increase of $78.9 million. $25.7 million, or 3.1% of the 13-14 budget. we would be happy to go over these and respond to any questions the committee may have. >>supervisor chu: we have a numr of these before us and we are taking them tomorrow. we would like to hear public, before we take the cuts, correct? >> yes. supervisor chu: if we don't have any other questions for the airport, like to think our airport director. after we hear public comment, we will likely be accepting the recommendations and we may not need you to come back next week. with that, if we have no other questions, why don't we move on to the next department?

>> good morning, supervisors. i'm from the port of san francisco. i would like to start by acknowledging the work of our colleagues at the budget analyst office and the mayor's office as well as the city comptroller. it is obviously a group effort every year. we are 100% in agreement with the budget recommendations. i prepared a presentation which i believe you have a hard copy in front of you to address the five areas you laid out. if you don't mind, i will run through that quickly. there are more slides than

talking points. first and foremost, i think it is important to note that the poor will celebrate its 150th anniversary as an organization. we were established in 1863 during the era of president abraham lincoln. it goes back a very long way. we were established 74 years before there was a golden gate bridge and our primary purpose was to move food and other goods up and down the seas. this included automobiles when the time came. our primary facilities were built in the late 1800's. that on the eastern side of the property and it was the testimony to the great men who

built it back in the 1800's. we are 7.5 miles from fisherman's wharf down to the primary areas. our challenge is to maintain that infrastructure, most critically the sea wall. in terms of the goals and challenges, of course maintaining a balanced operating budget is entirely critical. we are a self supporting enterprise. addressing aging infrastructure is incredibly important. we pride ourselves on the employment we have been bringing to the city for almost 150 years and we continue to do so. we have almost 550 tenants at the port of san francisco, 90% are small businesses, unique businesses, many of which are multi family businesses, meaning they are being operated by the third or fourth generation and

their families. this includes the fishermen in fisherman's wharf. we are dedicated to bringing the america's cup event to successful fruition along the properties. a new thing for us is beginning on july 1, with your approval, the harbour facility will return with the redevelopment agency which built and funded it. that will be returning to the port of san francisco, so there are changes in the budget to recount that. historically, we continue to seep modest growth in operating revenues. we see anecdotally from our tenants, that there is an uptick in the us economy. it is moving all will slowly but it is happily moving up.

at the same time, operating expenditures are moving up just as quickly. that is a real challenge for us. the vast majority of our department is from operating surplus. that has historically ranged from a low of $6 million a year to a high of $14 million a year. over 20 million square feet, that's a very small number. that is something we continue to focus on. operating trends -- most of it has remained very steady and small growth, primarily in the commercial area i just mentioned. we have seen some growth in our maritime revenues, primarily from a ship repair, which i will talk about. that follows the restaurant

retail and we have seen a modest amount of growth there. expenses continue to be driven by the same factors as always -- were quarters to other departments, and that service will be growing to pay for the new capital products we are financing on behalf of the cruise ship terminal and america's cup. i have included more details in the packet but unless you have specific questions, was not going to go through the different line items. i have highlighted where we see the major trends already. >> in terms of your increase, it looks like a large chunk is $80 million increase. that is primarily for the cruise ship terminal and america's cup which we have decided to self- financed? >> yes. we have the certificates of

participation in the amount of $34 million, $24 million as for the terminal project and the balance is for the obligations of the port with respect to the america's cup improvement projects which are at multiple peers. we asked and you agreed if we could utilize the debt vehicle or bond a vehicle because it is a cheaper one than the bonds, but it is payable from operating expenses and that is what you are seeing here. >> that looks like it's coming from your -- supervisor chu: you have taken under your wings the rehabilitation regarding the marina project? >> that's right. there are nine positions transferring over to operate the marina. there are approximately 777

berths there as well as other services that to a tremendous job and we have work to do they're going forward. >>supervisor chu: the last thini notice is the investments your making your capital expenditures. you are diverting some of which would use for normal maintenance work for your one and then you begin to put some of it back? >> that is the plan. we adopted a new policy which would look to have greater effort put into finding surplus revenues to fund a minimum level of capital that is reinvested in the port, the minimum level being 20% of operating revenues for the coming years and growing thereafter. we have a $2.2 billion capital

need and we have only identified a little over 0.5 billion in investment and another $300 million in development dollars for investment. this continues to be a concern because in that time i have been at the port, we have put numerous facilities into red tag status or yellow tag status which affects our revenues and abilities to generate the products we have going forward as well -- the projects we have going for it as well as keeping them for a number of small businesses that would be priced out of san francisco. that is something the port commission has been of great importance. we could find ourselves either trying to raise revenues or lower expenses in other categories. in this fiscal year, because of the america's cup, improvements that were being made, we are not

