administration. >> the reason for this is to provide you a high level look at the port's 5 year forecast so that you can guide our financial decisions lefaging opportunities and managing risks. consistent with proposition a, which the voters approved on november third, 2009, the city and the county now prepares a 5-year financial forecast every odd fiscal year, the city prepared the first plan in the spring of 2011, and last year the port prepared a informational update, for the commission to help provide insights to the america's cup and other major development opportunities along the water front. and now this financial plan update is included in the city's chapter and its second financial forecast and will be introduced to the board of supervisors in march. wallace the manager will take you through the presentation today as megan will show the financial forecast identifies the strong revenue growth five

percent per year that is out out paced by the growth in the operating budget which has the individual of 3 percent per year. this is designated to capitol and expands and stabilizing our capitol budget and meets the port's policy to allocate 20 percent of the revenues each year to the plan, that said the forecast does identify opportunities and risks that the port should consider moving forward. and one such opportunity is the releasing of former america's cup sites and another opportunity and risk and related to the timing and scale of development near term and in some instances long term reductions to operating revenues directly impact our capitol repair and replacement budget. this must be balanced against the opportunity to attract private investment, reduce capitol liability and extend the life of port assets. the timing is important as well

as the scale of development. the commission should also be aware that the financial forecast assumes that the capitol budget will meet our basic needs and fund a pair of facilities just as j935 and etc. and so that these facilities continue to be safe and in operational use, if they are unforeseen spending requirements whether environmental that require immediate corrective action or unfunded requirements for benefits this could force the trade offs with the capitol budget. i believe that the port commission has done a good job dreking with the policies and directing limited precious resources to the water front and improvement, just this morning, port staff did receive confirmation that affirmed our credit a rating, just finished the review in connection with our 36 million series, 2008, and 200 d bonds. the port notes are stable

structure, strong financial profile and policies and great location and the reverse revenue streams and the ratings continue to be that we have notified the completing to our deferred capitol. i believe with the continued financial stewardship and with the creative trifnging it will create the partnerships to develop a more complete solution to the backlog. >> with that, here is megan. >> good afternoon, commissioners. i'm megan wallace, budget manager of the port. this morning i was at the dmv and reminded of my driver's ed training when you are driving it is important to look out on the horizon and what is ahead of you but you want to know if you are going the right direction or if there are any has yards that you want to avoid and like ways, with our financial forecasting i think that this financial plan provides an important opportunity for the port.

if we are going for the direction that we want to and if there are changes that we need to be breaking. and are there changes to adjust how the revenue is looking. so today, i am going to discussion our five-year out look and give you an overview of our road map. and hopefully give you an opportunity, hope to help you feel more confident in giving us direction on any tweaks that need to be made moving forward. >> so first i want to look at where we are headed and earlier this year, executive director moyer actually had a kick off meeting to really look at on you fewer tur strategic goals, and actually as part of the city's five-year financial plan, each department has a section that details some of those goals and these are the goals that were included in that plan. and as you can see and actually the five-year financial plan is going to play an important role as a tool and part of our

future and strategic planning process and so these are not in particular order but i just want to walk through them quickly and the first plan, our goal is to reserve industrial and commercial maritime tenants and uses. i think that one intent of this was to particular looking at the southern water front and how we are using about maritime to use that space to the best capacity. and the next goal, redevelop and rehabilitate the instruct tur. and to improve the land, so much of what we do in the capitol plan is really about this particular goal. next, preserve, sufficient space, for pdr which is production, distribution and repair as well as for

non-profit entities. the port is the unique space for this type of land use, and we really need to capitolize upon it and particularly think about how we can use this space for supporting blue collar jobs and attracting industry like cargo. the port should lead a city effort to rebuild the sea wall and adopt the water front to see the study after study of how the sea level is rising and after seeing what happened in new york and new jersey after hurricane sandy i think that it hits home. and if we don't take care of this infrastructure that we could face the problems and it is a city-wide endeavor and so the port wants to engage, and finally planning and implementing a future, i think that you know why it was last and because it kicks off into the rest of the presentation and this goal resonate to all

