>> good morning. welcome to the budget and finance subcommittee. my name is carmen:naand i'm joined by supervisor avalos and we will be joined shortly by supervisor kim. >> please silence also phones and electronic devices. complete any speaker cards to be included and should be submitted to the clerk. items acted upon today will appear on the july 17 board of supervisors agenda unless otherwise stated. >> thank you very much. which call item no. 1. >> a resolution authorizing the director of public works to execute an amendment to the design agreement for laguna honda hospital replacement program. supervisor chu: thank you.

>> and the project manager with the department of public works for the laguna honda hospital replacement program. i apologize being before you just one month after this was brought before you but this is a correction for what essentially amounts to a clerical error in the resolution brought before you one month ago. this is for modification #19 to the architecture contract for the master architect agreement and we were unfortunately rolling out to modifications and only one was approved at the previous meeting. supervisor chu: thank you. anything you would add to the presentation? >> we have nothing to add. supervisor chu: why don't we open this up for public comment? are there any members of the public who wish to speak on item number one? seeing none, public comment is closed. we have a motion to send the

item forward with recommendations and we will do that without objection. item #2. >> item #2 -- a resolution authorizing the port of san francisco to accept and expand $1,495,727 in grant funding consisting of a grant from the department of homeland security , 2009 port security grant program for the ferry system security interoperable of the enhancements at the port of san francisco and from the metropolitan transportation commission has a match. supervisor chu: thank you very much. >> we're looking for approval to accept an extended grant funding to improve ferry service during emergency or surge times at the port to enhance communications and real-time updates for ferry schedules and approved sign it

at the ferry terminals. supervisor chu: could you speak quickly to the financials? are there any matching positions being added? >> the total is almost $1.5 million. part of that is from the federal grant which requires a 25% matched to non-federal funding. no additional positions will be provided at when the project is complete, operation and maintenance will be handed over to ferry operators and the mtc. supervisor chu: i believe there is no report on this item. why we open this up to public comment? are there any members of the public who wish to speak on item number two? seeing none, public comment is closed. we have a motion to send the item forward and we will do that without objection. item #3. >> a resolution authorizing the department of emergency

management on behalf of the city and county of san francisco, serving as the primary grantee for the bay area site and as fiscal agent for the approval authority to retroactively accept and expand a fiscal year 2011 regional catastrophic prepared this grant program grant in the amount of $1,281,976 from the united states department of homeland securities to the california emergency management agency to enhance emergency planning within the bay area region. >> i'm from the department of emergency management. the legislation before you is $1.2 million for the bay area region to enhance catastrophic planning and in this grant program this year, we will be expanding $1.2 million on regional exercises. i will be happy to answer any

questions. supervisor chu: it looks like there is about $420,000 of matching funds currently. is that currently budgeted in your department? >> it is not. their regional funds are divided proportionally depending on the agency that participate. i can tell you in the past, san francisco has expanded their portion in hard match and they were in the budget. this year, there are no positions budget and i cannot tell you exactly what the potential would be because the regional catastrophic planning team has not yet completed their budget process. supervisor chu: this is after the allocation process and a $400,000 would be allocated among different agencies that receive the benefit?

>> correct supervisor chu: and there are no agencies created by this. why don't we open this item up for public comment? are there members of the public who wish to speak on item number three? seeing none, public comment is closed. we have a motion to send the item forward with recommendations and we will do that without objection. item #4. >> item #4 -- the resolution authorizing the san francisco be sensible transportation agency to execute an agreement for parking meter coin collection counting and support services for an amount not to exceed $46,410,974 and for a term of five years with an option to extend the term for up to an additional four years. supervisor chu: do we have the mta here on this item? we don't. what we call item no. 5?

