>> good afternoon, everyone. welcome to the san francisco board of supervisors budget and finance committee meeting for wednesday, may 29th, 2013. my name is supervisor mark farrell. i will be chairing today's committee joined by committee members and supervisor john avalos, supervisor scott wiener and supervisor london breed. joined momentarily by chair supervisor eric mar. want to thank the members of sfgov-tv john ross and jeff as well as the clerk of the

committee mr. victor young. mr. clerk, do we have any announcements? >> yes. please silence all foexctiontionv and electronic devices. completed speaker cards and copies of any documents to be com included as part of the file should be submited to the clerk. items acted upon today will be on the june 14, board of supervisors agenda unless otherwise stated. >> thank you very much. mr. clerk, can you please call item number 1? >> item number 1, hearing to receive an update on the port budget for fy's 2013-2014 and 2014-2015. >> okay. so, we have a hearing, port budget update. we have the executive director of the port, ms. monique moyer, thank you very much for being here. >> thank you very much, mr. chair. for the record, monique moyer for the port of san francisco. i want to thank you for carving out time for all the items today. we hope to be succinct as you need us to be, [speaker not understood], but we appreciate the time. i also want to thank the

campbell and the [speaker not understood] for the amazing amount of work she's doing for us, [speaker not understood] and the mayor's budget office. i think i said that backwards, budget analyst and budget office respectively for all of their help. very quickly, we have -- are on the second year of our two-year budget and we just have a few items to make changes to which fall within the required 4%. and, so, i'll walk through those in just a second. to recap where we're headed as a port, we've strategic plan that i've identified, five priorities, for the record those are to preserve industrial and commercial maritime tenants and uses as we've been doing a lot of studies to determine that. we did provide some very unique economic benefits and utilizations by the fact we're on water and we'd like to be able to continue to do that under our port hat, if you will. we also are very keen on making sure we retain space for pdr space and nonprofits.

pdr are production distribution repair. you may recall that the eastern neighborhoods plan relies heavily on port property to meet the city's needs. so, an example of that we have aggregate plants on port property. the aggregate is shipped in from canada primarily, turned into concrete and used throughout san francisco. if our plants were to go away, they'd either have to find another home within the eastern neighborhoods or we'd be trucking in concrete from across the bay or down the peninsula. so, we find that some of those uses are critically important and we're highly populated by nonprofits who find the warehouse space to be important to them. the thing that most people know well about is our attempt to rehabilitate [speaker not understood] our infrastructure. there are 39 piers, we've been able to reha bill tate 11 of them in the last two decades. that is an ongoing process that will take us much more decades no doubt. more and more we're starting to focus on our seawall.

we participated in a lot of studies regarding sea level rise. we are doing some projects anticipating sea level rise such as the brannan street wharf. we're also focused on our seawall. with each of the redevelopments we've done we've been able to rehab the seawall in those sections. the seawall was built over 100 years ago and it was built in 42 segments. so, we see that as a major project going forward which will take us out probably the next two decades. and then lastly, financial stability is always an issue for the port. we've derived our revenues from the broader economic market and when the marketplace is up we go up. and when it's down, we go down. so, making sure that we have a diverse group of tenants that can maintain us through low times and high times is important since we don't receive any general fund of fundsing, and i'm sure none of us would like to see that happen. in keeping with the rest of the city, we've been doing a ten-year capital plan since

2006. i think we were one of the first departments to do that. our plan this year shows a need of 1.6 billion in deferred maintenance and a possible plan to finance for that deferred maintenance of about a billion dollars which leaves us about half a billion dollars short. that billion dollars relies on a pretty good investment from the port itself, a little north of $100 million, as well as a pretty significant investment from our tenants and from proceeds of infrastructure financing district switches, different legislation that's been before you previously. we're also doing a five-year financial plan in keeping with the city's requirements and that has been very helpful to us in keeping us on track for our priorities such as building the new cruise terminal. it also showed us that our operating expenses are predicted to rise faster than our operating revenue. that's been the port's history for a long time now. that's always a challenge for us. and that doesn't leave us with

