budget. that's correct? 1.7 million, 1.8 million. so what is overall your -- how does the d.o.e. cobble the money for rent. what are the sources? i know it is non-general fund money but -- >> the money for rent or tenant improvements? >> sorry, for tenant improvements. >> we as part of the original lease, there was $61 per square foot that hudson properties is coming. because it is a cold shell they offered $61 per square foot. >> all right. okay. then the reminder is something that -- okay. when we look at additional cost for tenant improvement allowance, what is not going to get done in the department of environment because of this? you are moving money from what sources, what programs

to this? how will you cobble together your budget in the future to -- >> that would be part of costs of operating so we will make adjustments to the grant. we will look at amortizing that over a lot of funding sources. we anticipate, because we get a lot of different grants, that the $2,000 a month amortized overall of the funding sources will be very small. so there won't be any impact on programs at the department. >> you mentioned you are required to have some lead certification in your construction and building in your furniture. where do those come from, are they actually mandates or things that you aspire to do? >> that is part of the environment code. all municipal projects as of 2011 are required to be lead gold. those are city requirements, that all are required to follow. we actually have a lead consultant, simon and

associates that guides us through the lead process and helps us figure out where we can get points while we are doing the value engineering. simon and associates i believe was one of the consultants that worked on the puc building. >> so you don't have any other scenarios where you could achieve lead gold certification with less funding, funding in hand without the tenant improvement allowance? you actually haven't modeled that at all? i think that would be because i think that would be strange if you didn't do that. >> the process is complex. you need 60 to achieve lead gold, 20 lead platinum. it is a complex system of trying to determine in an existing building what we are able to do. a lot of times new construction is much easier to achieve lead because you are not working with an existing building that. is where we have en counters some of the challenges. it is existing and mission-critical, they have operation systems that work in a certain way.

there are some things that new construction can get points for lead that we can't in an existing building. so i can assure you that we are doing everything that we can to maximize lead points while ensuring anything that does cost extra. for instance, there is an -- there are about five hvac points that we could get that would cost an additional $200,000 we are foregoing because we don't have that money. >> just wondering, something i don't quite understand, but we approve a lot of leases. don't really have approve leases and tenant allowances to achieve gold certification. has different requirements than other departments? >> no. >> why is it suddenly we have this before us today when we don't typically get for other departments? the d.o.e. has to have a high standard for showing that we are achieving legal

certification, according to our local laws, but it doesn't seem to be a situation we find with other leases we approve for the departments. why now? why -- is there something that is happening with the d.o.e. that you go the extra nine yards to get it done? not being done in other departments? seems like other departments make those decisions without asking us to do a tenant improvement allowance. i feel skeptical about making this, to approve this allowance. >> i can't speak to ore this departments. i see acting director of real estate john up dike is here to talk about other departments. what i can tell you is there was -- let me pass it to john, then i can come up. >> thank you. john updike, acting director of real estate. one thing to keep in mind is that the lead gold standard for leased premises privately owned is

relatively new. so you have seen in some cases the lead gold standard really baked into the tenant improvement allowance, so it is recent that. is probably why there isn't a great experience of dealing with that at this committee. secondly i would say in this case when financials were put together by the development design team that melanie referenced, there was some specific references to lead gold standards and pricing implications of that. that depends on the development and design team as to whether you see that as a separate line item or not. we believe it should be an integrated approach. so being a green development shouldn't have an add figure in a financial statement. in this case it did. i think we were able to

articulate that more clearly, the import of lead standard. i do want to emphasize because of the bank of america presence in the particular building at 1455 market, that has made it more challenging to effect some changes that in other buildings really haven't had to deal with because of the critical nature of their systems and their tie-ins with fire alarms and other security provisions. makes a little more difficult. this is not a typical building that you might find in other office environments. >> we are on the tenth floor -- 12th floor of this building. no other floor is going through any kind of rigorous standard to achieve its -- it is only the d.o.e. that as a lessee is going to be trying to achieve gold. >> actually for the city also the mta central control will achieve certification levels as well. that was put into that tenant improvement package.

