here. second, there's a payment the developer was holding in escrow. at was also a developer of the project at 3032 and the transaction agreement was they would hold those moneys in escrow, holding all excess profits with a return on money to hold that to the cruise terminal of that project. as it happens, they walked away from building that. those moneys were holed to be for use for a future terminal and those of the seed monies we're using to build the cruise terminal at pier 27.

$70 million was supposed to cross subsidize eight maritime project and we would much rather have had the cruise terminal built than getting those moneys but that was the result of that project. supervisor kim: how worthy condo transfer fees negotiated for the water mark -- how were the, the transfer fees negotiated for the water marquest for >> we have no ongoing participation. -- we participated only from the sale of the land and residential uses and our participation terminated. we no longer get individual value from asset. in summary, this is about a present value of $14.3 million. i want to focus on public open space in this project and a

transition into a discussion of tax increments. focusing on some of the numbers i put before you in the summary, the public benefits of this project includes providing $12 million of land conveyed to the port, approximately 30,000 square feet. there are open space improvements, this has a new cost associated with that. the developer received a bid in may, very recently, with an estimate of about $12.7 million. we have agreed to ongoing maintenance of this facility. overall, this means the developer has agreed to the transactions to up front of the cost and the lands for the park assets and they have sought

through the mechanism of reimbursement through tax increments of 15% of the project cost. the developer has agreed to 100% of the ongoing maintenance for this new public park. here is a rendering of the park. that brings an overall discussion -- i just want to say here that this is a preliminary proposal. the only element before you today is the resolution of intention to form an overall amending their resolution for the overall port of san francisco ifp #two and adding a project area that could encompass the project. i want to first talk about some of the concept support has been using and some of the needs we think this will serve. there is about $204 million of

tax increments we believe will flow through the ifp. half of that money on an annual basis, half the overall tax and commission always flowed to the general fund. we're seeking reimbursement for this public park. we've given the public benefit to the city and port that this partial reimbursement is comparable to other times the tax implement has been used to create these public assets. in other cases, far more public moneys have flowed into public open spaces. finally, there is the balance that represents one time bonding of the tax increment with a net present value of about $17 million that we would like to begin a discussion with the board to help fulfil some of the

potential leads the port has through these revenue bonds that can be supported by this ongoing revenue. the three projects we have presented in this regard of the cruise terminal, phase it to. phase one is underway and will be used as a building for the america's cup and will need to be retrofitted with maritime equipment such as getting ways to make sure it is a fully functional and state of the art cruise terminal. the other needs we are proposing are under peer utilities. we are currently in discussions with the water board. they have asked us to come up with a program to solve a number

of issues over time that amounts to about $45 million of expected it cost. there is water and sewer infrastructure so pollution does not flow into the bay. it also allows us to bring of the port facilities up to code. finally, the port appear substructures. that is the core of our capital plan, representing at least a quarter of our overall capital needs. finally, there is non-financed benefits to the project -- supervisor chu: can you tell us how you are splitting of the funds? it looks like you are from

loading this to the port. >> the way we have structured this is our core principle is that one half of annual tax flows would go through the i s p to the general fund. we have structured a single 30- year bond. when the tax and credit flows are stable, it is estimated half of those flows would be about 1.55 million. the sources would be split equally but three -- equally between these capital needs. the public park reimbursements, we believe will be able to be funded through the stabilization of the tax increment flow before it becomes a capital asset and we believe those early flows will discharge the supposition. >> with regards to how you got

to the 50-50 split? it's not a share of the land -- how do you get to that level? >> we looked at a number of factors. not sure we have a hard and fast proposal or single methodology. it was driven by the capital needs and what we see coming forward. we looked at the amount of units and assessed values being created on port lands, which is approximately 35% of the value and a slightly smaller number of the units. we looked at the city's overall guidelines and to look at the factors involved with up zoning as being one of the key policy rationales. in that regard, approximately 88

million assessed value or a 19% of the tax increment derives from the at the zoning of the city's site being proposed in this project. the original proposal was built in two equally sized buildings so half of the units were being built on property that was 90% port property which would be of greater value. we believe at that point, the original proposal agreed to comply with the embarcadero studies recommendations and over 50% of the assessed value is over pork plants. this is a way of looking at the project and the overall discussion should be based on

