>> at one point there was talk about moving out of the property. we should have had discussions with the landlord earlier. at one point we were thinking of moving, but then the landlord came back and said they would decrease the rent for you. it took a while to negotiate. i understand that you probably wished it should have started six months prior, so that the time would not have lapsed so much. supervisor chu: i think that on a larger point, whether it is property or different that is owned and managed by different entities, there are city departments and properties that have fallen into the jurisdiction of real-estate. it would be interesting for us to get a sense of how many leases, amongst other things, are currently out there, understanding what our plan is to address this. i see a lot of identification

and items coming before the committee, but they are retroactive, and the board is also asking why things come to us later. sometimes it is our process, but sometimes it sounds like a negotiating issue, a problem, or something else that happens. i think we need a better understanding of that. supervisor kim? supervisor kim: i want to reiterate that as well. it is an issue with an item that comes to us later. if there is a system in place where there are lease termination dates in the database, there is almost an automatic trigger in advance of negotiations. my question, and i am not sure if i should wait for the budget analyst report, i am happy to see that there was a huge reduction in the rent. that is great. it is important for the city. i am curious as to why there was such a drop per square foot.

in terms of the value of real estate, that was something -- was that something that could have been done earlier? or was this the only time it could be negotiated down? >> at one point, we were looking at other properties. i believe that the landlord at that point really wanted this city to stay -- the city tuesday. it became to the city's benefit. >> we did begin negotiations well in advance. this was one of our major leases. we could not come to a real, solid agreement as to market rate. as far as the point of time to renew, we were not in agreement with the landlord. we cannot continue in the long- term at the rate that they have

proposed at that time. i think that after they had put it on the market and realize what the real market was, they realize they could not get what they had initially been asking, so they came way down. we have offered $1.60 per square foot, going up to $1.70 per square foot, while they were at $3 per square foot and they came down to $2.80 per square foot. we said, ok, we will have to look for something else. they put the location on the market and i think they realized what the market rate was, they came back at $2. us realizing the cost and disruption to relocate, we came to the dollar rate. supervisor kim: well, i appreciate the work that went behind that. sounds like he started negotiating early? >> about one year before.

probably september or november of 2010. we went back and forth and did a lot of analysis. supervisor chu: let's go to the budget analyst report. >> on page 3, we pointed out that there would be a significant reduction in rent, $24 per square foot as opposed to the other towns that were being paid. in reference to the question from supervisor, when this came before the board of supervisors in 2001, the real estate division represented the rest being paid at that time as fair market value, as well as the representation. this looks to be fair market value today. there is an overall annual reduction of $537,052 in the rent.

over the 10-year term of the lease, depending on the adjustments, estimates included a negotiated rent credit with a total cost of the lease ranging, over 10 years, from $8.6 million to $9.4 million. we recommend approval of the resolution. supervisor chu: let's open this up for public comment. other members of the public that wish to speak on item number six? -- are there members of the public and which to speak on item number six? pal>> my name is douglas. i would like to speak in favor of this resolution is a well- known fact that the department needs all of the help it can get. from my experience at city hall, it seems like they're making progress. i have to admit that a lot of heads have rolled at the department of public health in the last five years.

the only thing i would like to caution the department of public health is that since they are getting a break on the rent, they should use the activities there sufficiently. please, please overcome their long-held traditions of waste and inefficiencies that i experienced in my 20-year career at general hospital. thank you. supervisor chu: thank you. are there other members of the public debt which to speak? seeing no one, public comment is closed -- members of the public that wish to speak? seeing no one, public comment is closed. i would like to thank the department for negotiating a lower rate. if only all of our leases were like that. we can do that without objection. thank you. item number seven? >> item #7. resolution approving in accordance with section 147f of the internal revenue code of 1986, as amended, the issuance of tax-exempt obligations by the california statewide communities development authority in an

aggregate principal amount not to exceed $17,000,000 for the refinancing of various capital facilities owned by the california school of mechanical arts. supervisor chu: thank you very much. is anthony from public finance here? >> the morning, supervisors. i am with the comptroller's office of public finance. the item before you is to put -- approve the issuance of a tax- exempt basis, a federal tax dollars that require borrowers to get approval from your local jurisdiction before issuing tax- exempt obligations. our office has held duly noticed public hearings, requesting approval of the financing. i believe that mrs. spitz will answer any questions you have on financing for the project.

there is no -- the city is not a party to the transaction. supervisor chu: thank you very much. supervisor avalos? >> i support the rest -- supervisor avalos: i support the resolution in terms of school financing. it has provided a lot of great community benefits in terms of meeting space and in our space for nonprofit organizations that train young people as well. on top of being a great school. i offered to sponsor this resolution. supervisor chu: thank you, supervisor. i believe that given that there is no fiscal impact on the city, there is no budget analyst report. let's open the item for public comment. are there any members of the public that wish to speak on item number seven? >> good morning, supervisors. my name is douglas. i would like to speak in favor

of this resolution. the supervisor is very wise to say that this is beneficial to the area. i do not live far away, westwood park, and some of my own friends, my own age, went there. it is a good partnership between the area and the school. obviously, it would be nice if all of the public schools have the same results. but maybe that is a pipe dream that we can hold for in the next 10, 40 years, maybe. i think that this resolution is a good resolution, so it should be passed forward. hopefully all schools will end up like lake liberty. thank you. supervisor chu: are there other members of the public that wish to speak on item number seven? seeing? seeing no one, public comment is closed. colleagues? supervisor avalos: forward with recommendations.

