>> yes. create an early understanding of a cap of costs and a cap of sources. i think one of the things we all struggled with during america's cup was trying to put limits on what the parameters of the deal were, so it felt important to create real structure around this. the numbers need to be fleshed out and fully developed but the structure will remain. there will be these three sources as sources of reimbursement and cap of 120 million. >> thank you. >> a followup question. just a cautionary note. we are looking at the value of seawall lot 330 based on current zoning. you know, if somebody is moving forward, i just want to make sure we are talking about current zoning and if anything is changing of current zoning we would expect a change in value as well. i know we have had projects come before us that require

new zoning. i would think that if there is anything that came forward that showed that we would have to do new zoning for seawall lot 330, that would change the value of that land. we would expect that to be reflected in future agreements. not they want to go there but if it ever happened we would expect something greater than what is suggested right now. >> i don't know if the value would change. if final approves include zoning changes. the warriors are proposing -- warriors are paying predevelopment including entitlement and taking the risk. oftentimes the city will be reimbursing private developers for that cost. so there is really shared risks in the entitlements. if the warriors are proposing zoning changes

that will come before you, evident in term sheet and move forward through the planning department processes, the costs and risks associated with that would be borne by the warriors up front in the entitlement process. i hear you and i will take that. >> thank you, supervisor. also a clarification. you have the three reimbursable limited services, one, two and three. does the term sheet or does the conceptual framework anticipate we exhaust one before moving to the next, or it is interchangeable? >> it doesn't specifically create a waterfall. but this also sort of gets to the issue of the proposed return on the cost of capitol. it is the city's intention to negotiate to try to repay the warriors for their expenditure as quickly as possible, with as much up -- as large sort of chunks as possible.

so the value is something that could come in early as a 30 million credit. the ability to bond against future property tax is a large chunk of money that could be put towards the reimbursing for those infrastructure costs. what the framework anticipates another source of credit in it a lump-sum early to create net present value of what a 66-year lease is and apply toward the expenditures. what i think is important to understand is 120 is a cap. it is a cap that if those expenditures are not met, if they are not needed in order to rehabilitate the substructure, there could be an excess of value in the three buckets, in which

kay they would not be exhausted but our goal is to have repayment as quickly as possible. >> thank you. >> some of the -- >> i have a question. >> are you finished answering the question? >> i am. >> we do have another question. supervisor kim? >> thank you. i have a couple questions regarding the buckets. the questions are how to lower impact of 13% interest rate which has created a lot of interest among the members of the public. it is clear the sale price of the seawall can be paid up front. with property tax generated over time, the bond, is that something we can pre-credit it to reduce the 120 million? >> you can't pre-credit it until something is built. one of the things we are looking at and already talking to public finance

experts that we engage, tom lockhart, chris lynch and assessor's office, we are engaging at an early stage, is a way to create a strategy that might allow community facilities district to create revenue that you could bond against as early as possible. even before traditionally you can create infrastructure financing district that relies on revenues that are flowing from a completed project. in order to create a revenue stream that you can go out to the market and bond against in order to bring back that chunk of revenue in order to pay back the warriors. so we are -- to your question we are exploring ways to accelerate as much as possible in order to ensure quick repayment to warriors. >> i'm jumping a little ahead to the budget analyst report but it was stated it is possible we could reduce liability in terms of what we would owe 13% on, down to 29.6 million if we were

able to use the estimated 34 million from the expected revenues and bond revenues. is that feasible? is that something from the get-go we could take out as to what we would owe 13% interest on? >> that is right. we are attempting to have that remaining number of 30 million be something taken out early. if we can negotiate a value for the 66-year lease at net present value where you look at annual increases, look at what a reset would be, calculate the present value of those -- that rent stream today and give a credit, that would take out the reminder. >> okay. >> that is actually something i want to show. >> right. in the report it said even if you could not do that, that what remained was the 29.6 million, that is 13%

