commitment that the organizing committee would endeavor to raise $32 million that would offset what the city would put in to support the project. we know the organizing committeev, for many reasons that will be discussed today, has not actually lived up to that promise. we've been told now and i would agree that our event of the america's cup is not as big as we expected it to be so our costs will be somewhat less. that could actually a leave -- alleviate the pressure to raise $22 million. what i'm concerned about today is since we've only raised maybe $13 million, i'll get a report from the controller what's been raised to date, we actually don't have to raise that much more money because we're going to use the revenue from the overall economic impact from the america's cup to actually pay for the effort that will replace what we're expected to get money raised

from the event. that to me is not what we had expected to see moving forward. we would actually expect that the city would live -- the organizing committee would live up to its commitment even if they use the word endeavor to raise money to offset general fund costs. so, we have money that's coming in from revenue. that can get siphoned back into our overall general fund that could actually move towards benefits for perhaps the port, perhaps for downtown, but also for our neighborhoods, for park, for streets, for public safety. those are things the general fund generallies covers. so, this hearing will cover these two big topics. ~ i want to make sure we give ample time for the fund-raising effort. we'll be doing that at the end. i want to actually start off talking about the efforts around prevailing wage, local business enterprise and participation and local hiring. so, i'd like to first before calling in our departments of

economic workforce development, olic, i'd like to have mark provide an overview about some of the commitments that were made from the america's cup side and the port, and then we'll get into the meat of the hearing. [speaker not understood]. >> good morning, supervisors, mike martin, america's cup project director and the office of economic and workforce development. very happy to be before you today and supervisor avalos, i want to appreciate the way you framed the hearing. i think it's exactly right. certainly we want to show both

to the people in this room and the city that we are living up to our commitments and looking ahead to this year's events that we're able to do an even better job of bringing home the economic benefits and the social and sort of a broader, i guess, san francisco image benefits of america's cup. you know, i think my team remains very excited. and as do all the people who work with in city government and the event authority to put on a first-class event. and it starts here. it starts here with how we're paying for it. it starts here with how we're bringing jobs and opportunities to local businesses and local workers. so, i'm going to do a brief overview of sort of how we got to today. but in the timeline since december 2010, then i'll hand it off to representatives from the off to you from here. thanks. can we have the slides up, please? so, to begin, in december 2010

as described by supervisor avalos, san francisco was selected as the host city for the 34th america's cup and its related rigattas. included was a host and venue agreement which was an agreement that outlined the roles and responsibilities of the city, the america's cup organizing committee as a local nonprofit corporation formed to support the city's efforts in hosting the events, and the america's cup event authority which is the private entity that is basically the project sponsor in this case. i realize that those names and that alphabet soup sort of get confusing so i just want to emphasize the event authority is the entity, the organizing authority is the local nonprofit. in december, that agreement before i move on, that agreement obviously required us to pursue approval under the california environmental quality act before we could actually agree to proceed with the project. that was something that was very near and dear to everyone's hearts to make sure we do this in the san francisco

way and really address all of the potential impacts. we had a very intensive effort over the course of 2011 to pursue this c-e-q-a clearance. we did have the final environmental impact report certified the end of that year in december. and then we moved on to approval at the board of supervisors. as many here recall, originally there was a set of approvals that included a long-term developments arrangement with the event authority. that arrangement was not finally approved and we sort of recast the agreement as more event focused with the port of san francisco carrying out a number of the capital projects to host the event at the port venues. and that's the agreement that was brought back to the board of supervisors in march of 2012. that agreement attached the workforce development and small business inclusion plan that will be the focus of our attention today and, therefore, that agreement sort of becomes

binding on the parties with the execution of that lease disposition agreement. so, the parties -- that approval included a delegation of authority to finish off the lead disposition agreement including some issues that we still had to negotiate around the security for the performance of the activities. obviously with the complex project like this that had sort of changed role and responsibilities. we had to similarly change the roles and responsibilities for who was securing who for what construction work, for example. those negotiations proved difficult. we were basically seeking an insurance product that was very much a one off because not many people have to host an event of this kind. and eventually the realization came to all the parties that we weren't going to achieve that particular piece of a delegated authority. so, what we proceeded to do was on august 14 of 2012 we negotiated a lease disposition agreement that specifically set forth that the security provisionses would have to be reapproved by the board of

