that we would be authority to issue cop to issue commercial paper in the project and fund the project and sell the construction period. so, that shows you an aggregate of 500 million which is equivalent to the project cost. the next slide is a highlight of attachment 3 in the budget and -- >> supervisor mar? >> ms. [speaker not understood], can i ask how this is different than how we financed previous expansions? >> thank you for that question. so, in the past the voters have approved and the city and the redevelopment agency now successor agency have issued lease revenue bonds to do construction from moscone south, moscone north and moscone west. and in that order. and those were backed by hotel tax revenue. in addition, in 2009 the board approved the delivery of certificates of participation

as well as the establishment of a [speaker not understood] improvement district allowing for the district to levy assessmentses of up to 1.5% to do improvements. .5% of that was available towards improvement of moscone and the city also contributed by way of certificates of participation to the 56 million improvement that is now at moscone. so, we've already established that partnership whereas in the first three pieces were voter approved and this is nonvoter approved. and we also partnered with sf travel improvement. we are now proposing as part of the expansion another collaboration. so, this is similar to what we've done historically. >> thank you. >> this slide is a highlight of attachment 3 of the budget analyst and legislative report. it shows you a huge cash flow. we are proposing a not to

exceed amount of 507.9 million, and we've assumed an interest rate of 6%. we are requesting that as part of the approval you authorize the [speaker not understood] to use commercial paper during the construction period. and this would allow us to reduce the [speaker not understood] costs on the transaction. we are proposing an issuance of -- in january of 2017. we are also proposing a final maturity of 2,047. [speaker not understood] appropriately expires in 20 45. we are proposing two years further out. as you know, the med assessment, if you approve this, would allow the med to collect and assess up to 1.25% with a .5% starting in july 2013 through the calendar year december 2013 and the idea is

that because of the existing 1.5 in place currently, the improvement -- the renovation of moscone, .5 expires in december. so, started -- so starting in january 2013, that would increase to 1.25. the remaining 1% from the first tid would stay in existence but would expire in 20 23. that is not available to this project. * 20 23. so, the 1.25%, the city would get 87.5% to 82.5% declines to for the first 10 years to 10.7

and remain 10.7 million flat throughout the term of the debt. i should also note that as part of the approval of 3the improvement for moscone, the board approved [speaker not understood] payment through april 2018. >> technical difficulties; please stand by >> and the 8.2 million is, as it were by background, an annual appropriation by the general fund, making the convention visitors bureau rather than applying it to its operating budget. the proposal is to reallocate toward the repayment of cop. these are not new dollars. these are dollars that have already been committed historically to the convention [speaker not understood]. the next slide is the sequence of how the flow of funds would work. as you know, by requiring 6%

proposing 6% interest, it is way higher than your typical -- the current market. in addition, we assumed in looking at the med assessment, if you look at assessment 3, that there are no -- it is just a cpr of 3%. it doesn't assume any additional growth in hotel tax revenues and so on. by using those conservative assumptions we have discussed and in agreements with sf travel we would establish a stabilization fund of approximately 2 million. and the idea was by looking at the last 10 years we realized [speaker not understood] general tax revenues were volatile. the idea is you could essentially get a 50 million loss over a given period. so, the idea that this account [speaker not understood] and would be replenished over time if the city should use it. additionally, using conservative rates, that could potentially be situationses where the city's component in

addition to the 87.5% of [speaker not understood] would not be sufficient to pay debt service. the idea would be the city would pay that debt service and then get reimbursed with future collection. additionally, the [speaker not understood] fund is for the final -- the 20 47 maturity, which would -- because we're asking for an extension, we don't know what the market would be like. we proposed going further than the 20 45 expiration date of the district. this would allow us flexibility of future dates to take that out, but it just allows us to put money aside for that future payment. * additionally, all these extra surpluses, if you can look at the cash flow, the first few years are the most constrained because of cash flow reasons. and the back end is potential for surpluses. we are proposing that that goes to the med for improvements to the existing campus as well as