annual rate on the 29.6 million is 3.8 million. that would exceed estimated annual fair market rent of 1.9 million. in that case because they have exhausted the three buckets that would be what the city would be committed to giving. nothing beyond that. >> i think that's been one of misconceptions. if warriors have rate of return and more owed, whether because they exceed the 120 million of reimbursable expenditures or because there is a rate continuing to grow that somehow the city is still on the hook. this deal is being crafted to ensure there are only three sources of reimbursable -- by which warriors can get reimbursed for the substructures. it is a cap on total amount spent and cap on sources. >> my last question just on this point is what you had

said regarding what if construction costs fall below 120 million. i have seen written the port could then negotiate other improvements to the site that would meet up to the cap. is it possible that actually that we could leave as an option that what we -- our lability to warriors would -- >> i want to be clear to explain why that is in the conceptual framework. because we drafted this at such an early stage we wanted to create space now to figure out if there were improvements. not ones we described that warriors are taking on, not open space in improvements described but if there are additional improvements or ones city wants done to degree that exceed what warriors would do in normal course of development we have carved out ability to negotiate a specific set of improvements with their own particular cost cap within 120. what my commitment is is

that would be spelled out by term sheet wha. we are not asking for is a carte blanche that can be negotiated after approvals to fill that bucket. >> i appreciate that. that is one of my concerns, that we could use that. in the unlikely case the construction costs are below 120 million we use it for actually commitments we expected the warriors to already -- like open space. >> that is not the intention. the intention is we were so early that we wanted to create this within 120 and not predetermine we wouldn't use up to the full -- up to what we think is the full value but that would come to you with specificity at term sheet stage. what it is and what it is costing. that would be something for you to opine on. >> thank you. >> i think some of misunderstandings and misconceptions have to do with some belief the city is giving cash or loan of money or some sort of guaranteed repayment or

return. that is not true. what i have been trying to articulate is regardless of the cost of the repair, the reimbursement to warriors is capped at 120 million from three sources we have just discussed. our current estimate of the value of these three sources is less than 120 million. the port really has a liability in the pier substructure, in piers 30-32 in form of crumbling pier. warriors have agreed to repair it with their money at their risk. what it means is under the current proposal, warriors do not get a return of their investment based on our current estimates of the value of these three sources. nevermind a return on their investment. if i can have the overhead. thank you. not that one. the light one. this is a pretty simple

worksheet that we work with our consultants eps to present that really looks at the qualified cost and sources for reimbursement. taking out this notion is not an interest rate but cost of capital but taking out the cost of capitol, the value if you look at the value of the three sources of reimbursement and look at them in two ways, there's the purchase credit for the seawall lot, projected isd bond, close to 55.5 million. the slight variable if you look at the fee value. if we could sell 3032, the appraiser looked at if we could sell 3032 what would the value be. 30 million. based upon calculations of what the net present value of the lease would be on 3032, that is 31 million. you see the three sources don't equal 120 million.

so i think the conversation on 13% has over shadowed the notion that we don't get to it under the present value of the three. >> jennifer, i want to clarify. at the current state we anticipate we would need potentially 120 million to be able to rehabilitate piers 30, 32, primarily substructure in order to support anything on top of it. what conceptual framework is laying out is saying no matter what the cost is even if it is higher than 120 million on piers 3032, the city is only liable for reimbursing maximum of 120 million period. not only are we limited to 120 million reimbursement cap but further limited to pay back that cap with these three sources. even if those three sources don't necessarily add up to 120 million, we are only

limited to using those three buckets to repay it. ris subpoenaing on warriors. if what ends up being the value is not quite 120 million. >> that's correct. >> okay. thanks. >> key provisions is the concept -- separate concept that we may agree on other improvements by warriors and other mechanisms, codified in the term sheet. one exciting example is relocation of station 35 from piers 22 down to piers 30, 32 and moving fire boats and stakes. i have assistant chief ken lombardi to say a few words about this opportunity. >> assistant chief lombardi with the san francisco fire department. the fire department has been looking at our

