approving revision to america's cup disposition and authorize procurement of insurance. >> thank you very much. for this item we do have mike martin. before that i just want to explain there's also an amendment that i would be asking the committee to entertain. the copy has been put before us. they are non substantive so they would not require a continuance but are fairly simple. on page six and seven, just specifies or clarifies online 13 changes definition of force ma joer * as to the provisions in security and 4.3 are hereby approved to provide clarifying language. on the page 6 also on lines 23 through 25, and on page seven lines one. simply adds additional language with regards to the type of reporting that is required. just clarifying that the

port director, as well as the project managers report any operating expenditures including draws upon cash collateral and specifies the fundraising does not appear to be on track to cover the city's cost operating expenses, that they work to provide a proposal for us to see cost savings measures to offset the shortfall. that is what i would ask the committee to consider. from what i understand these were provided to the budget analyst so the report reflects knowing these are part of what will be considered today. so that is it. generally this is a fairly simple resolution, though i think there may be o ther questions related. it is a resolution that approves revisions to the lease disposition agreement. changes definition of the force ma injury * if you pronounce it like that, disputes project delays not

subject to liquidated damages. it is my understanding there is procurement for delays due to weather and fire but not to labor disputes because that is not something available through insurance products. i think that is primarily because i think insurance companies believe labor disputes are things that the project sponsors have the ability to control for. so there is no insurance product for that. it also authorizes procurement of insurance policy worth about $1 million. of course it specifies the progress reports required from the ac project director, america's cup project director and port director. specifically quarterly reporting to the controller's office but also to the budget and finance committee of the board of supervisors of the acoc fundraising, then transfer infrastructure expenses in preparation for the event. city operating including draws on cash collateral and if acoc doesn't appear to be on track, raise sufficient payment for expenses, to provide

proposalals on expense reductions in order to offset shortfalls. these are primarily gist of what the changes would be in this resolution. i know mike is here to provide a presentation so if i could ask you to come on up. >> good morning, mike martin, i'm the america's cup project manager in office of workforce development. just had a few slides to do a brief overview of the item. i think the budget analyst has done a great job of summarizing a complex issue but i will try to distill a couple points. go through the time line. talk about structure of the new security proposal and talk about where acoc is in their fundraising.

just to start with the time line, in december of 2010 the city was selected as the host city and executed the host and venue agreement. the key provision in the agreement that sort of gave rise to the conversation we are having is requirement that acoc procure a security instrument in amount of $32 million to secure the city's performance of its obligations under the agreement, as well as acocs. as we reported to you in march when we cam forward for the approval of the america's cup items, we had looked closely at this $32 instrument requirement and saw the city's obligations and the acoc's obligation were so widespread from delivery of construction projects to fundraising and corporate sponsorships to actually delivering city services during the events that we were going to need to satisfy this requirement through a mix of

instruments. two of the instruments we reported out were a cash collateral escrow fund to pay for services that wouldn't necessarily be insurable on the public markets and also provide a deductible for any insurance policy that would be available to secure the other pieces of the obligation. so we moved from -- that included a delegation of authority with specific parameters so that people like the risk management office, the controller, director of the port would have specific finding to make before they could approve moving ahead with the lda. the disposition agreement. over the course of march through august we worked hard to negotiate the various provisions under the delegation received from the board. as we continue to engage with the insurance markets i think what chair chu mentioned earlier became clear certain aspects of the things is key to insure were not available in public insurance markets. in addition to those dialogues i think we also

understood that structurally getting insurance for contract as ours, fairly unique, would be a manuscript policy, a cut from whole cloth insurance instrument and have to be structured to basically secure what our contractual obligations and the penalties would be. alongside this i think we continue to refine the project plans and other things that moved forward in terms of planning out how 3032 appears would be used for team bases in 2012 as opposed to 2013. fire damage at pier 29 and other pieces worked into our work on the insurance product. we really tried to taylor that insurance product to the construction deliveries, because that was the most i think cost-effective use of that instrument and used the escrow account to basically fill in around that. i think those were productive because the event authority called out a few things that were very