future improvement to moscone. so, the way we are proposing is that the city would collect the assessment and we would withhold what is required for debt service. and we would give the delta of the 87.5 million to the med. and if there are any surpluses, we will fund all this [speaker not understood] and transfer the delta to the moscone improvement district for the future expansion as well as capital improvement. * to the district. the next slide highlights the supplemental appropriation request. we are proposing a not to exceed amount of 507.8 million with the 6% assumed interest rate. we are showing a amount of 484 million. it would fund the project fund including repayment of commercial paper and [speaker not understood] which is required in these types of

transactions which is almost equivalent to 10% of the transaction. and we are also proposing a capitalized interest. as you know, the project is expected to be completed in 2018. we would sell in 2017. so, there is still an 18-month period. so, this is an estimate of what [speaker not understood] would be. and [speaker not understood] underwriter's discount. so, you can note there is a [speaker not understood] $25 million cushion. the reason we're requesting that is that to address market conditions, the fact that capitalized interest is very costly. the 41 million in deposit is for 18 months. for every year we have to sell it earlier, it will cost the city approximately 29 million. so, we wanted that flexibility. additionally, we are going from -- if the board approvals the whole entire transaction including the cop, the establishment of the district would have to validate this transaction. * approves when you val dade you have to be as specific as possible.

if you make any changes you have to start the whole process and we wanted that flexibility. i'd be happy to answer any questions with respect to the financing. >> so, [speaker not understood], thank you for your presentation. i know we spoke in detail about this before. ran through the cash flows. i guess thing something, a topic for a future date, but something we talked about. what's the interest rate difference between commercial paper that we're going to be able to take down on this project versus the cops? >> it's approximately 20 basis points, .2 or less in the past few. >> that's commercial paper. >> correct. >> and the cops, what are we modeling in right now? >> we're modeling 6%. if we go to market it could be 3.7%. so, it's still considerably higher than the commercial paper. >> so regardless whether it's 3-1/2% or 5-1/2%, there's a massive difference in between. >> yes. >> and you are constricted in terms of the amount of your commercial paper. could you talk about that a little bit? >> yes, thank you, supervisor.

the board approved in 2009 the first general fund commercial paper and the amount was a not to exceed 150 million. and we have been very selective. and since we're the first time we've only used 100 million of capacity. so, it was definitely not sufficient to carry this project through construction or optimal to issue for cop which is why we're showing that capitalized interest component. if we're able to expand the program, as you can see, the 500 million dollars project and the 150 is not sufficient, we could potentially reduce that 41 million to zero, which would reduce the overall borrowing cost of the transaction. >> so, colleagues, this is something i talked to ms. sese about last week when i was briefed on this project. and i think it's something i'd like to be looking at later on this year. i mean, this is -- if we have this expansion potential for commercial paper program, this is millions of dollars of cost savings for the city longer term. so, not for this today, but something in the future i wanted to flag it.

but thank you for talking about that. >> thank you. >> thank you, nadia. as you can see by the schedule, we have a lot going on. >> excuse me real quick, supervisor avalos. >> i just have a quick question. perhaps, john, you might be able to respond. we have our tourist improvement district which probably is going to continue. is that going to have play any role in the actual debt service that we have? >> i'm going to let nadia respond to that. >> the tourism improvement district. so, there is a portion that's going to continue that's going to serve the convention visitors bureau outreach and marketing. and then what the other portion that was paying for -- >> the renovation is the .5 [speaker not understood]. >> that part is expiring [speaker not understood]? >> yes, in 2013 which is why it ramps up from .5 to 1.25. if has to [speaker not understood]. * it >> thank you.

