revenues have gone down slightly. in general. the project has decrees in its financial analysis since that time. supervisor mar: the numbers show that there has been a profit, $196 million, which is a pretty significant amount. do you have a dispute with that number? >> we have talked about the revenue numbers. i am not aware of what the cost numbers are in that case, so i cannot verify that one way or another. supervisor mar: going back to this question, there has been a lot of debate about whether this is a good deal or a bad deal, and there has been a lot of information from folks about how

this compares, but how did you decide in this project, with respect to this project, that you were getting enough? what went in to that analysis? at what point did you say, you know, this is a good deal for us. anything below this would make it a bad deal? can you talk a little bit more through that? >> supervisor, through the chair. there are several things that we looked at, and one was a proprietary basis, and i think the analysis that you have spoken today, there is a public benefit package. as a land under of approximately $14.30 million, it is provided, so i think on a proprietary basis, we are pleased with that, as a land owner, how we are doing in that

transaction. on the public benefit packages, the pork projects or the city projects, we have some benchmarks, but i think we always defer on the board of supervisors do as far as the entitlement and approval process. i think supervisor kim's analysis about what is done, what is implicated. >> does the problem for the developer come into this process at all? >> is one of the issues.

certainly as a land owner, that is something we analyzed in its own rights, and we differ on both an analytical and a policy basis to the board of supervisors on what the ultimate packages that this proved. >> and in making that consideration, if i may, what is the problem margin that you anticipate for the developer in this case? >> so the original profit margin that was proposed or implied in the development feasibility analysis that was done, that was provided to the court was an ir analysis, and a proximate return of about 20%. i think that is a relatively common rate of return, in a think it is lower than the rates of return that are required for the city shares and hunters point project, which i believe

is 22% preferred return, so we do not think it was unreasonable for the developer to be aiming at that, and there is also the very real possibility that a project of that level in this economic climate, where the level of feasibility threshold is is a real question of what equity partners are demanding in terms of their return. commissioner: the big difference is what you are talking about and what is shown in this document that was given to us by president choo -- chiu, so it is difficult to know what is the actual number. >> just to clarify, i am not privy to what the supervisor has distributed, but when the project's developer is seeking money is to complete their projects, they are looking at an

ir type of return, an annual return based on when the money goes in and when it can come out, so the delays of the original pro-forma of three to four years are very substantial when you come to determine that rate of return, so the initial rate of return unmentioned, the 2008 to 2009 document, it is probably lower. commissioner: may i have a final question, through the chair -- do you have any job -- any thoughts on this? >> mr. president and members of the board, a supervisor campos, we did not analyze the rate of return. we cannot tell you what it is because we have not done that analysis. supervisor campos: did you get

any information from anyone on whether or not that analysis was done by them? >> no, we have not gotten any information from the port regarding that analysis. supervisor campos: i would think and hope that that kind of analysis would be done when you have this type of a magnitude of a project coming before us. thank you. president chiu: colleagues, a couple of closing comments. the port, which was supposed to be analyzing this deal, has no ability to tell us whether the profit margin in this project is inappropriate, and that is a basic analysis that is part of our analysis of, i think, when we are about to provide literally hundreds of millions of dollars of value to a developer, it is important to us

to know what profits they will get back from that. supervisor kim had raised a number of questions are randy winn, -- rincon project. they did not receive 400% parking bonuses and other things. they also had a stabilization fund of close to $30 million, and i think it is just important to note as we consider all of these numbers, again, for a developer to say they're going to be providing recreation and open space and do that by taking $5 million of our dollars, it just strikes me as a bit odd, as the budget analyst pointed out, and that is why i offered the amendment that i did. commissioner: seeing no further

comment, could you call the roll? secretary: [reading roll] president chiu, supervisor chu, supervisor cohen, supervisor elsbernd, supervisor farrell, supervisor kim, supervisor mar. mar aye. there were five ayes and six nos. secretary: that is defeated. president chiu: i know you want to see some change. i know that many of you are ok with some amount of projects. this only represents 2.3% of the overall deal, the affordable a dozen, and as i've said before, i am frankly surprised that no

one here seems to be that shocked the fact that our budget and this, is recommendations we support when it comes to the budget, the fact that we're $50 million apart from the port i think is quite significant. that is $50 million of community benefits that we are not receiving. i would like to propose that we increase the affordable housing by some level. i frankly was having some trouble figuring out what the right number would be, because the office the cannot have a conversation with the majority of you. what i have in the amendment that i have circulated is that we increase it to $14 million. that represents 5% of the overall value of the deal and, frankly, i think is a very modest increase with what we are talking about. part of why i think we are comparing apples to oranges is that the affordable housing fees we are receiving are exactly the same level of fees we would get for the $500,000 condominiums

