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 so we will be back in ten minutes. to members of the public, given we have a small window or break, if you haven't filled out a yellow speaker card, please come up and fill out your name. the cards are over here. we will be calling speakers for public comment with the speaker cards. thank you very much. we will recess and be back in ten m m

hello, welcome back to the regular budget and finance. we came back from recess. i'm carmen chu, joined by supervisor avalos, vice chair. supervisor kim will join us shortly. i'm joined by supervisor campos and ferl. will you read item 6 and 7. >> 6, resolution authorizing public daily use commission subject to daily use to lawn tfp clean power sf, approving local assisting services for clean power sf customers and authorize general manager of the public utilities commission to execute a contract with shell energy for four years and six months to launch the clean power sf. it item 7, appropriating 19, 500,000 of hetch hetchy fund balance at public utilitis to support the clean aggregation program

regarding the authorization to the san francisco puc and board of supervisors and adding code 10.10037 2 and 3373 to establish clean power sf fund and clean power reserve fund. * >> thank you very much. colleagues, we have these two items before us. i think these two probably have traveled a long road before coming to us here at the budget and finance committee. we have a number of speakers here today. of course we have ed harrington and his staff from the puc. we will hear from the puc, then office of economic analysis and then our budget analyst report. before we do that i will ask my colleagues if anybody would like to make any opening comments. supervisor campos? >> thank you very much,

madam chair. thank you members of the budget committee. my apologies to you and members of the public for being late. i appreciate the brief recess. supervisor wiener and i have been coming back from the metropolitan transportation commission, where we ready the city and county of san francisco. first in terms -- there are some amendments to the resolution that is before you authorizing the puc to launch the clean power program. i have copies of those amendments and respectfully request the budget committee at some point make the amendments along the lines that are detailed in the document. i have the clerk -- i think you have them. make sure you have a copy and we have copies available to the public, if people would like them. let me begin by saying that

this has been a long time coming. community choice aggregation is something that the san francisco public utilities commission and local agency commission have been working on since 2004. i would like to begin the presentation today by taking the time to acknowledge the amazing work done over the years by the san francisco public utilities commission. in particular, i want to highlight and recognize the work of the general manager, ed harrington, who is here and presenting shortly. he and his staff have worked i don't know how many hours over the last few years to make this happen. i want to thank them for the professionism. the expertise, dedication and integrity that they have brought to this process. it is greatly appreciated. my hope is this will be

successful. i think this will be one of the many legacies that ed will leave the city and county of san francisco. it's been an honor, mr. harrington. i want to acknowledge lafco, a separate government agency. over the years lafco has had many members of this board and members of the community that have worked on this item. all of them have contributed over the years to make this product what it is today. i also want to acknowledge the work of the amazing lafco staff. we have our executive officer, nancy miller, as well as jason freed, who have put in many hours and have done a tremendous job moving this item forward. let me be honest about community choice aggregation and specifically the program that is before you. i don't believe that this program will answer all the world's problems but i also don't believe it will create them. i think it is important for

us as we hear this item, hear some of the public comment that's about to take place that we put things in context. we as a board have taken a position in the last few years. in 2007 we outlined -- we passed an ordinance that set out some really ambitious objectives with respect to community choice aggregation. puc and lafco have worked diligently to meet those objectives as much as possible but we have learned certain lessons. one is the ambitious objectives first set out by the board meetings were not attainable. the program that is before you is a program i believe, and as you will see by the presentation and puc, is as good a program as we can put together. this is a phrase used by this board of supervisors

before but i believe it is a phrase that aptly fit what is we are trying to do. i hope we don't let the perfect become the enemy of the good. this is not a perfect program. this is not as ambitious as those of us pushing community choice aggregation have wanted it to be. those of us who have talked about cca in the last few years wanted to launch cca so we not only had a contract before you but at the same time we had a build-out that could be approved at the same time and move forward at the same time. what we have is a program that has evolved in the last few years with the goal of making sure we have community choice aggregation, that we do so in a way that is fiscally responsible and minimizes financial risk to city and county of san francisco. that is why we have approached this in a phase,

through phases. phase one the contract and phase two in a fiscally responsible way it is something that will happen once we have a source of income out of phase one so we can then begin the process of doing our own buildout to generate our own energy and contracts like the one before you are no longer needed. that is the objective, that is the goal. the goal is not only to make this happen. but as you will hear from the puc, you will hear from the department of the environment, the program of ccs is something that is an integral part of what the city is trying to achieve in terms of environmental objectives. i think it is fair to say, certainly my opinion and i think from those who have read the reports i think it is reasonable to see we cannot meet environmental objectives without community choice aggregation. that is why this is so

critical. this is why it is so important. the current program has the following components. it is 100% renewable. the program will offer specifically customers a 100% renewable product. it will be at a premium rate. the initial phase was carefully crafted after extensive market research that found there is a market in san francisco for this kind of product. it would be a program between 20 to 30 megawatts or 50 to 75 residential accounts with an initial contract phase of 4.5 years. i know in the budget and analyst report there is a recommendation to change contract to five years. we are certainly open to that recommendation. yes, shell energy is the supplier of this contract. i will be the first to