facility at pier 22.5 for quite sometime as the piers behind have become dilapidated. most will notice as you are walking down embarkadero near the fire boats. we are looking at a project a year now where they will rebuild that and build a new pier out the back. it will be significant cost out of our bond money passed in 2010 by citizens of san francisco for emergency safety and earthquake safety and emergency response that a lot of our fire houses are becoming older and need a lot of work and not seismickly safe. as warriors came about with this project they approached us, as this is a block away . this would create a great opportunity for fire department and citizens if we move this, have a state-of-the-art fire house that could house three fire

boats. we have two, a new one coming at the end of 2013. currently we can't tie it up at the current facility. like i say we were going to do a new project. this is another opportunity. by putting this together would create less bay fill and open the area, the dilapidated piers could be taken down at that point. the old historic fire house would stay. everything behind it would open the view for citizens and people in the neighborhood. questions? >> thank you. >> thank you.

>> other provisions would be par yours pay the fees. port would receive a transfer fee, 1% on the sales of all condos developed there. it marks early on commitment to create funding stream to pay for neighborhood quality of life services. now fiscal feasibility. there are five requirements of fiscal feasible. looks at direct and indirect economic benefits of project, proposed construction costs, proposed funding, operation and maintenance costs and proposal to use public debt. in fiscal feasibility report and numbers we generated with help of eps and barrett, we did use conservative assumptions. if you have questions about the number of assumptions, i have jim mussbach and

richard burton from eps to talk through them. first the economic benefits. there are two sources. some is annual unrestricted general fund and other is dedicated or unrestricted revenue. approximately 12 million in annual unrestricted general fund revenue from sources you see in this chart expected from the development at the two sites. the initial number that was generated in fiscal feasibility report used pay roll tax. we will have gross receipts tax by the time arena is completed. the number has been adjust someday what to account for gross receipts tax. the annual unrestricted general fund is $12 million. dedicated or restricted is

additional $5.2 million. one-time revenues will be over 50 million for various impact fees. gross receipts and transfer tax from sale of seawall lot 330. >> can i ask in terms of annual general fund revenue, the 12 million you show on slide 13 that shows property tax funding that would come in, is this net of the proposed isd or -- >> it is not. thank you for pointing that out. what you have to assume is the first 30 years that five million should be taken off the annual general fund revenues because that would be dedicated to repaying the isd. that would be issued in order to repay the warriors for the substructure costs. >> thanks. >> thank you for that. >> so the one-time revenues include the jobs housing linkage, housing, child care, impact and ease --

east sea, that is all include thered that number. economic benefits include permanent employment, construction employment and annual economic spend. total direct jobs anticipated to be created and maintained is 107,000 jobs. over 200,000 full time equivalent leapt jobs from the three-year period construction time of this project. total of 282 million in annual economic impact. what is important is we adjusted to make sure these were net impacts. warriors are already located in the bay. we spent a great deal of time trying to net out the current economic benefits from having them in the area, including, for example, when visiting teams come to play the warriors they tend to stay in san francisco. we were careful to try to only look at new and

increased benefits. proposed construction costs are close to a billion. if you include hard costs -- >> supervisor avalos. >> sorry, to go back to the last slide. we are talking about net new jobs. i know there's been a discussion about existing workers that work for warriors coping to work here in san francisco. talking about new workers in addition for permanent employment jobs. >> that's correct. >> 1,712 new jobs on top of -- >> on top of what would be considered the transfer jobs, yes. >> great, thanks. >> proposed construction costs of close to a billion. i want to take a minute to pause and say it is our work through research and consultants it is unprecedented to have a sports facility be privately financed. the sports facilities you see built and rehabed

around the country really to one include direct public subsidies from state and local governments in order to finance the arenas. we are talking a billion respond, contributing only to substructure, only to the portion we own. the proposed funding, the city will reimburse warriors for improvements to infrastructure capped at 120 million. funds are restricted to three sources we have discussed. proposed operations and maintenance, we have reached out to city departments. the police funded the cost estimates are to be determined. we will be in -- the cost will be associated with calls for service during events and non events. responses to illegal vendors and such. fire anticipates no direct