import needs and we understand we need to make that case to the board when we seek approval for this project. >> if it is -- supervisor chu: in that situation, it's not necessarily the metric you would use. >> we try to advance projects we think are critical in the near term. we know we're going to need to do some substructure repair. we know that there is a critical need right now in discussions with regulatory agencies that like to stay in compliance and the cruise terminal is an important project and we would like to have enough funds for phase 2. >> can you speak to the project areas -- you talked about the reimbursement component, but

the strength -- the sub structure -- it is roughly broken equally among these three areas. if we were to fund them -- comment when the two -- for the cruise terminal, if we were to allow for the five million- dollar allocation, do you actually get to 100% funded at the end of the day? >> it's about half of what we are identifying as an unknown funding source at the moment. it does not get us all the way there. the board believes it is more important to fund 100%, the port would agree but there's a mismatch in terms of timing. it makes a pretty major dent in the amount of obligations we have currently. we believe in that next few

years there is approximately $11 million of -- $9 million of unfunded ports under peer utilities work. this goes quite a significant way to help us meet those obligations and the structure is significantly bigger. since the origin of our capital plan, we have always had to come to a place where we are not necessarily fixing the ongoing need to take these on a project by project basis and we need is some sort of funding source in mind when the appeared needs to be kept in service and revenue flowing into the city. pier 29 was identified --

certain portions of the area would have to be cordoned off as it do not enter areas which would not only allow us not to collect rent but take away from the overall value of that asset. >> i understand the issue before us today is whether or not we go forward with the creation but in terms of -- this is a conversation that will follow -- how do you expect that to come to us? when will we see a proposal about what this split will be and what the spending will be? >> we have introduced a partial infrastructure financing plan our intent is to update that to include a number of project areas currently under consideration. that should take the port three

to six weeks and we need to bring that to our court commissions for it -- port commission for approval. it seems unlikely we would be before you before the august recess for consideration by the board. supervisor kim: of want to follow-up on the questions about how we came to the reimbursement amount of $5 million for the public park. for me, consistency is really important that i tried to get a sense of what levels are we committed to funding public improvements like treasure island or the two others we have created in the city.

i wonder if you have a sense of how that was allocated and if this is similar to that? >> in those two cases, the developer will create a plan and do the initial work in preparing public and open spaces. there is work being done on the park for a number of residential towers and it will be the source of construction for public improvement. supervisor kim: do you know it the proportion is? >> it is my understanding the ifd will be part of the cost. my understanding is they have pledged to on site uses for

treasure island with a set aside for public housing but the both is to pay for both -- infrastructure like sewer -- >> will it fully -- i don't believe it is scheduled to do a full reimbursement. i believe there is approximately $1.5 billion of development cost and the public flows of money through special taxes are currently estimated in excess of $400 million to help reimburse the project costs. >>supervisor kim: i'm not sure f we're awfully embarrassing -- i thought we were reimbursed -- reimbursing roughly 50% of the cost because they actually go

open space fees to the city for planning are regardless. i don't think there is a full reimbursement because then we would be reimbursing fees they actually owe the city. >> i think you are correct and i misspoke. it essentially redirecting that impact fees through tax anchorman's that doesn't come close to funding most of the public open space cost. but it is tool sources. >> when you came to this dollar amount, did you base set off other deals or contracts made with other developers? i want more clarification on how we came to that dollar amount. >> there are two primary factors. looking at the overall public open space cost of $28 million,

this represents about 15% of the overall cost. we thought that was equitable and i think ultimately when we were negotiating this deal on behalf of this city, we were looking at the overall public benefits i discussed before. really looking at public benefits provided through this project and how to fund those from public moneys and private monies. we believe there is a way for the developer to up front certain costs and the partially reimbursed on the order of 15%. that seemed to be equitable based on the improvements made by the project and various tax flows coming from the project.