going to be in compliance with operating policy but we hope to be so going forward. we hoped to set aside that the surplus would be realized at the end of the fiscal year and expand in the following fiscal year. that gives us more certainty and this is something that has been of great importance to our ratings agencies. they do something called surveillance and do it on a regular basis and continue to do something about the large unfunded capital plan. >> i just want to mention that the port came back to the city in 1969. we have already lost 36 players. we do not show pure 38 here but

we certainly have some investment to make before it can be in a useful status. this is of great concern if we were to move forward, there would not be much left. we're constantly looking for resources to help with that. most of the $2.2 billion capital plan is for the needs of substructure and superstructure. these are investments that would keep the doors open in their current state. it would not beautify the pier or at public access to the pierce the way we have been doing on the development projects we have done to date. 20% of the overall number -- we have to separate developers we're working with to address that. right now, i am very pleased to say we have about $160 million

we of realized over a number of years that are being redeployed. you can see they come from a variety of sources, about seven different sources, including where the water mark condos are as well as the revenue bonds in 2010. through the generosity of the san francisco voters, we were eligible for general obligation bonds for the first time ever in 2008. a number of those projects are underway and we have some money for the army corps of engineers, which we are grateful to nancy pelosi for her leadership on that. these are being invested into a number of projects, notably the cruise ship terminal in the brandon street wharf and that greenway that runs from mission

bay. we are excited about that. here is a picture of the cruise ship terminal sites. all of the facilities have been removed. this is what it will look like on completion. we are looking to finish in time for the america's cup event and we will go back in and outfitted as a cruise ship terminal. that means adding gang ways and border protection areas specific to cruise terminals. as part of the cruise ship terminal project, we are building something called the northeast whorf plaza which is a sizable public space at the front-end of the pier joining the embarcadero. as a result, that means we are

building another public space at the back end of the pier. it is going to be a really changed environment there. we believe if we stay on schedule, it will be going up in two weeks' time. this is deal that has been fabricated in the united states. we are very happy about that. this is the demolition project that was boarded up almost seven years ago. it has been slated for demolition for well over 10 years. it includes a very important repair of the sea wall. under this expanse here, we have discovered that there had been a crack in the sea wall that had been repaired and that is of critical importance to us. this is what the new wharf will look like when it goes in. this will align the embarcadero.

it will create another great place for people to come and create and interact with the day. it's funded from numerous sources, including gl bonds. this is another seawall project up in fisherman's wharf. that project is underway, funded by g l bonds. this is what it will look like when completed. all told, we have public finance projects going on at 14 years and that another going on at 15 and 17 publicly fund -- privately funded by the exploratory and. -- by the exploratorium.

hopefully we will realize the value after the america's cup by renting this improved space as well as the public spaces we were already working on. supervisor chu: with regards to capital, does it include any thing not potentially in the 2012 spot? >> nothing is in the 2012 parks bond per say, but we do have a proposal that it would help us pay for the new plaza which is part of the cruise terminal project. it is more for the terminal itself than for the park. we feel like one of the main things we contribute to is to generate jobs. we have just over 200 employees

but generate a lot of jobs from the businesses located at the port. we think it is just shy of 10,000 jobs on the property. most are sold proprietorships. some are things like equity office partners. all told we think we generate approximately 16,000 jobs with an economic benefit of $2 billion. the bulk of that comes from smaller items accumulated here. the maritime industrial usage is a fairly significant portion, especially if you include the cruise ship business. there are 57 restaurants on port property and 25 retail establishments. most of which are managed by the

ferry building or the giant ball park. >> on the -- >> it could be a lot of non profits because of the affordability of this space, there is obviously activity that comes out of parking but that is very low. warehousing is a very low. that is part of the 8000 in the yellow. things like that. i want to mention passenger cruise. there were 420 jobs we think are attributable to crews. it's not a huge amount but what

does come into the city can be pretty amazing. i want to mention one in particular. sunday, may 12, therefore princess ships in port. we think this is somewhat historical for any port to have this many ships from one line in at once. but all told, those four ships brought in 18,400 persons for 24 hours, which is pretty amazing. that includes passengers as well as the crew. we see a real economic impact when these ships come into port. this is something we take very seriously. supervisor chu: how do you

