when i continue to read about the housing crisis that was basically caused by so-called different financial instruments used cleverly by wall street organizations. as a general concept, i think maybe the city and county should stick with things that everybody understands, and maybe we should shy away from something like certificates of participation. it seems to me, it is getting a little over most of our heads. and usually, when that happens, it is ripe for abuse. thank you. chairperson chu: thank you. are there other speakers? given no other speakers, public comment is closed. do we have a motion? we have a motion by supervisor avalos and willison nat ford with recommendation -- we will send out forward with recommendations. item number 5. >> resolution approving the form

of execution by the city of two san francisco -- of san francisco for equipment to be used for city purposes. >> good morning, supervisors. i'm with the comptroller's office of public finance. we have a request for public authorization for issuance of not to exceed $10.5 million in public revenue bonds issued for finance corp. the finance corp. is a non- profit organization created solely for the issuance of voters approved lease revenue bonds. in 99 -- in 1999, voters approved the issuance of bonds for equipment with increments

of 5% each year. the idea is that you pay down debt. as of now, we have the capacity of $55.7 million. we have about 25 available for issuance. we're proposing to issue $10.5 million in equipment that the board had already approved. this is coming later. we expect not to have any debt service payments in its fiscal year, but it will start accruing in the next fiscal year. the fund is approximately 10% of the paramount. you have to have occupancy before you can make payments. some of the equipment [unintelligible] in addition, some of the accounts that will participate will be the sheriff, police,

fire -- the usual suspects. it will be about $8.7 million in equipment proceeds. additionally, we have included some documents that include a preliminary official statement. the plenary official statement includes appendix "a" and that is updated to end -- be included in the most recent report that is included also with the budget analyst report. with respect to approval that we would need to sell it immediately, the finance committee has also approved this as of march 6th, 2012. if you have any questions, i will be happy to answer them. chairperson chu: thank you very much. supervisor kim? supervisor kim: i have a question about how the equipment lease revenue works. not the bond itself, but how do

we take the city departments and how do we allocate the funds and which equipment is approved? i know this came through the budget process last year, but i'm curious how that happens before it comes to the board. >> we work with the budget office. they get a request from the department and we go through the list and see what is legible and what would be a good equipment for a lease. when you do a lease structure, you need to put assets for collateral. we tend to use items that are bulky. vehicles, fire trucks and so on. and we also have the capacity not to exceed a certain amount. we presently do not want to issue more than $10 million. that is also taking into consideration, but we work with the mayor's budget office. supervisor kim: generally, the department submit requests for the equipment lease revenue, and then the mayor's office of budget determines which end up

on the final list. >> that is right. k. howard, mayor's budget director. every year, we ask departments to submit priorities for a variety of expenditures, including capital, 90, and equipment. and our office -- including capital, i.t., and equipment. and our office works with the comptroller's office and office of finance and the fleet reviews all of those requests and prioritizes them and figures out which funds will be available to support which requests. supervisor kim: thank you. chairperson chu: thank you, supervisor kim. why don't we go to the budget analyst report? >> as shown on page 3 of our report, we had a table based on information provided that identifies the dollar amount for

equipment to be purchased by 11 different departments under this proposed issuance of $10 million. that includes 8 million net $780,000 in equipment -- $8,730,000 in equipment. and on page 4 of our report, we work for the total debt service for the 10 million two for $5,000 is estimated to cost 5 million. and that includes $10 million in principal and $8 million in interest. all of the equipment shown in the attachment on page 5 of our report as has been previously reported to you was approved by the board of supervisors in the 2011-12 budget. that services costs are subject to board supervisor corp. annually in future budgets in

the city. this would be through 2017-18. we recommend that you approve this resolution chairperson chu: thank you. why do we open this up for public comment? are there members who wish to speak? >> ♪ well, they are working their way back to you ♪ ♪ with a burning equipment program ♪ ♪ yes, they are working their way back to you ♪ ♪ with a burning equipment program ♪ ♪ bringing it along ♪ they waited so long ♪ they waited so long for these bonds ♪ ♪ bring it to them chairperson chu: thank you. are there other members of the public who wish to speak? seeing none, public comment is closed. and a quick question for the budget office, in terms of a number of equipment, i notice there are a lot of vehicles being purchased. it typically is in terms of this equipment program.

i wonder, after your thought process and your evaluation, generally, has it been that you are authorizing the purchase of cars to replace those that are out of service? i know there has also been an effort to reduce the size of our fleet as well. >> that is right, supervisor. we are using this process to purchase replacement vehicles as vehicles go out of service. but we have also been over the last several years making a concerted effort to reduce the size of our fleet. if we were to take a look, we would see that although we are replacing some vehicles, we are not replacing all of them. that process is something we are continuing to look at this year with fleet management. to figure out if there are better ways for the city to share vehicles, to find other kinds of cost savings so we do not need as many. chairperson chu: thank you. we have heard public comment on this item.

