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 more detail as to

what our thinking is so far but it's pretty preliminary. >> so the money is set aside but before anything is done you will come back to us and tell us about it? >> we can. i don't know, i wasn't here for the last one so i don't know how we've done it in the past. >> i think generally the commission has to approve, has approved. >> i have three staff people giving me dirty looks so one of you come to the podium. >> i'll make my first contract. for the contract approval itself it's $500,000 for profession services contract to hire an eir contract, perhaps augmented to planning department staff so the commission would approve the request to contract and see the scope at that time. there may be other avenues as well for commission review. >> but in terms of what we're going to do --. >> i'm just trying to find out

what uses we're trying to have more of. >> so are we. >> okay. >> maybe you could explain the need for what brought us to the need for doing a new eir and then when we come back for the contract approvals or whatever we come back with next we could share more vision. >> diane with the planning and development division. years ago, and commissioner brandon will probably remember this, there were a number of different leases and port projects that we wanted to do in the southern waterfront and we did do an environmental impact report to cover those. that klud the illinois street bridge, probably the biggest one of the improvements. that eir, it was done so long ago that it actually is no longer current in terms of providing information about environmental impacts. so if we're going to be looking at proposed improvements in the

southern waterfront we would have to undergo ceqa again. it is preliminary and i would, if the maritime staff wants to kick me under the table they are free to do so, but generally speaking they have a number of cargo marketing efforts underway that i believe the commission is well familiar with and proposed improvements to our maritime piers plus any potential leases, new leases for facilities in the back lands or the southern waterfront areas would require environmental review in order to proceed. and while we're, this is projected, we've kind of indicated that we think an eir is likely to be required as part of the ceqa process, we haven't had any formal discussions with the planning department staff to determine that because we're still in the

process, quite frankly, of formulating what are the actual uses and improvements that we would like to pursue for the southern water front. so one frt things we have done in the past and maybe it makes sense to do it here is prior to going forward with the eir is to have an informational presentation to provide more details about some of those uses and improvements so that the staff besides myself, because i'm not necessarily in command of all the details, can address them. >> thank you. no, that would be great. it would be great to hear about what the plans are for the back lands because i know several years ago we started a planning process that never really materialized so i -- since then i hadn't really heard about what we were thinking about doing with the back lands so doing an eir --. >> i don't disagree. the reason i can't answer your

question is we know in this two year budget we need to work on this, but we don't have the specificity of what it is that you are looking for today. you haven't missed anything, i guess is the point that i want to underscore. >> another way of looking at it, this item is a place holder so we can go forward with the work we want to do once we figure out what we want to do. >> yes, it is. and we know at some point we think we know that, for example, the recycling center will be moving and what might become of that. i'm not sure what its timeline is. we have some inquiries about the properties that were coming up on the issues that diane just

getting started. >> no problem. >> i will point out this is one of several investments we are making to advanced projects, it's not a project yet, it's the preliminary work and 3 4 f1so we're trying to do in several areas for the seawall and sea level rise that will inform us so we can take them more fully divined. >> i really don't understand what the hurdles are you are discussing. are there hurdles? >> in some cases there may be ceqa requirements for the next use. that's my understanding. >> but what type of use? i guess that's what i'm trying to figure out, what uses are we considering. >> that's to be determinedetermined. >> okay. >> i had one more comment.

>> i appreciate your presentation. there's a lot of transparency there and i appreciate the comments of my fellow commissioners. i think mel made a good point about being responsible for the growth of the waterfront and i think commissioner woo ho made a comment about getting partners. we have to continue to grow our partnerships to grow forward. i think the commission will continue to grow in that direction because this will take a lot of heavy lifting to get to where we need to get to, but i think it's achievable. thank you. >> i just had one more question. as i understand it in your more detailed capital plan we know that sea level rise is obviously not reflected except at this point two things that are going on, one is the study combined with the capital

planning committee, the city ccpc you talk about the allocation of $500,000 which references the united states army corps of jers. -- engineers. these are 2 separate efforts but while you can't quantify anything by this time i would hope by the next time this is presented to the commission because sea level rises is obviously a huge strategic issue because this will be added to the capital plan at some point and we just have any way of knowing with the size of the effort is and also under the multi agency study my question is bcdc, are they involved? because it would seem this is not just a port of san francisco issue, it's really a bay area-wide

