with the venture capital group. we were directed to san francisco. city hall directed us to that area. we have only just learned of it. i was curious why there are only two proposals? >> in public comment to get to say, but they do not respond. >> i wish there was more than two proposals. we would love to submit a proposal. >> see the staff afterwards, but you are about a year and a half late. >> i think you may have heard from the presentation earlier that we spend a lot of time seeking and soliciting bids on the project. i want to thank the staff for tremendous our reactreach, and s

imperfect and do not reach everyone, but i think we kept it open for quite some time to be created on this. i want to think staff. and i view this as an area that has such a uniqunique character i think it will be a tremendous enhancement. now that i have a team here, and i think especially as we're sitting here in this building, it would be something wonderful to see a can of local to this. it would be a showcase for local businesses, locally-produced items that businesses that project -- that produce in the area to have a storefront and destination for people to come and see local items and be a draw for more traffic so to speak. hopefully we can take a look at these buildings, and there may be some space that could be utilized, and that would reduce

the environmental soap grants by allowing the manufacturers to have retail space nearby so they would not have to ship products a good distance. i think there is tremendous opportunity, and i want to thank everyone involved. i am very excited to see this move forward. >> i think this stuff has done a tremendous job in trying to our reach. sorry we did not get the word out to everybody. i know we are here to approve the actual selection of the developer, but just to mention on the term she we're looking at there is some participation of the port on future revenues, and i would like to hope when this does come back for the actual term sheet, that we see it some modeling and understand if we are going to not only preserve the buildings with what the developer proposes investing, but ongoing revenue opportunity

for the port, because this will be a major project, and we know the whole area will be developing so we do not see a hope but evidence that projections could support the idea that the port could participate in some of the bottom line here over time. i understand your not sure to answer that question today come i am just requesting and giving you direction that we would like to see that modeled out and have a chance to see that in detail. >> yes. the first thing we will be back with is the ground rules, but it will clearly include the economics. president ho: a motion to approve? all in favor? enter into negotiations. all in favor?

resolution no. 1218 is approved. thank you. >> item number 11a, request approval of business terms for proposed sixth amendment to lease l-11320 with bae systems in francisco should prepare for a portion of pier 70 plan area and authorization of executive director to negotiate and enter into the proposed six amendments. and we have been working on this project with terry and peter daily in the engineering division. i want to welcome the general manager of bae san francisco ship repair, the ship repair partner with whom we are working on the project. i will invite you to speak when

we are done. as the commission knows, this project, pier 70 power site project, a rose out of the city's efforts to secure a clearance under the california environmental quality act for the cruise terminal project at pier 27, and the america's cup, and it was really through a very rigorous progress -- process led by the planning department that we identified some project early significance in air quality impact associated with the project. i want to acknowledge some of our environmental stakeholders who participated in that process. we have terry shore here from turtle island restoration network. not here today is diane daly from natural resources defense

council. terry in diaand diane really woh the port in our regulators to try to go through the air quality impacts and identified this project with things that could move it forward. >i am going to talk to you about the power side project appear 27, pier 70, and the benefits of the pier 70 project. the proposed financing approach to the project with been working on with dealinelaine forbes.

kathleen will talk about the ship repair background and the proposed six amendments to the lease to carry out the projects and other changes to the least. then we will talk to you about next steps. pier 70 was really a marquee for the pier 70 project. it was up $5.2 million project installed at pier 27 that became operational in 2011. we put together funding for the project for a number of -- from a number of sources. there quality management district contributed 1.9 million to the project. the san francisco public utilities commission contributed 1.3 million, and usap and the port. we got it up and running, and

we're turning around and shutting it down. the reason is construction of phase one of the cruise terminal, which is starting now. one of the first up in the project is decommissioning the shore power facilities so they can undertake demolition of the pier 27 shed it. as a result of the construction activity and the america's cup village concept, shoreside power will be out of commission from basically this month, february 2012-october 2013 when phase two of the cruise terminal construction project can start, along with reconnecting shore power at that location. that obviously creates a lot of air quality impacts and sequa

process quantified those. they found impacts to be significant. we had significant public comment from our environmental partners and regulatory agencies to look at these issues. as a result, the planning department through the environmental review officer impose a mitigation measure requirement to install shore power at pier 70. i really want to credit jay hawk who took the lead on the pier 27 project, and he was the person who identified the opportunity and have been talking with you over time and really came up with this solution. with the help of one of the sub- consultants we did some modeling of the air quality benefits of the proposed pier 70 shoreside