do we have a motion to send the item forward? we have a motion to send the item forward with recommendations and we will do that without objection. item six. >> ordinance authorizing the director report to execute an agreement with the san francisco ship repair to install power equipment at dry dock no. 2 at pier 74 an amount not to exceed $5,700,000 and exempting the contract requirement of the administrative an environmental code. chairperson chu: thank you. we have brought with a report. . brad with a report. >> brad benson, special projects manager with the port of san francisco, representing the port director, monique moyer.

while i am pulling up the slide show -- the port through the america's cup planning process and the cruise terminal planning process has identified that it needs to disconnect shoreside power at pier 27. this pier 27 shoreside power project was a marquee project for the report. funded by combinations of

sources that i will describe in the presentation. we got a lot of scrutiny from the bay area air quality management district, who partially funded this court -- this project. epa and several nonprofit organizations that advocate for clean air about this proposal to disconnect shoreside power at pier 27 during the construction of the cruise terminal and the america's cup event. and through the ceqa process identified another short power project at pier 70 that could offset increased emissions that would result from disconnection of the pier 27 facility. this item does to how the court would implement the year 70 shoreside power -- how the court would implement the piers 7 shoreside power project and to

rely on our bea systems of sham -- of san francisco ship repair to install these at the dry dock port. i will go over the two systems at pier 27 and peers 70. i will give a little bit of discussion about the proposed project at pier 70, give a little bit about the project we have proposed at the utilities commission and the bae project. i will try to do this very quickly. the pier 27 project was a $5.2 million project, very close in cost to the cost of the proposed project at pier 70, which is by

-- $5.7 million. the epa and sfpuc combine forces for the project. the portland after the commission the project for construction services at pier 27. the eir requires the report, and the board in certifying the appeal of the eir also requires the port to install this shoreside project. even without the ordinance before you today, that particular strategy that we have crafted with the public utilities commission, this would be the option for the board to do. >supervisor avalos: eventually, we will have shoreside power at the cruise terminal and that

will be reconditioned, correct? >> yes. but what i am saying is, yes, we are obligated to reconnect the pure 27 shoreside power facility. but because of ceqa, even if we do not get the ordinance approved by the board and cannot execute this strategy by b.a.t., -- bae, we would be required to install the shoreside power at pier 70. supervisor avalos: in other words, they are providing for their own initiatives. >> yes, the reason for the shoreside power at pier 27, that is where we board vessels when they come in. they need to continue operating their engines to generate electricity for lights and other equipment on the vessel. that is a continuous requirement.

those are diesel engines and the emissions associated with that activity is avoided when the ships can plug into the city's electrical grid and receive hetch hetchy power. the same phenomenon goes on at year's 70 at the -- at pier 70 at the shipyard. the vessels there also generate power either through their own engines, or the shipyard will often bringing mobile generators, mobile diesel generators to supply power to the vessels while they are at drydock. supervisor avalos: can i ask another question? that is, when we are using shoreside power, and eventually using shoreside power for use when cruise ships coming into san francisco, as well as for ships in dry dock and are getting prepared, are they paying for that electrical used?

are they paying the may missable rate, or the private sector rate -- the municipal rate, or the private sector rate? >> they have several locations and they supplied power to a pier 27 had an industrial rate. when we are putting together that pure 27 project, puc and the port looked out -- looked at the cost to the cruise operators for running their engines and burning fuel while they are at bertsch and came up with an equivalent per kilowatt hour rate surcharge that is 3.85 cents per kilowatt hour. it is the cost for plugging in and is the same, so they have an economic incentive to do that.

there is cost recovery for the puc for their investment in the pier 27 project. and i will get into the financial approach for the year 70 project, but we are trying to mirror that approach at pier 70. the slide that is up right now describes the potential emissions benefits of the shoreside power project at pier 7, proposed for pure 70. there are major emission savings for reactive compound, party to the matter, -- particulate matter, socks and co2 associated with this facility. we think it is probably one of the biggest emissions projects that the port could implement on

a port wide basis at this point. the missions savings are so dramatic -- emissions savings are so dramatic that we have found they fully offset the emissions increases at pier 27, as a result of shutting down the pier 27 shoreside power facility. and there are additional savings that could be applied to other emissions sources during the america's cup project, such that we read able to reduce the impact below zero and on a net basis, clean up the air in three or four categories of criteria pollutants. attached to the file today there is a letter of intent between the sfpuc and the port and bae san francisco ship repair. under the proposal, bae will

build the system. they have hired an electrical contractor with the requisite experience to help design the spec transformers that will need to be installed. bae will participate as well with some of their own staff. the cost of the system will not exceed $5.7 million. that would include $600,000 to remove transformers that are the ports responsibility under the bae lease that we have right now. and those transformers are well beyond thostheir useful life ana half to be handled in a very carefully during the disposal process. the port would fund the project. we will be coming back to the board of supervisors with a proposal to issue debt to fund the project, probably in late april. and we would, through the bae

