2k5u7b9ing challenges i'm not talking about earthquake from the gold rush to the building of railroads through wars and lib ration movement the story of san francisco is one of rapid spurts of growth. it's a story of new industries and steroids that brought people more than most places santa fe san francisco has represented. over the time we grew west and south turning cemeteries and a sand dunes like the western edition and the sunset. today, we grow in places like the shipyard and the new transbay district or along our waterfront like pier 70.

whether it was the irish who come to pan for 0 gold or the african-american who came to work in the shipyard or latinos with who fluid for work or lgbt 0 who came seeking freedom each new wave of newcomers has come with this tension but my fellow san franciscans our city hasn't been a postcard frozen in time never been a city to slam shut the doors of opportunity to those who came after us when we tried to stereotype a group of people they've been the ugliest chapters in our city. so today as our population again grows in numbers and our skyline

groups i call b upon us to grow as well. my friends keeping this city a place for everybody to live whether you've been here or 60 days it's a challenge we must confront together. so as unthinkable it was mr. king who said it best we may have come on different ships but we're in the same boat now. it's a challenge we must confront by insuring every san franciscan that can work has a job. it's a challenge we confront by assuring every san franciscan is a afford to stay here it's a champ we confront by improving our schools and transportation

system and keeping our streets safe. we're one city but we celebrate the success of all our resident and we share in the responsibility of those who are left behind. it's that same city that thousands will come up or come out to support a kid who soufrd from cancer and was bat kid. to find new opportunity i say get involved. you're now part of this city and must be part of the solution. acknowledge our impact and make it a good one that were understand that the homeless man you see sleeping in the doorway thought at one time was inevitable too but you may also

one day find your that way. help clean up our local park and respect the history of those who were here before you break bread with your neighbors. because it turns out san francisco changes us more than any other group of new conforms will ever change san francisco. it's the opens our ideas and new ways of thinking it makes us special and at the cutting-edge if not more so than the late. my fellow san franciscans we've come a great distances and there's still too many in our city owe too many we have to help to insure this will be their city as well our work is

far from done. nelson mandela taught the world a thing about bringing up people together and reminded us that after climbing a great hill one only finds there are many more hills to climb and we may take a moment to rest and look back at the distance but only for a moment we have responsibility we dare not linger our long walk together is not ended. let's go forward together in 2014 and keep the state of the city vitality and strong and insure that san francisco remains a place where everyone can afford to call home. thank you and go this is

looking more particularly at the submarket that is affected western so soem a. here you see a calculation for western soma $50.33 a square foot. this transaction is now at $38.50.

for class a. all spaces at 45. so no matter what metric you choose, this is a favorable transaction in terms of the dollars per square foot that the city has negotiated at this location. in case you did not catch that on the chat. -- chart. sometimes they are small. overall rate is $59.01 citywide. we have an allowance provided by ownership here. in the amount of $24 million coming directly from the landlord. the actual cost to prepare the space for retirements needs will likely require another $1.1 million. that is addressed in the lease.

we do have options on how we want to deal with that at the time that the final true up numbers of cost of tenant improvements are before us later this year, the next fiscal year in 14-15. we can pay that amount at once. we can choose to roll that into other debt services items that we may have before us at that time or we can have the landlord act essentially as a bank for us. the cost of money is a little bit more expensive and the agreement is negotiated at 8 percent but we at least have the ability to amortize that $1.1 million over the initial term. also provided back fill plans for the space that retirement would vacate from 30 van ness as we have additional space pressures at the department of public works and recs park and where they have also staffing increases and frankly no where to put them.

this affords us the opportunity to put additional training space within the vacated third floor of van ness, it's a portion of the third floor. it's pretty well articulated in the budget analyst report. i'm pleased to be joined by the director as well as director maker. if you have any questions about the programs, we are here to answer any questions. >> thank you. why don't we go to mr. rose's report. can we go to your report, please? >> yes. mr. chairman and members of the committee. i would note on page 20 as mentioned and he's absolutely correct that there has been a significant increase in staffing. as a matter of fact on page 20 we point out that the staff has gone up 59.8 percent or 36.46 from 61.97. i

