>> i think what we'll do is a table that details the vacancy rate of the various facilities and send that to the xlition. it is going to be in the report you will hear in two weeks but neither nate and i can remember the figures but we were just working on the figures so we'll get it over to you. >> nate cruz with the real estate division. the vacancy assumption for the forecast that you have been presented with is basically a stable rate, i don't recall the exact percentage, i apologize for that, but it includes a similar, very, very low vacancy rate which the director just pointed out. i did also want to point out, we talked a little bit about granularity of forecasts, our budget forecast has been within 2 percent and the methodology we have kept true in prior periods. where i was a little

too conservative was the parking forecasts and based on conversations we have had in former years i got a little more aggressive and hopefully we will see a tighter performance of budgity to actuals in the future. >> the question would be the leases. did we have some leases executed a long time ago and even with cip increases if they were to come online today would the jump be a little bit more than cpi >> i think in some cases it certainly would and in some cases we don't know. the individual leases which will expire in the two-year budget window we don't individually address what might or might not happen to thep. as a general assumption we assume those leases will continue on either under the current tenant's name or be released under similar terms to someone else. i am a

little wary about turning the dial up in aggressiveness because we want to make sure we don't overbudget and have to do mid-year. >> maybe i'll ask the question in a different way. is more coming off lease or expiring than it has in the past? i hear what you are saying in terms of actual versus budget, it's been very close, but if a higher percentage is coming on scream for renewal or exploration, then that will change your forecast. >> i appall apologize, we look at how much revenue is still under contract in the near future. we can provide you with that analysis. >> so you do have a system in place to evaluate these leases every couple years or something like that? >> we do the continual disclosure an sully so we take a look at in chunks how much might be expiring in the near future. >> all right, thank you.

>> call the next item. >> item 8b, request approval of the port's 10 year capital plan for fiscal year 2015-2024. >> good afternoon, commissioners, i'm ann cary, i'm on assignment to the port to do this year's capital plan. i'd like to acknowledge my predecessor, daly dunham who essentially designed the plan and has carried it for many years and now i have inherited it full-blown which has been a big help, a great starting point. also the direction i received from elaine forbes and

brad benson and the invisible hand of your director elaine. >> not so invisible. >> this is an approval item if you choose to approve it today. in the array of all the financial items, it's the capital plan. unlike the 5-year financial project which you just heard which contains the trends and financial projections for the entire enterprise or the upcoming plan the capital plan focuses on capital investments over the next 10 years and as such is more a strategic planning document and reflects the port's values and i'm new of this so hope it goes forward. as you see on the next page, we've got the history really. i think that elaine eluded to this, that the capital plan represents a guiding document, it provides an estimate of the

amount of capital investment needed to maintain the port's facilities in this state of good repair which we have talked a little built about and you will hear a lot more about, over the next 10 years. it has a plan of financial which maps out the port intends to utilize the potential and new sources of funds to maintain the assets and enhance our portfolio. it also has an estimate of the capital need that remains at the end of that 10 years and some of the strategic issues that may pose a significant challenge to the port in the future. every two years the city adopts its own city-wide capital plan and the port's plan becomes a part of that which is very helpful to assure the partnering opportunities and go bonds and things like

that. the next update to the city's 10 year plan is in 2015 so we are doing this for the port's benefit only this year. so the plan has guided nearly $196 million in non-developer funding since the inception in 2006. some of the highlights from the port's 150's anniversary year include the project's listed here, you have heard them mentioned before so i won't go through them again, but they are very significant achievements. the project expenditures are reflected in the changes in the port's financial position that elaine described earlier. the criteria were used to set investment priorities and to allocate the capital funds to specific projects in the capital budget. the first

criterion which is listed here emphasizes the importance of maintaining revenue-generating assets to build future capacity, that is keep building assets that we can lease out and generate more revenue and support bonds and make more investments and just that whole cycle. so that's a very high priority we've tried to focus a little bit more on this year. the other criteria reflect the public's trust such as good stewardship, increasing public access particularly with new parks and open spaces that are also improving quality of life for the city, and building partnerships that leverage external sources. as we'll see those partnerships and external resources play a very important role in addressing the capital needs identified in this year's plan. so now to the numbers frplt the port staff utilizes the city's data base to track all