when they are $5 million conners. he helps them to be the most expensive condominiums in the city and county of san francisco. we were not asking for additional fees. one thing i am asking in suggesting that we increase our affordable housing to this level is really a community benefit. it is not about our inclusionary fees. this is not an as of right projects. this is for providing extraordinary additional bonuses to the developer, and so, colleagues, i would like to offer my amendment, and what i would like to ask or is it individuals have issues with this level of affordable housing, if you could articulate at what level you would be more comfortable with affordable housing, because, again, without having a conversation with this body in public, i would like to get a sense from you what you think is fair. i did that 5 percent is a fair number, and i would like to just

know what folks would be comfortable with. secretary: president chiu has presented an amendment. is there a second? please call. secretary: rea -- [reading roll] president chiu, supervisor chu, supervisor cohen, supervisor elsbernd, supervisor farrell, supervisor kim, supervisor mar. there are four ayes. >> the amendment fails. president chiu? president chiu: let me see if i could get affordable housing information, whether or not you would go for it. rather than 14, i will ask for

two, and i think that is, again, that willises dramatically while we can do on affordable housing, and given the level of profit here, colleagues, i think that is a very, very modest suggestion. >> : -- a motion is made by president chiu. is there a second? a second made by supervisor campos. commissioner: what is that affordability? president chiu: i am happy for that affordably to go to something you are always concerned about which is not just low and moderate income housing but middle income housing as well, so a to 140%. commissioner: what is the low end? right now, there is an

affordable housing payment, and my understanding is that typically in lieu payments, they can go in a lot of different payments. they tend to go towards low and very low-income housing as opposed to, for example, inclusionary on such, which tends to be more able -- middle income housing. that is my question. $11 million that is already being paid as part of the agreement. president chiu: actually, if i could ask city staff if you could answer that question. >> through the chair, my understanding is that the affordable housing, first of, i should not say -- i am not an expert on affordable housing, and other cities that might be better suited to answer this question. my understanding is what has come up in front of committees is that the affordable housing impact fees, the impact study

looked primarily at providing affordable housing in the low to moderate income range, and they were targeted at a certain amount of housing. we are looking at the full cost of housing in providing that. commissioner: 50% to 80% sun is not moderate income. that is low income. supervisor chu: could i just said, there are many areas that need funding, to a number of projects in district 10, and also i believe on laguna, one in the pipeline, so i did in general there is no real application on how that of an dollars million gets bad, which, from my understanding, goes into the overall budget. i just also want to state that

we cannot dedicate where these $11 million go, but i know certainly in my conversation with the director of the mayor's office on housing, we have had conversations about the potential of the parallel project that is going forward, which is the commitment by the port for affordable housing on the seawall log on broadway. this would be a waterfront parcel that would be dedicated to affordable housing, and i certainly of interest in assuring that some of those funds will be going there as well. to balance the market rate that we are building on the waterfront. >> thank you, supervisor kim. is there any other comment on president chiu's proposed motion? president chiu: i would like to, through the chair, supervisor wiener, i am familiar with your

concern that there is housing at all levels, particularly for work force housing, and if that is something we may want to do with this. again, this is a project that is creating housing for the wealthiest of the wealthy, and i think when we provided thailand to do that, we also need to make sure there are benefits for housing throughout the rest of the city, so i just wanted to say that, through the chair. supervisor wiener: i guess, through the chair, when it came up about affordability, every time i try to bring up front of the range, there were some folks who got shot down on that, still asking for more affordable housing money for this project, and i know when some of the opponents were talking to me, they were very focused on moderate income and middle income housing, that was very

important to me, but then it looks like this money is not really going to go to that need, which is a dramatic need, and that does not take away from the dramatic need for low-income housing. the two are not mutually exclusive. that is a concern that i have. we could raise the ami level for the entire fund or for a good portion of it, and, you know, perhaps, a small increase in the affordable housing money that might be warranted, but right now, i do not feel comfortable raising it when it is going to part of the spectrum of the need but not the remaining spectrum of need. >> thank you, supervisor wiener.

president chiu: thank you, mr. chair, i would suggest that this portion go to that portion or at least be expanded to go to an expanded portion of that ami so the we can assure the we are addressing different parts of the need. i happen to think that if you have $2 million that go to the low part of the spectrum, that provides in the less pressure for us to use moneys elsewhere, but i will make the amendment with the suggestion in comments that we have heard today. chair: supervisor campos? supervisor campos: thank you. i am still not sure what we are doing here. just as we need to deal with the housing, we're talking about luxury housing, and not just for the wealthy but very wealthy, the impact on low-income housing is pretty significant,

so i am still trying to understand what exactly it is that you are proposing through this motion. i am supportive of adding $2 million, but i am not sure where this is going. chair: president chiu? president chiu: let's be clear about where the votes are going. this is to contribute a certain amount to go to the city fund to create more housing, and i agree with many of you that our first priority should be for lower- income housing, but i'd also like to assure that we're able to see some level of additional money going to house ecologist given weatherization is today, so my suggestion for an amendment would be would be some flexibility for the low-income affordable have been developed and a glut of moneys that could go towards work force housing that i know supervisor wiener