>> resolution authorizing lease of real property and improvements done as the san francisco wholesale produce market, including the lease of property at 901 rankin street. authorizing the city administrator or designee to execute documents and make certain modifications and take certain actions in furtherance of this resolution. supervisor chu: this item is brought to is jointly by the mayor but also by supervisor cohen and the supervisor will join us shortly to say some words on behalf of this. until she comes, would you like to have any opening comments? >> good morning. and the acting director of real estate. when i began my position here

in san francisco, the first project i was handed by my director was to move forward with the san francisco wholesale produce market least, knowing that in six short years, the 50- year lease was coming to an end. unfortunately, we started this six or seven years ago. there have been many interested parties working on this and balancing a number of interests. those interests or the economic development desires of the city, the ability of wholesalers to afford the rents that have revitalized market, concerns of institutional financing sources in a very tight credit environment, providing sufficient term of least to give all of the comfort that the city is serious about making this investment work, and institution -- instituting sufficient checks and balances to make sure the city property delivers on the promise that

lays before you. i believe we have achieved that. if you would like to turn that over to supervisor cohen, we have a presentation that will serve the general manager of the san francisco wholesale produce market and i will follow-up with details on the lease itself. supervisor chu: thank you for that. i know that supervisor cohen is a co-sponsor and i will turn it over to you for comment. supervisor cohen: thank you for allowing me the opportunity to join you this morning. the produce market is a vital hub in the southeastern part of the city. for six years, have been supplying missile of fresh produce, employing local residents and distributing millions of dollars to payroll tax to our city. before slow food was

fashionable, for decades, the produce market has been trying to increase food equity and our neighborhoods which have traditionally lack access to quality food. this new lease is a tremendous opportunity to build on the relationship the city has had with the market, corporations and small businesses that operate there. the item before you today provides the produce market with a new 60-year lease that will facilitate a large expansion of the market, updating facilities and creating new, expanded space for those who want to stay and grow in the city and tenants looking to locate their business here in the market. the structure and term of this lease will also facilitate significant private investment in the market's expansion through the use of new market tax credits and is faced -- a phased building output will average rent paid to finance new construction. these are exactly the kinds of

private-public partnerships the city should be prioritizing. we have reviewed the budget analyst reports and understand the issues he has raised with the department of technology's relocation as well as the uncertainty on the date the city might receive net revenue proceeds from this lease. it is my hope we can have a thoughtful discussion about this project today and address any concerns that you as members of the budget committee may have so that we may be able to move this project forward. with that, we can begin our discussion. supervisor chu: thank you very much for the opening comments. >> good morning. i'm the general manager of the san francisco wholesale produce

market and this is the project manager. we would like to thank you for the considerable time to have taken to experience and learn about the market. we thank you for your ongoing and strong leadership in our district 10 committee. on behalf of the entire market family, our customers and forming partners, we thank you for the opportunity to talk to about the future of the market, including the ground lease an investment project. but first we would like to share but of our history. our roots in san francisco, we have been in our current location since 1963 but our history goes back even further than that. many of our merchants sold fresh produce in the embarcadero in the old market district. in the 1960's, the market was moved to its current location to allow for the golden gateway redevelopment area. since then, san francisco has evolved to become famous for its food culture and the market has been an integral part of this.

our merchants provide fresh produce to a multitude of independent retailers, restaurants, food trucks, hotels, caterers, corner stores and the list goes on. all of this makes san francisco a great and unique place to live and eat. tourists spent $1.6 billion annually in food and beverage year in 2010 and the market has been a key partner in that business. today, the market is comprised of 26 businesses with shared warehouse and dock space across five facilities. much of our work is performed behind the scenes. hour workday ends when the sun comes up. our passion is produce. we bring healthy and terrific tasting food to san francisco. but in a fragile, time sensitive product like produce is not easy. the professional that the market have a wealth of logic and know- how. it serves as an incubator for small food business.

earl's organic began with a single desk on a rear docked at the market. today he and his business are in 25,000 square feet on the market providing organic produce locally and nationally. the market is an asset to the city beyond reasons for fresh and healthy eating. it's an anchor for jobs in the neighborhood with over 650 employees working at the market. of our employees, nearly one- third are residents percent -- are residents of san francisco. the market and merchants are engaged with the track driving academy for local hiring. we have and continue to work with jvs. worker of the year is a member of our maintenance crew and we are proud of that. at the market has -- the market touches many aspects of the city and we're the backbone for are independent food culture and economy. we are a purveyor to the neighborhood merchant corridor and many small businesses have been shopping at the market for

many years. we have been donating to the san francisco food bank for countless years and now dominate over a hundred thousand pounds of fresh produce each year. there is a san francisco food bank track at the market every morning going from business to business to collect produce. the market is and invests in -- is an invested participant in many things it dropped at bay area. we are members of many organizations within the bay area. the market infrastructure is critical to the bay area food shed. we are the link between nearby farms and their customers in the city and provide all the services that move produced from farm to fort. but the market has done since we began in 1963 as provide infrastructure and that is what we need to be able to do and this lease will enable us to do that. a new ground lease will lay the foundation for a $100 million