these are meant to be one time costs and i have estimated there is additional taxes that will be generated from this project every year. the bulk of which is part and tax and the vehicle fees. >> if the cost of the open space public improvements go beyond what we are currently estimating, does that mean we would negotiate a higher reimbursement? >> the transaction documents obligate them to complete the improvements regardless of the cost. supervisor chu: you talked about the policies coming fall word -- that would go to the port commission first before coming back to approval. but we would still have to

authorize the sale of a bond or issuance of debt and we would have to appropriate that through the board. >> that is correct. above and beyond the steps you just talked through regarding the formation of the district and approval of the financing plan, the board would need to approve any debt issuance as you do with all other cases. the board would still be required to appropriate the funds and you would do that whether it is the appropriation of pay as you go. >> much like we had, we would appropriate a certain level from the city? >> that is correct. that remains a discretionary act by the city. president chiu: 01 to follow up

on a couple of points. part of what has been curious to many of us was the 50-50 split suggested by the port. i certainly appreciate the port has significant capital needs but i suggest every department in the city and frankly every district has significant capital needs. as our budget analysts point out, are capital planning committee had adopted guidelines that stated the port can obtain proceeds but if the project area included bonn court properties -- only the port properties should be retained to fund part capital projects. on this project, the court announced 27,960 square feet, 20% of this overall site. pat seems to be what the split ought to be. i think this is something we

will have to think about. whether it is fixing capital projects or that great highway or other issues, we have to think about this issue carefully, whether simply because of the fact the port has support landed here, that makes sense and i don't think it necessarily does. a separate question is related to the fact the port is going to keep 100% of the transfer tax or to have -- i think it might be appropriate to think about that revenue as a potential source for the general fund. that might be an appropriate conversation to have. with regard to the $5 million -- that's a curious thing given the size of this project for the city to be paying the developer

$5 million to build the open space we understood was going to be a benefit provided by the developer. we have received very few publicly available numbers on this project but as i stated a couple of weeks ago, the expected revenues are $470 million. the construction costs were $177 million. there is an enormous bill that and that difference between the figures, while there are some self costs in better than that, it has been puzzling to me why it is the port would agree to pay $5 million to the developer to provide a benefit we thought the developer was going to provide to the community. i know this will be raised by the budget analyst report, but i just wanted to state that. >> just to clarify.

almost all the cost of the open space and streetscape improvements were addressed by impact fees which were approximately 50%. in that case, the developer affronted when had% of those costs and were reimbursed almost fully. they are paying 100% of the up- front cost and we have agreed to pay them a relatively small portion of that to the public fund. as for the overall benefit package and has a real -- as relates to the pavement, as you see in this discussion, there is not a lot of capital amounts of money -- it's mainly giving benefits to the city in smaller, ongoing payments or in terms of

actual assets created. it seemed like an equitable solution when we were negotiating the package. equitable and with president to require the developer to pay 100% of the developer cost with all the liability in terms of cost overrun and offer a small partial repayments. based on the projects we just talked about, that is a pretty traditional model to include the tax income and reimbursement as part of the overall negotiation and we feel this is a significantly smaller repayment and some of those other cases. >> so when there are cost overruns in the other projects, who is on the hook for that? is it that developer or what

ever we are able to generate? >> my understanding is an overall pledge with certain set asides and those tax anchorman's would follow to the developer until such time as they are reimbursed. it's not that we have to pay any other monies in those deals, but they could get up to 100% obligated. that's not at all the case in this project. frankly, they're being paid without interest. regardless of the timing of when the dollars flow back to the developers. as to be exact mechanisms, i have to confess i am not an expert in the way it flows.

that being said, that is the bulk of my presentation. i wanted to summarize the public benefits not in numbers, which i have probably done too much, but to summarize the other benefits of the project, specifically the creation of open space. the new park between pacific and waterway -- broadway on the waterfront. there are other benefits to the city which are important. the transit rich housing units, to under 50 construction jobs. streetscape improvements along the embarcadero and washington, removal of for embarcadero curb cuts and relocation of service

parking underground, new public parks,, public open space, a new pedestrian connections, and a rebuilt aquatic club. numbers are one way of saying it, but it's important to get a vision of how this would change with these new assets. president chiu: when did the rf p to allow for this project? >> 2008. president chiu: are you familiar with the government to address as a fait city government is contracting with a party, that party should not have had an influential role in influencing the rp that goes out for it. i have not gone over this but

this copies of correspondence before the rfp that went out which indicates the developer may have played a key role in drafting this. >> i am familiar with the process and there were unusual circumstances in this case where the developer had already approached the port in 2006 and 2007 about combining the property. we told them we could not do this directly. at which time, to create -- we went back to our advisory group and we created a subcommittee to come up with policies and procedures