they benefited from a pretty serious financial commitment from fta to assist that project so the funding source was different. still serious challenges. >> that same building of working with existing infrastructure of that building to achieve certification else where in the building, so it does seem to have some ability to accommodate our needs. just wondering. supervisor kim. >> this is a question for john updike as well. i know we passed that policy fairly recently. if you could jog my memory. what triggers it. if not for buildings we own or temporarily leases on privately owned property that triggers the lead gold standard. >> we did have previously application of certain lead application applied to city owned buildings. you are correct. this new regulation both really i think it is fair

to say increased the requirements across the board and included leased premises. that is new and something fairly unique to san francisco. i think we are seeing other municipalities follow that lead. no pun intended. >> to lease renewals trigger that as well? >> no, a lease renewal would not be classified as a project unless it has a significant tenant improvement that required work there are certain triggers built in. >> for example we have seen several lease renews for human services agency, for example. their offices are incredibly old. in those cases they wouldn't qualify or the policy would not trigger for them. >> that's correct. unless we are making a substantial improvement that qualifies it as a project and kick it up to lead gold certification requirement. >> with bay shore lease with mta, is that going to

trigger the lead gold policy? >> it would, yes. >> i don't remember seeing cost of that incorporated. is that something they will have other sources of funding for? >> just an underlying assumption of the project, which is the approach we'd like to take. an integrated approach to delivering the project. >> that is good to know. i think it would be good, since you bring all the leases before us, to articulate that as part of the costs so we have a better understanding. i think ovener it is a good policy. i appreciate it. i want an idea of the cost. i'm not saying it is not a good way to invest city funds in the way of good environmental policies but i want a sense of the larger impact of that throughout the city, thank you. >> mr. chairman. >> mr. chairman, members of

the committee. a clarification. page five of our report, table 3, we show the improvements -- the funding for the tenant improvements the department has identified we list 1,502,571 as the landlord's contribution to tenant improvements. just to clarify that language. i know the supervisors know that is paid for by the city through repayment to the landlord in rent. so it is really city money that the improves are $1,000,0007 and advancing that so it is not as though the landlord is giving that to the city. the city is paying for it. so the city pays all the tenant improvements. >> is that what the 8% rent as well?

8% as well? >> this is not borrowed money. there is no interest on this 1.5. it is built into the cost and amortized over the period of the lease. >> was that built into the original is this >> it was. the supervisors have approved that. i just wanted to point that out that it is not -- we list it as a landlord contribution. it is an advance and paid for -- >> those were specifically contemplated in the lease that was approve bid the landlord? >> somewhere in the area actually over $2 million. as ms. nutter stated that was reduced, was contemplated in the original lease, yes. >> seems like mr. updike has a response. >> so most leases come with

some level of tenant improvement provided by the landlord. it is a give-and-take between the amount of improvement provided by them, which isn't really repaid directly. mr. rose is correct. it is paid indirectly through the rental that you pay for the space. you are also negotiating a rental rate at the same time you are negotiating the tenant improvement allowance. i would like to remind the committee we have a rental rate of $28 per square foot. if we were to reapproach the owner, sort of take the last year off the books and start fresh and approach them for the space, we would likely be looking at something closer to $38 per square foot for a base rental rate with a similar tenant improvement allowance. that gives you a sense of how the market dynamic has changed. that is a significant change in rate. we believe we have a fair and reasonable allowance provided. what i think is frankly below market base lease

rate. >> just reminder, what is the condition of this office space as we are negotiations? what is the condition of it in terms of being ready for use? >> cold shell. concrete. bare walls. needs all improvements. as all parties acknowledged when selected. >> a big portion is making it usable, habitable. thank you. why don't we open this up for public comment. members of the public who like to comment, please come forward. >> good afternoon, budget and finance committee. city and department of environment.

just listening to the comments from the project sponsor in item number three it says authorizing additional allowance up to $10 per rentable square foot. then i noticed the sponsor was talking about 550. the there seems to be discrepancy the way this was written and sponsor is talking about. sponsor is talking about 550 per rentable square foot. this is reading $10 per rentable square foot. could somebody please explain the discrepancy. does the 5.50 equal the additional amount of $3,809.27, or is that the calculation with 5.50 as the additional allowance?