supervisor chu: seconded, and without objection. item #8? >> item #8. resolution approving port commission lease no. l-14980 with china basin ballpark company, llc., for certain real property located at seawall lot 337, including a license for certain areas of pier 48 shed a, shed c, the pier 48 valley, and access to swl 337 from surrounding public rights of way in the city and county of san francisco for a term of five years. supervisor avalos: supervisor chu supervisor chu: thank you vey much. >> good morning, supervisors. the item before you today is a five-year lease in the ballpark company, known as cbbc. for the privilege of parking and special events, as just read, of it is the primary service parking lot for patients and this morning i will briefly review the development of the parking site and its linkage to the neighboring ballpark, supporting long-term plans for

this site and your consideration. representing the audience today, mr. jack bayer. in 1997, the port and turn into a long-term, 66 year lease for the development of the site adjacent from this property across the base in. at the same time, the port entered into an agreement for a 10-year lease for parking at the subject's site of today's hearing. it was then approved with warehouses and industrial uses. the 10-year lease for parking at that time required contractors to demolish the structure is including regrading, paving, striping, and lighting to the tune of $7 million in investment. the 10-year term of the lease was partly due to the amount of time needed to amortize those costs.

i also want to mention that the ball park itself, part of the funding mechanism for the ballpark is important to acknowledge regarding the item before you today. ball park funding included a 20- year loan that was partially collateralized with the parking fee component with personal licenses that reused as initial funding mechanisms for the ball park, which were privately financed at the time. the 10-year parking lease required cbcc to clear the site as mentioned in spend the necessary dollars to approve -- and spend the necessary dollars to approve the site for use. in 2009, the port initiated discussions regarding the management of the site going forward. the port consider the ongoing lender requirements that pulled out collateral as mentioned in

the need to actively manage parking to create the best possible experience for patrons, helping to ensure the ballpark possible liability, an important goal for the port. at the same time, the port was also discussing the long-term use of the site. the long-term development of a lot. they had awarded a long-term development agreement to the site. this multi-year effort is currently ongoing, representing the level of uncertainty to would be parking operators. for these reasons, the port decided to negotiate a direct lease. the existing lease their by continued on a month-to-month agreement. port negotiating efforts on a new lease focused initially on determining market rent, quickly adjusting to current lease or rent to market as permitted. using projected annual revenue

for the site, the port and cbc reached consensus in early 2010 on a new market rent, including a bifurcated structure that recognized the site. however, by the time the consensus was determined in reached, the giants' season- ticket holders have already purchased their tickets for the following baseball season, including parking for these season-ticket holders, limiting the ability of the giants to increase revenues to capture an increase in market rent. this resulted in the least, the existing lease, remaining on a month-to-month basis through the 2010 baseball season. in april 2011, using the market rent material decisions made prior, the port adjusted the rent to market under the following terms. when there are no baseball games, usually, the rent is

$45,000 at a base level. april through september, the rent is $355,000 per month. in 2011, the port and cbc finalized the remaining lease terms. in october of that year, the lease was approved. again, this is a lease for five years, and interim lease. the base rent extensions in the high season, $45,000 during a slow season. subject to an annual rate increase of 3%. the lease reflects standard parking lot basis. that is after deducting parking tax. this lease is unique for the port in that it allows for

$638,000 in substantiated, annual extraordinary costs directly associated with operating a lot for events at at&t part. these costs are allocated to security and will be provided to patrons that need it as an easy way to get to the ballpark. temporary bathroom facilities and associated labor costs during the event. extraordinary costs are based on the 2011 total and are projected to grow at a fixed% each year. the existing lease authorizes special events that are permissible under use of a lot 337 in a new lease permit tenants to use pier 48 a and c for special bands. this would allow the port to coordinate and insure maximum

utilization and revenue generation from pier 48. meaning that as far as coordinating calendars, we recognize that cbbc will hold events at this facility and as the calendar allows, the port may also use it to generate revenue. cbbc will promote events and pay the rent consistent with port commission's previously and annually approved special event parameters for this site. the majority of the events may be approved by the director, but there will be an additional approval required. the new lease allows cbbc to approved cyanates on the standards for advertising.