expect the passenger cruise portion of your portfolio to change? >> we are showing anticipation of more crews calls but also we're getting more ships with more passengers -- bigger ships with more passengers. a couple of years ago, we partnered with princess cruise lines and our repair operator and the expansion of the dry dock. that allowed for the bigger ships to be repaired and we no one was towed up here to be repaired. the line to the biggest ships and reposition them on the west coast. before we did that to the dry dock, they would have had to tell them back to the gulf or even across the pacific. this was a huge investment that our city and partners made which benefited the cruise industry in california. the budget shows an uptick in

the revenues that we expect and we have been told just because we are building it doesn't mean we're going to get up but we are already seeing new bookings. princess cruise has announced they will be home birthing a cruise ship in 2013 that will run from day 2013 through may 2014. a home port ship is a ship that starts and ends its tour in that city. in some of his passengers visiting for the day, we will see passengers coming to get on the ship and leaving the ship. they will be coming to our airport and staying in our hotels and we expect to see an even bigger economic impact from the home port of calls than we do from in transit calls. we are planning for more growth , and most of portly, growth of bigger ships. the little pier sandwich there is pier 35 that it was built in

1918 to serve ships which had a 500 passengers and crew combined. this ship here would carry about 5000. speaking of the dry dock, here is a picture of the golden princess in dry dock on mother's day. this has been picking up over the last couple of years. it has grown 20% from the time we enlarge the dry dock itself. it's the first time it has ever been done in the united states, so it was a very gratifying thing to do. we have coming in, two ships from the u.s. navy which we think will generate over 100,000

new man-hours coming forward. we are very gratified to our partners in their excellent work of bidding for them. there are two things that are most important -- we just participated in dredging the central base there. this has allowed them to bring in bigger ships and be more competitive. to direct results is they are bringing in these and navy ships, the knee -- the kaiser and the shepherd. pier 70 -- there's a big business after before them. we are trying to be ready for another bid it that the maritime administration will be putting out where they are asking specifically to have short power and that's being funded as well with some of the financing provided by some of our friends at the public utilities commission.

we are very grateful for that. these activities provide various levels of financial support in different categories to the city. we wanted to point those out. parking is a good one. the big one is the interest tax assessed all long-term leases. in terms of work force development, we have been steadily growing our program in the last seven years. we are working with five different programs. you can see the sheriff's garden -- americorps is helping us out and a couple of years ago, we piloted two new programs -- the port pilot apprenticeship which is moving forward and is terrific and then enhancement training at

pier 70 which we hope will touch 165 individuals. we are very excited about that. supervisor avalos: that is something we worked on together back in 2009, so i'm glad to have that seeing some success as well. i got a chance to visit your 70 last year and was very impressed with the whole operation there and the great capacity there. in terms of the ship repair operations, it seems like there is a lot of opportunity for making sure we are preparing a pipeline of workers at that site. the population there is currently aging and could soon be retiring.

especially close by the area, that could have real living wage jobs and the friendship helps in that direction. but i'm wondering what would happen in terms of making it more robust? >> they're very much part of the city build program. they had about 15 people come through. on any given job, they have a fair number of san francisco employees already. that is something that grew out of our budget hearing -- i don't no. what year, but has been a great success and is something we continue to work on. the pilot apprenticeship is very novel and it really exciting. the time we find this, we knew it would take a while to get it up and running.

there was a bargaining issue as well but it is now up and running and we hope to be able to have to apprenticeships in this budget. what also not mentioned here is our program with the maritime administration. this was something supervisor maxwell had the idea for. we work to provide a summer intern ships with our maritime institutions and at any given time there are students going to the program here in san francisco and work on everything from working with tugboat operators, cruise ships, ship repair, it has been a terrific program. we do have a fair number of physician changes proposed for this budget. nine of which are driven by the assumption of the south beach harbor. that's a significant change. we have five other positions either that we are reclassifying

or looking to add to the budget. i can go through those if you want, but they are program here. it generally, things are pretty stable in terms of employment. i talked about the south beach harbor, but here is a great picture of it in case you have not seen it before. it is sizable and has a relatively important breakwater their and makes a nice place for the vessels to be berthed. under the language access, we have not had the robust employment of language access of the way the airport has. we -- we are not required to and we don't actually track our language inquiries, but we have a number of key staff and our divisions that are available to help.

the most common language is needed are either spanish or eight chinese dialect. in talking to my staff getting ready for today, we have been asked to three or four times in the last five months to come out and translate. mostly when we do that, we have foreign dignitaries who are visiting and they are typically either chinese or japanese. we do have signs built back when the embarcadero road was built. they are all in english but they are not very verbose and use words like chinatown or fisherman's wharf. so far, we have not had any issues with that. we have found people will wonder into the reception area wondering how to get into the areas, wondering if it is walkab