would point out to the committee that the staff is there. there is not a question of more staff, of course the department will get additional staff in each year, but i do want to know that the staff, the big increase in staff has been in this space. and we are not questioning in fact, we are making a recommendation to approve this lease based on the recommendation that it's over crowded. i simply want to mention to the committee that the staff is there and have been operating this space. >> just on the staffing, do you have the staff that came on over the years that was between 1999 and the present that we gone from 62 to over a hundred. i see in your report to 7 staff. did the majority come on

in the last couple of years or over the last 10 years and maybe 5 years ago we saw the highest level of staff. >> we have not made that analysis supervisors. i think the department can respond to that. on page 21 we point out that currently the employee's retirement system, $524,000 of annual rent at the city owned building at 30 van ness. in cable two, on page 21 of our report, the department will in accrues the s -- increase the office space by 60 percent. if you look at that table too, the annual rent is going up from $524, 317 to $1 million.

finally the square footage is going from 24,000 to 79,000 square feet or a 60 percent increase. on page 22, regarding the tenant improvements as stated, there is about $3 million involved. about $2 million to be paid by the landlord and to be reimbursed by the city to the landlord. the landlord will do the work. it is our understanding in discussions with the department and the department at least has tentatively made a decision that they will pay that $1 million over 10 years at $162,000 a year which includes and 8 percent -- annual interest rate. if that resolution on how that's paid will result in a $1 million

$620,000 which is five plus interest when you add the 8 percent -- annual interest rate. finally supervisors i would conclude that based on the recommendation of the real estate division we are recommending approval of this resolution. supervisor mark farrell: thank you mr. rose. supervisor avalos? >> supervisor john avalos: yes. regarding staffing changes when we see the rising increase, what year did that take place and i really want to hear justification for this expansion in square footage for office space. it seems like a very significant increase and one i don't think i'm quite ready to approve. >> good afternoon, supervisors, first i would like to change

chair farrell and the committee for accommodating our schedule. we have a retirement board meeting at 2:00. we appreciate the opportunity for being here. first the increase in staffing in the area has been in the investment area, when we moved there in 1999 we were managing roughly over $10 billion, now we are managing over $18 billion. we had a management consultant come in and recommend a new structure for investment division which basically doubled and that was probably the single year where we had the highest increase in staff. and it was i think 6 fte specifically in the investment division. other than that it's been gradual as the city has, the voters have adopted programs, early retirement programs, those types of things. we have had to expand our capacity to serve the

public during periods where there were layoffs. we had to increase the customer service because as lay off notices were mailed out to nearly or all employees, those employees were called to us. i think it's been, i don't recall, i have been with the retirement system since 1999. i don't recall a year where specifically there was a specific or unusual increase in staffing except for the division that i reference. >> if you come back you can provide for us how staffing has gradually changed by division since 1999 when these numbers were first seemed to have the start of the change we are talking about. that will be worthwhile having and you mentioned your investment division as being where you had the largest single growth by year, 6 fte's. it's interesting because this past year we have

been working with retirement board or divestment from fossil fuels and the board of supervisors passed divestment and the entire board had given direction to the entire retirement board staff to provide information about engagement with companies and investing companies as well as report on how divestment perhaps could happen. that was the part that was supposed to provide for 60 days from the vote whiches in october. we are well past that time. if you have investment staff that have increased, they don't seem to carry out a real directive that is come from the retirement board to provide that information. i think that's something that has to get done

as soon as possible. i actually feel that when it's come to the retirement board responding to some policy direction that the board has offered, there has been a lot of foot dragging on what's going on with that, though it's a different matter, you overall talk about having an office space that will help you increase your capacity at the department and it doesn't seem like that capacity is being used as effectively as it could be given the directive that you have been given by your board and not following through on that. i find it inappropriate to provide this space given that information that your board has offered. what are your responses to that? >> i can assure you that the retirement department is work on the assignment in october. we are working to expedite --