has been championed -- championing. chair: do you accept the amendment? this is not approved by the new seconder. is there a new seconder? president chiu, would you stick with your first? president chiu: yes. chair: could we have an roll call vote on the regional amendment? secretary: [reading roll] supervisor campos, president chiu, supervisor chu, supervisor cohen, supervisor elsbernd, supervisor farrell, supervisor kim, supervisor mar, supervisor

olague. there are five ayes and six nos. chair: the amendment fails. are there any other items? president chiu: there are a couple of other questions, one for the budget analyst. from my perspective, i think this means the developer. is this correct? >> the sellers of the condominium pay the transfer of be, so when it is moved to the subsequent sales, it is the owner of a condominium who would be paying the fee at the time of the sale, if that is the question.

president chiu: yes, that is right. so, colleagues, they did no analysis on the rate of return for this project, the deal they developed was to let the developer off the hook from paying a fee off the first sale to the second sale, and as you know, colleagues, there are legal risks to this. we have encountered this issue before. we know that it is possible years down the line when the second sale occurs, there could be a lawsuit brought by the second purchaser to not have to pay this because it would be deemed a tax rather than a transfer fee. this is an issue we have had in recent years and is in the budget analyst's report, and frankly, i believe it is something that we were discussing with the america's cup as to why it was important for us to do the second sale as opposed to the -- the first sale as opposed to the second sale.

so contingent's, moving the transfer fee from the second sale back to the first sale. chair: president chiu has made a motion. seconded. commissioner wiener: i do not know the question that is directed. i know there has been some flux over time about when the transfer tax -- or the fee was going to apply. >> supervisor, through the chair, the portion. the transfer of the as i think was clarified at the budget year, the legal risks, my understanding is that the legal risk comes from the city requiring property owners and especially -- essentially turning it into a contract and that future fees be diverted to the city. in this case, the city or the

port as the party under can enter into that contract directly. the legality issue has to do with requiring property owners to enter into such a contract. the city or port can voluntarily enter into such a contract. >> -- supervisor wiener: subject of a motion? >> the president alluded to the conversation with america's cup. i think the budget analyst's is correct in saying that the first sale is essentially the one that the developer is directly party to. however, subsequent sales, the sale value does affect the first sale, support, i would say, agreed to negotiate in that regard for two reasons. one, we still believe it will affect leo rosales of the developer, and two, it allows essentially a rebalancing, as we always do, with capital funds of

fraud in a long term annuity fund, if you will, over time, to help us maintain and operate the waterfront, so given the trade- off that the president has pointed out, there are moneys we are passing up on up front, we are treating it for money over future years, and we thought it was appropriate in this case. chair: any other comments or questions on this proposed amendment? seeing none, supervisor cohen? supervisor cohen, can you get a little bit closer to the microphone? supervisor cohen: yes, supervisor, can you repeat?

>> the developer to get away scot-free. this does not kick in for many, many years down the line. this is a fee that is still relatively untested. in the budget analyst's report, it stated that the time they are aware of involves a property in tahoe, and the issue has been raised by attorneys that down the line, there is a purchaser on the second sale that does not

want to pay this date and/or tax, they might have a strong financial interest to actually sue the city because oftentimes these types of transfer fees should be considered as transfer taxes that would require voter approval, so there are real risks with the approach here, but that being said, i think that this is significant in indicated when it is keyed off of the first sale. any other comment -- chair: any other comment? mr. clerk, could you please call the roll? clerk: [readinig roll] supervisor cohen, supervisor cohen, supervisor elsbernd, supervisor kim, supervisor mar.

there are 3 ayes and eight nos. clerk: the amendment fails. are there any other items? president chiu? president chiu: colleagues, thank you for your patience. i know there has been a long discussion. i want to thank staff and the team. i know this is likely not going to the end of the story in part because there will be a signature gathering campaign on the part of community activists around some of these issues, and i do understand that there will likely be a number of lawsuits to move forward. that being said, i do not think it is not a surprise that i do not tend to vote for the underlying items today. i understand that for a number of folks, there were deals that were cut with regards to this process, this project, due to politics. i get that. but from my perspective, this

project is nowhere near where it needs to be a for the city and county of san francisco for us to ensure that all of us gets to continue to live in san francisco when we have some of the most expensive condominiums in the city that are going to be going up and all of the other issues that i know you have heard about that, so with that, colleagues, i do plan to vote no. i have an idea about where others will vote on this, but i would appreciate your support on that. clerk: supervisor kim? supervisor kim: thank you. i just wanted to clear up some of the confusion about my previous in. it will be raised at full buildout for juan rincon hill, each unit -- for one rincon hill, i consider this to be luxury development in san francisco. the units are gone for at