i understand that it is a great deal if the city gets it less than $30 because the director of real estate says it would be $30 without the allowance right now. if we get it for $20 and add just the five, then it seems like a good deal. but if you get it for the $10 it doesn't seem like a good deal. could somebody please clarify exactly how much this increases rentable allowance? $10 or $5.50. >> okay. if there are no other members of the public, close public comment. item four. >> i'm not super-excited because of the dollar amount i think we should pass it up with no recommendation. i would like to get clarification on the

actually budget if someone could e-mail that, that would be great so i can make a decision before tuesday. >> we have a motion to move forward without recommendation. >> proposed amendments? >> sure. supervisor elsbernd to move amendments and send forth without recommendation and take that up without objection. okay. could we call i think it is puc items, all related. at the same time. >> item four, hearing to receive update from puc on water system improvement to include information on projects completed to date, corresponding cost of upcoming projects and scheduling corresponding

for upcoming projects. five, release or reserve funds in amount of $62,253,692 to fund the following water system improvement projects. the project management, cuw395 program reserve, san joaquin pipeline system, new irvington tunnel. vegetation restoration of wsip construction sites and program management. item six, resolution adopting finding under the california environmental quality act including adoption of mitigated monitoring and reporting program and statement of overriding considerations related to the san antonio backup pipeline project and directing clerk of the board and supervisors to notify controller of this action. >> thank you, mr. clerk. we have with us julie lavante from puc. >> good morning, supervisor and mr. clerk. if you wouldn't mind

connecting computer. we have three items that relates to water system improvement program. first i would like to give a brief status update on how we are making progress to seismickly retrofit our water system. this is a slide you have seen before where we show the overall status of our 81 projects as of the end of september. the figures in parentheses are number in each phase. also shown is total value. we have five projects i have yet to reach construction. two are in what we call bid and award so only a few months from moving into construction. as with the past several quarters, the main focus has been to construction. we have 18 projects worth nearly 2.6 billion currently active in that phase. to date we have completed 58 of our 81 projects. now i last updated you in march of this year.

since then we is made sitting progress as indicated by the accomplishments shown here. we have issued notice to proceed on six construction contracts including the contracts for the seismic upgrade of beta vision pipeline 3 and 4, one of our most critical seismic reliability projects. last month we were joined by supervisor elsbernd on the last project to be built within the city of san francisco. that is the upgrade of sutro reservoir. we since march reached completion on four projects, including a very critical pipeline segment of the new lifeline that is being built under the -- around the bay to ensure water following a major earthquake.

we also reach final completion on five projects, including seismic retro project in east bay and dam project on the peninsula. i think there is no question that our system is much more seismically reliable since i last updated you last march. we have been able to complete 23 system shut-downs. the reason that is critical is we need to shut down our system 170 times or so to be able to accommodate all the construction work. that is, by far, our most risky work. so far the projects have yet to be delayed because of an unsuccessful shut-down, so we are very proud of that. also a lot of emphasis on safety. maintaining a safe working environment. with so much work going on, so far we have logged in 4.2 million hours of work with our labor and our

safety incidents are less than half industry average. we will show you a few photos of key projects as part of the program. we are updating both treatment plants. >> could i just ask what is the industry average? >> there are calculations based on the number. i could give you the statistic, tell you the truth. like lost time incidents. i don't have the numbers on top of my head. let's say 1.5 industry average, ours is 5.6. it is complicated and to me doesn't make much sense with how they come up with these stats but nonetheless we like to compare ourselvess with industry average. the number of incidents in general for amount of work taking place is really, really good. we have very, very few incidents. 1.5 per what? >> could you actually look -- we could -- why don't i provide that to you in an e-mail and explain the

statistics. >> that would be good. it would be good if you can say this amount of workplace injuries and it would be great. >> we have received major national award last month for those. it would be my pleasure to forward that to all three of you. >> okay, great. >> on our two treatment plants, we are making good progress as well. on the peninsula we have the harry tracy treatment plant where we are building a brew large 11 million gallon treated water reservoirs, as well as five new filters. over there we are 23% complete. we anticipate the completion rate to rise significantly, as we are ramping up activities. in the east bay we are much more further along, 85% complete and anticipate substantial completion in march 2013.