parts of the port not just the finance and the administration division. and so on that note, now i want to talk about really the details in the plan. so what does our road map look like? i think i want to give an overview rather than go into the details of the financial plan and you can see more of those in the report. i think that first off i want to say that we meet our policy requirements of having a 15 percent operating reserve of each year of the plan and unlike the plan last year, we now actually meet our capitol policy which is as you will recall, requires us to designate at least about 20 percent of our operating reserves, towards the capitol. sorry, operating revenues towards the capitol. and just generally, relatively prior to the plan, you will see that our funding resources have improved, and our operating expenditures have actually remained relatively study, but

that combination of having consistent expenditures that we actually have more money put away toward designating into the capitol and we are no longer required to cut expenditures in order to meet that policy, unlike, that is an improvement over the plan that you saw last year. >> so here is just a detail on how the revenue projections have changed. last year we saw three percent growth and now we are looking at 6 percent growth in operating revenues and it sure looks nice on a graph i have to say. and some of the key drivers, in addition to just a strong economic climate seeing the positive revenues in maritime. and we have assumptions about releasing the america's cup used after the event and beginning the fiscal year, we are going to start releasing those properties and it is really important to think about how we are going to do that and

try to fill that space. with the highest and best use. additionally, with the herman cruise terminal and we are actually excited about having the special events in that site and having the america's cup be the first of those great events that are going to be happening. and the plan does assume that we are going to have a passenger facility charge and this is going to be for all cruise passengers coming to the port and the critical component of funding the terminal project. and we will be coming back to you in just a few weeks. and to really talk more about that. but the plan assumes, $900,000 per year, from that facility charge. but the real change to our funding sources is in fund balance. and it increased by 2 percent, really as a result of the improved revenues and then designating funds to future capitol and i want to show you

the relationship, really, what does it mean to have or to build our fund balance and what or how or what funds are we putting away towards the capitol. and with this diagram is intended to show is the port's budget and we will see the first year, of our various sources and our operating revenue surplus is then put into a designation towards capitol. so it is kind of a savings plan, and at the end of the year, once those revenues are realized it has been to the fund balance and it is money that is available to use in the next fiscal year and so you can see in the second year our sources that fund balance actually contains the funds that were put away from the prior year. and that money is then used to meet our 15 percent operating reserve and the remainder is spent on the capitol budget and i hope that you will look at this and hope that it helps you to digest it. i have been talking about this

for a long time and found out a good way to show it. hopefully it helps you. so next, so speaking of capitol expenditures and this shows how our expenditures have improved. last year, we thought that we were going to have a (inaudible) capitol and now we are looking at $12.1 million and you will see in the fiscal year, 1213 it is low and that is because we have spent the money in the prior year on america's cup infrastructure and the cruise terminal project and then for 13, 14, the fund balance is replenished because we are looking at a really healthy end balance of money through surplus revenues and savings to expenditures and so we are going to fund that money but that eats up our fund balance and it gets back down and from the years on ward, it is being replenished through that growth and operating

revenues and designating funds to future capitol.. and i just want to highlight how our operating expenditures have remained consistent through the plans and the basic assumptions that is carried through both years was that most of our operating expenditures were going to grow at 3 percent and the real drivers for growth in both plans was hel and this retirement expenses and debt service, and health and retirement expenses were given to us by the controller's office so it is assumed city-wide in the five, or the city wide five year financial plan and debt service will be issuing new debt for the james r cruise terminal. >> so the things that were not included in the main body of the plan but they were highlighted in the staff report as major considerations were

the arena and the potential for the 35th america's success cup of events. first of all the warrior's arena really highlights trade offs of you know beginning in the first year, let's see, the first year that we would be losing revenue. would be in 2014-15, so about around $2 million a year across the plan. the benefit, though, would be being able to take that deferred maintenance out of our capitol plan. so even though, you know you kind of have to weigh those pros and cons. the giant's development consistent with the presentation that you just saw there is a dip in our revenue and we lose revenue one year but then it actually builds back up once the development comes on-line. and in washington, this is very much uncertain at this point and it would only come into or only be exhibited in the plan

