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good morning. welcome to the regular meeting of the budget and finance committee. my name is car men chu, chair, joined by supervisor avalos and supervisor kim. our clerk is mr. victory

young. at sfgtv, derrick fernandez and mr. young. >> please silence all cell phones and electronics. completed cards should be submitted to the clerk. items acted upon today will appear on the september 18th, 2012th board of supervisors agenda unless otherwise stated. >> thank you very much. would you call items one and two. >> item one, resolution approving issuance of up to 502,200,000 aggregate principle amount of san francisco airport plan bonds and approve certain matters. 2, ordinance appropriating 502,200,000, proceed for sale for capital improvement to airport commission for 2012-13 and commission for 2012-13 and placing total appropriation

reserve pending sale. >> thank you. we have julia dawson from the airport. i would ask you speak about the bonds and what the purposes of the bonds would be. also speak to budget analyst recommendations as well. >> okay. chair chu, members of the committee, julia dawson, i'm the budget manager of the airport. we are here asking for approval to issue 502.2 million in bonds, but also to appropriate 502.2 to support the capital plan. i would like to give you a context about what is going on at the airport. last fiscal year we had 4 3 million passengers traveling through sfo, 5.1% higher than the previous peak year, 99-2000, 3.1 million more pbople than the last fiscal year, or 7.7%, so the airport is very busy.

because of that we have a lot of demands on our facilities, so we are here to ask approval for our capital plan. so in the appropriation we have requested, we will be investing -- i will hit the highlights of some of the projects. we have our runway safety project, a federally mandated project to improve the safety of the runways at sfo. we have some baggage handling and security improvements, some terminal improvement projects like the air traffic control tower, nicely covered in the press. the reconstruction of boarding area e. we are doing roadway and parking improvements and we have utility and infrastructure projects in the plan. we are projecting over the five years of this capital plan that we will generate 3,277 total jobs. the project has been reviewed by the capital planning committee. they were included in the

city's ten-year plan. we have a very strong underlying credit rating at the airport. a1 for mod dids, 1 plus from fitch and 1 plus from standard and poors. we don't anticipate those will change *. the budget analyst has recommended approval with an amendment. that is to include $41 million to basically increase our requested appropriation of $41 million to include appropriation for cost of issuance. we agree with this recommendation. i'm here to answer any other questions you might have. >> thank you very much. why don't we go to the budget analyst recommendations. >> madam chair, members of committee, debra newman from the budget analyst's office. we would note issuance of the $502,200,000 bond also carry a total interest cost of $772.5 million, at an estimated interest rate at 6% for a total debt service

of 1.3 billion over a 30-year period. as noted in the report and shown in table four on page eight, the airport will be combining the requested 500 million issuance and appropriation with the prior slightly over a million -- $100 million of issuance for combined total, which would provide for the cost of issuance that reflects our recommendation for the $41 million. our specific recommendation is that the requested appropriation for $502,200,000 be increased by the $41 million to $543,200,000 to provide

authority for individual costs. the individual ones are specified on page ten of our report. we recommend you approve the proposed ordinance as amended and the proposed resolution. my understanding, though, is that with this amendment you may need to continue this item one week. >> thank you very much. i think -- did the airport say you were in agreement with that increase? why don't we open these for public comment to the members of the public. if you wish to speak come up. we likely will be continuing these items because the appropriation and resolution amount also be increasing. are there any members of the public who wish to speak on items one or two? seeing none, public comment is closed. colleague, do we have a motion to accept the budget analyst recommendation to amend the proposed ordinance to increase by $41 million, to include estimated bond issue wans and related financial cost and continue the two items for one week? >> so moved. >> we have a motion. we will do that without

objection. if i could ask the controller to perhaps assist the clerk because they are appropriations, that would be helpful. thank you, item three, please. >> item three, resolution authorizing san francisco public utilities commission to accept and expend department of water resources administrative grant in amount of $2,114,000 for implementation to the park water project. >> thank you. we have sheryl munoz from the puc. >> good afternoon, i'm julia ortiz, the water conservation manager with puc. we are here for authorization to expend 2.1 million in state grant funds from department of water resources for construction of the harding park recycled water project. this is a very important part of our efforts to diversify our local water supply and reduce amount of poetable water we import.

the project is an effort between daly city and sfpuc to produce recycled water that would irrigate harding park golf course and fleming golf courses. it basically involves building a new pipeline along lake merced, hardinger park, new storage tank and irrigation pump station. there is no negative fiscal impact associated. we are asking to accept state grant funds. the total amount of the project is $7.4 million. funds are available through the puc's water system improvement program funds. so if there's any questions, i'm happy to take those. >> thank you very much. you have articulated the matching funds required, the 5.3 million, is within your current budget? >> yes, that's correct. >> there is no budget analyst report so i would like to open this item for public comment. are there any members of the public who wish to

speak on item three? seeing none, public comment is closed. colleagues dockser we have -- do we have a motion? we have a motion. we will do that without objection, thank you. >> thank you. >> welcome. item 4. >> item 4, resolution authorizing san francisco public utilities commission to accept and expend department of water resource administered grant in $863,100 for san francisco public for the their program. >> thank you. we also have julia for this also. >> we are asking to authorize and accept funds from the same dwr issued state grant bond. this would be to support on going implementation of our programs to help our customers replace old water wasting toilets with more efficient models. again, it is an important part of our efforts to expand conservation and reduce amount of poetable water we use. there is no negative fiscal

impact. the total estimated cost is 5.3 million, of which we have funds available in our operating budget to cover. so if there's no questions -- >> thank you. i believe this also does not have a budget analyst report. supervisor avalos. >> i have just a question. it is not a facetious one. but is there any effort around making our toilets in city hall to be more efficient? >> absolutely. we are working on a project, an epa grant-funded project, working with department of public works to replace the old toilets with high efficiency models. you will see changes occurring over the next few months. >> that is great. they are very low efficiency. it flows almost minutes for -- >> in fact, it is part of efforts in the whole civic center area. >> awesome. >> thank you, supervisor avalos, for that question. why don't we open this up for public comment.