project to enhance and expand the market. this will position us to better serve existing and future customers demand while creating jobs. here is a photograph of the newest edition of the market which currently houses earl's organic produce. this is an example of where we would like to go with our other buildings. the reinvestment and tails upgrading and expanding five buildings. we will take a phased approach, developing the project over 10 to 15 years, focusing on one building and a time so we can maintain normal market operations. we will increase our capacity between 100,000 and 200,000 square feet and we're planning to minimize traffic conflicts. reinvesting in the core infrastructure is paramount to our future success. modern storage and distribution facilities will allow us to serve and attract high-quality produce businesses, reduce our environmental footprint and meet best practices and standards. in closing, even though much of

our work is performed in the middle of the night, the benefits are clear as day. san francisco's food culture and the lore as a food destinations predicate of fresh, healthy cadaver's produce made available throughout the city. we provide critical infrastructure with our local and regional food system and continue to provide quality jobs that help businesses establish themselves and succeed in our community. thank you. supervisor chu: thank you very much. >> i would like to go into the details of the lease itself and the key terms and conditions and address some of the issues in the budget analyst reports. this is a 60-year lease with the sf market corp.. the negotiated term was elected to cover the entire reconstruction to completion,

which could be out to 2036 and assuming a final tranche of debt that takes us out 54 years. with consideration for flexibility in the schedule, 60 years was deemed most appropriate. that term would provide comfort to the institutional financiers of project certainty which affects not just the interest rate due to the risk of the debt issue, but also address the basic viability of financing. we don't have a lot of term, financing may not be available from certain sources. a shorter term would make financing not only much more difficult but much more expensive. it also provides certainty to wholesalers. we're dealing with today the sons, daughters, grandsons and granddaughters of the vendors displaced by the market there redevelopment in the early 1960's. we're dealing with subtenants

whose vision cuts across generations. we need to be consistent with that vision. this is admittedly a sole source leased but it is justifiably so. there are no developer profits, there are no developer fees, this is not a traditional development. the city is offering up simply a one time transfer of accumulated revenues from the existing market corp. to the new market corporation. along with the use of consolidated land at no additional cost, the city receives the benefit of the transaction downstream. upon completion of the project, and establishment of stabilize net revenues. we project it will be approximately 2036. it is not a precise number given that there are four phases and many complexities to the project, but we estimate the stabilize revenue flow will be approximately $1.5 million per

year and that has a net present value for the remainder term for approximately $35 billion to the general fund. over the first 50 years of this lease, at what recognize we have a 50 year positive history on this site, there has been no net revenue flow to the city. we're changing that dynamic in this agreement. the project works because the only fiscal burden to the city is the replacement of a dilapidated world war two vintage facility. we knew we had to replace this on site or elsewhere. it has been previously articulated as a deferred or unfunded need. the remainder of the sources come from project revenues, the institutional financing, new market tax credits and potentially some federal sources. with regard to 901 rankin's

relocations, we have to use is there -- one by the mta and one by the departure of technology. the mta is budgeted and approved for relocation. their relocations are set forth and on going to both their bancroft and marin facilities. that has been initially deemed consistent with the ongoing overall asset management review performed by a team of consultants assisting the mta on improving their space use. in addition to the infusion of funds from the city, -- to the city from the corporation, to a system covering rental costs by replacing a location or if we so choose, debt service if we purchase the replacement site. there are certain triggers in the least that need to lead to the relocation. the city has to find a suitable

site. the corporation has to have certainty they have an anchor tenant to take the newly constructed space. we than mutually move forward subject to board approval of the transaction regarding a suitable replacement site that will return to this committee, as likely, and to the full board. we are looking very closely at to particular sites we think are well-suited to meet the needs. there is the potential there will be some right sizing of what they provide and we are considering that. in terms of what the replacement site might be, it may not be quite as large as the current site. the estimates of move costs and ongoing rental expenses are outlined a budget analyst report on pages 8 and 9 and reflect the reality of those particular sites we're looking at and the likely expenses.