in the last year, the fiscal year, 2017-18 but it would be a huge benefit to the support in our ability to fund the capitol. and then, the america's cup success's defense, we just assumed a similar footprint to what we are currently using for america's cup and applied parameter rents to that and found that we could lose up to 6 million dollars per year if we bought the america's cup. back to san francisco, so we would really need to consider, what type of arrangements we would want to make with the city of making sure that the port is made whole during those years. some other considerations are the environmental and regulatory risks and the environmental risks are really, you know, taken in hand with the landowner ship and urban industrial setting. and that along with regulatory risks have all been incorporated into the plan, but

really highlight just if there are any unknowns that do pop up, they have real potential for a financial impact on the port. and it would require trade offs in the capitol and operating budgets in order to meet these requirements. so, next steps, this plan or the city-wide plan is actually going to be going forward to the board of supervisors on march first, so friday. and the board of supervisors will approve the plan by this summer. and just on an ongoing basis here at the port as we through the leadership of executive director moyer moved forward with the strategic process, this financial planning tool is really going to play an important part in that discussion, in laying out really where it is that we want to go and what adjustments need to be made to get us there. thank you. >> thank you. >> is there any public comment? >> commissioners? any questions? >> just a comment.

you did a great job, i loved this presentation and it was really easy to follow. so thank you so much. >> thank you. >> and i agree. thank you. >> it really was very helpful. >> i think that we probably covered most of these issues but we will put you on the spot. >> sure. >> going back to the earlier referencing sort of strategic goals is there anything else that you would have to have for us now that you have looked at the entire thing. >> well, since i shared an office with our financial analyst larry brown i am fully going to fund as many capital projects as possible. but my priorities are consistent with everybody else's that are as wanting to prevefsh the revenues in order to be able to continue to invest more in capitol.

and it is i think, that it is that challenge of balancing taking properties off line, in order to allow for a larger development, like at piers 30, 32, in exchange for being able to produce liabilities in our capitol plan, for example, i just think and i recognize the challenges that behave been discussing. i think that the last meeting that we could find a way to quantify the benefits that come back. i think that is a hard one to do and i think that it reiterates it. >> the 35th america's cup, successive defense. estimating that the 6 million dollar lost revenue. what would that be based on? >> so, we make cruise in the real estate division helps with that analysis and we just

assumed a generic layout of properties we did not assume the same venues, just the square footage from this event and applied that to the parameter rent to calculate about $6 million in that or in 2017, 18. okay? >> yeah. >> and that was assuming that they get some sort of flat rate verses what you would normally charge? >> that is right. we did not make any assumptions about the particular quality of the venues that they might be negotiating. >> so i guess that the message would be that if the state was going to be another mru that maybe we would argue for something that was closer to what we think is more equivalent to the market rent. >> that is right. >> and sense there is a difficulty of getting any money out of anybody for america's cup. we know how difficult it is, and so it does not look like the third parties will come to the rescue on anything. >> right. and an important note about that actually is that we assume

that the current agreement does not assume the cruise terminal because that facility was already off line. but the 6 million dollars assumed a similar footprint as the cruise terminal which is why it is worth the cost would be so much more. it would be like taking a cruise terminal off line. i guess some of the levels could we maybe flip it around and say that we have already fixed up a lot of the sites that might be of interest. so on the other hand it may be that we could come up with ways of increasing their revenue to us given that the cost of fixing up some of these sites is now diminished. >> that is an exciting part of looking at our releasing opportunities. i know that there say lot of discussion going on with staff, as to what opportunities to pursue at any of those venues. >> yeah. >> so i would say that i think that it is great to see the more optimistic forecast from last year and i think that we