so, as you can see by the schedule, if you'll bring that up, please, we have a lot going on in the weeks and months ahead. today's presentation is highlighted in the slide in orange. coming up next, february 5th, the board sitting as a committee of the whole will consider an additional resolution to form the moscone expansion district. once ballots are received and counted which will take place during the meeting. if two-thirds of the received ballots are favorable, you will then be asked to consider a resolution to form the district along with three items we just presented to you today. so, following the next tuesday's meeting is the entitlement process and c-e-q-a review followed by a court validation action period. and if all goes well, the moscone expansion district and collection of assessments will officially begin on july 1. commercial paper is scheduled to be issued in the fall and construction is slated to begin in november of 2014. cops will be issued beginning in january of 2017.

so, supervisors, to recap, we are asking for your support of three items today. number one, an ordinance authorizing the issuance of cops, an ordinance appropriating 507,880,000 of cops and finding fiscal feasibility. and noted on the bottom of the slide if you choose to authorize these items today you may want to consider including language clarifying that the committee's action is subject to weighted authority of district hotels awaiting formation of moscone formation district on february 5th. once again, supervisors, we appreciate your time and interest in this very important project for the city and thank you, supervisor kim, for your support and for adding your name as a co-sponsor. in addition to the speakers you heard from today, also joining us in chambers are lisa and kelly from the office of economic and workforce development * . john [speaker not understood] and lynn [speaker not understood] from san francisco travel representing the moscone expansion district. dick [speaker not understood],

moscone center gm, and edgar lopez city architect. and at this time we welcome your questions. thank you again for your support. >> thanks, john. thank you to all the speakers that came out today and for those other people that are here for support. and i would like to recognize supervisor kim who has joined us whose district this resides in. supervisor kim, do you have any comments or questions? >> i have a few comments. >> we still have a few speakers. >> i just wanted to say it's been a real pleasure to work with the moscone convention center and sf travel on this project over the last year. i know a lot of thoughtfulness went into this. clearly there is capacity issue with moscone and we know that this is an engine through which we are able to attract a lot of our tourism and our tax dollars here in san francisco. and this is why we support it by our hotels and our hotel counsel as well. what i'm excited about is moscone is in our neighborhood and we have many residents in the area and they've done a great job of reaching out to. of our residents and we're

really looking forward to building a stronger relationship, particularly with the senior community that resides in that area. we have a lot of senior citizens who are really excited on making moscone convention center not just an attraction for the city, but also more friendly and attractive for pedestrians including themselves. this is also just right next to neighbors, our youth and family zone. so, i think there is a lot of conversation not just with children's creativity museum, but other ways we can expand open space opportunities with the expansion we're talking about today. so really excited about all of these things. >> thank you very much, supervisor kim. and ms. sese, thank you for your comments as well. as we think about the expansion of the commercial paper program, one thing to think about already is modeling out what the difference would be for this project itself. just as an example so we can bring that fought full board and committee when we talk about that i think it would be a great idea. with that we have two other speakers would like to can, ted egan is here from our

controller's office to give an economic impact report. >> good morning, supervisors. ted eagan from the controller's office of economic analysis. this morning our office issued an he can economic impact report on this item. you have it in front of you. * i'd like to share some of the highlights with you now. i won't go through again the details of the financing or the construction, but just go straight to how we view this affecting the economy on slide 4. really from a positive side, this will result in

construction spending in the near term in san francisco to the tune of about 500 million dollars and in the long run it will make possible for the convention center to accommodate more attendees which will lead to some number of net new visitors in san francisco and increase of visitor spending. to the negative side this has to be paid for and the financing costs both fall in the hotels and on the city which is effectively withdrawing some funds from the local economy. and there is also a repayment risk to the city that we looked at briefly. in terms of the construction costs, again, it's about 500 million dollars over the 2014 to 2019 period and that's fairly easy enough to get an economic impact number for. the visitor spending, however, is slightly trickier so i'll walk you through what we've said about that. that should work, too. thank you.

