allows us to remain on the premises until may of 2015. so the one agreement, that has us exiting, would call for an early exit by no later than february 4, 2013. in consideration for that early exit, we've negotiated a payment to cover the cost of the move itself, as well as the increased cost of occupancy because rental rates have increased since we struck the agreement at 875 stevenson. so that's sort of where we're at, and why we're leaving. the other question is where we're going. so we have, at 875 stevenson street our repromail operations, treasurer tax collector, assessor, recorder, business property division, department of public works, bureau of street use and mapping, human

resources, department of public works and general services agency, as well as city attorney's office claims division. all within the footprint of 875 stevenson. the majority of those folks would move to one location, 1155 market street where we have negotiated a new lease. 1155 market street was the headquarters location of the sf puc. so you may recall they occupied both that building and the building next door at 1145 market street. so there's no confusion i'll refer to 1155 as the headquarters location. that building is owned by the lors corporation although you see the agreement is with a limited liability company that is a subsidiary of lors corporation recently purchased within the last two years. we've negotiated what we think is a favorable agreement that is of a term of 10 years at 1155 market street.

we do have the right to exit after five years, or after 92 months. so we have two opportunities to decide if there is a better location, or part of a greater plan to consolidate services, we have those exit opportunities from 1155 market street. the initial lease rate is $31.67 a square feet. that jumps in the second year to 39.14 a square foot and then 3% increases per year. the reason for the big jump between year one and year two is that year one is included a few months of what's considered free rent, and the ownership preferred to simply blend that benefit over the term of the first year. included with that rate is a tenant improvement allowance of $25 a square foot and then

ability to amortize or pay for over time a 35 dollar square foot tenant improvement allowance over the initial 10 year term. the second entry agreement to cover the relocation of repromail which was sought to be an inappropriate use at the office building of is 155 market we were fortunate enough to find a location at the intersection of 12th street and south van ness, 110 12th street also has an address of van ness. it would be single use, a little over 10,000 square feet in size. we believe it's ideally situated to service our repromail operations, has a small parking area/yard and ability for adequate loading and very approximate access to the civic center which is the main client base for repromail operations. that particular lease is a 10

year lease as well, with an exit any time after five years. so we have a continual right to exit the property after the fifth year. the initial rate there is $30.95 a square foot per year. that increases 4% per year. the last one let me speak to briefly the exit from 875 stevenson street, the terms of that agreement are that the city completely vacate the premises by no later than february 4, 2013. which we are primed to do. if we accomplish that successfully, we will receive payment, over all, two different payments but a sum of 3,250,000. so that's the consideration for the early exit. there is some fairly intense calculations in your board package that shows that that compensation adequately covers our physical cost to move.

it covers cubicle refinishing, new cubicle acquisitions were necessary although we're pretty much moving around our exiting furniture. we're trying to make this a green efficient relocation. and covers most importantly the differential in the rent. for the rest of this fiscal year and the full term of next fiscal year. so the budget impact of this move is deferred to fiscal year 14-15. that's somewhat consistent with what we would have faced if we hadn't done this agreement. so but for this agreement we would remain at 875 stevenson street, where we do not have a renewal option, and in mai of 2015 we would have had to have found a location to move to. so we knew this day was coming. this accelerates that day but it brings to the table a fiscal partner to help ease the fiscal impact of the move.

we speak to timing. so the reason this is before you, the nature that it is, as opposed to the normal course of a budget analyst review, budget and finance committee hearing, and then to the full board which frankly would have been my preference, is that we were squeezed, really, on both ends. so we had the ownership of 875 stevenson being very clear to us that that exit date of february 4 was firm, there was no negotiating that. once we negotiated the date we had, there was no extension possible. and there is a fiscal penalty for every day delay of our exit in this agreement. we will receive less money from shornstein for every day of delay. so if we leave on february 5, that will cost the city $10,000 in reduced revenue from that $3.25 million. it's $10,000 a day for the first

week, $20,000 a day for every week thereafter. so clearly there is motivation for us to be timely in our exit. secondly, on the entry, there's only so many days between now and february 4, plus we have -- the worst time of the year to put this all together, during the holiday season. so when the construction schedule was coming together, many of these things working in parallel, we found that, because of the one week window next week, where we do not have a board meeting, that one week was absolutely critical from a standpoint of ordering furniture and other expenses that the landlord will front as is typical in a landlord-tenant agreement. the landlord will front money on an executed lease, but not on a non-executed lease. so reasonably so, we needed to get this item to this board to