supervisors, and it was the execution of this agreement that brought all of the other pieces from the board approval into play including the workforce plan. shortly following that august 14th agreement execution, the event authority moved quickly to set up for and host the august america's cup world series events from august 21st to 26th. because of this timeline, i just want to point out a couple things that are important for the hearing to follow, we did not have the lead time to get out ahead of these issues with respect to small business inclusion and the local hiring and the workforce plan. it's certainly not an excuse and it's only an explanation to say i think this year we have a much longer runway to do things appropriately and we're hopeful this hearing will help us really layout what that work is going to look like. so, moving on, about five weeks later after that first event, we held a second event from

october 2nd to seventh, that was the second america's cup world series rigatta. also september 2nd the board approved the provisions before the lisa disposition. at that point we had a finally approved agreement. again, october 2nd to 7 i think fleet week and other events, but really gave us a really good test of all of our operational plans and part of why i think i can express a great deal of confidence about the work that's gone into the budget projections with you later in the hearing. moving on from the october events, as i mentioned earlier, a key provision of the new lease disposition agreement was the port of san francisco constructing the improvements at piers 30-32 that was originally part of the long-term development arrangement that was not pursued. the port of san francisco always had the responsibility on top of that to construct the pier 27 cruise terminal. i'm happy to report that both of those construction projects

were completed by their deadline of march 1st, 2013. again, i'll come back to this later in the budget hearing, but that was a key issue because, as the supervisors know, when we came back in october, one of the risk management approaches was to basically self-insure for certain risks associated with those construction requirements. and at the same time purchasing extra insurance on other risks. so, that strategy has paid off and i think -- i really want to thank the port, dpw for their project management skills as well as turner construction for achieving that. looking ahead, what we have in front of us is the cup challenger series from july 4th to september 1st, 2013. followed by the america's cup final this september. so, right now we are very much in the stages of ramping up our efforts and really forming our plan based on what we expect for this year and i'll talk more about that later in the hearing. so, with that i'll sort of stand down and move on. >> okay, thank you, mr. martin.

next i'd like to call up donald levitt from the office of labor stands enforcement. my office has been working with the office of economic workforce development, with labor unions, with small businesses, community groups, all to make sure we're maximizing what we can in terms of the benefits for local residents and small businesses and for workers. we've actually found that through thea departments that there have been violations, violations of prevailing wage, violations of the first source agreement, and violations of the workforce plan for local business enterprise participation. i know mr. martin talked about a lot of the -- there was a lot of lead time that the office of economic workforce development had in order to put in place the standard for these programs for prevailing wage first source and local enterprise business participation. but i'd like to say we knew all

along these were going to be things we wanted to do as a city. we made a commitment we would have the highest stance possible for these types of programs and we didn't live up to them when it came to that happening last year. so, donald levitt is here to talk about her findings, findings of the office of labor standards enforcement and i'll cede the mic to you, donna. ~ >> good morning, supervisors. the office of labor standards enforcement conducted an audit of the america's cup world series events after receiving a complaint from carpenters local 22 that alleged that employees who were installing bleachers were not being paid the prevailing wage rate for the work they performed. on the day we received the complaint, august 27th, we went on-site, observed the work, and interviewed employees.

we then reviewed the lease disposition agreement, [speaker not understood], small business inclusion plan provided to us by the office of economic and workforce development, and determined that there was a prevailing wage requirement for the temporary structures that were built on marina green for the events. the lease disposition agreement contained a workforce development plan that provide, and i'll quote from the plan. when the event authority enters into these venue lease agreements, it will follow all of the standard provisions for prevailing wages that are included in the lease agreement and agrees to extend those terms to construction trade work at any stage of erection, construction, renovation, alteration, improvement, demolition, excavation, or installation including the installation or erection of temporary structures including but not limited to scaffolding,

staging, or the installation of bleachers or tents. it goes on to say, the event authority contracts shall require the contractor and any subcontractors to pay prevailing wages set by the city and county of san francisco under san francisco admin code section 6.22 e3 for each of the aforementioned job classifications. compliance with prevailing wage requirements including certified payroll records shall be determined and enforced pursuant to california labor code section 17 20 et seq. each contractor and subcontractor shall employ apprentices at rates specified in the california code section 17 77.5 from a state adjoined apprenticeship program.

