endorsing that policy, introduced with some co-sponsors among the board, we are hoping that that will happen in the coming weeks. and that the board will be able to consider that ifd policy prior to the term sheet going up for board consideration. the project really does, or is and the project finances the entire negotiation is predicated on the ability of the project to capture 65 cents of every dollar of pretax that is generated, which is really the entire local share. and so, without that, financing tool, we are not going to be able to fund the infrastructure required for the project. so it really is a predicate of the project. >> and i understand that entirely but i am just saying that sometimes as we have seen in the last few years, not because of us, but because of markets and the other conditions, that we can't predict sometimes if there are

problems, i am just asking... >> what the back up plan? >> correct. >> okay. >> it is a good question. the other tool that is a component of the project is the melaruse community district financing tool. it allows the establishment of special taxes that would be leveed on each of the parcels in the development. and that can add some incremental value to be able to fund infrastructure. the effect of that, however, is that if you levee special taxes on the development parcels you will have a corresponding decrease in the long term value of the parcels. so there will be an impact on the finances of the project. but that would be the most obvious back up plan to the ifd. >> okay, we just always have to consider what the down side risks not that i would like to see it happen but he knows what

i haven't but i am just, it is just something that we have to worry about. >> but the commissioner this is mike mar again, i wanted to amplify that a little bit. part of what we saw in the past years has been for example the public finance markets seizing up and so we have the funding mechanisms where we have a tax stream or an increment stream and don't have the way to stop the clock from ticking what we have crafted is that we with the developer look ahead and say how are we going to finance the development of these two or three leases? if at that point it looks like the markets will not be there we can adjust so that there is more up front money coming in so we use that cash payment to pay off or when we have also reserved the discretion to find other public financing sources. if there are other types of

issuances that are well established than a port revenue bond or a cop and not that we have to do any of those things, but we can have that conversation. by having this phase process where at each phase we look around to say how is this going to work? that is how we address part of the risks but we have to be managing this on a day-to-day basis going forward through the build out to make sure that that works. >> thank you. >> that is helpful. >> and also, i wanted to understand jonathan, you know, in that chart that has the 15 or whatever the period. i believe that pier 48 is not in that rental stream; is that correct?? >> we are talking about lot 337,; is that correct?? >> that is correct. >> so we are not seeing in the other revenue stream that i am not sure is captured is the transfer fees, the developer fees are not captured. so i think that for the final presentation we would like to see how you capture all of the revenues that we will see

throughout the life of this project so that we have a better understanding. because when i looked at it this is not all that we are going to get. >> thank you for that point, and that catch. we were trying to isolate 337 in this graphic. the one point is so far, to be conservative we are not showing a definite income stream from those refinance or sales because they are uncertain events that we don't control them but we said, what or when they do happen, we say that they have estimated that they will bring in on the order of a half million to a million dollars per event. >> per event, per parcel. >> so, 8 parcels times... >> depending on how much they turnover. and that is... >> well, we are offering your best estimate in general. >> i understand that it is a guest and it is a forecast of we are not holding you to it but we had to get the full picture and i understand that on pier 48 we have not actually negotiated anything specific. but again if we sort of use what we normally use within the

parameters if we could get a feel for the entire revenue picture because this is just the rent picture this would help us understand what because we are saying that we are unlocking land value etc. etc. and help us to understand that. i know that this is my favorite question again, we are not selling the land but increasing the land value. how is it going to be reflected on the balance sheet? >> i will refer to elaine on that question. >> elaine forbes, deputy director of finance and administration. we will be working together the fiscal officer and i will be working on it, but in general, private investment that we don't control the rates or the rents charges etc., do not appear on the balance sheet.

however the investment in the infrastructure will. and that is an an shall response but we will be analyzing this in more detail for its implication on the balance sheet. >> so at least 150 million dollars worth of infrastructure costs will be added. we would like to push for more but that is the minimum. >> i believe that is correct. yes. >> two other questions, i am not sure that i fully understand this correctly. we have talked about it so much. of each possible comes up and we have a different vertical developer that comes in, and obviously the master leases with the giants for 75 years. you might have you know the giants may corporate with the vertical develop and her may be a totally separate vertical developer and the relationship at that point as far as the

lease is concerned, is more with the giants or would you explain that more to me again? >> commissioner, phil williamson. so the master lease as you correctly state is between the port and the giants mission rock, 327, llc. going forward each individual parcel could be between the port and the giants or an entity of the giants and not the same llc but a separate more than likely, should they not exercise the option to take one of those parcels then we will go up and seek a third party vertical developer for a direct relationship with the port. so the port would have direct leases with each developer whether that is the variation of the giants or a third party, separate entity altogether. >> and then, for instance, it could be the case of pier 48 could be a direct lease between the port and the anchor steam for that long term lease.

>> okay. >> and my last question relates to i guess in the final presentation of this, you do mention, obviously the great, the jobs and everything else, and everything else that is created, but it will be great for us to see the benefit for the city entirely of the property tax revenue and all of the things that we would see in terms of the big picture and the port and the financial picture and that gives us a better sense of what this is doing for the neighborhood and the city over all and not coming into the harbor fund that we should know what we are doing for the entire city. so if we could see all of the other i just mentioned the property tax and there are other things that you can come up with in terms of what we expect to see in terms of the benefits for the city. >> exactly, what you will see at your next meeting if not before is the copy of the fiscal feasible report and it is a great deal and the different costs to the city and the benefits to the city on jobs and you know, costs for policing the site and all of the issues recovered in that report. >> thank you. >> any other questions?

>> commissioners? >> well, as commissioner brown has already said i was not here for the entire six years. i have had a very accelerated course with this but i have to say that it has been a marvelous sort of process in development. i know that it has been slow for our stake holders and partners but i think that we have arrived and we are going to move forward and i think that it is very exciting so on behalf of the commission we commend you all for the hard work and i also want to say that we know that the model that we have put together for the project is new, different, than what the number is for. and i think that it is precedent setting and it is a model that may not apply exactly the same to all of the other future projects but i think that it is very important that we set this project on the right for the foundation so that as we go forward, the other projects that are coming down the road that we have a really good guide post on how we are thinking about the development >> in the short term and the long term and we want to thank

the giants for working on this as well as the port staff and i think that the relationship with the mayor's office has turned out. i think very well, and i think that we are very pleased to see that. thank you. >> thank you very much and thank you for your continued guidance on this project. >> item 12 a. informational presentation on the port's five-year financial plan for the fiscal years 2013-14 through 2017-18. >> good evening, commissioners, elaine forbes, executive director finance and 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 les