

as you directed, we're looking for payment for the reduction of the contribution, so when we come to you in april, we should have, we will have answers from the preference of the mayor's budget office in that regard and potential reductions by enhancing other payments sources. chair chu: thank you. if there are no questions at this time, why do we not go to the budget analyst's report? >> we were advised by mr. rosenfield at today's meeting about the potential question regarding the $2 million. we were friends that at the top of page 5 of our report from the event of 40. they were to reimburse up to $2 million in actual expenditures related to the shoreside power relocation. i would recommend the fact that given there are other

uncertainties, it be placed on the budget and finance committee reserve, that $2 million, and i think the committee would then get the total clarification whether or not that is going to be paid or not. regarding the fiscal impact, we point out on the bottom of page 5 that the funding sources for the entire cruise terminal project, phase one is $62.30 million, and the funding sources are identified in table two, the attachment of page 9 and the report, and the actual budget for the expenditures of the 27 cruise terminal project is $93 million, and that is shown on page 9 in the attachment. the attachment was provided by the port, and that includes over $60 million for phase one

and more for phase two. and regarding the item of uncertainty, on the attachment, it shows the total budget of $30.70 million, and there has not been an identified funding source, and that is why we have made the recommendation for the port to come back to the committee, to give an updated status on that $5.30 million. we do recommend approval for this appropriation ordnance with the contingency regarding the qualification regarding the $2 million. and we do note, as has been pointed out, that there are two, even within this phase one, there are two still pending actions by the board of supervisors for two funding sources, and that is the $15.50

million for the certificates of participation and a possible general fund appreciation of $6.50 million, but given that this cruise terminal project has come before the board several times, and it has been the policy of the board to proceed, at least heretofore with this 27 cruise terminal project, we do recommend approval. chair chu: thank you, mr. rose. i think in light of this news that we do not have a funding source for 2 million, i think both the supervisor avalos and i find it that the cleanest way for us to deal with this is to reduce it by the $2 million, but the only reason why we may actually pass a $27 million with perhaps a reserve on the $2 million is it there is an eminent source of funding and we expect to becoming relatively shortly and also in terms of the

timeline, if there is a particular timeline that we are trying to meet. can you explain to us why we may want to do this with a supplemental? >> yes. there is an imminent source, and we are working with the office of public finance on it. we do have a timing of cash needs throughout this project to deliver it in march of 2013. the office of public finance is looking potentially at commercial paper for us to meet our cash flow need in june, and with this $2 million coming out, i believe we would have a deficit in may, so we would be needing commercial paper in may without this appropriation. we would be needing a commercial paper source if the event of 40 is not reimbursing us for the $2 million, so there is an eminent

source coming. the source of repayment will be harbor funds for the $2 million if, in fact, through the final dda they are not reimbursing the port for those costs. so that said, if it is the committee's strong desire to just reduce the supplemental appropriation and strike out the $2 million, we would just need to issue commercial paper earlier instead of june. we would need to talk to the office of public finance for a may auction. as i said, because it is still under consideration, and the final deal is not before you, it is hard for me to say, to give my best recommendation to you today, but if it is your recommendation to reduce it, that would be the impact. chair chu: in terms of what you

are working with the office of public finance on, is that something you are bringing before the board? >> oh, yes. chair chu: ok, it seems that you can come back at that time with that $2 million if it should be materialized in the process, so i think that will not necessarily impact and have you go to require commercial paper early. it sounds like it is already a bill to a process that you have to come here anyway. >> it is just later in the process, so the proceeds would not be available until july or august, so right now, our cash problem begins in june. without the $2 million, it would push back to may. chair chu: from what i am understanding you say is that one of the potential sources -- >> and the proceeds would be available in the summer. chair chu: either way, it will

not come later, you'll still have to get the commercial paper is. >> yes. chair chu: thank you. why do we not open this up for public comment? are the members of the public who wish to speak on this item number three? >> ♪ let there be you let there be made let there be oysters under the seat mate you fly like a dove most of all, let there be budget money america's cup love ♪ chair chu: thank you.

>> good afternoon, supervisors. i just want to thank the committee for a cheerful discussion of this item, since it does deal with $7 million, and i also thought that mr. rose had a very simple but accurate analysis, so i think his recommendations should be carefully considered. also, i would like to make one in formal suggestion. maybe we can come up with $2 million in less than one hour. we can always ask the mayor to contact our friends overseas, in other words china, and i am sure the chinese can easily find $2 million sitting around if for no other reason other than philanthropy. thank you. chair chu: thank you. are there any other speakers who wish to comment on this item number three? seeing none, item number 3 is closed.