irvington tunnel is very challenging project where we have en counters challenging ground condition presence of large quantities of ground water. hazardous gas. despite all that the contractor has been making very good production rates. we have actually excavated two-thirds of the 3.5 mile tunnel so far. we achieve what we call hold-through in one segment of the tunnel in june where miners coming from two directions met. that was exciting. in june we will have crews working 24/7 for two months to complete the connection between the new tunnel to existing pipelines. over there we are 63% complete. the other very exciting project that we have is a five-mile tunnel under san francisco bay. we are nearing 70% completion. the tunnel-boring machine left the west bay over a

year ago. now we are four miles into the bay. we are currently under the south ponds in newark. we have been making great production rates ahead of schedule there. so we are very pleased and on track to complete this entire project by 2015. now we have en counters some environmental challenges in the field. one of the most common problems is when you have creatures basically making their way to our construction sites. a good example is on our san joaquin pipeline system where we have bird nesting along the alignment. the photo on the left is the chicks from the nest that were actually removed from that project site. in all cases we work closely with environmental agencies to make sure we do protect all these species that are discovered during construction. in addition to responding

to these unexpected environmental challenges, we also pro actively are mitigating all the environmental impacts on our project. we are doing that not only at the construction site but building off-site mitigation projects. this is one where we are creating new creek habitats in the san antonio creek. now we knew all along the calaveras dam project would be the most challenging project. back in june we discovered unexpected surface condition on the slope above the left abutment of the new dam. that is referred to as observation hill there on the slide. we perform extensive exploratory work all summer to better characterize those features. it was concluded that we have multiple ancient landslides on that hillside, as well as the location of an existing

known fault was actually shown incorrectly based on the preliminary data that we had. this has caused some instability on that slope. as a result, our record -- engineer of record, u.s. corporation, recommended we take out a lot more observation hill. we are basically bringing the hill down to a much flatter slope, resulting in an additional three million cubic yards of material having to be excavated and disposed of. though we won't get a formal proposal from the contractors on the cost and schedule impacts of those challenges, we know they will be very significant. originally we placed the cost impact at about $60 million and schedule impact of a year. now we have received new

information that shows those impacts will be greater. we have been working with a contractor on trying to mitigate the schedule impacts, which costs a lot of the additional costs. what we are trying to do is balance scheduled costs and risks. we have committed to going back to our commission with cost and schedule update november 13th. we will do that and keep you appraised as well as where we stand on that. this concludes my program update. i have a few slides summarizing the two action items before you today. in the first item we are seeking your approval for the release of 34.9 million that is currently on reserve with this committee. and 27 million from program reserve to six projects. in a previous appropriation

board put on reserve funding for program management that was after june of this year. now we have reached and are past june we need these funds in order to complete the program and shown on this slide are some of the program management services that are being covered by that funding. in late 2011 the board of supervisors approved the creation of a wsip program management reserve, where we could set aside some of the savings at the project level. we had initial balance in that reserve of $144.5 million. that was put on reserve with this committee. recently our commission approved the increase in budget for six projects, as shown here on this slide. what we are doing today is seeking your approval for reallocating a total of 27.4 million from our

program reserve to the individual projects. i think the budget analyst did an excellent job at summarizing the need for these. that sin included in the attachment to the analyst's report. before i move to the last slide, i want to summarize where we stand budgetwise on the program. if you are to approve the second item i mentioned, the reallocation of funds to the sixth project we will have $117 million remaining in the wsip reserves. at this time we feel comfortable staying we are still forecasting the completion of the program to be under the approved budget. however, we need to keep in mind here these major challenges with caladeras i talked about. in early 2013 or 14 we will need to come before you to seek funding for that additional project that we