power project, and it will have major air quality impacts for the southeast community at the foot of petro. we did not really know it that well until we got into this project, but what happens at the dry dock is pretty similar to what happens at the crews of terminal. you have a ship that comes in for crews activity. the user -- indeed their runs its eengine to generate electricity so it can run the light and supply the teams with power in the vessel, or the shipyard has to bring in mobile generator start run on diesel and emit significant air pollution. all of those current activities happen. there are currently permitted under the shipyard's air permit. this project is the best way to

improve air quality of the ship yard. -- atht the shipyard. the mitigation i talked about earlier, this project fully offset the commission -- decommissioning of shoreham power at pier 27 for the two- year period, and it has surplus air quality benefits that help offset some of the additional america's cup race operations omissions to the point where in three of four air quality or air criteria measured by eight sikh wy sequa for cleaning up the ai. so what we spent quite a bit of time with hugh in the san francisco public utilities commission trying to finance

this project, and it was an uncomfortable initial conversation with dae, because as a result of this being a mitigation measure, the project is not eligible for carl moyer funding. i want to thank hugh for taking the news in stride as we try to come up with an economic solution for the project. and i think we have done a pretty good job of that. the letter of intent proposes it will construct of 20 megawatt system using an electrical contractor. it identifies highly-qualified company to do this kind of work. they are in the process of trying to meet the city's various requirements for doing business with the city, and we will continue to assist them with that. mayor lee and supervisor cohen have introduced legislation to

enable the port to work with them on the project an amount not to exceed $5.7 million, and that includes a $600,000 cost for disposing transformers that have been at the site for a very long amount of time and are well beyond their useful life. that is a pork obligation to dispose the transformers. under the term -- that is a port obligation to this force the transformers. we would come up with the initial sources of capital to pay for the work. bae would pay an equipment charge of 4 cents per kilowatt hour used by the system. that cost would be passed through to the vessel owners that are taking advantage of ship repair services. that is the major source of

payment. the p.u.c. was veryby 2017 to c5 million as a project to rebate. we envisioned that the m s cents per kilowatt hour will continue until all project costs are advertised. to the extent that that lease term as iranian and there is a need to continue paying back this project, then a sense would continue. the san francisco public utilities commission and would install utility-grade meter to measure the actual act. electricity use so we can pass around that force and charge. working met elaine, we estimate that the capital outlay for the project would be approximately six planform million dollars. that covers the capital cost,

and debt service reserve, and a p the long-term debt solution is some months off. mayor lee and supervisor: have introduced a supplemental appropriation ordinance that the board of supervisors that would reappropriate some money from the back land project, part of the 2010 revenue bonds project. it has been designed. it is ready to go to construction this summer. the proposal here would be to borrow funds on a temporary basis from that project until

the long-term debt proceeds are available. elaine has been working with the controller's office to fashion that proposal, which would be certificates of participation. the real advantage to that, while it would be repaid by harbor funds, the city has an excellent credit, and an issuance will result in very low projected interest rates on the project. $780,000 a year is what we estimate. based on the four cents per kilowatt hour, we estimate an 8.3 -- $8.3 million revenue source.

we think support will likely recover 75% of the total project cost, but it could be all of the project cost. now, i would like to turn it over to kathleen. >> in my role as project manager, i've been working with maritime with how we sustain repair within the master plan while we are doing everything else. this lease has been going since 1987. this whole site was least repair -- lease repair. there has been a whole series of amendments over time. there are 20 buildings, two dry docks. this lease runs through december 2017. we did a real significant amendment in 2007 and partnered with old princess cruises and bae to upgrade the dry dock to

be able to lift large cruise ships and invest $5 million. it was notable and challenging lease amendment. there have been some housekeeping issues on the lease. they now pay us rent at 3.3% of the revenue. there is still a rent credit paying out. it is how they're getting back some of the funds from the dry dock upgrade. the annual minimum guarantee will increase in january of 2013. in general, even with the rent credits, the rent has been above the guarantee.

this gives you a sense that if we took this slide back even farther into the 1990's, it really was hit. they were able to grow their revenues, the slow-down in 2006- 2007 is when they have the upgrades, and they had a strong growth rate. we hope that continues to succeed. what we're looking to do in this lease amendment is any number of things. the main one is executing that letter of intent. brad has walked through those terms. we are establishing one of the more successful partnership things we did last summer, dredge so ships could get in to the dry dock. we had agreement then of how we would share costs with future dredging. it was in the plan where we were hoping to move it on to the