important to them in really realizing the vision for the america's cup village at piers 27 and 29. i think the fire damage at 29 made fire a key issue. unusually severe weather and strikes, as mentioned earlier, were the three key issues that were excused under the original approved lda but that the event authorities thought were hugely important to their proposal. so we negotiated with them and said, look, because the lda was approved with these excuses we will have to go back and get approval from the board to change that but in return let's negotiate a targeted sort of security provisions that. is what we are presenting to you today. we signed the lda in august to basically set up all the other contractual relationships in time for the events but set out this needs to come back to the board for approval as something that needs to happen after that signing that would authorize these pieces. as noted in the budget analyst report and in the resolution, failure to approve these would give the authority the right to

terminate. what we would like is work through the issues and hopefully move ahead with an approval. the structure of the security is well laid out in the budget analyst report, as i mentioned. the primary pieces are twofold. first is amend excuses under force ma injury * as required, which requires subsequent board approval. we structured the potential security under this agreement to actually total amount of $9.8 million, down from the $32 million called out in the original host agreement. this is basically in what i would call three buckets. the first is a $2.4 million deposit as of january into a cash collateral account. the primary use would be to make sure construction deliveries of facilities to be used by america's cup can happen on time or we can find replacement space. we are looking closely. right now we are on time

and on budget. if we fall off we hopefully look for ways to accelerate to avoid further damages and really, you know, give the time needed to develop these areas for the uses that we are going to use them for. the second bucket is a new listing of up to five million in liquidated damages. this is a per day amount that starts march first at one and increases over time, reflective of the increased damage to the america's cup village and having to delay getting things up and going. the $5 million exposure, as noted in the resolution is something we proposed through help of risk management to address through procurement of insurance policy that covers a wide range of things not covered by traditional builder's risk policy and liquidated damages, including the two new force ma injury * that are no longer excuses, fire and weather. as noted before insurance isn't available for strikes against the project but we feel that is unlikely.

like the schedule, we will keep a very close eye on that. the third bucket of security is the potential replenishment of $2.4 million cash collateral. that is only if we depleted to deliver construction projects and then have to go and replenish it. that amount is supposed to be on deposit starting in july of next year and really is focused on delivery of city services. buses on the street, cops and emergency personnel on the street, a way that matches up with the need created by the influx of visitors and spectators. so our intention is to obviously manage without having to access this account. this becomes a backstop for those city costs should that be necessary. we have a funding source if it becomes an emerging situation. as noted in the budget analyst report, these security instruments, both insurance and also the cash collateral would be -- we propose them to be funded by the city through the existing appropriation and

repaid through reimbursement relationship. we recognize the quarterly reimbursement with acoc, but obviously we want to give sort of a snapshot of where we are now. a lot of the facts on this slide are in the budget analyst report butly run through them quickly. approximately $13 million in seats and pledges. acoc paid 6 million to city to reimburse our fiscal year 2011-12 costs. they have cash on hand and 2.2 in pledges beyond that that would be receivable through january 2014, which is sort of the end of their event fundraising window. i think what we are seeing -- what we saw in august was obviously an uptick in interest in terms of having this waterfront event. i think acoc did a terrific job to capitalize on that, bringing in forces to know what the cup is. a lot of things we have

done to improve the event, from sustainability plan to beginnings of youth involvement. we had a good youth day we'd like to improve on, going into next year. the other things i think make this a san francisco event that we can be proud of. they had $350 donors at the event august 23rd, hoping to reach a similar number of donors through a variety of different ways during this october's fleet week/america's cup sort of waterfront celebration. acoc is expanding beyond philanthropic to look at foundations. they have secured gifts from the san francisco foundation, along with a couple others. the steven bechtel is another. they are opening to local corporations, which may not be candidates for sort of the global sponsorship level of america's cup corporate partnership but would like to be good civic partners and a potential for us to engage and hopefully find additional financial support.

based on the philanthropic piece, the most developed, the acoc is projecting -- it has $10 million outstanding, projecting another $5 million with target in 5 million new gifts, conservatively 3 million would be a good outcome, dove tailing with the costs for the first half of this year. they are looking at year end of giving to be key. obviously that is the time when they do a lot of giving. hopefully the dove tail, followed by good followup will result in realization of more funds over the course of the next three months that. is my prepared remarks but i'm happy to answer questions about any of that. >> thank you. why don't we go to the budget analyst report. >> good morning, chair chu, members of the committee. as we say on page five of our report. i won't repeat too much of it. mr. martin had to say.