issue. i'm asking more questions than you can answer. >> someone can answer them, i believe mr. dunham is going to do so right now. >> brad benson, special projects. regarding the first expenditure describing the capital plan, it's a grant agreement with the dutch knowledge for climate program. the commission previously authorized that grant agreement. there we're working with bcdc and some of our development partners in the area and i'll let daly talk about the other effort. >> so they're two separate efforts then sounds like what you are telling me. >> yes, that's true, good afternoon, commissioners, daly dunham with the special projects group. the second effort we are working in parallel with the army corps of engineers, it's the same type of program we are using to pursue funding for the 17 principal basin and it's

unpredictable. we can ask for funds but we don't know if it's going to be assigned because the national pot for this type of funding is very small. we've been pursuing it in parallel and we've just heard in the last 6 weeks or so that it looks like we are going to get a small amount of money to start this process through the army corps of engineers so the project manager on our end was deployed to afghanistan, is going to be back next month. at that point we'll be able to figure out how these two efforts can plug into one another or create some synergy or how we'll manage that. >> let me just clarify. i thought i read here that we were allocating 500,000 out of our capital plan and you are talking about getting a larger poopl of funding from the federal government? or asking the federal government for the 500,000? >> i'm just going to clarify there's actually three efforts. the two-year capital budget

allocates that $500,000 for the port's contribution to a multi-city, multi agency study on the seawall. >> the strength and seismickity of the seawall. >> we are trying to get a cost on the seawall as well as the plan to address sea level rise and we understand, based on what we discussed in the last presentation, that the port's balance sheet clearly is not going to be an adequate source to address either the seawall unless it's much less expensive than i'm anticipating, or sea level rise, but we're putting forward efforts to seek partners, open the door to future funding and develop strategies together about how we will finance these very important future capital needs. >> so commissioner you raised a good point when you asked what bcdc's role is. we have

talked to you previously about sea level rise and the seawall fortitude hand in hand and in recent months we've come to process through agreement with the other city agencies and regional agencies that there is a group led by the department of environment that is addressing sea level rise which the port is a party to, but we are not leading that effort. and then there is the ert that we are leading is for the seawall in particular seismic risk and we are following direction given by mayor lee, we are putting to the an interdepartmental task force to work on what does that program look like and how do we start to assess what the need is. i don't for myself see us having concrete numbers by the next capital plan update. we might have some very large projections, but the work is getting underway and we will be coming to you to retain a

consultant to help us analyze that work on the seawall. that responsibility has been designated to the port to lead. >> thank you. >> so there will be a lot more coming to you on these topics as they evolve. >> to that point, one request i was going to make, i want to thank staff and also appreciate, usually give you short slift with these items at the end of the agenda so i appreciate your coming at the beginning but now you have to suffer with more of our questions, i think, than usual. but one thing i would like to say if we could, we talked about the sort of funded items in the capital plan but if we could get a report at some future point and how we might start thinking about addressing some of those unfunded items so that we can -- and that ties into some of the questions my colleagues asked as well, but if we could get a report back on that in the future.

>> thank you. any other comments, commissioners? have a vote, all in favor? aye. opposed? approve the 10 year capital plan. >> item 8c, informational presentation on the port's fiscal year 2014-15 and fiscal year 2015-16 biennial operating and capital budgets. >> good afternoon, commissioners, i am megan wallace, as a number of people have commented now i'm going to be reporting on the two year operating and capital budget

which is really where the rubber hits the road in terms of all these projections we've been talking about and how we're actually putting resources in place. i think something that really came forward from the financial projections is how we need to control operating expenditures and recognize the trade-offs between seeing operating budget growth and how it eats away at our ability to invest in capital. we've seen this in a number of places, the 5 year financial plan that i reported in prior years talked about future operating deficits and potential losses in investment, reductions in investment in capital and now we're seeing a projected decline in income from the financial statement perspective. the operating budget you are going to see actually focuses on controlling expenditures so you are allowed a 3 percent percentage increase based on actuals both for operating expenditures and revenues but we tried to recognize known