schedule, responsibilities being part of the channel. we will work together to do that. then we are realigning the premises. i try not to do slides. i am sure you cannot read this. this is one of those. this is the premise boundaries now. these here and here are all what we call the reversionary. they are to revert back to the port in december of this year. this building is actively being used. some of this area is exactly behind the buildings we agreed to go into negotiations with. what we are doing, and this is a better sense of it, right now, it is this area. there is not a whole lot going on. they are not using all of it or asking them to do it. this is to retain all of it, the parts they're using and not, and

to keep it under secure, and what we're doing is establishing the area here, which is behind this historic building. we would give them one year notice. that can work within the plan we can do with the developer. area b sticks into 20th street. there is a small area c that is part of the ongoing operations and parking lot. this block in the corner, above the park, that as a license area we have month to month. that is a bad scale representation. the rest of the drawing is my power. . -- power point. we could get it back with a one- year notice. this is on the periphery, changing the adjustments. we are not getting any reduction in rent. it comes from what happens from the dry docks. we need to be able to get these

historic buildings without necessarily having to go through the security measures. we will put provisions in that we can realign lines to access the historic building. those are the other amendment pieces we had been planning to bring to you this year that we have managed to move along with the power negotiations. i will go back to brad with the next slide here. >> if the commission authorizes staff to go forward today, we would move next to the board of supervisors, the two ordinances that we mentioned earlier at the budget and finance committee of the board of supervisors. we are awaiting budget analysts report on those items. i hope for a favorable outcome. if the board approves the

temporary borrowing from the project, we would have to come back to the port commission to get appropriation authority for the project. kathleen and the team would negotiate the lease amendment and execute that amendment pursuant to your direction. we would hope that the project would get constructed in the spring-summer time frame and operational by september of this year. i am available for question and answer. thank you. >> anyone would like to comment? terry shore? >> good evening, commissioners and court staff.

i am a project director. we are in marine conservation group based in the bay area. they have been engaged in following activities of the port for a number of years and have sat on several advisory committees. we recall the great success of pier 27 and the project to install power for cruise ships. i am here this evening to urge you to support this proposal by the staff. this is a little different type of shoreside power. the ships will not be picking up passengers, but they will be in for repair. the benefits are significant. they are outlined in the excellent staff report. for year 2013, the project will save more than 10,000 tons of

greenhouse gases. 285 tons of air pollution. those are big numbers. they offset the decommissioning of pier 27. i commend the staff and puc and everyone involved in making this happen. it has been a challenging project. the only thing i would like to raise is something to consider to look at is the reconditioning of pier 27. i realize with all that is coming on with the america's cup that right now, the shoreside power is going to be reconnected in the second half of 2014. i am sure everyone is doing everything they can to hook it up before then so that the full benefits will be seen as soon as possible. in the long-term big picture, we will have two projects along the waterfront for the future to

protect the air and water of san francisco bay and the resident. thank you very much. >> thank you. commissioners come any comment? >> i was going to ask -- i was confused in the beginning, thinking we were moving all this equipment down. ultimately, we would have two installations. >> that is correct. the pier 27 shoreside power facility is being decommissioned by our cruise terminal general contractor. that will be stored. it will be reconnected in phase two of the cruise terminal project. while this is in mitigation of the cruise terminal and the america's cup event, it is a legacy benefit. it is going to continue to operate and improve our quality of the shipyard for as long as it is operating. >> also a question about the

financing. i am a little confused about what appears to be short-term borrowing of $5.7 million. i don't understand. do you have all the money in the bank in order to start it? >> that is a very good question. we are working with you to develop a schedule of payments that will be necessary for the project. when we finalize that discussion, i think we will see less borrowing from the back plans project. there is a need to pay an initial deposit to the contractor to get work started on the new equipment that is being designed for pier 70. that will be an obligation. we hope not to use the full 5.7 from the back plans project,

only what is necessary to get started and carry us through the time when the long-term debt proceeds are available to carry us through to completion. >> i don't have a problem with it. i think it is a clever solution. i don't understand why you needed the full amount at once. now i understand. thank you. >> i want to welcome you to the microphone. >> i should have brought a coat. thank you. i continue to be impressed with the port staff and a forward thinking we have come up with here. we continue to talk about the environmental benefits to putting in power at pier 70. kathleen mentioned it. you saw what is happening with the revenue this is creating.

from a funding standpoint that you are not seeing here, this will allow us to bring in more work. year-over-year, since 2008, when i came, last year's numbers were 20% higher in revenue than they were in 2008. that translates to a union jobs and a lot of union guys last year, over 2010, 2011, we ran almost 30% more man hours. what the short power will do for us is allow us to power up ships we cannot power up right now. we will see the alan shepard coming in in april. we will have the power set up for that. that is a huge contract. it will continue to push their revenues up. those translates directly into the port of san francisco. additional funding coming to the port on that.