see the lease approved before further expenditures would be made by the landlord on our behalf, or really on their behalf in order to secure us as a tenant. so i hope that helps give a little perspective as to the timing. certainly happy to answer any questions you may have about any one of these three agreements. thank you for your time in allowing this process to go as it has. >> president chiu: colleagues, any questions to department staff? supervisor kim. >> supervisor kim: thank you. i had one quick question. this is the second time i've seen, in the lease, us using kind of a landlord advances to front the tenant improvements at an 8% enterrate. being that we're seeing this over and over again i think several of my colleagues has said this is very high if we do choose to participate, and this came up with the department of environment. i was wondering if the department of real estate is thinking in the future, if there are other ways that we can borrow money for these tenant

improvements at a lower interest rate. >> well, that's a very good question, and it's timely. because we are seeing this more and more frequently. and the reason we're seeing it more frequently is that the market is changing and there is less of an allowance provided by landlord than there was when the market was softer. so as this market continues to heat up there is less advantage to a tenant. and because of that, then we have to amortize our improvement costs. the challenge we have is each one of these individual deals is have fairly small so we're not talking about a large sum of money which we would normally think of in terms of a certificate of participation, or other fiscal mechanism we might have to borrow funds at very competitive rates. so we're in a market just like any other tenant is in the market. and what landlords will charge is in this 8% range. we do our best to negotiate something lower but that's where

the market stands. i've talked to -- about this concept of could we find a different mechanism to self-finance improvements. we have found where new york city did accomplish that, but it's on a much grander scale. so if there is the possibility perhaps to bundle properties, that might get us enough heft of what we want in debt, and perhaps get a decent return but for small agreements it's very difficult to do anything other than what we're presenting to you at this 8% rate. we are -- i do want to make mention though that our rough order of magnitude budget at this point has us considerably below what our availability of funds is at 35 a square foot, we're probably 80% of that and we're seeing already value engineering opportunities where that number will only go lower. but in abundance of caution we're providing you numbers that assume full amortization of the

entire 35 a square foot. >> president chiu: supervisor campos. >> supervisor campos: thank you, mr. president. thank you for your presentation. just a quick question, just an informational question. there is a way to keep track of how much the city is spending on these kinds of improvements, collectively? i don't know how many of these deals we have, where we're actually, you know, paying or borrowing the money at this interest rate. but to the extent that the individual agreement, you know, is de minimus in terms of the amount, it might be useful to just keep track so that we at least can consider different ways of dealing with them collectively. >> that's an excellent idea. i'm sure we can work with the controller's office to put together a working matrix as we go forward. >> president chiu: any

additional question to city staff? thank you very much. let me ask if there are members of the public that wish to speak on this item. seeing none, public comment on this item is closed. and colleagues, unless there is further discussion, this hearing has been held, and i will close it and file it. and we have in front of us items 9, 10, 11. why don't we -- unless there are additional comments, let's take the items in order. madam clerk, could you call the roll on item 9. >> the clerk: supervisor cohen, aye. supervisor elsbernd, aye. supervisor ferrell, aye. supervisor kim, aye. supervisor mar, aye. supervisor olague, aye. supervisor wiener, aye. supervisor avalos, aye. supervisor campos, aye. president chiu, aye. supervisor chu, aye. there are 11 ayes. >> president chiu: the resolution is adopted. item 10.

>> clerk calvillo: item 10, supervisor cohen -- >> president chiu: why don't we do this same house, same call. without objection this resolution is adopted. item 11, same house, same call. without objection this item is adopted. madam clerk, could you please read the in memories. >> clerk calvillo: today's meeting will be adjourned in memory of the following individual, on behalf of supervisor carmen chu for the late esther -- >> president chiu: any more business in front of the body? >> clerk calvillo: that concludes our business for today. >> president chiu: thank you, ladies and gentlemen. this meath i -- meeting is adjourned.