fiscal impact from the project. number of staff and hours worked will not change as a result of this development. as mentioned by chief lombardi the san francisco department may contract with warriors for emergency services. certainly if they are co-located, that makes sense. no impact to the project as golden state warrior also pay to maintain open space they create. for dpw and mta we are currently working with both those departments. there will be parking and service officers. there will need to be traffic and cleaning services and other amenities determined as we move forward. as a parenthetical, we will get into this, peter albert is here, but we will have a robust transportation as part of design hearing monday. we recognize transportation is probably the single biggest issue that needs to

be addressed by this -- through this process in order to have a successful project. i have heard rick say several times it is not in their interest to have a project with bad transportation, not if the city or community's interest. we have heard it since the first meeting. >> supervisor avalos, a question? >> yes, please. just when it comes to police fire, currently with the willie mays park, giants stadium, i call it willie mays park, the giants do pay for part of funding for pmta and police services. isn't that correct? >> giants pay for all services that occur on the premises. they pay extra when there are non related events, they pay the city extra for cost of the events.

the giants pay ample taxes. it is the tax revenue that comes to the city's general fund that's been used to pay for supplemental services for mta, police, outside of their premises on game days. is that the model we were expecting for this development? >> i don't think so. we will endeavor to create a separate funding stream that has neighborhood oversight and input. maybe neighborhood control. this is something we need to -- in a cbd model you wind up having neighborhood or stakeholder control of pot of money that can be used to deploy to address issues that are often neighborhood issues. not sure we will have a cbd but what we are committed is creating a dedicated funding stream that is visible and discreet from the city's commitment to ongoing maintenance and security. that the neighbors have said one of the things necessary is an ability to

dial a response to impacts from having large numbers of people come in and out of the neighborhood. >> we don't have a real concept of what the funding mechanism would look like. >> we don't have a concept of the mechanism or what the funding stream is but that is something that, again, i think we will have -- >> having something is what you will want to have. >> we will have something and fleshed out by the term stage. it is a commitment of ours to sort of figure that piece out. >> great. >> thank you. >> the last issue that fiscal feasibility looks at is proposed use of debt. as discussed the city may bond against to reimburse for public infrastructure. we talked about isd bonds. this is something we are bringing to the committee next week. we used cfds and ifds on

waterfront projects. >> i will invite brad up to talk about how we move from conceptual framework to transaction documents to have you have an understanding of what are some of buckets and categories from what i have described talked about in the term sheets. >> good afternoon, supervisors. brad benson, special projects manager with the port representing monique moyer and port team. monique will be up to address the committee after the presentation. i think jennifer, if we could go with the slides please. jennifer i think gave up a fairly thorough description of the conceptual framework, which is essentially the status of negotiation right now between parties, between

warriors and owd and port staff. it was a staff recommendation to not seek an endorsement of the conceptual framework at this moment in time because the key questions. what is the cost of the substructure. what are the eligible costs for reimbursement under the conceptual framework. we need a level of due diligence. warrior also provide cost estimates to justify those expenditures and the city staff will do a third party review of the cost estimates before bringing a recommendation to you on those topics. we have outlined the three sources of repayment. we need to do additional pro forma-based analysis of the entire development proposalal.

really looking how you structure, financing for multipurpose venue of this type. as jennifer mentioned city has retained eps and barrett consulting. they have specific expertise in sports economic analysis. they will be advising the city team as we enter the term sheet negotiations. so at port commission last night the port commission approved a resolution delaying the exclusive time line for term sheet approval from concurrent with the fiscal feasibility analysis to this time later in the spring of 2013 to allow that to go forward. i think jennifer in her presentation is also gone over the major areas we will be digging deeper into.

members of the committee have a memo from jennifer outlining some of the major topics that will be addressed in term sheet negotiations. for the benefit of the public i will go over a few of those issues that we will be looking into. one, we have a project proposalal submitted by the warriors. we are in a very public process with citizens advisory committee, with hearings at the port commission and board of supervisors. we expect to hear about how the project may change and reflected on the term sheet. a few will go to the deep weather berth at the east face of 30, 32. we appreciate the fact warriors are looking into how to make that a functioning berth. that is something we have he