very much money to do minor repairs and replacements which would even just keep us able to earn our revenue. so, this fiscal year, the fiscal year we're just concluding, the port commission asked us to create a policy whereby they would like to see 20% of our operating revenues dedicate today capital improvements. and how we do that is by generating surplus between revenues and expenses. 20% is a pretty big number for us in addition to having a 15% operating reserve. and, so, we are stretching to do that. but looking forward that means that we will have to have some difficult policy decisions to make sure that expenses don't outstrip the ability to generate capital. so, we're just in the beginning throes of that policy. we're able to make it this year if you approve our budget adjustment and we're looking forward to seeing that the next couple of years. with respect to where we've been, operating revenues are starting to grow again at a

positive flip, but then so are operating expenses. so, as i have mentioned, we are kind of keeping an eye on the delta between operating revenues and operating expenses, we call surplus and that's what we have as investment for our capital needs the following fiscal year. again, very important for us to keep an eye on. in terms of how we receive our money, this primarily comes from commercial real estate leases. we have over 550 commercial real estate leases. most of them are with small businesses. a few exceptions are the san francisco giants and pier 39 and the ferry building. but most of them are with sole proprietors, so very small businesses. then we also get about 21% from our maritime activities. we are in every maritime market there is, except for the movement of containers. sometime ago we made a decision not to subsidize movement of containers and leave that to the port of oakland, but that keeps us in 11 different maritime operations. and then, of course, we rely on

fund balance, i.e., surplus. in terms of expenditures, personnel is our highest cost followed by work orders, services we procure from other city departments. and investment in capital and then, of course, administrative and debt service needs. so, we are proposing a fairly dee minute miss change to our budget by 4%. we are proposing to ~ amend our budget by $3.8 million. that represents some added surplus that we hadn't forecasted when we did the budget two years ago. 800,000 of that would be for payment of principal and interest on new debt that we'd like to issue to help pay for phase 2 of the cruise ship terminal, and some other revenue generating and property improvements. and then we like to take the surplus cash to be able to meet our 20% policy requirement, bringing our total investment

in infrastructure to 16 million for next fiscal year. >> so, ms. moyer, how realistic do you think 20% is? >> i really think it's a stretch. if you go back to this slide, you can see that a fair number of our expenses are fairly fixed. so, you have -- if you took personnel and debt service and potentially work orders which is personnel of other departments, those are pretty fixed rates. but debt service a fixed rate hopefully, but the others as we know salaries and benefits keep growing. so, that means that we have to either cutback in our administrative operations or we have to cut back in our capital. those are our only two line item. historically we've cutback in capital. but the problem is our properties are getting more and more challenged as we get more and more older. that's not very articulate of me. as they get older. and it's become a very big concern. making sure that we have good

exiting or nonleaking roofs, one roof can wouldthv $3 million to repair. it's about an eighth of a mile long. that's -- one apron can cost $3 million to prepare. that's a good number. these are big numbers we're talking about. in terms of our supplemental capital funding, the next slide here shows how the $3 million would break out. again, 800,000 towards debt service for a couple of different uses, and then just plain cash investments. i'm sorry. and primarily these are the amendments we would like to make. we have a capital line item called pier structures repair. we like to bring some of that down to create some surplus for us and then we'd like to invest a little bit more in our a-d-a transition plan so we can continue to try to bring our 100 plus year old facilities into more modern a-d-a. improvements, we're looking to repair portions of the pier 35 roof. pier 35 is our secondary cruise

ship terminal beginning the following fiscal year. in this fiscal year it's actually our primary cruise ship terminal. and then that brings us to a total of 14 million all in in investment and capital projects. so, you can see here are a couple of pictures of what we would like to do. the pier 35 cruise terminal roof, some substructure repairs over at pier wharf j-9 which is where the restaurant is and the harbor services. and then we have a number of pile projects including some mandatory projects through our permits through the cruise terminal and for the america's cup that were part of our negotiations with the bcdc, the bacon certification and development commission. and that concludes what i wanted to present. be happy to take any questions you have. and i neglected to say that we completely agree with the budget analyst and thank him for recommending approval of our modifications. >> all right, thank you.