>> so nicely here, and very happy that all of you could come out and join us, you know, on this evening. my namey. the director of the night rover challenge. i'm going to kind of be the moderator for tonight, as we go through this first-ever challenge america summit. so i've got just a few things that, you know, i wanted to do with everyone, before we get into the program. first of all, i just want to take a minute and have everyone just look around this room. in this room, we have amazing people that are corporate, nonprofit, and government, all focused on challenge driven innovation in some way or another. this is a really powerful,interf

people that are gathered here to look at how competitions can drive innovation. that's what tonight is all about, is, you know, the next step in creating a real wave of innovation. my job tonight is just to give you a little bit of background on what we are, what we're tiqp)q)s that we have.roup of so just to get going with that, i want to tell you a little bit about this thing called the night rover/< challenge. this is a collaboration between the clean tech open, unoodle, and nasa. it's a program from nasa's office of centennial challenges. and it's challengin the best innovators in america to create radical new energy storage technology. you know, way above what we have now. this is something very powerful, to be able to keep rovers going on the moon, in mars, things that could be useful, in your cell

electric vehicles, something that just is a radical leap in new technology. but i don't want to go into a lot of detail on that. you'll hear more about nasa's efforts later. and what i'm going to do1r is ge a little more background on challenge-driven innovation. and i'm going to do that just by plaijerrizing some people because it makes it a loteasier for me. i want to look at this quote, prize is a very old -- an old idea that is surprisingly powerful in our modern society. this is by a study that by mckenzie and company, back in 2010. prize is a very old idea, very powerful in our modern society. surprisingly powerful in our modern society. mckenzie also said this, 32,000, in 2010, there were 32,000no competitions, competitions, prizes, awards. that's a big number.

it could be bigger but it's a big number, for one year, 32,000 competitions happened. to continue on in myk mckenzie also said this, while tens of thousands of prizes and awards are give out every year, we've been struck by the lack of conferences or professional associations to share best practices and facilitate collaboration. now there's some kind of relationship between what doing here today, and that. i don't know exactly what it is, but hopefully by the end of tonight and tomorrow, we can start j we're doing here, can really start toqphp having an organization, or, you know, somethingd exactly what mckenzie is saying is missing. so this just brings me to myó last question. and it's why are we here. here inca this room. that's just one side of it.

i'm not talking about why we're here in som galactic cosmic sense of theá@ word. what i'm talking about is a more important part of that question. i am missing a slide in there. so the important part of that question was why are we here in san francisco. and we're here in san francisco because san francisco is one of the most innovative cities in the galaxy, and it's a very great place to be the home of the challenge america summit, the first-ever challenge america summit. so it's now my job to introduce our first speaker of the night, who is going to officially kick off the first-ever challenge america summit, somebody who has been verylfe instrumental in creating a movement around innovation in san francisco. just a few months ago, announced

october as innovation month inla whole lot of work on, you know, creating a@g real ecosystem for entrepreneurs, for governments, for everybody to create new ideas and new innovations. please join me in welcoming mayor ed lee to the floor. >> [applause.] >> thank you. thank you, josh. welcome, everybody. now that i know where i'm at, i want to welcome all of you, i want to of course thank the night challenge -- night rover challenge, nasa, of course, for being here. i also want to thank s.p.u.r. again for hosting it. you know, when i started working with s.p.u.r. many years ago, i knew they were a spacey people. didn't realize it would ultimately end like this. wanted to thank s.p.u.r. because they really have always been host for so many of our great

ideas of how to do better planning in the city. i also want to thank -- i know jennifer is here as well -- i told you when i first met you, i love your title, director of prizes? are you kidding? of course she has the longer title, but i thought that when bevan dufty and i were creating the director of hope in san francisco that we thought we had a pretty good title but now i'm going to change over, director of prizes. i may have to adopt that for some of our programs. but that's exciting for you to be here as well. certainly for green tech, open, for their contributions here, because it's really a neat blend, with the efforts that we're doing, both in innovation, as well as being greener and trying to continue earning the greenest city of america title that we earned just this past year. we've been pretty lucky. as i announced this innovation month, there has just been scores of ideas that has come

forward about what we could do, how we could celebrate, and how we could expose a lot more about what our technology companies are doing here in collaboration with so many others. but i'll begin by saying, first, you know, there are some things happening in our city that are just incredible. you know, i didn't declare myself to be, you know, the tech mayor, even though i've kind of fallen into a lot of that. i actually wanted to be -- and earned the title being the jobs mayor. the jobs for the city has been my number one goal. and we've been doing pretty well. when i first began last year in 2011, unemployment rate here was 9.6. and just a few months ago, we celebrated the milestone that it went down to 7.4. and that's like the third lowest in the state. well, today, we got some even better news. so how about we flip 9.6, a year