so, according to the consult apartments [speaker not understood] hotels, the attendance at the moscone center is expected to rise to about 1.2 million by 2020, even without the expansion. and what the expansion would permit is an increase to about 1.47 million. so, about 267,000 new attendees could be accommodated with the expansion. and given the average length of stay, that translates into about 9 34,000 room nights of new convention attendees. * now, how does that exactly affect the hotel industry is a complicated question of economic analysis and we frankly couldn't get that done in the time frame of this report. but there are some things that are clear. first, the city is very near capacity, what would be a maximum occupancy feasible already. the hotel consultants have suggested the city could not get higher than about 87.6% and

the city is already at 83% through all of 2012 or almost all of 2012. in addition, there is relatively little new hotel development in the pipeline, about 250 rooms. and what that means is although there is room for or the convention center has room for about 267,000 new attendees, hotels only have room for about 175,000 new visitors. so, what that means is about 65% of the demand can be accommodated and then additional conference attendees will basically be staying in san francisco at the expense of tourists who are not convention attendees. however, that 175,000 new visitors will add a lot to the city's economy to the tune of about 180 million a year in current dollars. when the convention expansion opens, that number will be even bigger because of inflation. and that breaks down into categories like lodging and restaurants and retail trade and transportation.

a second point is because the demand for hotel which is driven by the moscone expansion is bigger than the supply, that means that it's very likely that hotel rates in san francisco will rise simply because demand exceeds supply as a result of this. and what that means is it seems very likely that the hotel industry will benefit from higher rates even given their assessment on the convention center. from the perspective of the hotel industry, the expansion project will pay for itself. i'll get to the question of whether it kind of pays for itself from the city's perspective in a moment. but with that success, also because it's going to be very favorable for the city's hotel industry, it's likely that city's repayment risk [speaker not understood] of cops is quite low, quite minimal. and again, the arrangement itself has been structured as she told you, in a very conservative way [speaker not understood].

economic fundamental suggests the risk is very low. we use as we always do in our reports our remi model of the san francisco economy to estimate the city-wide economic impact of the legislation. so, specifically we look at 500 million dollars in new construction spending, 1 08 million in annual new visitor spending. we model zero impact of higher hotel assessment mainly because it seems clear that the hotel rate rises will nullify any negative impact on the hotel industry for having to pay for their share. we did include the 8 to 10 million general fund impact as a negative in the economic impact simulation. and, again, what our model does is basically track the multiplier effect of all of these impacts to create a city-wide total. and the job creations of this will be fairly substantial compared to other legislation that we have modeled. we would expect the creation of an average of about 790 jobs mainly in construction during

the construction phase, and that rises to about 1240 jobs a year on average once the expansion is completed. and, of course, those jobs afterwards are permanent jobs in tourism-related industries like lodging and restaurants and retail trade primarily. there will also be fiscal and direct tax benefits to the city from this economic growth that we just looked at. by 2019 when the completion is complete, the expansion is complete, the city should get about .6 million in new business tax, 1.5 million in new sales tax and about 10.9 million in new hotel tax revenue for a total of 13 million in that year. that is notably more than the city's general fund contribution, and that number will increase with inflation. so, what it really means is suggests every year the city will be making indirectly more in taxes than it is contributing its share to the expansion. the only thing i would note in

addition and conclusion is that the city's fiscal and economic up side, if you like, is somewhat limited by the fact that there is limited hotel capacity in san francisco. and if we had the capacity to accommodate 100% of the demand, the job benefit and the tax benefit for the city would be greater. and with that i'll take any questions that you have, supervisors. >> thank you, mr. eagan. just, again, to summarize here. in terms of the financing. so, 70% is going to be paid for by the expansion district so 30% by the city general fund. it's going to create thousands of jobs in terms of both construction and long-term. i think your job numbers here, were these annual jobs? >> they're annual averages. they're different year to year but that's the average. >> 800 annual jobs in the construction phase. a little over 1200 fern netctionv jobs on an annual basis going forward. and the city's general fund will be technically in the black here, making money off of this? >> yes. >> proposal. and, again, with more commercial paper capability, it

