sector and the private sector resulting in the renovation of moscone and the lead gold certification that the moscone building has received and also the economic recovery that we are seeing right now in san francisco including the room tax collection, job creation is due in large part because of the passage of the tid four years ago. so we encourage your favorable response at this time. thank you. >> sure. >> good morning, chair, supervisors avalos and mar. my name is brook [speaker not understood]. today i will go over a few slides to discuss the project's phasing and square footages to familiarize you on the project. so, we have an investment opportunity to expand an important facility for san francisco, that's the moscone convention center. the slide that you see before you today, we are looking to add about 26,000 square feet of

meeting rooms to bring it up to 85,000. 80,000 square foot or more of contiguous exhibit space which is the most important space for the convention center. up to 87,000 in multi-purpose space and 178,000 of support spaces such as loading, service, restaurants and things like that. the -- one of the key objections of the expansion project would be to maintain continuous operation during the construction for the expansion of the moscone convention center. in addition to the improvements to the facilities, we will also be looking to improve streetscape, connectivity, bicycle and pedestrian safety, and bring a sense of arrival of moscone convention center with [speaker not understood]. the image before you is an aerial view of moscone showing where where the areas of expansion will be. that is at the north, south, and at the east building what

we call the esplanade building. the next couple of slides will show a sample of cultural facilities including existing deficient conditions at moscone center. as you can see there is an open space, yerba buena at the top left image. sister cities garden, performing art center, restaurants b, and [speaker not understood] in north moscone. the bottom two images you sue there are the emphasis to north and south. these are two out of the three areas where we are expanding the moscone. so, bringing the building out to the street, activating the street, and improving the streetscape. this slide shows some of the deficiencies around the moscone convention center due to the loading and exiting of the trucks. we have the sidewalks that are up on the moscone convention property, the sidewalk on first street. as you can see in the top right image is closed.

we have -- we show the egress exits on the side of course we'll be looking to reduce some of the egress on the expansion projects. and this slide would talk about how we will be able to maintain operations at moscone while we're doing the expansion. the first step that you see there would be to provide connectivity from south moscone to the ball room at the esplanade. what this would do is it would allow us to be able to demolish the front third of the esplanade building and build a four-story building there. there will be three levels of meeting rooms and a ball room on top. that is essentially a fourth moscone convention center. what would allow us to be able to hold conventions at the howard street building while moving on to the next step of three -- improving the south

moscone and step 4, the north moscone. so, it will act as a swing space for the three next steps. the cost of the project is 500 million. the project budget is 500 million. we are anticipating about 3 88 in pre-construction demolition and construction and about 112 million in [speaker not understood] architectural engineering construction management [speaker not understood] and other soft costs which accounts for 78, 22% difference between the two. the next slide i'll be presenting the fiscal feasibility on behalf of office of economic and workforce development. adam [speaker not understood] who is out of town today. the fiscal feasibility and admin chapter 29 requires that the board finds the project fiscally feasible and note that determination. and, so, some of the few highlights of the net benefits to san francisco are 7 34

million in direct and indirect impact through fiscal year '26. 5.8 to 7.6 a year in additional general fund tax collections. a net increase of 33,480 jobs through 20 22 over the next eight years. * 3,400 in 7 one-time construction related jobs. the advantages here, it allows us to leverage the private sector to meet the convention demand. it limits general fund in long-term debt capacity to transfer adopt district formation. and as i mentioned earlier, some of the public benefits would be surrounding the streetscape with pedestrian safety, tourism, and operationses and maintenance. and now i'd like to turn it over to nadia [speaker not understood]. >> good morning, supervisors. nadia [speaker not understood] from the office of public finance.

this slide highlights the [speaker not understood] up front. there are three potential forces. the city contribution which is an annual appropriation including this year's appropriation of approximately 1.7 million and an additional 2 plus million proposed for the next fiscal year. there is also a combination of district assessments if this board approves the formation of the district and establishment of the district. we could potentially use some of the assessment from inception of the district through the construction period and a total aggregate of 82.6 million plus [speaker not understood]. in addition we are proposing an issuance of certificates of participation to fund the project and we are also asking 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 si