are there any members of the public who wish to speak on item 4? seeing none, closed. colleagues, do we have a motion? >> motion to approve and move forward with recommendation. >> we have a motion to send the item forward with recommendation and we will do that without objection. item five. >> item five, resolution establishing rent and terms for second extension and confirming second sublease extension of lease with san francisco unified school district for real property at 1235 mission street for human resources agency for general assistance services. >> thank you very much. we have john updike and the representative. this is brought to us by supervisor kim. did you have any opening comments, supervisor kim? okay, john. >> good morning, thank you, chair chu. john updike, director of real estate. if i could follow up on supervisor avalos's question. the retrofit for city hall is a broader effort to bring city hall into a lead

operating and maintenance certification. so we are actually looking forward to a whole number of efficiency projects in city hall that we are working on aggressively with puc as a great partner. that being said, this particular item is a retroactive approval of exercise of a second five-year extension of a sublease at 1235 mission street. picture on the overhead. this is on mission off eighth street. the entire premises has nearly 118,000 square feet in improvements. it is leased by a private entity by the san francisco unified school district. it is subleased to the city and has been since 1992. the city operators human service agency's cal fresh food stamp program and county adult assistance program out of this location, has done so for about 20 years now.

this is the second and final extension of the sublease. this will take us through august, the end of august of 2013. by that date sfusd anticipates having paid the debt owed on the property. mostly via revenue from the city as the sub tenant of the property. per that debt financing arrangement will take ownership of the parcel. the city and sfusd intend to enter into negotiations to secure a lease directly between the school district as owner and city as tenant, which would be affected in september of 2013. assuming the school district does take ownership, as anticipated. that would be subject to approval by the representative governing bodies, the board and this board. this particular agreement is a bit unusual in that the effective date is so many years ago. there was an initial

disagreement between the city and school district as to the fair market rental value to be used on the date of the renewal of the sublease. that is a july 1, 2008. so our discussions are around what the market conditions were in july of 2008. not today. staff turnover furthered the challenges in reaching an agreement and intervening litigation involving the property. not necessarily this particular issue but the property also further delayed timely resolution. that all said, what is before you is, in our opinion, a reasonable agreement as to the fair market rent of the property as of july 1,2008 of $19 a square foot per year. i have on the overhead some of the comparables used by an independent firm hired by the city to look at this back in 2008. the comparables at that time were $40 a square

foot, at 1155 market. $33 a square foot at tenuin plaza. 35, 26, 31, 36. i think you see the point here, a resolution at 19 as the fair market rent is a reasonable conclusion from the city's perspective. this will mark the first increase in the rental rate since the sublease began in 1992. the rate is fixed for the term. the term is through august 31 of '13. the accrued amount owed, the difference between what we have been paying in 2008 and today and the effective date of this legislation, should it be approved, since the renewal is 1.1 million in change. as laid out in the legislation and budget analyst report. that has been budgeted by human services agency. we anticipated this coming forward at this time. it is in their adopted budget for this fiscal year.

so it is in conformance with that expectation. happy to answer any questions and the chief financial officer with sfusc is here f you have any particular fiscal issues from their perspective. >> thank you. just to ask for the sfusd representative, whether they wanted to make any comments. >> i'm joe grazioli, the chief financial officer of sfusd. i just wanted to say i appreciate the work that mr. updike has done on this. we are very happy to finally come to a conclusion on it. we certainly have an obligation to the lessor on this. i would like to say thank you for whatever you come up with on this, i appreciate it.

thank you very much >> thank you very much. why don't we go to the budget analyst report. >> madam chair, members of the committee, as mr. updike has noted the human services agency has continued to occupy the 1235 mission street property since july 1, 2008, and has been paying the same flat rental rate of $15.75 per square foot, per year since then, which was the previous rental rate. based on an independent appraisal conducted in december of 2008, which found that the fair market rent was for 95% of the fair market value was between $17.16 a square foot and $18.24 per square foot per year. the proposed resolution that is before you would set the fair market rent at

95%, or $18.05. as shown in the table on page four of our report through june 30th, 2008, hsa has paid approximately $7.4 million but actually oh owes 8.5 million to the school district. this funding has been anticipated. it would be paid with approximately 25% federal sources, 75% general fund revenue. because mr. updike has indicated this proposed retroactive rental of $18 per square foot per year represents 95% of the fair market value, we recommend approval of the proposed resolution. >> thank you very much.

why don't we open this up for public comment. are there any members of the public who wish to speak on item number five? seeing none, public comment is closed. colleagues, do we have a motion on this item? >> okay. we have a motion to send it forward with recommendation. we can do that without objection. okay. so just for members of the public and colleagues, we have two items remaining, items number 6. also 7, that is on the agenda. and 8 as well. beth of those sponsors of legislation supervisor campos and supervisor wiener are on their way. they are actually coming from the mtc across the bay at the moment. rather than start immediately, i would like to take ten-minute recess and we will come right back, just to make sure we find out where they are along the way