would be even more in the black. >> excuse me, supervisor. it's not necessarily true that the general fund will be. i'm counting the hotel tax as a whole. so, not all the hotel tax goes to the general fund. >> fair enough. i get where you're coming from. okay, thanks. i want to make sure the public was very clear on all those combined benefits. colleagues, do we have any questions for mr. eagan? okay, seeing none, thank you very much. appreciate it. and at this point we'd like to call our last speaker, our budget legislative analyst for their report. >> mr. chair, members of the committee, supervisor kim, we report on pages 17 and 18 that the proposed expansion of moscone would yield annual additional tax revenues to the city as has been indicated of approximately 5.8 million in fiscal year 17, 18, and up to 6.6 million in fiscal year 21 22. *

generally estimated, ourest mass of 24 08 for 37 new one time construction jobs and up to 9 45 ongoing permanent jobs by fiscal year 20 21, 22. provide an estimated 3 82 million in construction expenditures for an additional 3 71,000 square feet. * that's an estimated 1,0 $30 per square foot. * be financed with 82.6 million of available hotel assessment fees subject to separate approval based on the results from the hotel ballots and by resolution of the board of supervisors. and then 5.2 million of available city general if you hadxv of approximately 8% of the total 1 billion 105 million 915 [speaker not understood] project costs. now, that includes, of course, the financing costs of which as

the chair has stated 70% would be paid from the hotel assessments. increase moscone's ongoing maintenance and operating costs about approximately 1.3 million annually to be paid by the city's general fund and result in total 99 6.5 million of cop principal and interest costs. and that would be repaid with an estimated 6 99 million from the moscone expansion district hotel assessments from 2013 through 20 45. and 2 97.3 million of general fund contributions from 2019 through 20 47. * and that ranges from 8.2 million which is currently being paid by the general fund to 10.7 million per year. we also report that the proposed fiscal feasibility is predicated -- and this has been discussed before at committee -- on receiving an estimated

82.6 million of initial available hotel assessment revenues and a conservatively estimated 6 99.2 million from the moscone expansion district assessments from 2013 through 20 45. * so, that would be the primary funding source or the 70% to proposed moscone expansion project. therefore, we conclude that the proposed moscone expansion project is not fiscally feasible without that additional hotel assessments and, therefore, the board of supervisors should not find that the proposed project is fiscally feasible if the moscone expansion district is not established based on the results of the pending election of the hotels and subsequently approved by resolution by the board of supervisors anticipated to occur on february the fifth, 2013. similarly, the board of supervisors should not approve

the accompanied ordinances to authorize the issuance of up to 507.8 million of the certificates of participation and appropriate the cop proceeds if the moscone expansion district is not approved on february 5th, 2013. however, if the hotel ballots result -- results approve the creation of the proposed moscone expansion district and related assessments, which is subsequently approved by the board of supervisors, then based on the city's fiscal feasibility criteria, the budget and legislative analyst finds that the proposed development could be fiscally feasible under chapter 29 of the city's administrative code. so, our recommendation, supervisors, on page 19, we recommend that you amend the proposed resolution and the two proposed ordinances to add a further resolve clause that the board of supervisors finds that the proposed project is fiscally feasible and

responsible subject to the approval of the board of supervisors to create and levy the moscone expansion district hotel assessments on february the fifth, 2013 when the board of supervisors would consider this matter. and we recommend that you approve the proposed resolution and ordinances as amended and we would be happy to respond to any questions, mr. chair. >> thank you, mr. rose. i would concur with your recommendation there and we'll certainly entertain that moment after public comment. colleague, any questions? okay, thank you very much, mr. rose. thank you to all the speakers. at this time i'd like to open up to public comment. i have a number of speaker cards. ly call them out. if you could line up on the side there. and if there are any other members of the public that would like to speak, please feel free to come forward as well. anthony urbena, craig swan, kevin carol, james lim, and tony north. * colleague ud