can agree and i think that it is a combination of the fact that the economy has gotten better and i think that we are did he go better as well. both in terms of the way that we are operating ourself and always help from the market environment also cooperating with you so you can make a one plus one equals three equation so you can look for those plus equations. i did have a couple of questions in terms of the cruise passenger facility is that per passenger? >> that is right >> what will be the charge that you are thinking? i know that it has not been formulated? >> i think that it could be anywhere between $3 and $5. other, we are following a standard implemented in seattle and san diego. each of those ports actually implemented charges to pay for the gang way and for san diego cruise's terminal. for us it is just a matter of how long we want our debt how long we want until the debt

matures and off of that willingness to pay by the customers. so we received positive feedback from the cruise lines indicating that they did not think that it would be a hindrance. >> and it is part of the over all cruise fare or they actually outline it separately to the passengers for $3, to $5 that is not something that you will have a line item on your bill. would i be aggressive on what you think. >> and it is important to note that we or that that charge would retire once the debt was paid off. so if there are concerns about that costs tha, is an important piece of information that it is only to pay the cost of the infrastructure. >> so this morning i roughly did a quick estimation saying that the cruise ship itself cruises on i guess 80 stops is what we are experiencing something like that a year and that may be 25 percent of the

time and so what is the occupantcy for the remainer of the year for the terminal? >> i apologize i don't have that information. i had relied on the a home study at which had assumed, 800,000 per year. in revenue. i don't know the details of it, i took a haircut off that have and the plan assumes $5 on ... $500,000. >> i guess that we are getting the responses back from the companies and it will be interesting to see what the thoughts are whether that matches up with the study that you are taking because it will be interesting to see how many days that we assume besides the cruise ships will be utilized what the rent will be and at least if we could judge from today. and we even have the host tes with the mostest getting excited we can assume that there will be tremendous interest, and we have to figure

out how many days a year we can rent it out and see what the rental will be, that will be very interesting to see. so that number sounds like it is conservative at this point. >> it is. >> it can be refined as we learn from or get more input on to it. >> that is right >> on the real estate rents, there was an assumption that we made. >> yes, actually so that is another way that are you speaking specifically about the america's cup? >> no i am talking about just the real estate revenue that you obviously improved here and it is a combination of vacantcy and rental and we have not talked about it here but at some point improved delinquency. >> right. yes, i don't have those details, but it is based on real estate's analysis of current or how the market is currently looking. and a turnover, and that sort of thing. okay.

>> so basically, if that is the case, i would say that this is probably more of a conservative side and i think that we all understanding what your aexceptions are and hopefully you show us a more positive picture and the revenue that we can generate the more that we can manage to control. and knowing that we have to invest the better off we are. is kind of what i called the jaws. and the revenues like this and the expenses go up like this. the jaws effect and that is always a good sort of indicator of the future. i think that is going to be a positive. and i think that at some point, probably to think out of the box and the revenue sources could probably be in. it is hard for the public properties and naming the opportunities across the water front, etc.. and these are things that we should be thinking about whether there are sources of

revenue. that are not typical. >> and this is an off year with our budget. and we will be getting the next budget process. that we will talk about the revenue options and try to build them into our next budget. >> and they are great. thank you very much. >> any other comments? >> okay. thank you, thank you. >> thank you. >> item 13, new business? >> commissioners if i may, i left one person out earlier today and that is martin who has been doing a terrific job all along the job, with our projects and the communications with the public and most especially thanks to her today for a great event. >> thank you. >> is there any comment on any new business? >> public comment? >> no. >> i chat about this and maybe just to say it. we heard in some of the

presentations earlier about the importance of really pdsing the water front transportation and you and i had discussions about whether the port needed to look it along the design standpoint up and along the water front, if i could have you come back and perhaps the port could help peter more because he is looking to the surface transportation. and while walter ... water is part of the picture i think that we have an interest we need to be conscious and what can the port do to accelerate to help in those efforts. >> and any other, any other new business, by the commissioners. >> okay >> we make a motion? >> to adjourn? >> second. >> all in favor? >> aye. >> we have to call public comment.

>> sorry. >> i think that we asked for public comment already. >> new business. >> just general comment. >> item 14. >> public comment? >> hearing none. should we have another motion to adjourn. >> so moved. >> second. >> all in favor? >> aye. >> thank you.