finally, i would like to touch briefly on the sole source request before you today. they're subject to the lot development partner. in may of 2010, the port commission authorized an exclusive agreement with exclusive associates to develop terms before the lease of the site. this will continue through 2014, with allowable extensions of time, containing language with additional use before you today. should it terminate, the port will pursue its subsequent bidding process. thank you for your time in for considering this item. i am available to answer any questions you have. supervisor chu: thank you very much. let's open this to the budget

analyst report first. >> madam chair, members of the committee, on page 6 we point out that in accordance with april 1 provisions of 2011, the port increased the base rent to the china basin ballpark company. that went up from 1 million poor hundred $5,000 to -- of $1,405,000 to $2 million, annually. looking at table four, we point out that the total grant, actually on page 8, would be $12,473,000. that been cbbc would pay the port over the proposed five-year term of the lease.

in addition to the base revenues come cbbc estimates an additional $27,000 in revenues and parking use. plus an estimated $225,000 for special events, for a total of $3,345,000. we also noted on page 7 that the current cost to park at lot 37 is $30 for automobiles, $50 for oversized vehicles. the china ball park company has the exclusive right to set the parking lot rates to be charged under the proposed license. on page eight, we raise a question as to why a new lease was not submitted to the board for approval. now instead of going on a month- to-month basis since november of 2009, the expiration data was

when the rent should have been increased to market rate. seawall lot 37 was not increased until 2011, when the rent was increased, as i stated, from $1,405,000 annually to $2.4 million annually. regarding the meal -- the reasons for the sole source nature of the agreement, they are explained on page 9 of the report. i will point it out to the board of supervisors, who previously approved the lease on a sole source basis, basically for the same reasons listed on page 9. supervisor chu: thank you, mr. rose. a question to mr. williamson. in terms of what you mentioned in your presentation, when the ball park was being built, part

of the financing depended on using parking revenue as collateral, essentially, for that. i suppose i am wondering if that has changed, or if it has been considered in this context of the contract? >> i understand that the loan used to build the ballpark expires in 2017. we recognize that low. the parking is collateral for that loan and it remains. a little more detail, the loan is tied to the personal licenses as mentioned. there is parking revenue that flows through those licenses. the lender has a claim to that revenue stream, if need be. supervisor chu: in terms of a five-year interim least, that makes sense to me, in terms of someone receiving the long-term future of that lot. that makes sense to me.

can you address more clearly the comment that was made about the timing? it sounds like we knew that it was expiring in 2009. it sounds like we did not start charging a different rental rate until 2011. it sounds like there were sort of -- that the port initiated a conversation in 2009, coming to agreement in 2010, but by that time it was too late to implement it. i am kind of wanting to understand better, from you, the process to make sure that we are on top of these negotiations. if we knew that we were going to receive the expiration at the end of 2009, did we start talking at the end of 2009? in advance of that? can you explain? >> certainly. these issues have, in general, the month-to-month lease at the

port. there are policies in place now to address a month-to-month leases that were appropriately raised through the office and by the board. we have come back to the board with policies that address that. one important thing to mention is that our least, this lease from 1997, with leases that are more current with regards to holdover, they do include a provision that if they continue, but there is an automatic rent increase, it is just that it would focus both parties to begin discussing an exorbitant least a tent -- intended to grab the attention of both parties. that is an effective tool, going forward prior to 2009, it took some time to get into agreement on direct negotiation agreement positions. the factors that were mentioned.

we felt that was the right decision at the end, but as you mentioned, the majority of the parking, the most highly valued parking -- the ability to generate additional revenue was diminished. extending the current lease through that season was the best course. i would also say that the new terms, as i mentioned, have a bifurcated basic rent, such that the low season from october through march -- the old basement was $117,000 or so per month. putting the new print in place prior to april, it would have dropped before that time. supervisor chu: i see.

so the comment you are making, in 2010, early 2010, the tickets for the parking were very much sold. in baseball season at least, which is when we would have charged a higher rate of $300,000 for a permanent rate. so, if we, at the port had decided to say, let's implement in april 2000 at 11, we actually would have seen an implementation, so it made no sense to do it at that time. supervisor kim? supervisor kim: i just had a follow-up question to that. selling spaces in advance -- why was the port not aware of this? i am aware at the time

renegotiated finally, but knowing this was the president, would it not have been a surprise to the port that -- known this was the precedent, would it not have been a surprise to the poor that the parking spaces would have been given away -- to the port that the parking spaces would have been given away? >> yes, in retrospect. i think it was an oversight, frankly. in retrospect, we would have started negotiations earlier. we have a provision that allows for the deduction of rent for emergency expenses. that is a significant amount of money. but the actual expenses we have seen with regard to last season are quite a bit higher, and negotiations -- the 638 number is a negotiator number. i think the port went into that

negotiation with the fact that they had missed, if you will, the six months of 2010. supervisor chu: thank you. just to follow up -- and supervisor kim: i thin -- and i think her point is a good one. if there is an automatic rate increase that goes into effect, does this lead to the same position? >> yes. supervisor chu: ok. why don't we go to public comment? are there members of the public who wish to speak on this item, item number eight? seeing none, public comment is closed. colleagues? do we have a motion to send the item forward with recommendations? ok. thank you for the presentation

and for being your. we will send the item for word. >> thank you. are there other items before us? >> no. beckham please the agenda. >> thank you. we are adjourned.