the olse relied on the office of economic workforce development to interpret the intent of the scope of work from the workforce development plan as to what work was subject to the prevailing wage requirements. and in the beginning of october , there was a determination that vertical construction of the temporary installations including bleachers, stages, tents, scaffolding, flooring and electrical lighting and av equipment associated with thats was covered by the prevailing wage requirement. the plan also expressly exempted from the payment of prevailing wages all construction buyer for sponsors and individual team facilities. we relied on the prime contractor hartman studios, for a list of some subcontractors who worked on the events and we

audited eight first and second tiers subcontractors who performed covered work. other than hartman studios whose signatory was iatse local 16 and is familiar with the city's local prevailing wage requirements for theatrical workers, and other than safeway scaffold who is a local construction contractor, the subcontractors who performed this work are not construction contractors who are familiar with prevailing wage laws. these are events staging companies. >> is the language that we had in the agreement, though, was that standard prevailing wage language? >> no. it referenced the prevailing wage requirement of the admin code, but not the other provisions of the admin code that pertain to how we enforce prevailing wages on a public work. and it then went on to say that enforcement would be pursuant

to the labor code. the labor code provides for the state labor commissioner to enforce. the state labor commissioner is not going to enforce a prevailing wage requirement on a privately funded san francisco project. so, the language could have been better. >> how was that language crafted? how was the process, was olse part half? >> olse was not part of that. ~ so, we requested payroll documents including time cards, check stubs from all the contractors as part of our audit. neither the event authority or hartman would provide olse with a copy of the contract between the event authority and hartman, which was confidential. but both parties agreed that if it contained the prevailing

wage requirement. ~ that it contained none of the subcontractors we spoke with at olse informed hartman of the prevailing wage requirements. none of the subcontractors maintained or kept certified payroll records or hired apprentices for the work. the audits were difficult because most of the subcontractors did not keep track of the hours worked specifically on this project. and, so, they had to reconstruct to the best of their abilities who worked when . some sent in estimates. some attempted to reconstruct the dates and the hours worked by which employees. and because certified payroll records which would show the name of each employee, the hours they worked on this project, the hourly rates paid

on this project were not kept, olse relied on the best available information provided by the employers and provided as part of the interviews we conducted on the one day we were on-site for our audit. ~ >> typically, what do you have in place that would prevent this from happening that you would have the contractor and subcontractor know exactly what they're supposed to do to follow prevailing wage rules? >> typically on a public works project there is a prebid meeting and a pre-construction meeting. and olse tries to attend one if not both of those meetings. and where the contractors are informed that were available to answer any questions. so, on the front end any questions about the correct prevailing wage rate that needs to be paid or even in this case

how to complete certified payroll records, which generally public works contractors know, but these contractors didn't would have been answered. >> quick question. first of all, thank you for being here and for talking about this. so, you talk about public works contracts and this was different because it was private. have you been involved -- how many other private developments have prevailing wage in the city before? >> prevailing wage is usually included by the port for projects that are privately funded but are built or worked on on port property. the same is true of treasure island. there are a couple other examples that i can think of,

maybe properties that the city leases, but work is done -- that's a little different. the work would still be publicly funded, but on private property. and then rec and park sometimes has privately funded like friends of the park who will fund some improvements in the parks. so, there are some unique situations like that where the city intends to or requires that prevailing wage be complied with even though the funding is private and sometimes it's on private property as well. >> i guess what i'm trying to get at, it seems like there were issues before. your audit caught that. i guess i want to hear about the remedies going forward.

but i think to the extent that wouldn't it be great if we saw more prevailing wage on private -- on private developments that happen going forward as a city. how do we make sure the city inserts itself early on like you're talking about doing in public works so there are no issues here and we don't have to do an audit going forward? that's what i'm really trying to get at. >> i totally appreciate that, supervisor. and i have been working with the city attorney's office to craft the strongest language that we can so that the intent to require prevailing wage is actually enforceable. and there have been situations where our office has done an audit related to work we just discussed, but we weren't able to enforce it because the language wasn't tight enough. >> so, my concern is that it was part of the agreement that we were going to do that. we should have the mechanism in place to make sure that it's

carried out. that ball was dropped when it comes to that. my concern about doing this, we came -- this project came to the board with a blank slate and through the public process, there was a lot of discussion about how we're going to live up to certain commitments around standards, around jobs, and public inclusion and we did not live up to those standards. so, this hearing is really to right the ship and to make sure that we're looking back and looking forward to making sure we're doing it right. >> supervisor avalos and through the chair. thanks, ms. levitt, for raising these issues. since the carpenters raised the complaint, i think it's been mentioned that $400,000 of back pay has been owed, that's been reported in the media. is that the amount that's owed for the subcontractors that didn't pay the prevailing weighingv? >> -- wage. >> so, there is a chart if we can bring it up. there we go.