is that this revised da, the one thing it does is transfers responsibility for obtaining the security from the acoc to the city. he spelled out the exposure of the city there would be in terms of cash 2.4 million dollars that would need to be put into the cash collateral or escrow immediately that may or may not be used. also another $1 million the city would have to come up with in terms of paying the premium on the $5 million insurance policy that the organizing committee will obtain. these are in the budget, are general fund moneys and reimbursable by america's cup organizing committee. if the cash collateral were to be drawn down in case the city couldn't meet its obligations or if there were additional funds, the additional 2.4 million during the event, those moneys are supposed to be reimbursable by the

america's cup organizing committee. but as we said in our earlier report in march the availability of those funds is not certain. there was a discussion of fundraising. it is short of the $32 million that was originally considered. the city's been paid in full through june. we don't know about the august payments, so we do consider this to be a policy matter for the board because of the uptick in the funds. >> thank you. supervisor avalos? >> thank you, just followups for the budget analyst or mr. martin, but that is really on -- what we are anticipating as a city in terms of how -- what our appropriation from oewd for -- we are anticipating we would have 2.4 for cash collateral and another one million plus for insurance or is this a new expenditure that we hadn't anticipated? >> supervisor, i will take

a first shot at answering that and go from there. we anticipated the cost for security when we came before you in march n. the current appropriation we feel there is capacity to make these payments as required, as proposed in the resolution. we are not looking for new authority but strictly folding it in with what's already been reviewed. >> so then when we had made the appropriation for the office of economic workforce development was there an actually line item that referred to these expenditures and others? >> there was not a specific line item that said cash collateral and security. it was appropriated as a $10 million amount broadly for event purposes. >> is there any risk of something else not being covered by this expenditure being done? have we over extended, you know, how this $10 million will be used and looking at future trade-offs that we will have to adjust in budget committee down the line?

>> i don't believe so. we went through sort of a forward budgeting exercise in reviewing this with the risk manager and controller's office to understand how this looks going forward. we see certainly that costs of not only finishing the planning of the event but also putting on the august events were lower than we projected. think we did a conservative job and it is coming in below. i guess i would express confidence on that side but provisions chair chu mention about coming back with reports on cost-saving measures on a quarterly basis is a way to keep on top of this going forward. >> just kind of related to what we have before us, more general to the america's cup, what have we been able to learn from the events that happened last month and what we expect relative to what will happen next month and next year? do we have a sense that we are successful in terms of

attendance? do we have any measurements of economic activity that we earlier had projected? what do we have for any kind of data related to that? >> it is interesting. so back when the original economic projections were done back in 2010 that had the much ballyhooed one million number of jobs, et cetera, it did not take into account 2012 america's cup world series events. those weren't in part of their analysis. what we have done, i think, is used august to give sort of a baseline of what, quote unquote, normal day or normal week of next year would look like. i think we really were pretty pleased we got a lot of constructive comments but it wasn't a great deal of complaints. i don't think services in the marina were overwhelmed, muni performed well. we can do better like community augments so there are operational things we want to improve on and test out in october.

we have anecdotal evidence of certainly neighborhoods, commercial districts, starting with the waterfront ones having increased interest. we don't see sort of upticks in hotel bookings for august. at least in our sort of unscientific sampling. i think part of that is what we will look like next year, august, september and july are the big tourist areas anyway. >> it is hard to measure who came specifically for america's cup year over year. hotel occupancy rates seem to be similar. >> right. for that sector we will have to do thinking about how we measure that. do we do surveys, try to find ways to count people year over year. i mean we want to be able to assign with some specificity this was an america's cup benefit. we have been talking to the organizing committee as part of what they are putting together to get an economic study that looks at what is happening during the events.