>> it seems that everyone else is aware of that. >> i'm not aware of the 60-day that it was brought back to the board. we publically stated it would be brought back last year. we are participating in the seminar held by the 350.org group and we are prepared to bring that forward when the report that was requested is ready. i would suggest that i agree, it's sort of a separate issue. we have out grown the space. we are focusing on the public space and the ability to more effectively counsel and educate our members and clearly what you are referencing what follow up back to the board is in progress and part of the investment staff work product that they are working on and it will be brought forward as soon

as it's ready. >> i recognize it's a separate issue but we are talking about a lease for your department. if we are to approve an expansion that you carry out the will of your board. >> supervisor avalos again, i say that the critical need for space at this point is in the public area whenever we would have the ability to more effectively counsel and educate our employees. we are going to double this space to over 8,000 square feet for not the investment side but to provide better service to our clients. >> could you also tell me more about now this is like as the budget analysts pointed out on page 21 of it's report that we are seeing 60 percent of expansion of space. i understand over all that that is what you are saying is necessary in order to have

adequate counseling area, adequate space where people can work without being interrupted and more privately what they need to. but, i'm not sure if this space that you have that you are asking for is really what's really needed. i would like to see if you can come back with another estimate that's lower than this. the one that could actually achieve greater cost savings for the city. what are your thoughts? >> supervisor avalos, we have worked with the real estate division to come up with what we believe is an appropriate amount of space. i will give you an example. we have tried to expand our education and counseling services over the year and for an add sfrar ministrator program which is a cost to participants. under this new lease we would be able

to offer them that space to rent out for the customers to be able to operate with the side by side with the plan side of staff. the other issue we have tried to expand service for kiosk, we have no space for that at that location. as much as we can look forward to a move, we want to move into a space that will accommodate our continued growth and focus on customer service and empowering our clients. i will leave that, the space. >> you are in a current building where there are other city departments located, is that correct? >> that's right. >> i'm wondering what work was done to look at the current building? >> we've asked over the last 6 years if there is additional space that are even if it's apart from our main office floor. we added some space when

the department of ethics left the building because we needed to expand the space for our deferred comp program. we have non-adjacent space on the same floor but we have prior to becoming the executive director we have approached for any available space for that building to expand our operations. we have over the last 5 years been limited into what we can roll out and what we feel is appropriate to roll out for our customers. >> okay. if no other comments, i would like to say, i don't know where you want to go with this, i would like to understand more and speak and have time to have additional discussions about this. i'm open to understanding why this relatively dramatic amount of space increase is necessary and you are talking about the

programs that you are going to offer. we haven't had a chance to understand that. i would like to understand that from greater detail. as far as finance, this is more than doubling of rent. i understand it's the current market rate, but a massive increase per employee and maybe it's all necessary and valid and so forth. but from my perspective i would like to have more time to evaluate that. i'm happy, we are going to have to take public comment. if my colleagues have different thoughts, that's fine. supervisor john avalos: i would like to come visit the retirement board site. i have been there since 2008. i would like to check it out especially in light of the decision that we have before us. prior to approval of a lease. >> be happy to arrange that or you can just show up and say

that you are here to see the operations and the public area. supervisor john avalos: i will have the staff reach out. >> if it wasn't for the brown act we can do a field trip. i'm sure we'll be down there in the next few weeks. colleagues any questions? okay, at this point we'll open it up for public comment. anyone wish to comment on no. 5? >> hello committee. my name is jed hotels man, representing 350 san francisco. we have been involved in the fossil fuel divestment. as you are looking at space this is neither in support or opposition, just ask that you pay particular attention to the public meeting space. the meeting space currently for the retirement board meetings is very cramped.

usually with all of the staff and contractors who are attending there is very little room for the public whether retirees, city workers or advocates to participate in the meeting. so their definitely is a need for increased public space. i'm not sure at the retirement board meetings, i'm not sure how that is addressed in the proposed lease. i would ask that you take a look at that and currently the retirement board meetings are not recorded for public consumption like this meaning is being. i understand that there is cost incurred in doing that but you are doing the business of the public and it's important that they a veil themselves of the work. >> thank you very much. anyone else wish to comment? seeing none, public comment is closed. supervisor john avalos: if i can get a response on the

actual meeting space for the building. i didn't hear from mr. -- >> thank you. we are essentially doubling the size of the largest meeting room from it's current lotion and adding additional meeting rooms on the three separate floors that they will occupy. there is an opportunity for small group, medium size and much larger group up to 60 that they can accommodate in a room to about 30 today. >> the room that can accommodate 60 will be for the retirement board meetings? >> yes. the room will be specifically designed to accommodate today's needs for transparency and transmission of board meetings and to hold them in a manner that is appropriate. essentially they are in a converted conference room with nothing particularly different than any other meeting