of our capital needs and every year we update that data base, which is what's arrayed in this table here. we start with the prior year plan in this case it was 2014-23 where we've completed projects we delete those costs from the various elements, we may have also completed a project at a lower cost and the entire cost estimate comes out even if we spent less. sometimes there are project savings that also reduce the backlog. similarly new cost estimates are loaded in. most of those this year are associated with the development projects. where there are more detailed design and engineering estimates for those projects as they have become better defined going forward. some of them have increased and some have decreased so it goes both ways. similarly during the 10 year plan we added a new 10th year,

the prior year drops off, sometimes rolls into backlog, we gain a new 10th year and finally the controller's office identifies the costs used in the plan and that's based on construction cost indexes. this indicates the need for capital investments, the changes are not necessarily actual expenditures so this is really just a cost table. and at the bottom even with all of these adjustments the port's 10 year need remains relatively unchanged from last year of 1.59 billion dollars and i'd note that at current spending lechls we're just barely holding our ground year over year as inflation and renewals add to the costs and as we work projects off. there's another 463 million dollars in what we call conditional seismic work and that may or may not be required to be made over the 10 year period. so as such we treat

it, we show it separately but we don't add it into the total need and i'll talk a little bit more about what triggers seismic. in the pie chart it shows a breakdown of those elements again as maintained in the data base for state of good repair, our 1.6 billion dollars is broken into the three elements, the backlog, which essentially equals our deferred maintenance, what's already on the books, what we haven't done, it's not the same as the capital appreciation number that elaine referred to. in fact, this number isn't part of hers, hers really reflects the next item, which is the renewal. so as we go forward over the next 10 years we expect some systems to wear out and have to be replaced, that's what the renewal costs represent, costs we will incur for our existing facilities as they age and as they require repair or replacement.

there's also a category called one time. these are non-cyclical items, i'd note that for example we have a big project in here for repairing the under pier utilities. that's not a, it's not driven by annual renewals, and sometimes driven by code changes and such, so these items we are characterizing as one time and note that in some cases they are backloged and in some cases they are things that will incur in the future so we'd like to do a better job going forward of trying to parse those out and throw them into one bucket or another but for now they are kind of a big category called one time. again that seismic item is the conditional cost which may or may not be required and that depends on whether there is a change in use or a major rehab of a facility that would trigger building code requirements that we would then have to do seismic. because we

don't know at this time if and when seismic will be triggered and sometimes we try to define projects in a way that does not trigger the seismic need, we try to add it into our need of good repair needs. we continue to refine these as we get updates from facility assessments and as repairs are completed so we expect to number to continue to change from year to year and again i might note that the costs could go up and they could go down. hopefully we see them go down. so now to the money side. the sources of funds, we have identified that 1.14 billion dollars in the 10 year period and this year we've tried to take this slightly different characterization of it and broken it into these two broad categories. the first is shown in blue are the internally generated funds, that is

sources that are primarily within the port's control utilizing our existing assets. so, for example, the annual allocation from the operating budget is here and the port debt that's supported with our port revenues. also tenant improvements, a number of tenants with long-term leases have responsibility for maintenance and capital improvements such as this building and pier 1, the ferry building fisherman's wharf areas. in the aggregate those sources are projected to generate 37 percent of the total revenues in the plan. in green we now see what we call externally generated funds, that is those sources that require some sort of partnership with an external party, for example the general obligation park bonds we have partnered with the city's sponsored we have partnered with rec and park. our federal, state and local grants are all reflected in those small pieces near the bottom of the circle and then development

projects that are partnerships. those are not small money, a lot of them are tax increment that we can apply to the benefit of those project areas but the dwefrlment projects are very significant in terms of contributing all of 43 percent in the total funding in this pie and just to add up the two slices that are port capital budget and bonds, that's about 16 percent over the course of the 10 years so to get to the point of how are we going to tackle this fairly large 1.6 billion dollar problem, our internal money is not going to do it alone, we really need to build these partnerships. i think it just demonstrates the importance of maintaining that strategy. another look at the uses -- now we'll turn to the uses of the funds. again we're trying to show the funds going towards

