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. the shoreside power facility would serve a number of locations, not just the dry dock, but other wards where vessels could be burst. -- berthed.

this is an actual picture of the dry dock. so if the board of supervisors approves the ordinance, we would then come back, as i mentioned earlier, in late april to seek your approval of funding for the project through debt issuance. we are in the process right now of negotiating six amendments to the bae port these based on the letter of intent and already have port commission authorization to enter that lease -- the bae port lease. with that, and available to answer any questions. i also want to ask hugh to come up, if the board is a mineral, to answer any questions. >> i apologize for my entire.

i was working in the shipyard this morning, and brad asked me to discuss the shore power upgrade at pier 70. i have to say, there is the environmental impact of the shore power upgrades, and as you have seen, we will be taking a lot of carbon and everything else out of the atmosphere where we do not have to run generators in order to power this new class of ships. what i do not know that fred touched on is the fact that we will be employing a lot more people because we will be able to bring in ships that we were not able to provide electricity to power up. just two weeks ago, we won a contract -- two and a half weeks ago, we won a contract on the united states naval ship alan shepard. that contract will run about $14 million in work. our people will run about 200 or 250 employees on that alone.

the ship shows up on wednesday. we will be bringing in diesel generators in order to power the ship up, but in the future, and we just had meetings in norfolk, virginia, and the military sea to command asked what we're doing to get this class of ship. the san francisco drydock is unique in that it is the biggest on this side of the pacific ocean. there are only two united states drydocks on this side of the pacific ocean that could lift this class of ship. it is a great opportunity not only to do good things on the environmental side, but it also generates jobs, and i think that is unique. i think it is great when the jobs and environmental sides come together to make something work like this. we have had a great relationship with the port of san francisco. i was looking at the numbers this morning for projections of manpower this year, and it will continue of work. looking for a very solid year this year.

rents are tied directly to the volume of work we do, and i expect to do more volume this year over last year. since 2008, we have been able to increase our volume year over year to the tune of almost 20%. i think those are unique numbers in this economy. we are employing blue-collar workers and paying them a living wage. we are paying union workers $25 an hour. they are paying their mortgages and feeding their families. it is important work, and we appreciate everybody's support in making this happen. supervisor kim: really quickly, i know this is different from the item coming to us later regarding increasing the contract to turn a construction because i'm construction thehrc would still be setting an lbe requirement based on the original bid, so this is a slightly different issue.

i noticed an amendment to a lease that is a slightly different set up. >> yes, i think we are seeking to waive that requirement with respect to this project. but we would take your policy direction on this matter. so if it is the direction of the committee that we need to go back and work with bae and its contractor to see if there is an lbe potential for this project, we would be happy to do that. supervisor kim: thank you. supervisor chu: thank you, supervisor kim. why do we go to the budget analyst report? >> madame chair, members of the committee, on the bottom of page five of our report, we point out that table 1, which is shown on page 6, shows the total estimated cost at $5.7 million for this project. that excludes the certificates

of participation in financing and interest costs. the table there shows the total cost of $5.7 million. then, on page 7, we state that, as shown in table 3 on page 8 of our report, the estimated cost, net of the revenues that the port would receive from the shoreside power project -- that is the equipment usage fees as well as the rebate from the puc -- and this table 3 includes the certificate of participation of finance costs. mr. bentsen stated that the port does not intend -- does intend to continue the usage fee, which we have suggested, on page 8 of our report. we consider approval of this ordinance to be a policy matter for the board because the ordinance waives the city pose a competitive bidding and the lbe

contracting procedures as presently required under the city present administrative code. -- the city's administrative code. supervisor chu: thank you for your presentation. are there members of the public who wish to speak on item #6? >> good morning, supervisors. i would like to speak from personal experience dealing with bae systems. i feel this is a good company. most people do not know about the project on the world, but i have to give them credit for past work in iraq. i also went to one of their facilities near mohave, california. they do act as a good neighbor there and elsewhere, so obviously, approving this project could only help the citizens of san francisco.

so i think having them here is better than encouraging the company to send more workers back to michigan. thank you. supervisor chu: thank you. next speaker? given no other speakers, we will close public comment. do we have a motion to send this item forward? we have a motion by supervisor kim to send the item forward with recommendations. we can do that without objection. thank you. item seven please. >> should i read seven and eight together? supervisor chu: yes, please. >> items 7, ordinance adopted environmental findings with respect to the north beach branch library and approving the expenditure of bond proceeds of lease revenue bonds previously authorized and issued to finance projects. item eight, ordinance amending $6,259,742 consisting of

$5,770,742 in library preservation fund and appropriate balance and $481,000 in interest earnings from the branch library improvement program general obligation bond proceeds to the public library in fiscal year 2011-2012 for the completion of remaining projects in the branch library improvement program. supervisor chu: thank you very much. before the presentation, i would like to offer a representative from supervisor chiu's offers the opportunity to speak. >> thank you very much. good morning. president chiu's office. i will be brief and let our wonderful city librarian and the budget analyst go over the details of this, but i wanted to emphasize how strongly president chiu supports these items and the appropriation in particular of the north beach library. it really makes completion of it really makes completion of the project as close to reality