so, colleagues, we will hear those specific items and budget adjustments further on in this committee meeting. are there any questions for ms. moyer in terms of overall budget update? okay, thank you, ms. moyer. appreciate it. thanks for your time. at this time we'll take public comment on item number 1 if anybody wants to publicly comment, please step forward. okay, seeing none, public comment is closed. [gavel] >> colleagues, we've had this hearing now. can i have a motion to table item number 1? motion to do so, can we do so without opposition? owe can i, so moved. [gavel] >> thank you. mr. clerk, can you please call items number 2 and 3ed to thetion? >> item number 2, ordinance appropriating amended estimated receipts and amended estimated expenditures of $3,$857,224 for the port of san francisco for the fiscal year ending june 30, 2014. ~ together item number 3, ordinance amending ordinance no. 165-12 (annual salary

ordinance fy's 2012-2013 and 2013-2014) to reflect the addition of 7.0 positions (5.39 fte's) in class 9330 (3.85 fte's, pile worker), 9331 (0.77 fte's, piledriver engine operator), and 9332 (.77 fte's, piledriver supervisor i) in the port of san francisco in fy 2013-2014. >> okay, thank you very much. these are the items that were alluded to earlier. who from the port wants to come up and talk on items 2 and 3? >> good afternoon, supervisors. aileen [speaker not understood]. as executive director moyer laid out our [speaker not understood] to do two things. to fund capital, to provide additional sources to capital and debt service for the phase 2 cruise ship terminal project. the addition of positions is to add a third pile driving crew.

we have a backlog of deferred maintenance in some of our pier structures that are wood pile supported and we learned through the america's cup improvements that our own staff performs the work at a lower cost than through doing -- than for contracting out for the work. and, so, i'd like to add this third crew, which would be a project funded capital funded crew to address our backlog and the crew would go away once our backlog is addressed and we think it's a good efficiency for the port and it will really help us to deal with structures like j-9, some apron repairs for public access, et cetera. so, as i said, it's a very small change to the budget to add new sources for capital which is our critical need at the port. >> okay, thank you very much. colleagues, any questions for ms. forbes? okay, thank you. we have a budget analyst report for items 2 and 3. mr. rose? >> yes, mr. chairman, members of the committee. on page 4 of our report, we

point out that as shown on table 3, this request would increase the port's capital project appropriation by a little over $3 million, specifically $3,0 57,524 to [speaker not understood]. and those projects are included in the port's capital plan. we concur with the port's request on both -- on the capital projects. the debt service that is being requested as well as the 7 off line or off budgeted amendments. we hope you would approve this ordinance. we would be happy to respond to questions. >> thank you, mr. rose. colleagues, any question? seeing none, we'll open this to public comment. if anybody wish toes comment on items 2 or 3 step forward. seeing none, public comment is closed. [gavel] >> kiloton, can i ask for a motion to a move these forward to [speaker not understood]?

motion by supervisor avalos. can we do that without objection? [gavel] >> so moved. thank you very much. mr. clerk, can you please call -- we're going to do item number -- because mr. rose, we talked to you. we're going to do item number 4 first separately because we have a separate budget report. can you call item number 4? >> item number 4, resolution authorizing the executive director of the port of san francisco to execute an amendment to the contract with kaplan, mclaughlin, and diaz architects, and pfau long architecture, a joint venture, for architectural and engineering design services for the pier 27 james r. herman cruise ship terminal and northeast wharf plaza project at pier 27 to increase the not to exceed contract amount by $1,541,708 from $9,950,000 to $11,491,708 for the period of november 10, 2009, through december 31, 2014. >> okay, thank you very much. ms. forbes? >> good afternoon again. charter section 9.1 18 requires that the board of supervisors

approve design service contracts in excess of at or in excess of $10 million. kaplan mclaughlin architects [speaker not understood] were selected through a competitive process for design services on the cruise ship terminal back in 2009, november of 2009. the contract has been amended five times through dpw as the project progressed. the final proposed -- the final and sixth amendment would increase the contract from 9.v 95 million to 11.[speaker not understood] million triggering board of supervisors approval. this is included in the proposed cruise terminal budget. the budget analyst has looked at the contract and the reason for the changes ~ and finds them to be reasonable. and the additional contract will be used for phase 2 -- the amendment will be used for phase 2 of the cruise ship terminal project so we request that you approve -- you authorize our executive director to execute this final amendment.