not only state of good repair but in some cases there are enhancement projects that we will, that will be supported with these funds. for example most of the general obligation park bonds support new parks and open space that enhances public access to the water front. similarly the proposed development projects add new infrastructure such as roads, sewers, street lights, things like that, that while those development projects may address a component of state of good repair they will also have an enhancement element to them so the funding is often split between them. it's analogous to the redevelopment projects, i think, those development projects that we're trying to sponsor with the ifd's that but for that project there would be no tax increment to support those investments and those investments are necessary to increase the land value and support higher uses in those

areas so they are a critical component. the next pie shows, is the same information arrayed a little bit differently and showing again where those, the uses of those funds go. i think the good news in this plan is that of that 1.4 billion dollars we're applying fully 59 percent of it to address that state of good repair need that we have. 34 percent is going to enhancements that's shown in the two green slices and then there's some that's going to seismic, the bulk of which is represented by piers 30 and 32. overall i think the plan strikes a good balance between maintaining state of good repair and making investments that enhance our assets and add value to the balance sheet. also you can discern in here the light blue sliels -- slice to the right shows most of the

port's internally generated sources shows to state of good repair. the money we can control directly and generate with our assets we are putting back in our assets to protect that revenue base, whereas a lot of the enhancement projects are more dpepb dependent on those external sources. that's why we're putting them a little bit at risk if we don't continue to develop them. projects scheduled to get underway within the 10 year period, all the components do have a component that addresses the existing backlog of repairs within the project area while two of the larger projects address seismic conditions or add enhancements such as streets and lights. the intention there is to use that increment to fund streets and sewers and lighting and sidewalks and parks so there's a lot of enhancement associated

with that. the projects at pier 38 bulk head and the orton's pier 31 bulk head both apply to the (inaudible) shown here are entirely for the repair needs of those facilities. there will be additional expenditures there but they will not be on the port's book but they are addressing a lot of the backlog for those two. taken together these 5 development projects, as elaine mentioned, fund 243 million dollars in state of good repair so they are making a significant contribution to our ability to work off that backlog. over the 10 year period, development projects represent 36 percent of the funding that we have identified for state of good repair so i think as it's stated in the waterfront land use plan, these and other dwefrlment projects remain the principle drivers and potential

waterfront improvements. and perhaps one of the biggest risks to the funding strategy would be, as elaine mentioned, a change in the real estate market or a change in the political climate vis-a-vis waterfront development so we'll need to watch for that. oh, red. unfortunately there is some red in this plan. so this is the use plan projects a greater amount of funding going towards the state of good repair projects than in previous years and that's represented by the blue bars at the top of the graph. as i mentioned we're funding about 42 percent of our total need in this 10 year period. if all of that funding that's projected in the plan is actually realized at the end of the period we'll still have met about 42 percent and we'll have about a $921 million dollar unfunded need and that's represented by the red bar at the bottom. again, the trend here is good in that it's

getting smaller, but it's still a very, very big nut to cover. so as i said, the state of good repair at the end of this 10 year plan, state of good repair we would have a $921 million dollar need or backlog. we would also have seismic conditions which for the most part we haven't addressed because we don't know if they will be triggered, there is some but there is potentially $385 million more and there's a number of emerging issues identified in the report that could add to this need. in particular protecting the seawall from sea level rise, what to do about our red and yellow tag facilities, there are a number of them outlined in your report, we need to continue to address the risks posed by our vulnerable underpier utilities in response to our agreement with the water board and we want to try and do something to reuse and

revitalize our underused assets such as the southern waterfront and the ac34 venues and dredging of course is always a kind of tricky item, it seems to always go up in terms of costs and since it's funded out of the capital budget it continues to take a lot of that capital capacity that would otherwise be available to apply to state of good repair. so while the current 10 year plan shows an improved outlook by identifying potential funding sources to address 42 percent of the repairs needed, clearly more work needs to be done if we are going to maintain and bring all of the port's properties up to a state of good repair and put it in productive use. to do that we are going to build partnerships, make trade-offs, as president obama made in sort of an airy fairy comment that hope is not a strategy so we need to do a little better than just hope. i will just go quickly through the maps that show the

