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 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 ge