because i think it is -- i think difficult as we are finding to take a snapshot in hindsight how many were there and what did they spend on. we need to be ahead of doing visitor accounts, surveys of neighborhood groups to see how -- i think also sort of informs our strategies. we will survey a neighborhood, we want to figure out a way that there is a specific strategy to get them involved in the event benefits and that sort of thing. i wouldn't say there is a number kicking out of august and october of this year. but what i would say is, you know, i think we feel comfortable with spectator estimates that the event authority has put together from their aerial photography, about 150,000 over the course of the august events. i think there's really no chance of us being able to aggregate america's cup visitors fleet week or decompression or visitors during the weekend of october 6th and 7th, so i think we will probably not be able to see what that bump was. what we are going to get out of october is the strategic understanding of white -- what it means to

have that number of people moving around the waterfront and do the muni work. does the closing of embarkadero work for bikes and pedestrians? does that work or create problems. i think that is the experience we are looking at in october. together i think we would like to then refine our plans for next year, assign sort of better planning for low days versus high interest days for next year. do budgeting and our economic sort of scientific analysis based on that and come together with a policy dialogue that really verifies and validates the policy decision in moving ahead with the events. >> do we have other indicators we can look at in terms of city spending, overtime, quantifying how buses have been used as well? is some of that going to be gathered together? >> certainly different pieces have different things. we had good stats on the ridership on the different

muni augments, the e line, the light rail line on the embarkadero was a huge sort of spectator hit. probably hit for the neighborhood too. that is where a lot of the ridership went, which was interesting. that isn't necessarily the center of attention for the america's cup world series event, toward the northern part of the city. i think we are using that kind of analysis, sort of august to october, to make sure we are better sort of deploying our resources. i think august probably didn't tell us a ton about overtime usage for big days next year. i think october, we are in good dialogue with fleet week and folks that run these events to see if how america's cup changes them, if some of the plans make those things work better. i think that is the dialogue we want to have before and after october and we started on that. >> we did use overtime for different departments, mta,

police, dpw and that over time is a cost is occurring, that is getting reimbursed by the organizing committee. >> that's correct. that is coming out of the budget appropriation through an innerdepartmental process. we turn to the mou and say these are the costs we have paid, reimburse us for these. what we have asked departments do is show us effectively their net new is relating to america's cup events relating to things you described, supervisor. using that as a way to sort of review that budgetary ask and seek reimbursement. >> we have been reimbursed. >> correct, through june 30th. the next quarter under the mou we actually to the end of october. we wanted to capture the costs. we will likely do a roundup of those and in working with the controller's office issue a

reimbursement request. >> okay, thank you. >> thank you, supervisor. supervisor kim. >> thank you. i appreciate supervisor avalos's question. i had a quick follow up. by the way, i appreciate the work put into place after our last hearing on america's cup to ensure we were getting reimbursed through privately driven fundraising for this event so we can take on the event without necessarily incuring the cost, as supervisor avalos brought up. you mentioned it is difficult to discern between fleet week and america's cup and strictly bluegrass. how would we calculate additional costs for police, fire, other infrastructure when we have multiple events going on that weekend? >> i think the aggregation from my perspective was around the spectators, what they are doing. i think in terms of america's cup proposition, if what america's cup is

doing is requiring new efforts beyond what would be provided for fleet week, that is what we want to see in our being. for example america's cup will do some activating on marina green. awe we know fleet week has the bulk of the main park. so to the extent there are rec park costs for overseeing that build or, you know, other security things we have to stretch down, one other thing we are doing is bicycle valet. not something fleet week has done in the past but something we have in the america cup people plan. that is something we are expecting our budget to pay for, not fleet week. it is things different and kind from what people understood. those are ones we want to come to us. >> i apologize that i don't actually know this but has fleet week usually taken place with strictly bluegrass festival? >> my understanding is this was a this year thing. that generally doesn't get scheduled together. but there being so few weekends in this time of

year, i think everyone tries to pile as many of their great events in as they can. >> okay. thank you very much. why don't we open this for public comment. are there members of the public who wish to speak? seeing none, comment is closed. we have this item before us, the amendment on the whole i spoke of earlier. do we have a motion to accept that amendment of the whole? we will do that without objection. to the underlying item. do we have a motion to send that forward? we will do that without objection. thank you. any other items before us? >> no, no further matters. >> okay, we are adjourned.