ago, to 6.9. today, it's 6.9. >> [applause.] >> and technology is leading the way. we're home to now -- just within our 49 square miles, we're home to 1,635 technology companies, still growing, over 225 clean tech companies, more than 100 biotech companies, and we have owncone of those categories or growing more every month. imgetting excited because that means a lot more jobs. i think we will soon lead the whole state. and i kind of say that too because marin county has traditionally been lower than ours and so has san mateo. i think marin county has been lower because we have their wine, you will probably have some tonight and san ma taiee because it's our airport that emploaxcju everybody there. so we will take credit for all

three counties. i told jerry, i'm never going to complain to jerry brown, what he to happen in the state legislature, because i used the first year and a half to insulate myself from all of that, emotionally as well as programmatically to say i'm not going to let the state hurt our city or the federal government. we've got to innovate our way out of this economic dole drum and we are doing so with inviting people here. those of you who take this word challenge, and really can really seriously bring that to fore with your best ideas, this is what i'm doing with all these technology companies. i'm not satisfied with just hosting a new company in the city, i want to know what they're doing, who's working there, where they're coming from, what they plan for the five or 10 years and how we can help them grow. as they're growing their jobs i want to know technologically how

we can help. that's why i love going to accelerators, to find out what are the next five years that we're incubating so when it comes like what happened last week with dr. yam naka working at gladstone institute at mission bay becomes one of the newest nobel prize winners in medicine working with uc-san francisco and the pharmaceutical companies there, they're on the verge of discovering wonderful stem cell research that will cure a lot of cancers in our lifetime. you're going to see some cures come out of mission bay. we're doing the right thing, we're creating this wonderful, exciting innovative spirit in the city and we're doing it, not just with the companies locating here, with the people that are here, we're asking employees of the company to step up, through our sf city, our tech chamber of commerce, and volunteer their time to improve things that are not working as well as we'd like

in the city. we have on-line ability called improve sf that allows people to come on line, tackle a lot of the issues that the city faces, allow for some c)eative thinking, people who can't spend a lot of time in meetings with us, that can actually offer their ideas on line, and we take those ideas very seriously. so we've been working on things on like how to make muni faster, how to bring fresh foods to low income poverty areas of the city, and our newest one, just to given you a sense, we wanted everybody to help us develop and design a new library card. talk about civic engagement. 2,000 submissions on line for a new designed library card. that leads me to a challenge that i would like to announce, as part of this night rover challenge, and that is we have been asking ourselves a question, along the lines of energy use in the city, something that has been hard for us to figure out. and that has to do with what

would inspire you, as someone who lives in the city, to give your data of your own energy use in the city, like your home energy use? all that data about when you use it, what are your hot times, your cool times. how about if we try to find some way to inspire people to give us that]h data, in some coordinated way. because if we understand that 20 to 22% of our emissions comes from1ar residenl use, you can imagine if we had that data coming from every household use in the city we could break that data down with involvement of creative people like yourselves, and then try o see where there's patterns where we could lessen our carbon footprint and talk about better energy use. that's perfect for us. that's what we're going to ask

this challenge to present for our next improve sf challenge for the city. and that's what we'd like to engage people in. and then hopefully, some time after this challenge is announced, and if we can get the best ideas out there, we will be engaged with you to select the best answer. and if there's an idea out there that can answer that question about how to inspire people, then hopefully wq can go into november a hack-athon sponsored by green biz and others to develop an app that everyone can use. that's a great challenge. that's going to be so worthy of contributing to a goal that we've had about reducing our carbon footprint as a city. it's not just the households. once we get that data out we could look at the data from a community.re level and look at e data from a citywide level to see what we can do. i'm encouraged by that. i didn't want to give my data up to pg&e for various reasons.

now iú] want to give it up for this challenge because i know people will be creative in having thisçe challenge to be something positive for the city. i wanted to announce that, get that out there with you, and join this wonderful challenge that you have, and think about how we could work together. meanwhile, in between that stuff and in between celebrating the month and doing things we have to write a proposal to win the superbowl in san francisco. thank you very much. thank you. >> [applause.] >> thank you, mayor lee.