>> okay, thank you very much, ms. forbes. colleagues, any questions? okay, we have a budget analyst report. mr. rose, item number 4, please. >> mr. chairman, members of the committee, on page 9 of our report, ms. forbes referred to table 4 of our report where it shows the increase going from 9.95 million to [speaker not understood], increase. and as ms. forbes stated, we believe that these requested increased expenditures are reasonable. we recommend that you approve the proposed resolution. >> thank you. mr. rose, as we discussed before, these were anticipated adjustments that were anticipated long time ago in the initial contract was signed? >> correct. >> thanks. colleagues, any questions for mr. rose? or staff? okay, we'll open it up to public comment. anybody wish to publicly comment on item number 4, please step forward. seeing none, public comment is closed. [gavel] >> colleagues, can we have a motion to move item 4 forward to the full board? we can do that without

opposition. [gavel] >> mr. clerk, can you please call items number 5 and 6 together? >> is that for the june 4th meeting or june 18th? >> june 4th meeting. >> thank you. item 5, resolution authorizing the issuance of not to exceed $25,300,000 aggregate principal amount of port revenue bonds for the purpose of financing capital improvements related to phase ii of the james r. herman cruise terminal project located at pier 27 and for improvements to northern waterfront historic piers; authorizing the port to cause the preparation of such documents necessary in connection with the issuance of said port revenue bonds; stating the official intent of the port to reimburse itself with tax-exempt bonds for expenditures made or to be made for the acquisition, construction, or improvement of the project; authorizing the port to borrow funds on an interim basis from the city's commercial paper program; and related matters. item number 6, ordinance appropriating $34,722,930 consisting of $25,265,500 of 2013 port revenue bond series a and b proceeds, $849,680 of interest earnings, $6,445,220 from 2010 revenue bond funded projects, $1,689,074 from 2012 certificates of participation series b funded projects and $473,456 from port capital funded projects to the port commission in fy 2012 - 2013 for the development of the cruise terminal project at pier 27 and the northern waterfront historic pier structures repair project. >> thank you. ms. forbes, welcome back. >> thank you. good afternoon again.

the port has completed phase 1 of the cruise ship terminal, the james r. herman cruise terminal at pier 27 and is putting in place financing necessary to complete phase 2 of the project. first, the port looked to all other available sources before proposing new revenue, port revenue bonds and the port is also requesting a reallocation of existing taxable debt to taxable projects in the northern waterfront which i will describe. items 5 and 6 allow us to authorize newport revenue bonds and allow us to on an interim basis utilize the city's commercial paper program. and item 6 is an appropriation ordinance of 34.7 million of which 25.3 is new rev nigh bond funds is 9.4 is reallocation. these sources are intended for two purposes. face 2 of the cruise terminal and northern waterfront historic pier projects. the reason for bringing these

items now is in advance of having the pos and sale documents is to keep the cruise terminal schedule so we can award big contracts. so, that is the purpose. we'll be back in the fall with the request for sale. just a bit about the facility. as you know, it was completed. phase 1 was completed february 28 of this year. the event authority is using the facility now as the america's cup village and will do so until october 1st. phase 2 of the project consists of building out all the maritime improvement, the park, northeast wharf tip, ballards provisioning et cetera to make it a functioning cruise ship terminal which is its primary purpose and then we'll begin to see about 200,000 visitors to san francisco through our cruise lines. it's a 9,000 square foot building. it's got a large gta, 2-1/2

acre park plaza and a tip at the end. so, it's quite a large facility. we already talked about the design services. in terms of the budget for the project, it was phase 1 cost $66.31 million. total project is estimated to cost 112 million, but we added a 2 million dollar contingency to manage project risk in the budget analyst report. this slide shows phase 1 ask title 1 and 2 project costs [speaker not understood]. the budget analyst report notes that we have all the appropriations for the project, but 23.78 million. the supplemental before you would make that final appropriation. other sources for the project are varied and it's been great for the port to have support in building this project.