changes. there are just some things such as rate increases, work order agreements for services that we rely upon with other departments in the city, other strategic strategies that we need to fund such as staffing, we'll go into details on that, and there are port staff that are focusing on a new marketing initiative to help identify new funding sources and make sure that assets that we've invested in such as the james r. irving cruise terminal gets the best foot forward and can generate the best revenue for us. additionally you will see the budget includes a new project budget that is focused on development projects. both the expenditures the port has to make such as the warrior's arena, pier 70, mission rock, all of those support has had to make expenditures and this budget reflects those costs as well as the developer

reimbursement for those expenses. but it's really important to highlight that in addition to controlling growth that we're meeting our policy requirements of 15 percent operating expenditure reserve and the capital policy of designating at least 20 percent of operating revenues either towards direct capital spending in the budget year or designating surplus revenues towards future capital. so the first year of this two-year budget, fiscal year 14-15, you can see actually grows by 10.5 million or 10 percent. now we're at 115.9 million dollars and that growth is quite significant but it's critical to point out that 4.2 million of that growth is this development project that i had mentioned. and 6.6 million of it is operating revenue growth so that's a reflection of the

health of the revenues that the port is generating. but the main ways these funds are being spent, like i said just to draw your eye to the green line development projects are a direct offset to revenue from development reimbursement so that's budget neutral. even though the budget has grown by 4.2 million dollars, we are spending money and we are bringing it in. the other half we are only growing operating expenditures by 3.3 million so it's 4 pine 5 percent. we want to allow at least 3 percent increase in spending, costs go up so we have to accommodate for that. but on top of that we have strategic initiatives, we have additional debt service that reflects our investment in capital, rate increases and the like. so we managed to keep the operating budget growth

relatively low at 3.3 million and the rest goes to our designation to capital. in the second year our budget grows by 5 million dollars, 4.3 percent, and all but $800,000 of it is designated to capital. so again the priority here is investment in capital. we're trying to put the money away, we're recognizing our operating revenue growth and aside from that first year where we have some important investments either for existing costs that are just going up or for some strategic investments that i'm going to go into more detail about, other than that growth we're investing in our designation. let's talk a little bit about the trends. here i set the slides up to talk about the two year periods, i'm talking about fiscal year 14-15 and 15-16.

you can see from the pie chart on the left of the screen that of the revenue, areas of revenue that are growing in the budget, parking is the largest piece. commercial industrial rents is the second largest and cruise is the third and i think it's really great that we have a very strong maritime presence on this item, particularly a lot of it is driven by the opening of our new cruise terminal. the other element for parking and commercial industrial rents what's really important to note is the return of the 34th america's cup convenient tue to the court is allowing us to bring those venue sites back online for interim parking or re-leasing and those are pretty large drivers of this growth over the next two years. but looking back, here i'm showing how we've actually done

on our revenues going back to fiscal year 10-11, you can see a steady growth in our revenue and right in the middle there i show our 13-14 budget and i highlight it because it dips below prior years and then you can see in the 14-15 and 15-16 budget we are actually budgeting more. we're showing we are trying to get those budgeted revenues closer to what we think we are going to generate and be consistent with those prior year trends so we can really identify the sources that we're going to designate as revenue. and then for expenditures i also show the two-year growth and as you can see, salaries and fringe is a huge investment. our people are obviously a critical part of how we run the waterfront and of the growth over the two years, over $2 million of it is just for salaries and fringe but it's important to note that

about half of that is the cost of existing staff. so salary and fringe costs are growing and of that, particularly fringe, departments are having to make higher investments in the two budget years because we're still replenishing the pension system after the recession. so after this point in time we should see a reduction in the growth in those costs. this is really just a push to replenish that system. and then as i'll go into more detail, the other half of that are the staffing investments, the port staff had looked at a backlog of positions. we really think they are critical for strategic, you know, approaching our strategic needs, where we want to go, as well as just a backlog of ways that we could really just be more efficient in our operation. and then the other element is other current expenses. they are just costs related to