lease amendment, apply and equipment charge of four cents per kilowatt hour to pay off the cost of the equipment. that will not pay off the cost of the equipment within the remaining term of the bae lease. that is set to expire in 2017. we would have to construe the budget analyst recommendation carry over to a new lease for operating the shipyard. the puc has agreed to contribute $1.5 million to the project, which is on par to their contribution with the pure 27 project. we really appreciate puc's partnership in this project. puc's role on an ongoing basis will be to monitor the actual electricity usage from the shoreside power facility and report back to the port and to

the bae. we estimate -- these estimates are based on taxable debt of $6.3 million capital outlay, based on the project cost of $5.7 million. we have a debt service reserve of just over $600,000, and a very low $50,000 cost of issuance, because we are proposing to combine the debt issuance with the debt required for the cruise terminal project. the long-term financing would probably be certificates of participation. we paid by port harbor funds. we are estimating that over the 10-year timeframe of financing that we would recover at least 75% of the project costs through

the sfpuc contribution to the project and the 4¢ per kilowatt hour equip in charge. >supervisor avalos: just a question related to the electricity charges, there is a story in the business section today about the ferry building. it looks like pg&e could be -- i think it is suing the city, because that of their rates that we have for tenants at the ferry building. i wonder if this controversy would apply to our cruise ships and our ships at drydock and repair. is this an incidence that is particular to the ferry building and their electrical themselves? >> idell and -- i do not profess to have complete knowledge about this controversy. the puc staff could provide a better view about this, but i

think part of that controversy arises out of when we take something like the ferrie building and redevelop it for commercial uses, is that municipal load? i know the puc would contend that it is missable load. pg&e is arguing it is not municipal load. with. 27 and you're 70, we are very clearly talking about -- with pier 27 and 70, we are specifically talking about the port drydock and the puc would contend that is missable load. it is very clean hydropower, and i think it improves the profile of the project. supervisor avalos: it also serves the purpose of providing a clean source of electrical generation, which is a municipal service. >> yes, exactly. chairperson chu: thank you.

>> the court has been in these with bae sfr or its predecessors since 1977. there have been five amendments to that the spirit of these are maritime leases, so they do not come to the board of supervisors. they are approved through the port commission. it is a very complicated and interesting site that most people do not know about. i know that you, supervisor avalos, have been down to the site with port staff. they pay a percentage rent to the port. we had a very similar amendment to the least in the past to make improvements to the port at the dry dock facility. actually, princess cruise lines was looking for a place where they can dry dock their post and a lack -- larger sized cruise

ships and we have made improvements to the dry dock to be able to handle those larger vessels. and that has been the casebae -- been the case. bae services those, but the dry dock owns those. chairperson chu: can you explain why they have decided to go forward with a contractor? >> it is a two-fold decision. the port does not have expertise in implementing these types of shoreside power projects. the shipyards and the requirements of the ships in the dry dock are something that the port knows a lot more than the bae does. they're getting all the time, whether it be vessel owners, or

private owners. under the current lease between the port and bae, bae has the obligation to maintain the drydocks and they are operating in and maintaining it under the lease. we feel that this project falls within that rubric. additionally, we are under a very tight timeframe to get the work done and believe that bae, with its own workers and through this subcontract that they would have with eden, could deliver the project in time with the way that eir envisions. supervisor avalos: i imagine that the local ordinance come out when it comes to constructing the facility, the power generation would apply for residence working on the project? >> you know, i will have to

consult with the city attorney on not one and see how we have treated that in the context of this ordinance. if i could after the presentation, i will take a break and talk to the city attorney about that issue supervisor avalos: the other issue -- about that issue. supervisor avalos: the other issue is around the maintenance and power generation at the facility. what other opportunities are there? >> on the construction site, bae is proposing to use some of its own staff who work at the shipyards to do some of the work at this installation. there is a very complicated portion of this work that has to be done by its electrical contractor, which is actually building the two spec transformers that will be installed to supply the right level of power to the vessels.

that work has to be contracted out. but the shipyard workers themselves will play a role. i have to i that'sbae has been an -- say that bae has been an incredible partner in programs to train san francisco residence in the shipyard work. it is highly paid, skilled work. these are great your -- right jobs at the shipyard. bae has been working with the port to make sure that local residents have an entry pass to those positions. and i know the general manager knowbae is here today -- the general manager of bae is here today and can talk more about that. supervisor avalos: i'm wondering if there is an increased level of staffing that is going

forward on this project. in connection with the city build and the local current training institutions that we have here with san francisco to make that happen, so i feel comfortable with that. >> this graffis provides a little bit of a sense about how the shipyard business has been going. there has been a bit of a dip, but the current trajectory of jobs has been increasing over time. the port has a great deal of confidence in the management of the shipyard now, and in their business plan. we think this trend is going to continue. this premise is map gives you a sense of the scale of the site that is under lease. that is under lease. the shoreside power facility