allocation of the capital projects by geographic area. i apologize that they are too small to see and the legends i illegible. there are projects all along the waterfront that are going to be addressed in the capital funds and there's a mix of funds used in each area. here, for example, in the southern waterfront you will see sources including the port capital budget, development projects, grants, private equity and such. so there's quite a mix in terms of both the distribution where the moneys are being spent and how the moneys, how different color money is being used in different places as the map so elegantly expresses. so in conclusion atz i said at the outset, the 10 year plan is really the port's guiding

document for capital vefrments. it does not appropriate funds for specific expenditures, that's something you will do with the next year with the two-year capital and operating budget but it is the document we will use as we go forward and try and build these partnerships, seek support from our partners internally and bring back to you on a regular basis. at this time i will take questions and we're also seeking your approval of this 10 year plan today. >> so moved. >> second. >> second. >> public comment before we turn to questions? i have one, karen woods. >> good afternoon, commissioners, my name is karen

woods. i've been reading the capital plan all weekend, it's riveting. i think the port has come a long way since the first capital plan was put together. and obviously we have a long way to go. i think one of the most scary things to me is the fact that so much of the capital planning is based on development projects with outside partners and as was mentioned both here and in the previous discussion, we need to talk about the political climate vis-a-vis waterfront development. you can't talk about the waterfront height initiative, you are not allowed to. but i think it's important if you are in conversations with policy makers, particularly the

mayor's office, that they understand how critical these development partnerships are to the port's survival because without this infusion, both for state of good repair and for enhancements, i don't know how you get to the future. and i will be advocating for the port for moving these projects forward even though i don't always agree with them. but i think that it's important to keep the process moving and i think it's important that decision makers, the supervisors, planning commission, mayor's office, truly understand the restrictions that the port is under and how critical these pieces are. and if there's

anything that a member of the public can do to help, let me know. >> thank you. any other public comment? please come forward. seeing none, public comment is closed. commissioners? >> well, first of all i want to commend the staff that this year's presentation of the capital plan has taken it down and i guess relatively speaking more granular, more categories explaining the external/internal funds as well as the different categories, the separation of seismic and i want to commend the port staff because i think we understand it more. there is light at the end of the tunnel although it's still very overwhelming. i want to thank karen for her

statements because i think the take away i took from this report, that we want good development, we want balanced development, but the only way to really crack this nut is to do more development and faster development because if we were to take our, as we just saw in our financial projections, the allocation of internally generated capital funds from our operating revenues we're never going to get there. and in the meantime that means the waterfront will continue to deteriorate. so it is important to understand how we can use the healthy balance between what we need to do and to be able to move this backlog of state of need repair as well as enhancements and to balance that with all the other objectives we have. so i think that i don't have specific comments on the particular numbers except to say i think the take away is that we have to -- this year you've given us more insights how to work the issue. last year i think we have just overwhelmed with the

numbers and the insights are very useful and hopefully we can all work on it together and as karen mentioned we have to probably work with other partners in the city to see the picture appropriately. >> thank you for your report. i concur. i believe we are on the right track and we should definitely move forward with responsible growth. thank you. >> thank you very much for this very well-written report. i too had to take a couple seatings to read it because there's a lot of information. but what i can't figure out and maybe i missed it and it's probably in here is what are we spending this year and where is it going? >> that will be coming in the next item. >> okay, so you want us to approve it but tell us about it in the next item? >> let me clarify this is the capital plan, which is really a policy document and guides our

efforts in terms of our strategies for seeking funding and prioritizing projects, appropriations and actual expenditures of funds to specific projects is included in the capital and operating budgets which you will hear next and that will have the two years specifically. >> but you are asking about the current year. >> yeah. larry may be --. >> we might also get some of that in the --. >> i don't think we're looking at current year in the next item, we're looking at the forward two years. larry, would you have that info handy for the commissioner? >> in terms of what we are spending our capital fund on. >> this current year. no? is that a no, larry? >> okay, then my next question, i saw that we were

setting aside 75,000 for the southern waterfront and i wonder what they will be studying. >> the concept there is to have a somewhat generic plan for the area that we would take through the eir process so that we can pass all of those over, you know, get over those hurdles, get the conditional approvals so as opportunities arise we can take advantage more quickly. >> which would that be? >> we are still studying but they are maritime. >> they wouldn't be office or new housing but in terms of what we are going to be studying, we are still coming together as staff but because of the budgetary process before, we put some money in there as a place holder, i don't know diane if you want to speak to any