running the port like janitorial services, security, and the like. there's a financial policy that was passed through the city for how we manage certain costs in our budget. it's not something that's within our control so that's another reason why our budget grew. and you can actually see these growth trends are consistent with prior years. you can see as the operating budget grew, i detailed it, personnel, debt service and other current expenses are some of the main drivers of that growth in prior years. as far as the personnel are concerned, i mention that there's 1.1 million dollars in that two-year period of increased salary and fringe benefits and that increases our full-time equivalent count so each full-time position in our budget by 7.56 fte's and we tried to address some key

issues. so improving efficiency and effectiveness of operations, our maintenance division has identified a number of ways we can adjust our staffing in order to be able to manage workload, identify project needs and just get work done on a more efficient and effective way. and two of the key ways of doing that, i only highlight the 0932 manager 4, this is actually a new assistant deputy director or deputy director of maintenance. this person would come in and serve a new role of overseeing a functional area of the port and by doing that, that would actually free up the ability of the deputy director to focus on more long-term strategic planning, resource management and the like. that change, along with reassigning the functional areas of the maintenance division to other

managers, would allow just the maintenance division to perform more effectively. addressing a changing and complex environment, so this is adding a new finance manager to the finance and administration division. this position is really critical for supporting the deputy director of that division, be able to oversee a whole line up of finance-related issues from long-term financial planning, capital planning, debt management and when i say debt management, this also means being able to pursue the infrastructure financing districts, the ifd's that we talk about in the capital plan. really it's saying without supplementing the port staff resources it's going to be difficult to really pursue these longer term analysis and support roles that we need in our staff in order to make the changes that we are pursuing

with capital. improving and protecting revenues. so our real estate division currently has the property managers there, currently have a workload of about 90 leases per staff. the private sector has between 25 and 30 leases per property manager is more of the standard. so what this would do by asing -- adding a new property manager would still be approximately 3 times the workload of the private sector. this really trying to add resources to division where there's a lot of need for help, work with our tenant, protect revenue and even if possible identify new ways to pursue additional revenue such as by pursuing leases that have higher annual rents. and then an asset manager. this is a position that would really be focused on managing

the port's assets, trying to make strategic investments and working with the real estate staff to try to get that work done. and then i think meeting strategic goals, i didn't highlight it here but i meant to say that the 1246 position would actually be doing, focusing on work force development. so currently the port works with the office of economic and work force development and programs like city built to try to get san francisco's work force developed and be able to invest in people that can come around and work for the port. we don't have a designated person at this point who can really focus on what we need and trying to get the right staff and working with oewd, we need somebody who can really manage that and what this actually is is a constitution so converting a lower level class to this higher level to allow this person to take on this new

function. last but not least, temporary salaries. these are actually for project manager type positions that the maritime planning and executive divisions would use to help implement projects. as you know we are working on a number of projects on the city and it's difficult to get all the existing port staff to bridge the gaps of getting, working through the different pieces of all of the projects. and this would allow the divisions to have additional resources to do that work. so the topic that everybody was just enjoying, we have our capital budget. and what this shows here is we have budgeted 12.8 million dollars each year over the next two years and i have the allocation by areas on the port. i didn't go into a lot of detail but the staff report does provide it and if

you want even more detail, the port secretary has all of the project explanations on record as well. but what i wanted to emphasize here is that even though we're doing pretty well relatively speaking, like i said there are some years that we budgeted just over $10 million, other years we budgeted upwards of 15 and 14 million, 12.8 is doing pretty well. but going back to elaine's presentation talking about the depreciation and amortization schedules, you can see that we should be spending more, like 22 and 23 million dollars a year. so it's all the more -- while i'm supportive of our operating budget and believe that we've done a good job of keeping it from growing too significantly, it's clear that we have a long way to go before we really finance capital at the level that we need.

then the last item on the agenda, my agenda, is this 5.2 million reallocation of previously approved funding. this is really actually the first item is an indication of a delay in procurement of very large pile work equipment. we realize by moving the funds into the pier repair project, we would have much more flexibility in how the funds are used. if that procurement gets on track and we're able to complete it we can still spend it out of this project. if not we can go ahead and use these funds to do critical repair work that's on our line up over the next two years. then the next reallocation, city certificates of participation or cop's. it was part of the america's cup