>> and when will the carpenters or the folks that did that work be paid their back wages? >> okay. so, this chart shows the eight subcontractors who were audited the amount of back wages that is owed by each, the back wages total $400,455.03. the amount that -- so, prevailing wages include a basic hourly wage and fringe benefits. one of the fringe benefits is an apprenticeship training contribution. that doesn't go to the worker. that goes to an apprenticeship on a public works contract. that would go to an apprenticeship program or the state of california apprenticeship council. that amount totals $3,99 6.29. ~. i'll get to your question if i

may, i'll review a bit about the audit procedure. >> okay. >> okay. and as a follow-up to chair farrell's points, i really want to know who is responsible for ensuring that this doesn't happen again? is it the event authority? and as a so-called private project, it seems to me like it's more of a public and a private project given the port's involvement and i'm just hoping where your stadium or other projects like this that we're looking very, very carefully so that the workers are paid the prevailing wage if that's been the part of the agreement and that we don't have this happen again. especially given the number of jobs that are still to be involved in the build out in the project, but yeah, this is very troubling but i'm really appreciative of the information that you've given. >> the back wages are owed to a total of 113 employees. the amount of back wages owed

is quite high for events of this short of a duration because the hourly under payments, that is the difference between the actual amount paid and the required prevailing wage rate were very significant. for example, the prevailing wage rate for a carpenter who installed bleachers is about $64 an hour. that's the wage and hourly fringe benefit amount. and the three contractors who did this work paid no more than $27 an hour. prevailing wage laws were created to protect local businesses and local workers from unfair competition from out of area employers who would undermine local wage standard and destabilize local economies. unfortunately the america's cup world series events demonstrate how this can happen. the audited subcontractors included companies that are based in virginia, pennsylvania, louisiana, texas, and san diego. three of the eight

subcontractors failed to even pay the san francisco minimum wage rate of 10.24 an hour to some employees. employees worked long days and some contractors paid over time only after 40 hours a week, not the daily overtime of time and a half after 8 hours or the daily -- the overtime -- double time after 12 hours as required by california law. and contractors also failed to pay the weekend overtime rates that are part of the prevailing wage requirements. the olse findings were presented to the event authority and to hartman studios on february 25th and hartman promptly accepted responsibility for ensuring the payment of all back wages owed by each subcontractor. >> are there penalties applied as well besides pay back wages?

>> in our calculations, we followed the provisions of the workforce development plan and we applied the labor code penalties. we applied both the prevailing wage penalties which in this labor code -- >> it's very difficult. >> the state labor code can range from $40 per worker per day to $$200 per worker per day. the commissioner makes a judgment on the -- based on whether it was a good faith semis -- mistake, whether it was a first-time violation. we use the $40 per worker per day and we use the $25 per worker per day penalty provisions from labor code 18

13 for the overtime violations. ~ and that's the calculation that we use to estimate the cost of the city's enforcement efforts. an m-o-u was signed on march 6th that provides a framework and timelines for the payment of the back wages to the workers which will be monitored by the olse. the m-o-u also provides for payment of the apprenticeship training funds to the oewd to be used for apprenticeship opportunities in san francisco. >> is that oewd and the authority? >> the event authority hartman studios and the olse. >> olse. >> all parties are committed to ensuring compliance with prevailing wage requirements on the upcoming america's cup main event this summer. the event authority has been informed that the olse is

available to answer any questions that bidder may have at this point regarding the prevailing wage requirements. and the oewd will provide a pre-construction meeting with olse and the contractors to review the applicable prevailing wage rates before any work begins. while it's challenging to apply prevailing wage rates and prevailing wage requirements to a privately funded temporary event of this kind, it can be done and our office is committed to making this summer's events a success. >> thank you. do you see the penalties, they actually will or will not be levied? >> the penalty discussion is, as i understand it, is still ongoing and we're hopeful that there will be some compensation to the city for our enforcement costs. >> okay. thank you very much for your presentation. i believe [speaker not understood]. >> thanks again, donna, for being here. i guess from